South African retailers are increasingly looking beyond clothing and groceries for growth, betting that financial services, not retail shelves, will drive their next phase of expansion.
That shift was underscored on Wednesday after Pepkor Holdings, owner of brands including Pep, Ackermans and Tekkie Town, unveiled plans to combine its fintech subsidiary Flash with merchant payments platform Shop2Shop in a deal valuing the merged business at R21.3 billion ($1.29 billion).
The combined company, to be known as FintechCo, could eventually be listed as a standalone business on the Johannesburg Stock Exchange.
Rather than simply expanding its retail business, Pepkor is making a bigger bet on South Africa’s informal economy, a market of millions of consumers, township merchants, spaza shops and small businesses that still handle large volumes of cash but are increasingly adopting digital financial services.
The transaction will leave Pepkor with a controlling 57.1% stake in FintechCo after injecting R1.57 billion ($95 million) in cash and contributing its entire Flash business, valued at R10.6 billion, in exchange for shares in the combined company.
