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Lesaka - Building Africa's Leading Fintech as a Publicly Traded Company, with Ali Mazanderani
00:50:47
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- [00:00]
A
The best way to build a business is not necessarily iterating from what is right. It's usually from working back from the future, from what should be successful. Businesses prioritize the customer that you're serving first, then they prioritize the employees that deliver for that customer and then the consequence of that is the benefit from the shareholder. I don't believe in walled garden. This is an Android, not an Apple mindset. I want to maximize the benefit for the society, I want to maximize the interoperability and I want ultimately efficiency and effectiveness to dictate outcomes. I'm always amazed by the further people are away from the customer engagement, the more that they assume price is the defining feature. And it's never price, it's value.
- [00:41]
B
Welcome to Fintech Leaders. I'm Miguel Armaza and over the last six years I've recorded nearly 400 conversations with the top leaders in fintech. I also co founded Gilgamesh ventures, a fintech VC where we've backed almost 50 companies around the world. In this show we extract how the best builders and investors in fintech think, what they've learned, and how you can apply some of these lessons to your own work. If you enjoyed this conversation, I invite you to leave a review on Apple, Spotify or YouTube. I sat down with Ali Mazandarani, Chairman of Lesaka, a publicly traded leading fintech in southern Africa with over 400 million in annual revenue and over 2 million active customers. Ali is a fintech veteran investor and builder who's been involved with some of the leading multi billion dollar fintechs in emerging markets including Stone Pine Labs, Kushki thunes and he's also a co founder of Tea. Ali, thank you, thank you for joining Fintech Leaders. All the way from South Africa, right? When did you land in New York City?
- [01:55]
A
I got into New York on Monday morning.
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B
All right, well thanks for taking time out of your busy schedule to join us, talk to us. We'll talk about your story, but let's start with why is fintech and commerce digitization so interesting in Africa? Specifically Southern Africa, which is more your area of focus. Why is it so interesting right now?
- [02:30]
A
Q1 2026 thank you very much for having me, Miguel. I mean the digitization of commerce is a wonderful theme in that it affects every human whether they're young or old, whether they are poor or wealthy. It's a universal thing as long as humans have engaged with each other for commerce. And the African context is very specific. We have a continent of 1 1/2 billion people it's the youngest continent in the world. The average age is 21. It's going to become increasingly relevant on a global basis just because of the demographic aspect. And in many respects, from a digitization perspective, it's going to be particularly exciting because you're coming from a much lower base. Cash is still a dominant medium of exchange. Even in South Africa, which is the most industrialized and largest economy on the continent. You have about 60% of all transactions which are still conducted in cash. And that's in an environment where cash handling is extremely expensive. And that's despite the fact that almost every adult in the country has a bank account, has a digital store of value. You still have transactions at point of sale, overwhelmingly cash, with more than 90% of all merchants not accepting any digital assets. So it's an enormous opportunity, and it will have a profound impact, I think, on the economic development of the continent.
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B
And you've seen this story in similar fashions in other parts of the world. Maybe share a bit about your story because you've been an investor in the past, now you're an operator, but always focus on this topic.
- [04:19]
A
So I chose the theme because I wanted to dedicate my life to something that met a few criteria. The first thing was I wanted it to be a big arena. And obviously digitization of commerce is an enormous theme for our generation. I think it's one of the defining investment themes of. Of our generation. The second thing is I wanted to be something that was global, that was not specific to one geography, mostly based on the fact that I thought that provided me the best opportunity to cheat, to take the lessons from one environment and to apply it in another. And although markets are not identical, they often rhyme. And so you can pick up themes and benefit from a perspective that others may not have. The third thing I wanted to be good. I wanted to engage in something that was going to create value, that was going to create positive sum outcomes, that it wasn't just a trade. You win, I lose. It was something that would benefit the society, would have positive externalities. And, you know, in the African context, as an example, these things are incredibly powerful because digitizing commerce has an impact on growth. It has an impact on removing cash and so reducing crime in the economies and on facilitating employment. So that was the reason I decided to dedicate myself to the theme. Initially, I was actually born in the States. I was born in Texas, but my parents moved to South Africa when I was young, and I grew up there, and I fell in love with the country. I grew up In a rural part of the country, in the Northeast. I left to go to university in the UK and my first, if you like, major job was as a strategy consultant. But I quickly ended up becoming a private equity investor and I sort of spent all my time as a private equity investor on what became the fintech theme. It was sort of 2007, 2008 dovetailing with the Visa, MasterCard IPO. So it was sort of the birth of what fintech became. And because of my background in emerging markets, I focused on emerging markets. It was great fun. I managed to go to, to many places and through that process was intimately involved in the creation as a private equity investor of several multi billion dollar platforms from Asia, India, Southeast Asia, the Middle East, Latin America, any of the
- [06:41]
B
most interesting markets that you worked in in this regions.
- [06:46]
A
I mean, I loved pretty much every story I was involved with. I was very fortunate. I spent my time with good people doing good things. I had a lot of fun in Brazil. I was a fairly early investor in Stoneco and I was on the board of Stoneco for several years. I very much enjoyed building across Africa, a business that ultimately ended up becoming a material part of what was Network International in the Middle East. I was on the board of, of Network as well, led an investment into Pine Labs in India. I was involved as a material investor at the IPO Fowry in Egypt. So there's really many and probably too many to do justice to in this, but the abiding thing that I took away from that was not how different those stories were, it was actually how similar they were.
- [07:49]
B
Yeah. And as an investor to find all these great companies, what would you say was the most important professional muscle, if you will? Why were you good at your job?
- [08:03]
A
I, I, I wasn't somebody who was waiting for opportunities to come to me. I had a clear idea of what should evolve based on incentive structures, based on efficiencies, and I tried to participate in the creation of those realities. Ultimately, every business is a function of the people who are executing on it, the thesis or the business opportunity that they are executing against and then the capital to fulfill those. And I was the provider of that capital. So ultimately what I was doing was I was trying to understand the business opportunities and then looking for the people who are executing against it and who are most likely to lead. And then the rest is putting in the oven and applying some heat.
- [08:50]
B
Now that you're on the operator side, what is it that you look for in shareholders, investors that you would like to join, a supporter Right. Kind of. A lot of. A lot of founders, they go on to build a venture firm. They say, I'm building the investment firm. I wish I had. You've kind of done the other way around, right? You've been an investor, now you're an operator. From what you saw from the investing firm, what is it that you want others to bring?
- [09:24]
A
So, I mean, the first business that I co founded was a business in Europe called Taya, which I co founded with my partners who were the founders of Stoneco in Brazil. And the initial seed capital was provided by us. And I suppose when we started the business, the main reason why I wanted to be, as you say, operational was because my real joy was in building businesses. When I was investing out of closed end funds, there was obviously a life cycle. You have to turn the capital and you're always one step removed, I suppose, from the coal face. And if this is a generational theme, that will compound. I often say the digitization of commerce is. It's like with electricity. Although the first use case may have been illumination, many use cases come subsequently. It may be authorization and settlement of a payment, but ultimately the data flow, the consequences of that digitization is going to be a far more profound thing than just the payments. I think that the initial instance of what I was looking for in shareholders was people who also had a joy in the arena. I do think that in the early stages of when you're building something, if there's not a passion for what is being done, you come at the equation in a slightly different way. Because I think the successful businesses don't prioritize the shareholder. Successful businesses prioritize the consumer, the customer that you're serving first. Then they prioritize the employees that deliver for that customer. And then the consequence of that is the benefit from the shareholder. And so the best investors should have the wisdom to understand that reality and have the patience and the empathy and the appreciation that their benefit is likely to be maximized if the operators in the business are prioritizing first the end customer and the employees who are delivering at it. And ultimately their benefit will be a consequence of that, rather than that they should be engaged with as the principal stakeholder in the creation of a successful business.
- [11:40]
B
Something I like about the theme, the digitization of commerce, which in my mind, that is fintech, right? In many ways is that traditionally you hear about how infrastructure, roads, ports, railways, project finance, essentially that enabled obviously commerce. This is just the next iteration of that. It's just as, if not more important to me, it's it's that, it's more, more of that. So let's, let's talk a bit about kind of your, your operating role these days. Right. What's the story of Lasaka, which is a publicly traded startup if you will.
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A
There's a nice wedge coming. Yes. I mean Lusaka is effectively a four year old business. It's today by most metrics the leading fintech in southern Africa. It's a business with about 4,000 employees. It makes roughly speaking $400 million of revenue. It's profitable business. We're guiding the market to sort of an EBITDA growth of north of 50% year on year. It's sort of circa $70 million of EBITDA and 100% year on year growth in the EPS. So it's a very exciting platform. It's a growth story and it's a, it's a, it's a business that operates in three segments which are sort of mutually reinforcing. A consumer business which is effectively a near bank that provides transactional banking, credit and insurance to consumers. In South Africa we have about 2 million active customers. It has a, a merchant business which has about 120,000 merchants where we offer merchant acquiring alternative digital payment acceptance software, credit and, and cash management and has an enterprise business which is effectively the technology infrastructure that supports the other two and is also provided to third parties.
- [13:42]
B
Why pursue all this within a publicly traded structure?
- [13:47]
A
So the sort of like reasons why people might not want to pursue it within the publicly listed structure I don't think really applies. So the one reason that I often hear is the short termism you're required to react to a quarterly market cycle. We have a business that manages the executives on own a material portion of. I think we've been clear in terms of where we're going and I don't feel that we need to make decisions for the short term that jeopardizes our long term objectives which are ambitious. The, the other thing is that people don't like the frequency of engagement with the market or maybe the cost associated with that. But people may also not like going to gym or other things that create discipline, that create muscle. I find that the, the requirements to communicate and look at the business on a regular basis. While it can create friction if you don't manage it well. Just like you know going to the gym can be a pain in a time sink. If you do it well, it creates muscle, it creates discipline and you can, it can be a very beneficial thing for the company. You don't have the ability to ignore things because they emerge with a high frequency. And then you also have the capacity to really be audited in a different way. You can point and there's nowhere to hide. You know, we've delivered on our guidance now for three years, consecutively every quarter. That creates a track record of credibility which is enormously valuable. And being in a public market environment is I think still to this day the ultimate end goal aspiration of most businesses in order to create liquidity for shareholders. So if I'm already in that environment, I don't feel a need to come out of it, to go back to it for any specific purpose. Even the large private fintech businesses would, I think generally be reticent to say that they'll never be public. They may say that they will delay the moment in which they would ultimately get there. Really it's less clear to me why the burden of proof should be why not as should be why as to why not.
- [16:03]
B
Do you recommend more founders do it then?
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A
So it depends on where you're sitting. I inherited a position in a publicly listed business. We took over basically a structure. So if you're not public, there has to be, I think, a good reason to be public. But if you are public, there has to be a good reason not to be. So would I recommend it. I've run public and private businesses. I think they have different flavors. I don't think it's clear. Do you prefer football or hockey? Each one has a joy, has a value, has the rules of the game. I've personally enjoyed it because it was an experience I didn't have before.
- [16:45]
B
It also specifically for Africa, it addresses the concern head on of a lot of investors to go into African investing for tech, that IPOs are scars and there's no, you know, not much, not that many liquidity events. Right for you. That's already, that question has been answered. You already are.
- [17:11]
A
I think that's a, that is a important thing. The other more important thing is, you know, the, the actual process of taking a business in Africa public does not have a great track record. Right. There's a lot of examples of businesses that went public and disappointed. So if you grow up in that public environment, if you like, if you undress in public, you have a lot more credibility at scale. So I believe that you can, you can build a multi billion dollar business without the disconnect of the event.
- [17:37]
B
What markets, what countries is Lysaka operating in?
- [17:41]
A
So we currently have operations in half a dozen African countries. We're focused predominantly on the south and east anglophone countries. So South Africa, Botswana, Namibia, Zambia, Kenya are all geographies that we're focused on today and we will expand into neighboring geographies over time as well.
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B
Can you paint a picture for us of kind of the state of Parash services of fintech e commerce in those markets?
- [18:12]
A
So the first thing is we're addressing today the sort of the countries that we operate in and adjacency roughly speaking at 250 million population. So a bit bigger than Brazil as a population but as I mentioned earlier, it's still largely cash economies. However, as I also mentioned, you have good penetration of, of accounts. The, the thing that is I suppose particular is the fintech disruption that has occurred at scale in the US and the UK and in other emerging markets like Brazil and even in Africa like Egypt has not had the same impact relatively speaking in South Africa. There's a few reasons for that and I'll give two sort of measures of how it hasn't had the same impact. When I, when I started investing in fintech as a private equity investor, the acceptance volumes globally that was happening in traditional banks was you know, 99% of the total totality. Today it's less than half right. So there's been an enormous disruption and when I was doing it in financial services were obviously overwhelmingly dominated by the traditional banks in those markets. Today if you go to, you know, Brazil, the market cap of the largest four FinTechs is 30% of the market cap of the largest four banks. If you did the same in Egypt, the market cap of the largest four, Finex would be 30% of the market cap of the largest four banks. In South Africa that's not the case. The equivalency would be 5%. And in South Africa, even though acceptance volumes that have occurred outside of the traditional banking environment have gone from 100%, they've only gone to 90. So you still have a lot of Runway not just in the digitization of moving from cash to electronic payments, but also in the evolution of the scale and relevance of the fintech businesses. Because the tam of these markets is non trivial. South African banks have exceptionally good roes. They are also material in size. You got a big profit pool that you can disrupt, but in addition to having a big profit pool that you can disrupt, you still have the tailwinds of digitization and decashing of that society. So I very much like the, the intersection of those two things and I don't think that Lusaka will be the only winner. I think that like what happened in Brazil, you're going to get multiple businesses that are going to succeed. I think, I hope that that is also the case because frankly it'll be good for the business. And you know, the main reason I think why the opportunity hasn't realized the same speed is, is because there was two or three things that slowed down that process. The first one was the regulatory landscape was not as conducive. The regulators prioritized stability over innovation but have recognized what's happened in India and Brazil as a consequence and Toho are proactively engaging with changing that. The second reason is in order to crystallize this reality capital has to flow. As I said, you needed to have that environment and the economies were not the flavor of the season. South Africa has had a very good last year or so. You've had inflation coming down, you've had debt to GDP stabilizing, you've had acceleration in growth. The Rand has strengthened, you've got an upgrade in the ratings. It's a good moment. We haven't had that in years gone by. And so capital has been relatively scarce investing in growth, people have typically invested in defensive stock. It's not been a core arena. And the third one I would say was that of the three things the people, the energy and the effort of people who knew what they were doing focusing on this wasn't there at scale. And one of the things I'm proudest of in the Lusaka business is the quality of the individuals who are addressing this opportunity. We have a team that includes the ex CEOs of two of the largest banks who have built multibillion dollar businesses in the past. We have a guy who ran the Starlink business in Africa and Uber Africa before we've got leaders from across the sort of Neo bank and nutritional bank space. So the combination of those people, the capital I think will make the opportunity be realized.
- [22:39]
B
And you're not afraid to grow via acquisition. You're growing organically. I know but you just close this, this I believe major acquisition for L which is Bank Zero and I read your piece talking about why and a little bit of the history of Bank Zero but maybe share the strategy behind it.
- [23:04]
A
So the transaction hasn't yet closed but I expect it to close relatively soon. Bank Zero is a neobank in the country. We are a fintech that has subsidiaries that are regulated in insurance and in credit provisioning. But our banking proposition we require a bank sponsor for today. The acquisition of Bank Zero will negate that requirement. It has multiple quite profound effects on the business, the one is just in terms of the balance sheet today when we provide credit to our consumers or our merchants, we have to do so either with our own equity or with bank funding lines, which is obviously very expensive. Being able to use the bank and the deposit of the bank materially reduces the gross debt that the business has and materially reduces the cost of credit for us. So that has a substantive consequence, indeed the purchase price for the bank is less. Then the amount of gross debt will be reduced as a consequence of buying it. So will be EPS accretive from the get go because the bank is pretty much break even. The second thing is we can then provide a full range of banking services not just to our consumers but also to our merchants. And we can also make those banking services available to other third party FinTechs as an enabler. Because historically I talked about the regulation that was required. Most activities required a bank gatekeeper and obviously the traditional banks were reticent to enable the fintech ecosystem to compete with them and ultimately to disintermediate them.
- [24:42]
B
So that becomes yet a new business line.
- [24:46]
A
Yes, and I think a material business line. We already effectively have the principle associated with that within our enterprise business. Where I don't believe in a walled garden. This is an Android, not an Apple mindset. I want to maximize the benefit for the society. I want to maximize the interoperability and I want ultimately efficiency and effectiveness to dictate outcomes. I believe that we have the capability to win that race. I don't want to have an unfair advantage in that structure because ultimately when you do that, you create the bigger pie and I'm fighting to grow the pie. Not a small share of a miserable profit pool.
- [25:21]
B
Related to this is also the concept that you have written about. I think we've talked about it in the past. Also the concept of innovation and new technology alone is not enough to disrupt a market. You also need to marry it with really good distribution. Right. And this is goes hand in hand, right, with this acquisition.
- [25:46]
A
Yeah, I mean, so I think, you know, Bank Zero is a digital bank. It has a complete digital onboarding process. And I don't believe that that is sufficient. It's necessary, but it's not sufficient in order to achieve the outcomes that we want. As Lusaka, we have almost half of our employees, our frontline employees, field force employees are engaging directly with consumers and merchants to onboard and service them. They do so being able to deliver instantaneous digital products at the point of engagement. But that engagement is very necessary and it provides us with a competitive advantage over others. I mean, to make it tangible for you. It's the difference between somebody being required to get into a taxi in a rural part of the country, travel an hour to the closest point of presence that they have from a traditional financial services business and pay maybe up to 5% of the deposits that they get monthly in their account in order to withdraw cash from that or be serviced. If you can create an economic model where you can service those customers directly by going to them, by being where they are, and that is the strap line of Lusaka. It's where you are, then you can really disrupt the business. And I think that distribution is one of the three key things that is a global theme that I've seen across the world that has differentiated the winners from the losers in the fintech space. I mean, I fundamentally believe that whatever I've done has had those three things at its heart. It's distribution, doing it differently from the traditional. This is not a branch based game. This is, you have to think differently about how you get to your customer. Sometimes it can be digital channels, sometimes it's physical channels. It depends on the specifics of the dynamics and the product. But it's about changing the mindset of how you serve the customer and you serve them on their terms, how they want to be served, putting the customer first. The second one which is often talked about is obviously technology is, you know, engaging and the acceleration of the advantage of adopting new tools and technologies is obviously much more relevant now with what's happened with AI over the last couple of years. But it's always been thus that if you have legacy, it doesn't just have a cost consequence, it has a product and a feature consequence. And the third one, which I think is just as important, important, but is often under represented, is about vested interests and protecting profit pools. So when you have an incumbent, what you typically do is you empower the individuals mostly who are operating with the biggest profitables because that's the nature of how decision making and power structures work. But the best way to build a business is not necessarily iterating from what is right. It's usually from working back from the future, from what should be. And so if you don't have those structural disadvantages, if you have the capacity to say, okay, how do I set ourselves up to deliver against what should be? What I'm not trying to do is defend what is and evolve what is. And so that decision making paralysis within traditional banks is actually probably one of the biggest advantages, structural advantages, Fintech SAP I think a lot of incumbents are structurally disadvantaged to take the initiative in this digitization journey, which is why fintech businesses have blossomed in the way that they have.
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B
Does that become even worse for incumbents in this age of AI?
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A
I think that it could be worse. It takes a very brave executive of a large existing financial services business to taste also one who's very strong, who has a long time horizon, who's willing to cannibalize existing profit pools, who has the credibility of the market to communicate that in order to compete in that respect, there are certain advantages that can exist around scale, you know, creating moats. But if you were to ask me in general terms, I definitely think that AI accelerates the tools available to insurgents and disruptors relative to empowering and supporting incumbents.
- [30:22]
B
CalPERS understand, you know, underneath the hood. How do you get this all done? What's the organizational structure that you've come to build the company? You know, how is it structured? Like a, like a regular bank where you have products and you have GMs or different products? Or is there, is there something different?
- [30:44]
A
No, I. The. The primary access of organizational structure is around the customer and around customer segments. I don't think that the winning business is a monoline product business. And a large part of our success will be defined by the attachment rates of multiple products and building relationships with customers, whether they be consumers or merchants, rather than selling a product to those customers. That obviously has a consequence for your ltv, it has a consequence for your churn rate, especially if you're able to leverage the same distribution channel for multiple products. So I think in every business there are choices in how you organize yourself. And there's always going to be more than one dimension of organization for successful scale businesses across multiple geographies and multiple products. But it's about the primacy of access. So the primary access is we have a consumer business that is run by CEO of that consumer business, merchant business run by the CEO of that merchant business and an enterprise business. And they build their business around delivering for those specific customers within those businesses. There are different product offerings, but I look more to the ARPU per customer as the primary access and the segments of those customers than the ARPU per product, which is obviously a contributing factor to that because the cross sell is so relevant, the attachment rate is so relevant. And you will, I think, reinforce your economics if you build around what that customer needs from adjacencies rather than trying to find new customer segments for your products.
- [32:19]
B
From your point of view, given where the company is today. What is one metric, maybe two metrics that you track obsessively?
- [32:28]
A
Because I'm in a publicly listed environment and we are now a profitable business, I've been pointing the market obviously to the eps, the adjusted, so the core EPS of the business. But from a sort of a KPI perspective, the ARPU that we generate per active customer, whether it's on the merchant or the consumer side, is the most relevant single metric. And the take rate that we effectively generate on the volumes, obviously leading indicators of that would include things like your nps. You have to have capital allocation hygiene. You want to make sure that your payback is within the required trades, you want to ensure that you minimize your churn, the usual things. But if you were to force me to articulate at this particular juncture what is the thing that I'm managing most, it's the growth in the active customer base and the growth in the arpu. And as you get increasingly mature and increasing competitive markets, most observers work on the assumption that what will happen is that that ARPU will decline. And I work on the assumption that that's not the case because that only is the case if you're operating in a zero sum game, if you're operating with a constrained pie. But we work to provide our customers with more things that they need that facilitate that. So you know, in our consumer business, we have grown our customer numbers at the same time as we've grown our arpu. And that's largely a function of cross sell, but it's also a function of our customers recognizing value and having a greater willingness to pay. I'm always amazed by the further people are away from the customer engagement, the more that they assume price is the defining feature of decisioning. And it's never price, it's value. The greatest example I have again in our consumer business is we have a competitor in a segment that's subsidized by the government where the price of a transactional account is free, yet customers are leaving their drove to join us. We have the largest growth in the low, what's called low LSM segments in South Africa of any provider bigger than any of the banks. And it's not because we're the cheapest, it's because we provide the greatest value. And we can expand that ARPU because our customers are engaging increasingly with different propositions and products. And a lot of our competitors do not provide those products because they're product centric in their mindset rather than customer centric and asking the question what is the Other things that this customer needs.
- [35:16]
B
I mean in the U.S. you or anywhere in the world, you have the U.S. postal Service, yet FedEx and UPS still exist. Right? Okay, so that's, that's on the ARPU, the cross sell, of course, providing great value. How about on the active customer?
- [35:34]
A
What have you learned?
- [35:36]
B
What are the main drivers to help grow that, that KPI?
- [35:41]
A
It's, it's different on the consumer versus the merchant segment. As I said in the case of consumers, almost all consumers are already engaged with a digital product. So you're demonstrating value relative to competitors, if you like, relative to traditional banks, which is about the offering that you provide and the value that you provide. In the case of the merchant business is a bit different. You know, 90%. Register that for a moment. 90% of all merchants in South Africa, South Africa and obviously the rest of Africa don't accept a digital payment. I mean that's an extraordinary thing. 90 and that's the central bank's data. So you have to understand the why they don't accept it. It is because you need to create an environment in which digital payments are, in their own mind, a cash equivalency. So the first thing is they will largely not buy the argument that cash is more expensive, even though for the ecosystem and the economy as a whole, it may well be. But they will view cash as providing two features which an electronic payment may not be providing from a traditional bank. The first feature is instantaneous cash is immediate. I get the cash, I can use it. Whereas a digital payment may well be T +1, T +2, T +3. What if it's a weekend? What if it's public holiday? You may end up with four days. And for small traders open, you know, operating in rural areas, a local convenience store, the ROI calculator in their brain is better than that from an investment banker. Right. They really understand the value, the time value of money. And so if it's not instantaneous, it's a problem. Again, this is where I ask the question. The traditional banks have the structural disadvantage. Well, I mean in order to provide an instant solution, you really should be in a stablecoin environment, right? On a chain environment because then you don't rely on banking hours. So we are pioneering Zar based stablecoin and I think it's going to be a very, very important feature of the retail transactional landscape. Not just in the cross border environment, but actually in a retail environment. So you need to create instantaneous settlement. We are one of the only players in the country that provide instantaneous settlement on acceptance of a Visa MasterCard for that return. But then it's not enough for there to be an electronic store of value in their wallet. They need to be able to use that electronic store value. So traditionally, what would happen is, let's say I'm a convenience store owner and I'm buying bread, or I'm buying milk, or I'm buying from Coca Cola or from P and G or Unilever consumer goods, whatever it is. What would happen is physically, a truck would do the rounds and they would get cash and they would deliver their product. And then likely at the end of the road, they'd be hijacked and somebody would take the cash. But the point is that the merchant had the experience of providing cash to these customers. So what we did was we contracted with suppliers across the country so that the merchant, when they have their own wallet from acceptance, can then utilize it to pay those suppliers. And if you were to do that to the traditional banking rails, the banks are charging them. So for the banks to participate in that, they'll be cannibalizing their existing core banking revenue, and they can't do it for one segment versus another. It's very, very challenging. But for us, it's creating that efficiency and it's enabling that merchant now to accept those payments, and we can benefit and financially do it effectively. So to sort of answer the question of what drives that arpu, it's creating the use cases for that customer where they have value. And in the case of that merchant business, for example, if you have merchant acquiring as a proposition, you're engaging with the supplier payments for that merchant, you can potentially now provide credit to that merchant to pay their supplies in a way that creates a virtuous circle. But you also create an opportunity for that merchant, because they have a digital wallet to purchase digital prepaid goods, whether that be electricity, data, air time, or other things that customers who come there want to buy that they can make margin from. So if you looked at our merchant business, almost half of them are not a single product sell. And very, very few of our merchants are just engaging with acquiring as a product. They're usually engaging with alternative digital payments, the ability to provide these services as well as acquiring. So the story on how you evolve that ARPU is you evolve that ARPU by providing multiple product offerings. And you've defrayed most of your fixed cost of engagement and delivery already. So you should be able to expand that ARPU in that construct over time.
- [40:11]
B
India had upi, Brazil picks. Will there be an equivalent that can push the market even more.
- [40:19]
A
South Africa, the South African Central Bank SAAB has been promoting something called payshap, which is effectively a response to that, the recognition of what happened in Brazil and India. But the dynamics are different and the way that they are executing on it is different. Whether it will be a material contributor to the digitization, I think they have to engage with it slightly differently in order for it to be so. I hope so. I'm, for me, we are agnostic to the store of value. We are agnostic to whether this is a Visa MasterCard transaction, this is a crypto transaction, this is a loyalty points transaction, this is an account. What I want to do is I want to serve the merchants problem. I want to facilitate the consumer's engagement and create efficiencies. Ultimately, using your analogy of physical infrastructure, I think that the digital infrastructure works in the same way. We in the merchant business are the port. We need to reconcile, settle, simplify that merchant's life, irrespective. Anything that digitizes improves that. So I hope so. There's not any material traction yet to demonstrate that we're at that inflection point. And the reason for that is, as I say, just go back to the first problem. 90% of merchants don't accept a digital store of value full stop. So the process of evolving that requires a different level of focus on, on, on, on, on expanding the digital footprint for merchants.
- [41:51]
B
Is the informal economy as big a barrier as some would imagine it?
- [41:58]
A
I mean, I don't know. I, I, I think the informal economy is an enormous opportunity. A lot of our merchants would be classified, if you like, as participants in, in that economy. I'm not really sure what, what sort of differentiates the formal economy from the informal economy. In many contexts it's effectively a sole trader world, but in many parts of the country they are the backbone of the commerce. And we've demonstrated that you can very profitably service them to the benefit not just of themselves, but also of the communities in which they operate in.
- [42:36]
B
When you look at the global landscape of our industry, and you know it well, what are some companies that you, you regard as North Star for where you want to get with Lasaka, you
- [42:53]
A
always want to do better and more than you've done before. So I want Lusaka to be the North Star. I want us to be a reference and I truly believe that we have the opportunity to, to do so. I mean, I'll come back to the question, but just as a slight segue. The biggest business in Africa by Many metrics today is a business called Naspers Naspers sort of market cap, which is hugely defined by its investment in tencent a few decades ago. So a South African business invested in the digitization of commerce in China and evolved as amongst the largest businesses on the continent. I'm a firm believer that the largest businesses on the African continent, which has a similar population to China slightly more today and I think bears some of the demographic similarities of China in decades past, will be a business that isn't investing in the digitization of China, but is investing in the digitization of Africa. And that is, is part of the Lusaka narrative. So the ambition is to do something profound and great. And so the ambition is not just to be an example in the South African context, but be an example in the global context. Now in achieving that, right now we are a small business. We're a $400 million market cap business as we sit today and we have a lot to learn. So there are many, many businesses that I look to in the constellation of success and many, many businesses that I admire, including businesses that I've participated in, including businesses that I've competed with. But I, I think we will lose our way if we steer to a North Star. We need to steer to the constellation. And there are different businesses and different economies that have done things that I admire hugely. I think it's easier maybe to pick a country and pick a segment and then I can answer the question.
- [44:47]
B
If I was to visit South Africa next month, what are some things that you would recommend I do? Maybe not so business related, just in general.
- [44:58]
A
It's such an amazing country. I mean it's a world of different places to visit. Obviously in the Cape you have a beautiful city. In Cape Town you have the mountains. There you have the Winelands, which which to my mind are amongst the most attractive in the world. And you have the beaches not just in the Cape, but also in Natal, which looks out onto the Indian Ocean. You have obviously the wildlife, right? You have the parks, the game, our farms. Then you have the vibrancies of the cities, you have the open expenses. The country is an amazing place. The tourism strap line is alive with possibilities and it's a great joy for me to be back there. There's also a joy in the people. It's a much more diverse society than I think people realize, with segments from all over the world, not just on the African continent. And there is a harmony in its engagement that is not necessarily obvious from people outside of the country. There's also a dynamism and a youth. And right now you'd be joining it at a time where there is an optimistic moment.
- [46:15]
B
How is that diversity and that harmony within the country influenced the culture of Le Seca?
- [46:24]
A
So, I mean, our business is a very diverse business. You know, we have a demographic representation that is a mirror of that society, partly because also we want to be serving our customers in the communities in which they are. And the best way to service your customers in the communities in which you are is with people from those communities. So I treasure that aspect of the business. But, you know, it's not that when you bring people from many different places together, you're not going to get conflict and discord. It's not that you're not going to get misunderstandings. The issue is not whether those things emerge. It's the empathy and the respect that people pay to each other and what they take from it that matters the most. So I don't have an issue with there being misunderstandings. I have an issue where they're not being respect and appreciation for where the other comes from. And you quickly learn about a culture of business where there's going to be successful at servicing customers, if people are able to achieve that. Because ultimately in. In order to be servicing customers effectively, you need to be servicing them with empathy. If there's a single thing that I want the company to imbibe, it's that authenticity of engagement. It's very difficult to fake authenticity. And in the world that we're in, where increasingly the sort of the threshold of success is going to be about your capability to engage with digital tools, to adapt to AI, the businesses which marry that with human authenticity will be the ones which will captivate. You cannot succeed without the tools of today. You will lose, you will fail. But the ones who utilize those tools with an authentic and a human interface, who are able to captivate emotion as well as efficiency, will be the ones that will have a differential position.
- [48:30]
B
And if your brand speaks to that, it's very hard to replicate and compete against.
- [48:39]
A
I think that is absolutely the case. I mean, we are still, no matter how rational, the tools we use, irrational utilizers of those tools.
- [48:50]
B
Yeah, yeah, that. I think that's. That should be reminded more often to this doomsday or especially when I was talking about AI before I let you go as. As you can see, I love to read. I think 100% of these books have been recommendations from guests. The latest one being Medici money from my colleague. Any book recommendations, any books that you've particularly enjoyed recently or very much in the past.
- [49:24]
A
Many I love to read as well. I'm particularly fond of economic history and I think there's a lot of lessons in that. And one of the sort of cornerstone books that frame divergent economic outcomes of humanity is the Guns Gems and Steelbook. If you haven't read it, I think it's a fantastic book. So I was recently reading that. I was rereading it actually, but I was reminded by how profound it is.
- [49:53]
B
I want to pick that one up. My co founder also talks about it. Great. Well, Ali, this is fascinating. Thank you. I hope I can visit South Africa and not just talk about it. Never been, but that would be a dream if I can go in the near future.
- [50:11]
A
But they would love to host you.
- [50:12]
B
Thank you. Thank you. That means a lot. I'm so glad we did this and I'm excited for people to learn more about Lesaka and about you.
- [50:21]
A
Thank you so much. Thank you.
- [50:23]
B
All right, thanks for tuning in. I hope you enjoyed this great episode with Ali from Le Seca. If you want more interviews, please subscribe, follow and leave a review on Apple, Spotify, YouTube or whatever. You get the shows. It helps and truly means a lot. If you have any suggestions or thoughts about the show, just drop me a line on LinkedIn or email. See you next time.