Connect Group - Afrikan Heroes

A $242m Acquisition Deal Underway For South African Fintech, Connect Group

November 3, 2021

Net 1 UEPS Technologies, a financial technology business with operations in Africa, Asia, and Europe, has announced the signing of a formal deal to buy Connect Group, a South African competitor, outright. The total value of the transaction is estimated to be roughly 3.7 billion rand ($ 242 million).

This operation reinforces Net1’s ambition to become the leader in the fintech sector in South Africa. The acquisition is expected to close in the first quarter of 2022, as it is subject to regulatory approval and the satisfaction of customary finalization conditions.

“As a standalone business, Connect Group has become one of South Africa’s fastest growing fintech businesses serving MSMEs,” said Steven Heilbron, CEO of the Connect Group. “Having spent a lot of time with the Net1 management team and directors over the last year, I believe that the combined management teams of the Connect Group and Net1 will work very well together. I am very confident that this transaction fast tracks the combined businesses which together, now has the essential and differentiated building blocks required to deliver on the focused objective of being the leading South African fintech platform. We believe that this transaction will create distinct field advantages and will take the group to heights that neither entity would achieve alone,” Steven Heilbron, Connect Group CEO said.

Steven Heilbron, PDG de Connect Group — *Steven Heilbron is the CEO, Connect Group. Credits> Connect Group*

Chris Meyer, CEO of Net1 Group, said it enabled him to expand the customer base of small and medium-sized enterprises (SMEs).

This is the seventh acquisition announcement for a fintech company active in Africa this year, according to data available on the Crunchbase platform. 2021 is thus a record year for fintech acquisitions, since 2002 that information on the sector has been collected. However, the amount of transactions on previous transactions is not known.

“Our vision is to transform Net1 into the leading South African fintech platform, offering payment processing and financial services to underserved merchants and consumers. The acquisition of the Connect Group transforms our merchant offering, MSME footprint and growth trajectory, while also uniquely positioning us to be the South African market leader serving both merchants and consumers,” said Chris Meyer, Group CEO of Net1. “Further, Connect Group advances our mission of financial inclusion by bringing into the Net1 fold a base of 44,000 MSMEs, many of whom are informal businesses. We welcome the Connect Group’s high-caliber team to Net1 and are confident that the combined group will significantly exceed the sum of the parts,” Chris Meyer, Net1 Group CEO

To finance this operation, Net1 will use several types of mechanisms, including debt, the issuance of new shares, and cash compensation. The company immediately realizes a potential positive capital gain, as Connect Group is valued at $315.3 million.

A Look At What Connect Group Does

The Connect Group, which was founded in 2006, is a lucrative, fast-growing, and market-leading provider of financial technology solutions to almost 44,000 micro, small, and medium enterprises (“MSMEs”) in Southern Africa. The Connect Group’s customer base includes over 8,600 formal MSMEs and over 35,000 informal MSMEs as of February 28, 2021.

Under well-known and renowned trademarks, the Connect Group offers four primary product lines to its consumer base:

Kazang is a prepaid value-added services platform; Cash Connect is a digital cash management platform; Capital Connect is a merchant financing platform; and Kazang Pay and Card Connect are merchant acquiring solutions.

Connect Group Acquisition Connect Group Acquisition

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write

How South African SMEs Benefit from Alternative FinTech

June 20, 2021

The lending industry in South Africa is experiencing a major shift, thanks to Data and automation. The country is seeing the emergence of an agile new class of fintech that uses proprietary data and algorithms to vet loan applications within minutes so that retailers can access working capital they need to grow and thrive. This is the submission of Steven Heilbron, CEO of the Connect Group.

Steven Heilbron, CEO of the Connect Group

“Alternative, technology-powered financing solutions are disrupting South Africa’s commercial lending market, especially the retail space and in the process, it is helping thousands of SMEs to navigate the threats and opportunities of a volatile economic landscape during the pandemic,” Heilbron says.

“The cost of capital and having access to business finance has traditionally been a challenge for local retailers, from the family-owned franchise of a major supermarket chain to the independently owned butcher, wholesaler or fast-food outlet,” he continues.

“In addition to high financing costs, lengthy approval processes and paperwork have posed significant obstacles to financing for these businesses.”

Data and Algorithms are Changing the Game

“Now, however, technology is changing this landscape by enabling innovative lenders to approve up to R 2,5 million in funding for a retail business owner in less than 24 hours. What’s more, rather than charging interest rates, they provide finance for a small administration fee.”

Heilbron says that access to rich, online data sources enables these lenders to assess whether a borrower is a credit risk without the usual requirement for audited financial statements and prolonged processing.

From the retailer’s perspective, applying for a loan has become as easy as downloading an app, registering and completing an application form. Once this is done, the borrower can tap between tens of thousands and millions of rand in borrowed funds, to be repaid on flexible terms and in small daily instalments which are deducted straight from a cash vault.

Should the retailer not make use of a cash vault, the borrowed funds can easily be deducted from a bank account. The good news for retailers is that funds can be deposited within hours of loan approval, allowing a merchant to capitalise on the opportunity at hand.

This level of access to financing is helping to transform the retail market by enabling retailers of all sizes to come to market with innovative propositions, Heilbron says.

“Many of our customers have faced complex challenges during the lockdown and have needed to be nimble to adjust to a new trading reality.”

Jumping on Opportunities

“With quick access to capital from [lenders such as] Capital Connect, merchants are able to jump on emerging opportunities while they’re relevant and grow their businesses.”

One example is bulk purchases of stock, where Capital Connect sees retailers make smart purchases at the right price to benefit from bulk buy discounts. Some mid-sized liquor traders, for instance, are now buying products at wholesale prices to resell to smaller bottle stores at a profit.

“Many are investing in expanding into new territories, moving into e-commerce for the first time and improving their in-store experience via coffee shops, hot food counters, bakeries and more.”

“In fact,” Heilbron says, “It’s not unusual to see a retailer grow turnover by 12% or more after refurbishing and modernising their stores. For others, easy access to working capital has simply enabled them to survive the worst of the lockdown.”

“To grow South Africa’s economy and spark job creation, we need to support the small and medium business sector. Providing businesses with capital is one of the best ways to help them unlock their full potential. In doing so, we can help drive choice and competition to the benefit of every South African consumer,” concludes Heilbron.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry