Mergence Group diversifies, enters emerging market fintech space

The Mergence Group, best known for its main subsidiary, the R34-billion Mergence Investment Managers, has acquired for an undisclosed amount an initial 26% stake in 2Engage, a disruptive fintech company founded in 2010. Mergence has the option to acquire further equity in 2Engage in due course.

Andrew Weinberg, managing director of 2Engage, was recently voted 2019 Entrepreneur of the Year in the Sanlam and Business/partners awards.

Under the consumer brand “bonsella®”, 2Engage subsidiary Retail Engage runs South Africa’s largest digital rewards and loyalty programme in the independent retail market targeting over 10 million LSM 3-7 consumers in the peri-urban and informal “main market”, currently shopping at over 1,000 independent second-tier outlets nationwide and representing some 60% of South Africa’s economically active consumer base.

By signing up for a free bonsella® card, consumers benefit from in-store promotions and get instant airtime on their mobile phones. To date the bonsella® programme has grown to 1,2 million members, growing at an average of 2,500 new members daily. The intention is to rapidly expand into further stores not only in retail but also in spazas, liquor stores and taverns.

Participating stores realise increased sales revenue and increases in average basket size and foot traffic, while brands achieve an average 40% increase in product sales per campaign.

The Retail Engage turnkey solution, comprising a unique set of cloud-based technology and methodologies, can easily be white-labelled and the model tailored and rapidly deployed across multiple industries and global markets to drive desired behaviour.

The company has already expanded its pan-African footprint to Nigeria, Ghana, Kenya, Uganda, Zambia, Angola, Tanzania, with Mozambique, Botswana and Namibia launching in Q1 2020. Though Mergence’s international fintech partners, the footprint will be expanded into other emerging markets such as South America and Asia.

Masimo a badimo Magerman, Mergence Group MD, said the disruptive fintech acquisition fits into the Mergence group’s aspirations for pan-African and international growth. He said the 2Engage model feeds into the leapfrogging technology trend in Africa where mobile telephony is the enabler of most financial transactions. There is also immediate potential for 2Engage to leverage off Mergence’s financial services platform to offer bonsellsa® gold card customers added value services and financial services products.

“Retail brands are approaching Retail Engage on a weekly basis to exploit POPI opt-in compliant data mining opportunities as Retail Engage is one of the only local companies with detailed insights and data on the mass consumer market. A clear example is our current programme to tap into the 35,000 tavern/shebeen network with a loyalty programme”, said Mr Magerman.

He said as a result of acquisitions by Mergence over the past year (see Notes to Editors), the company could be described as substantially a financial services group with infrastructural/industrial manufacturing and fintech exposure.

Regarding the Mergence group’s industrial manufacturing acquisitions over the past year, the company will tap into opportunities within the $108 billion deficit in infrastructure spend in Africa, particularly in the automotive, renewable energy and rail sectors where local content and B-BEEE credentials count. The strategy has an Sub Saharan focus and Mergence is actively developing skills to build a local manufacturing legacy.

“Our plan is now to consolidate our recent acquisitions and actively pursue an aggressive growth strategy into the future,” Mr Magerman said.