Kazang takes the lead in digital transformation in Southern Africa's informal market

Southern Africa’s informal trading market has seen an exponential rise in digital transactions since the lockdowns of the COVID-19 pandemic, with merchants embracing digital payments and acceptance as a means of embracing efficiencies, serving their customers, and growing their businesses. 

This, in turn, has helped to drive financial inclusion and access to key products and services for consumers in townships, peri-urban regions and rural areas.  That’s according to Martin Wright, CEO of Kazang, the prepaid value-added services (VAS) and card acquiring business within JSE-listed fintech Lesaka Technologies. 

Creating access for the excluded 

He emphasizes that empowering merchants is pivotal in enhancing accessibility to financial services and digital offerings within the informal market. While this segment was traditionally hesitant towards adopting card and digital payment methods, there has been a notable shift in recent years.

Kazang, renowned for its expertise in providing prepaid value-added services (VAS) tailored for the informal market, is spearheading the digitalization efforts within South Africa’s informal sector. The company facilitates merchants in offering various VAS, including prepaid electricity, airtime, data, DSTV subscriptions, bill payments, and sports betting. Merchants receive comprehensive support through face-to-face onboarding and training for all VAS products.

With a vast network comprising over 100,000 merchants, Kazang is uniquely positioned to assist informal traders in embracing digital payment acceptance and managing supplier payments. Over the past four years, Kazang has enabled 57,000 informal traders across South Africa to accept card payments and conduct card withdrawals directly at the point of sale through its Kazang Pay card acquiring solution.

From nought to R840 million 

Since the launch of Kazang Pay roughy 2.5 years ago, Kazang has seen a large transition from cash transactions to card transactions. The majority of these transactions are from Debit Cards.

One of the key success factors is that it has become more affordable for merchants to accept card payments, with low acceptance fees as well as free terminal hardware with no monthly rental for those that meet a modest transaction threshold each month. Merchants receive training in how to use the Kazang device to accept card payments.   

Another secret of Kazang’s success lies in the merchant wallet linked to the card terminal. Card transactions are instantly settled in the wallet, then merchants can use these funds immediately to pay around 600 FMCG suppliers. This  reduces the security risks associated with cash delivery and merchants have working capital for purposes such as stock purchases. 

“Our differentiator in the fintech arena is the breadth of our platform,” says Wright. “Not only do we enable card acceptance and supplier payments solutions that streamline transactions, we enable our merchants to offer a complete suite of VAS to their customers. We have effectively put 57,000 ATMs in the market with Kazang Pay, allowing people to conveniently draw money from a nearby merchant.  

“Consumers don’t have to travel or draw money to buy the data they need to look for a job or support their child’s online learning, pay for their DSTV subscription and electricity, or buy a lottery ticket. From the merchant perspective, we can also support larger traders with financing and cash vault services from our sister company, Connect Group.”

Rewards platform accelerates growth  

Innovation and enhancing value for merchants remain at the forefront of Kazang’s priorities. Recently, the company introduced a rewards platform on the Kazang device, aimed at incentivizing merchants to expand their businesses with Kazang and its partners.

This platform enables Kazang’s supplier and product partners to engage with merchants directly, offering rewards and incentives based on various factors such as purchase behavior, merchandising, surveys, competitions, and general promotions. Since its launch on February 1st of this year, over a third of Kazang’s merchants have enrolled, with 30,000 offers already claimed.

In March, Lesaka finalized the acquisition of Touchsides, a data analytics and merchant services firm acquired from Heineken International. This acquisition significantly broadens Kazang’s presence in the tavern industry within South Africa’s informal market, while also opening up avenues for revenue through data monetization.

According to Wright, digitizing the informal economy is crucial for enhancing financial inclusion and fostering the growth of microbusinesses in southern Africa. By assisting small merchants in better serving their customers and providing easier access to essential services, Kazang aims to drive prosperity within this market segment, thus contributing to economic growth in South Africa.