Morning, Elly here.

Are we the only one’s looking at Space X’s S-1 (IPO offering doc)? Their S-1 shows why Elon Musk is so obsessed with getting Starlink into South Africa - Starlink (Connectivity) is currently the only profitable division of the Space… uh… AI company.

Moving swiftly along, Investec just applied for an Irish banking licence while Pick n Pay sold another chunk of Boxer to fund a turnaround that seems to be missing targets. One story is about a bank chasing wealthy clients across jurisdictions. The other is about a retailer cannibalising its only profitable asset to keep the lights on. Both stories give you an insight into capital allocation under pressure.

Investec wants to expand its UK private banking client base from 7,100 to 13,300 by 2030 while targeting 122,000 new clients in South Africa. Pick n Pay, meanwhile, raised R4.7 billion by selling 12.5% of Boxer at R82 per share to fund a turnaround targeting breakeven by 2028. The contrast is sharp: one company is building distribution infrastructure to capture wallet share from ultra-high-net-worth individuals. The other is liquidating its growth engine to patch cash flow holes in a core business burning R1.8 billion annually.

This week also covers PayShap's pivot to merchant payments after three years of underwhelming peer-to-peer adoption, and why South Africa's instant payment rails still lag Brazil and India despite similar infrastructure investments.

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On to this week's edition. It’s a lengthy one, so grab a cuppa.

Investec targets 122,000 new South African private banking clients and 13,300 new UK clients by 2030. Pick n Pay sold 12.5% of Boxer for R4.7 billion and still burns R1.8 billion annually in its core business. If Investec's current SA private banking base is 128,000 clients and Pick n Pay's remaining Boxer stake is 53.1%, which company faces the tougher execution challenge over the next four years?

A) Investec (must grow SA client base by 95% while navigating tougher UK regulatory environment)
B) Pick n Pay (must stop burning R7.2 billion over four years while retaining majority Boxer control)
C) Both face equal risk-adjusted challenges
D) Insufficient data to assess execution difficulty

Scroll to the end for the answer.

Pick n Pay cannibalises Boxer to fund cash-burning turnaround

WHAT'S HAPPENING

Pick n Pay is South Africa's second-largest supermarket chain (after Shoprite), operating regular supermarkets across the country. Boxer is Pick n Pay's discount grocery store brand (think of stores where everything is cheaper because they sell in bulk, have simpler stores, and fewer products). Pick n Pay has sold 12.5% of Boxer for R4.7 billion. To understand what this means: Imagine Boxer has 100 ownership units. Pick n Pay owned about 66 of them, sold about 13, and now owns about 53. It still controls Boxer, but it has less room to sell more without losing majority control.  They still own 53 stores, so they control Boxer, but they got R4.7 billion to spend on fixing problems in their regular Pick n Pay supermarkets.

The shares were sold at R82 each through an "accelerated bookbuild" (a fast way to sell shares to big investment companies in a single day rather than listing them slowly). Pick n Pay needs this money because its regular supermarkets lose R1.8 billion every year. That's like a business spending R1.8 billion more on rent, staff, and products than it makes from customers.

Pick n Pay’s core supermarket business has been loss-making, although losses narrowed materially in FY25, the company faces three big problems: labour disputes (fights with unions representing over 22,000 workers about pay and working conditions), investor confidence (retail investors don't want to buy Pick n Pay shares), and market value (Boxer’s market value has at times exceeded Pick n Pay’s own market value, which highlights how much of the group’s value sits in Boxer. Financial Mail reported Boxer’s market cap had risen above R40bn, with Pick n Pay’s Boxer stake worth about R26.4bn before adjustments). Pick n Pay reported losing R3.2 billion in 2024, mostly from regular supermarkets.

ZOOM IN

Boxer succeeds because discount retailers perform quite well during difficult economic periods when customers become a little bit more price sensitive. Its operating model is also structurally cheaper to run: fewer product choices, simpler stores, lower operating costs, and bulk-focused retailing.

Meanwhile, Pick n Pay’s traditional supermarket, compete directly against Shoprite Checkers and face a scale disadvantage that is difficult to overcome. In grocery retail, size matters because larger retailers negotiate better pricing from suppliers. Shoprite’s scale allows it to secure lower product costs, pass some of those savings to customers through lower prices, attract more shoppers, and then use that higher volume to negotiate even better supplier pricing. It becomes this self-reinforcing cycle that smaller competitors struggle to break.

Pick n Pay’s turnaround plan includes closing underperforming stores, reducing head office staff, freezing salaries, and restructuring labour costs. But those measures mainly reduce expenses rather than solving the deeper structural issue: Shoprite’s scale advantage. The R4.7 billion raised from selling part of Boxer gives Pick n Pay additional financial runway to continue the turnaround, although the company has committed to maintaining majority control of Boxer, limiting how much more of its strongest asset it can sell in future.

SO WHAT

The Boxer selloff creates an obvious investor question: why not fully separate Boxer, return the proceeds to shareholders, and allow Boxer to operate independently?

Management argues Boxer still depends heavily on Pick n Pay’s shared infrastructure, including supply chains, logistics networks, warehousing, IT systems, and support services like accounting and legal operations. That argument is partly valid. Shoprite successfully operates multiple retail brands such as Checkers, Shoprite, and Usave using shared backend infrastructure while maintaining distinct customer propositions, proving that different store formats can coexist operationally under one ecosystem. The key difference, however, is that Shoprite’s core retail engine remains structurally healthy and profitable, while Pick n Pay is trying to use its strongest asset to support a broader group turnaround.

That creates the deeper tension underneath the story: capital allocation under distress. Pick n Pay is effectively asking whether it should use its strongest asset to stabilize and rebuild the broader group, while investors increasingly question whether Boxer may ultimately be worth more as a more independent business. For investors, the dilemma is frustrating. Boxer represents exposure to one of South Africa’s strongest retail growth segments, yet you cannot fully own Boxer without also carrying exposure to Pick n Pay’s struggling supermarket operations.

Retail analysts note that international grocery retailers eyeing South African market entry may eventually view Pick n Pay as an acquisition target. But any buyer would still face the same strategic challenge: how to unlock Boxer’s value while stabilizing a supermarket chain that has steadily lost market share to Shoprite over the past decade.

PayShap pivots to merchants after three years of slow adoption

WHAT'S HAPPENING

PayShap, South Africa’s instant bank transfer system, is pushing deeper into merchant payments after slower-than-expected consumer adoption over the past three years. Originally launched around instant account-to-account transfers and cellphone-linked ShapIDs, PayShap is now expanding into QR payments, e-commerce checkouts, informal traders, and retail transactions.

PayInc, the company operating PayShap, acknowledged that cost, friction, and inconsistent customer experiences limited adoption to roughly six million users after three years. By comparison, Brazil’s Pix reached over 150 million users within 18 months, while India’s PhonePe added six million users in just five weeks. Finance Minister Enoch Godongwana recently confirmed that PayInc would become part of South Africa’s shared national payments infrastructure, while the Reserve Bank’s investment into PayInc signals growing state involvement in the platform’s future direction.

ZOOM IN

Businesses were never fully excluded from PayShap. Some banks already allowed merchants to receive PayShap payments through registered Shap Names and business-linked accounts. But what’s changing now is the ambition: PayShap is evolving from an instant transfer tool into a broader merchant acceptance rail supporting QR payments, retail checkouts, and e-commerce transactions.

One of PayShap’s biggest structural challenges is that South Africa chose a voluntary bank collaboration model rather than the centrally mandated approach used in Brazil’s Pix or India’s UPI. Each bank still decides:

You can already spot the issues - this creates massive fragmentation. Some banks charge nothing for certain transactions, while others charge small fees depending on value and payment type. GoTyme positions many instant payments as free, Capitec competes aggressively on low-cost pricing, while banks like Standard Bank, FNB, Nedbank, and Absa use varying fee structures across channels and transaction sizes.

So the deeper conflict has always been about incentives. South African banks still earn significant revenue from cards, EFTs, acquiring, and payment fees. Instant payments threaten parts of those revenue streams while also requiring investment into fraud systems, QR infrastructure, merchant onboarding, and customer education. Unlike Brazil and India, South Africa never forced banks to standardize pricing or make instant payments free nationally.

SO WHAT

PayShap’s trajectory highlights a much deeper lesson about payments infrastructure - tech alone is not enough. Success depends on so many other factors like positioning, pricing, standardization, merchant acceptance, and whether banks are even economically motivated to aggressively push adoption.

That helps explain why South African banks have moved cautiously. Cheap instant payments improve customer experience and reduce cash dependence, but they also risk cannibalizing existing payment revenue. This is the crux of the matter. The result is a fragmented rollout where banks cooperate on shared infrastructure while still protecting their own commercial interests.

The merchant push is strategically important because it moves PayShap from occasional transfers into everyday commerce. The long-term opportunity is not simply replacing EFTs between friends as its currently positioned. It’s competing for the infrastructure layer underneath retail payments, informal trade, e-commerce, and small business transactions.

Now that also explains why companies like Yoco, SnapScan, and Ozow matter. They’re not direct competitors to PayShap in the same way card networks compete with each other. Instead, they compete for merchant relationships, QR infrastructure, checkout experiences, and payment acceptance inside businesses. These platforms can simply integrate PayShap underneath their ecosystems rather than allowing PayShap to replace them entirely.

The broader strategic question is really whether PayShap eventually becomes a national low-cost payments utility similar to Brazil’s Pix, or whether it remains another fragmented bank-led payment option competing for attention inside existing banking apps.

Checker is an African fintech company that raised $8 million to expand stablecoin payment infrastructure across emerging markets.

First, what are stablecoins? Think of them as digital dollars that live on your phone. Unlike Bitcoin, which can be worth $50,000 today and $30,000 tomorrow, stablecoins are designed to always equal exactly $1. They achieve this by holding real US dollars in a bank account to back every digital coin. If there are 100 million digital coins, there must be $100 million sitting in a bank account.

Checker provides payment infrastructure (the behind-the-scenes technology that makes payments work) allowing merchants (shops, restaurants, online stores) to accept stablecoin payments from customers while receiving settlement in local currency (rands, naira, shillings) through banking partners. Here's how it works: A customer pays with stablecoins on their phone. Checker instantly converts those stablecoins to local currency. The merchant receives regular money in their bank account and never has to touch cryptocurrency themselves. This eliminates merchant risk (businesses don't need to worry about cryptocurrency prices changing) while letting customers use dollar-equivalent digital money for everyday purchases.

The company operates across multiple African markets where local currency depreciation creates demand for dollar-denominated savings and payments. When a country's currency loses 20% of its value in a year, people want to hold dollars instead. Stablecoins provide a way to save and spend in dollars without needing a US bank account.

The business model targets markets where three conditions overlap: meaningful currency volatility (money value changes a lot), limited formal banking access, and sufficient smartphone penetration (enough people have phones that can run payment apps). Checker competes with Opera-backed MiniPay and Bitget Wallet in the African stablecoin space, but focuses on merchant infrastructure (helping businesses accept payments) rather than consumer wallet applications (apps for individuals to store and spend money).

Checker plans geographic expansion to East Africa and Southeast Asia while building additional financial services on stablecoin infrastructure, including credit products (loans) and savings accounts. Success depends on regulatory clarity (governments deciding how to treat stablecoins legally), merchant willingness to adopt cryptocurrency-adjacent payment methods, and consumer trust in digital dollar equivalents over traditional banking products.

Learnt something new today? Don’t keep it to yourself.

That’s a wrap, see you on Sunday.