Media Coverage
Lesaka aims for bigger slice of grants market
11 Feb 2024
By THABISO MOCHIKO, Business Live
Banks and retailers are also lining up to grow their share of social grant payments. About R200bn is paid annually to 27-million people in South Africa
Payment group Lesaka is eyeing an 18% share in the social grants payment market over the next five years after its EasyPay Everywhere (EPE) delivered a record number of new accounts in the three months to December.
EPE has 1.4-million active account holders who are social grant beneficiaries.
Lesaka Southern Africa CEO Lincoln Mali said the company has an 11% market share. “So we still think that there's room to grow in that space. We want to make sure that we can present our customers with a value proposition that makes sense. They must stay with us because they see the benefit.”
Banks and retailers are also lining up to grow their share of social grant payments. About R200bn is paid annually to 27-million people in South Africa. This includes disability grants, child support, old age grants, and the R350 social relief of distress grant introduced during after Covid hit. Over the next three years, R945bn will be paid to social grant beneficiaries.
Mali said on average EPE signs up 30,000 new clients a month. The card works like any other bank card and Lesaka provides additional products such as funeral policies and loans, which are capped at R2,000. EPE has 384,000 insurance customers.
Since joining the company three years ago, Mali and his team have turned around the EPE business, which was loss-making after it lost a lucrative social grants distribution tender that was found to have been unlawful.
He said the company had worked hard on its reputation and invested heavily in marketing, rebranding, upgrading its branches, training staff, and re-establishing the relationship with the Social Security Agency.
The business has completely turned around. It generates cash and it's profitable. I think we could reach 15-18% market share in five years
Lesaka Southern Africa CEO Lincoln Mali
“The business has completely turned around. It generates cash and it's profitable. I think we could reach 15%-18% market share in five years.” Revenue from the consumer division — EPE- rose 16% to R313m in the three months to December. Revenue was boosted by more transaction fees generated from the higher EPE account holders base, higher insurance revenues and an increase in lending revenue as a result of an increase in loan originations. In the three months to December, EPE added 92,000 new customers.
Lesaka’s outgoing CEO Chris Meyer said during the financial results presentation that the consumer division produced record numbers of account activations, loan disbursements, and insurance policy sales in December.
This week Lesaka announced the acquisition of Touchsides, a data analytics and merchant services company, from beverages giant Heineken International. Touchsides has an active base of more than 10,000 point-of-sale terminals in licensed taverns, and processes more than 1.5-million transactions a day. The company will complement Lesaka's other business, Kazang, which provides digital payment devices and other services such as secure cash vaults and supplier payment platforms to more than 80,000 spaza shops.
Lesaka said Touchsides provides platform-as-a-service and software-as-a-service solutions to licensed taverns, enabling the measurement of sales activity in real time, management of stock levels and informing commercial decisions such as pricing and promotional offers.
“The data and insights gathered from these terminals carry significant value and potential to be monetised through relationships with a range of clients including fast-moving consumer goods companies, retailers, wholesalers, route-to-market suppliers, and financiers,” said Lesaka head of merchant division and CEO of Connect, Steve Heilbron.
There are about 45,000 licensed taverns in the country.
“Operating as an independent company unaffiliated to a major beverage supplier, we see a distinct opportunity to significantly grow Touchsides' tavern base and to monetise its real-time data,” said Heilbron.
Mali said the increase in card payments coupled with complementary digital solutions would further reform the informal market.
“With Touchsides, we are giving taverns and spaza shops the opportunity to have data and insights that tell them how many sales were done, maintain their stock and do inventory and understand which products are in demand. We see this as part of the growth and development of the informal market.”
For suppliers, the insights will also help them see which spazas or taverns are doing well and ensure products are always available at those establishments and possibly provide discounts.
“These businesses are embracing the technology because they see the benefits in them. Moreover, investing in the townships is not only just the bricks and mortar, it's also bringing digital capabilities. With those insights and data, we can now do predictive models about where the next growth points are.”
Lesaka is looking for more acquisitions to bolster its merchants business. Meyer said the company was looking at adding scale and broadening products to customers.
Lesaka owns 5% of Cell C, down from 15% before the recapitalisation programme in 2022. Mali said the company has ongoing “constructive conversations” with Cell C's leadership.
“They are going through a lot of changes. We are engaging them as a shareholder. Part of the discussion is about possible collaborations,” he said.
Jorge Mendes, Cell C CEO, said recently that management had met with all shareholders on the future plans of the mobile phone operator and the feedback had been positive.
“They have all supported the strategy and everyone wants to contribute to the success of the company,” he said.