With around 8% of the population still unbanked in South Africa, the township economy and related services is still predominantly driven by cash. Merchants operating in townships and rural areas remain underserved by the mainstream financial services sector.
This has driven a vibrant development opportunity within the Fintech sector with companies looking to address their pain points with innovative solutions that help them to, in turn, serve their customers more efficiently and effectively.
According to Lincoln Mali, CEO of Lesaka Technologies, who was speaking at theTownship Economy Summit 2024, hosted by the Township Entrepreneurs Alliance (TEA). “South Africa’s merchant market remains underpenetrated, with huge addressable opportunities,” he says.
“Merchants are struggling with pain points that the legacy providers are not equipped to address.” These include limited access to viable solutions for digital payments, a lack of access to growth capital, and a lack of secure, automated cash management solutions tailored to micro or informal merchants.
The untapped potential of South Africa’s R900 billion informal economy
The costs of transport, the competitive pricing offered by informal merchants, and improved offerings and customer experience at townships and spaza shops are powering growth.
With more than 500 townships across South Africa and an informal market estimated to be worth around R900 billion, this is a sector that shouldn’t be ignored.
Mali says that this gap has created significant opportunities for organizations like Lesaka and its subsidiary, Kazang to step in. “South Africa’s township economy is a remarkable ecosystem of innovation, resilience, and entrepreneurial energy. Informal traders offer essential goods and services while sustaining countless livelihoods,” says Mali.
“Yet these entrepreneurs face unique challenges that require innovative solutions and fresh perspectives. Big businesses need to see township entrepreneurs in a new light, recognize their value, and to partner with them to offer better solutions to their needs. This in turn, will enable entrepreneurs to provide better services to their communities.”
Lesaka’s mission to drive financial inclusion across the informal market and township ecosystem is close to Mali’s heart. “Many have asked me why I left a large bank in South Africa after 20 years to join Lesaka.
“The possibility of using a combination of smart people, cutting-edge technologies, innovative solutions, and mutually beneficial partnerships to champion financial inclusion towards shared prosperity was hard to resist. Our approach unlocks potential and bridges the gap between informal markets and modern financial systems.”
Partnering with township entrepreneurs to foster shared prosperity
With around R72 billion in throughput across more than 93,000 merchants, Lesaka is building a holistic ecosystem tailored to the needs of township merchants, enabling them to thrive. Through brands and companies such as Kazang, Lesaka offers informal merchants solutions such as:
- Card payments acceptance, reducing their reliance on cash
- Lending options to grow their businesses
- Value-added services (VAS) vending solutions like airtime and bill payments
- Safe, cashless supplier payments
- Data insights to help them make better pricing and promotional decisions
The Kazang VAS terminal is one of Lesaka’s key touchpoints for informal merchants. They can use the same terminal to accept card payments, process cashbacks, accept bill payments and vend services such as prepaid electricity, prepaid airtime and data, bill payments and gaming vouchers.
“Our business isn’t just about giving someone a point-of-sale (POS) device. We bring the bank into the store and empower merchants. The goal is not just to provide tools but to be an absolute partner to entrepreneurs, driving shared prosperity with tools and services that enable merchants to innovate and grow,” says Mali.
