The Unlikely Fintech Breakthrough Of Africa’s Biggest Clothing Retailer Rocked By Dispute
The unlikely thriving fintech arm of Africa’s biggest clothing retailer has investors clashing in a dispute over governance that threatens to overshadow a strategic pivot into financial services.
Pepkor Holdings, the owner of the Pep and Ackermans discount chains, has built a fintech business that is growing far faster than its core retail operations. Revenue from the fintech segment jumped 25.4% to ZAR 4.8 B (~USD 290 M) in the quarter to December, while financial services revenue surged 47.6% to ZAR 2.4 B (USD 144 M). For a company known for selling affordable clothing to millions of low-income shoppers, the numbers are striking. Credit sales now account for 18% of total group sales, up from 16% a year earlier.
That growth explains why Pepkor in July agreed to combine its Flash subsidiary, a payments platform serving 170,000 informal traders, with rival Shop2Shop, which has more than 210,000 users. The deal creates a fintech company valued at about ZAR 21 B (USD 1.3 B), with Pepkor holding a 57.1% stake. Pepkor says the combination will expand its payments, lending and merchant-commerce operations and broaden distribution for a planned digital bank it aims to launch in April 2027.
But the transaction has exposed a governance rift. Some directors voted against the deal, and a top 30 investor, Aeon Investment Management, says shareholders should have voted on a transaction where Pepkor Chief Executive Officer Pieter Erasmus also has a financial interest. Erasmus held a minority position in Shop2Shop before the deal and will own a 13.2% stake in the combined entity, valued at about ZAR 2.8 B (USD 169 M) based on the transaction’s implied valuation.
The transaction does not require shareholder approval under Johannesburg Stock Exchange rules because it falls below the threshold for a related-party transaction. Erasmus recused himself from board deliberations, according to Pepkor.
Even so, seeking shareholders’ views would have demonstrated better corporate governance, according to Asief Mohammed, chief executive officer of Aeon, which holds a 0.4% stake in Pepkor. “It would have gone down better had they done it,” Mohammed said. “Seeking shareholder approval would have been good governance”.
Pepkor says it obtained independent valuations of both businesses and a voluntary independent fair-and-reasonable opinion. The retailer declined to disclose how many directors voted in favour of the deal, citing the confidentiality of board proceedings.
The dispute comes as Pepkor’s shares have dropped 31% this year, compared with a 25% decline on the eight-member FTSE/JSE Retailers Index. The governance concerns also arrive as the company pushes deeper into financial services to find growth beyond its core discount retail operations, a strategy that has delivered tangible results but now faces heightened scrutiny over board process and shareholder rights.
The planned listing of the combined fintech business, provisionally called FintechCo, in the medium term adds another layer of complexity. Pepkor is betting that its informal market platform and merchant network can become a standalone fintech powerhouse. Whether investors will reward that bet depends partly on how the company manages the governance questions the deal has raised.
