🎽 The Pepkor FinTech Juggernaut…

Plus: Lazy AIs, cybertruck deliveries, AI in Africa & how to set laser-focus KPIs for growth.

Newsletter

December 1, 2023

Break time? Brickception lets you play a game within a game within a game – adding a whole new dimension to Atari’s classic 1970s hit “Breakout”.

In this Open Letter:

Big money: Pepkor’s secret FinTech weapon.
Lazy AIs, parking investment & SA’s lost businesses.
Recap: Using AI in local context to benefit Africa.
Smart scaling: Laser-Focus KPIs for growth.
Landlord experiences: The results are in.
Tell someone: Share this & get free business tools.

TRENDING NOW

The FinTechs that Earned Pep R10bn

Where does the 2 out of 3 baby garments sold in SA come from? Or what about 7 out of 10 prepaid phones?

Well, most likely, China. Originally. But locally, it gets sold through one of the various stores in the Pepkor. With store chains such as Pep, Ackermans, TekkieTown, Buco – even Hifi Corp and Incredible Connection – Pepkor has diversified a lot over the years.

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The group reported revenue of R87bn in the 2023 financial year. But what’s most noteworthy is that their FinTech division contributed R10 billion of that revenue and R950 million in operating profit. It’s a powerful combo… Physical stores spread across the country that serve as a place of distribution for FinTech products — there's likely no slowing down.

FinTech at Pepkor

Pepkor’s FinTech division has a suite of products including:

Capfin, a subsidiary of Pepkor, is an unsecured credit provider.
Abacus is a niche insurer within the Pepkor group, offering easy and affordable retail insurance.
Tenacity Financial Services, part of the Pepkor group since 2007, specialises in managing in-store credit card programs for several Pepkor retail brands

But these all make up only 33% of their FinTech revenue.

The other 67% is generated by one you probably never even heard of — Flash.

Flash gives merchants (mostly spaza shop operators) a device with an app that allows them to sell digital products and services like:

Airtime
1voucher (which can be redeemed for sports betting, Dstv or other online services such as Uber)
Prepaid electricity and water
Payments
Payouts of SASSA grants
Transfers and much more.

Impressive range of services, but one of Flash’s major feats is likely how it “digitises cash” – i.e. allowing the “unbanked” to transact digitally.

They reportedly turned R37.1 billion of cash into digital vouchers or digital products. That’s a significant amount considering the estimated size of the township economy is R425bn.

What could Flash become?

Flash is currently financial services and VAS, but with its footprint of circa 200k merchants across South Africa’s informal market, it could become any or all of the following:

Payment and distribution for e-commerce plays – perhaps they can even launch their own e-commerce solutions to informal markets by collecting cash at Flash vendors and using those locations as pickup points (yes, this is super complex, but if anyone has a chance of pulling this off in informal markets, its probably them).
Provide financial services (and even bank accounts) to Spaza shop owners – and with the data points they have, they could offer unique services.
Perhaps a more ambitious move could see them go into informal FMCG supply and compete with the likes of Yebo Fresh.

Pepkor only started reporting Flash’s numbers in this year’s financial results, for good reason. This FinTech juggernaut might just become the major driver of group revenue and profit in years to come.

And with them cracking the cash-to-digital problem in informal markets, chances are anyone wanting to sell things from outside the informal settlement to inside (be it digital or physical goods), would likely need to make use of their systems.

IN SHORT

🦥 LazyGPT. Users have been complaining about ChatGPT avoiding doing monotonous or tedious tasks asking the user to complete the work. Wasn’t that why we got ChatGPT in the first place? Interestingly enough the tedious and monotonous tasks we’ve put up with for decades, ChatGPT got tired of in a year.

🪡 Listed Threads. Shein wants to list for R1.7 trillion. The e-comm clothing behemoth has filed with US regulators for an initial public offering (IPO) in the wake of its massive growth. Perhaps shareholders can expect to receive their dividends 4 times longer than expected and also need to pay additional “duties” before cashing out.

🚪Shutting Down. More than 1’300 South African businesses have closed down in 2023. Loadshedding, N3 transport disruptions as well as consumers feeling the pinch (or shall we say punch) of elevated petrol and food costs, have all made it harder on businesses.

🛻 Get Trucking. It’s been a busy week for Elon. He not only announced that Cybertruck deliveries would start this week (this could push Tesla’s valuation closer to $1 billion), but he also told us exactly how he feels about advertisers wanting to blackmail him by withdrawing their ad spend (it’s not flattering, we can tell you that much).

💰 Parking the Bag. Ticketless parking company admyt has agreed to the terms for a R30 million investment from REdimension Capital to drive product enhancement, expand the number of admyt-enabled locations and scale its user base.

THE RECAP

AI in the African context

Yesterday was ChatGPT’s 1 year birthday and to celebrate we did an online webinar to discuss how AI can help solve the continent’s biggest problems. In case you missed it, watch our very own Bobby Sequeira, Catherine Lückhoff of 20Fifty and Matt Quatra from Webory talk all things AI and Africa.

BUILDER’S CORNER

How to Set Laser-Focus KPIs (as you Grow)

It’s easy to set and track core KPIs when you start – maybe it's just you and a few founding members. Simple. But keeping that laser focus gets hard when you grow and stuff gets complicated…

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No worries, the good guys over at Midstage Institute developed the concept of retaining only 2 core metrics, no matter how large your business (inspired by Jim Collins’s book Good to Great).

And they make a compelling case using 2 examples from a few years ago:

Facebook has 2 company-wide metrics:
Active users
Engagement time
Google also has 2 across the entire company:
Active users
Clicks

Why? Well, that’s how they make money. Facebook sells advertising based on exposure, so the more people on their platform for longer, the more they can make. Google also sells ads but they get paid more on the click. So the more people click, the better.

Reverse-Engineer it like so

1. Identify your Growth Metric

This is what amplifies your revenue. In Facebook and Google’s case (all ads-based social media actually), active users because they need network effect. In free-to-paid and freemium, for example, this might be the total number of new free users, etc.

2. Pinpoint your Economic Metric

This is the single action that generates revenue – when that free user subs (the upsell) or a user clicks etc. This can usually be tied directly to a monetary value.

3. Use it to scale

What’s cool about this method is that you can use it to simplify KPIs as you grow. Each metric has millions of sub-metrics underneath it that all contribute to making it happen. So you can tie almost any employee’s action to the core metrics.

What’s more: It helps align your team’s focus and can even help you make critical growth decisions – if you can’t tie a new role’s performance directly to your 2 core metrics, maybe you shouldn’t be hiring (paying) a person to do that job.

How do you measure and ensure performance in a growing team? Hit reply and let us know…