Wealth Check: Rapper on the right track to start his own label

A London-based South African musician hopes to be able to release his debut album next spring, if he can raise enough cash to fund the dream
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The Independent Online

The patient

Self-employed rapper Sisanda Qengque has big ambitions.

The South African-born 29-year-old, who hails from the south-east region of Transkei, now lives in west London and performs under the stage name Ruffnax. He has already collaborated with major names on both sides of the Atlantic, among them the American guitarist Justin Rich and Dweezil Zappa, and has earned several awards for songwriting and urban music composition.

Next year he intends to release his first album, but to do this he will first have to set up his own independent record label – a process that he estimates will cost in the region of £10,000.

He has secured a loan from his partner worth £5,000 and aims to raise the remaining funds by the end of March next year to begin selling his album to music enthusiasts.

Despite residing in London, one of the most expensive cities in Europe, Mr Qengque has wisely avoided building up too much debt; apart from one credit card debt of £710 and a car loan in South Africa for £1,500, he is on a solid footing. He has £3,700 in savings and rents a room in a property he shares with friends and has an outgoing monthly expenditure that amounts to just over £2,150, taking into account £1,000 rent, £400 on entertainment, £100 on food and £150 on public transport and the remaining £500 on miscellaneous items.

As a performer, he is generating a regular monthly net income of £3,100, giving him just over £800 of disposable income at the end of each month.

The cure

Discipline

Three independent financial planners have analysed Mr Qengque's situation and believe raising the funds to set up his label by early next year are well within his reach if he can be disciplined. Keith Churchouse, the director of Guildford-based Churchouse Financial Planning, says Mr Qengque will be able to accumulate the requisite £5,000 well within his time frame if he takes full advantage of his disposable income.

"Sisanda has the ability to save about £800 per month. If he were able to save this amount into short-term deposits, this would add a further £3,200, giving him a total of £6,900, meeting his business target of £5,000, with a surplus of £1,900. Reasonable short-term deposit rates are available from providers such as Chelsea Building Society e-saver reward which provides 2.57 per cent gross/2.60 per cent account for internet savings," he says.

"He could consider using his tax-efficient cash ISA allowance and add to this on a monthly basis. Competitive terms are currently available from Skipton at 2.95 per cent per annum on a one-year fixed rate, but it will be important for him to check the small print to ensure that the accessibility to the funds meets his plans. Northern Rock is also offering an alternative plan fixed for 11 months at 3.00 per cent per annum."

Repaying debts

Mr Qengque has a car loan in South Africa and a small credit card debt totalling £2,210. To address the repayment of these, Mr Churchouse recommends that he looks at some budget planning over the next few months, particularly in areas such as entertainment and others.

"Sisanda currently spends £900 per month on entertainment and miscellaneous items and this may include utility bills," says Mr Churchouse. I would recommend that Sisanda looks at his miscellaneous costs, possibly along with his housemates to see if the household budget can be reduced, either by switching providers or just looking at the usage to see if they can be lowered. The whole house will benefit from Sisanda's desire to save.

"If he could significantly reduce this spending for four months, these liabilities could be repaid at about £552 per month, leaving him debt free."

Feathering the nest

It may not be at the forefront of his mind at the moment, but with at least 30 years of employment-aged work ahead of him, Mr Qengque would do well to put in place a pension strategy to ensure he has a secure life in old age.

He currently has £5,330 invested in a commercial property portfolio investment in South Africa. However, Peter Cooper, a chartered financial planner at Harrogate-based Cooper Johnston Wealth Management, says Mr Qengque would be wise to diversify and avoid being exposed to a single asset class.

"Sisanda will receive 20 per cent income tax relief at source on the contributions he makes to a pension in the UK. Therefore, a contribution of £100 will cost Sisanda £80. As Sisanda is self-employed, his monthly earnings may vary and he may wish to avoid a large monthly contribution for the flexibility to make lump sum payments into his pension," he says.

"If Sisanda contributed half of his disposable income – an average of £425 per month net – into a pension, he would build up a pension fund of £410,000 by age 65 assuming a net return after inflation and charges of 3 per cent per annum. If he delays by five years, this reduces to £324,000."

Mr Cooper says it is important to consider the implications of moving Mr Qengque's pension overseas should he choose to return to his country of origin in the future.

"If Sisanda retires to South Africa, he can transfer his UK pension into a qualifying recognised overseas pension scheme – known technically as a Qrops – either in South Africa or a neutral jurisdiction such as Guernsey. However, Sisanda should seek specialist pension advice at the time as this is a complex area."

Insurance and wills

Kevin Morgan, the managing director of Hertfordshire-based Concilium Financial Planning, says a number of organisations support up-and-coming musicians by providing offers on specialist insurance. "I would encourage Sisanda to join the Association of Independent Music (AIM). AIM provides a collective voice for the UK's independent music industry as well as access to specialist insurers and can be found on musicindie.com," says Mr Morgan. "Membership is just over £100 per year and will provide valuable guidance. It also produces a guidebook to individuals starting up a record label which is free to members."

Mr Morgan recommends that Mr Qengque consider some protection products geared towards business owners such as professional indemnity insurance, which provides cover for claims brought against a business owner due to professional negligence. Liability insurance is another product he says he may wish to think about as well as insurance against accidental damage to his working premises.

And while death is not usually the top of the agenda, preparing a will while still young and updating it periodically can avoid unpleasant situations of asset redistribution after unexpected events. Mr Churchouse says that, as a musician, Mr Qengque should consider the financial value of his creative endeavours.

"If Sisanda is going to be producing music, he may well create some intellectual property rights which will potentially have a monetary value," saysMr Churchouse. "He should consider the value of this and make a will to pass it on as he would want in the event of his death. If the business builds in value he would also want to pass this on to his beneficiaries."

Do you need a financial makeover?

Write to Julian Knight at the Independent on Sunday, 2 Derry Street, London W8 5HF

j.knight@independent.co.uk

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