GUGU LOURIE: Pepkor potential to carve a new path for Capfin

When life threw a curveball at former SA Post Office employee Waven Voges, who lives in Reiger Park in Boksburg, a small loan offered him a lifeline. Facing the uncertainty of retrenchment, Waven knew his severance package would only sustain his family for six months.  

Before Waven was retrenched his wife, Shaydon, and their three children, Esme, Deon and Fadiel, relied on his Post Office salary to cover life’s necessities. 

With no access to his pension until retirement, Waven had to find another way to earn an income. Determined to chart a new course and armed with a microloan, Waven invested in a beauty parlour business in Boksburg. 

Waven said he believed his fresh business venture would sustain him and his family after retrenchment. He reasoned that a well-timed loan could help him transition smoothly into entrepreneurship and maintain his family’s lifestyle. 

With a microloan of R40,000 from Capfin, he managed to finance his new business. Reflecting on his business venture, he remarked: “I wish I had started this as a side hustle while still fully employed.” 

Waven’s story is one of resilience and resourcefulness, mirroring the struggles of many retrenched South Africans. I was at the Boksburg scrapyard looking for used parts for my beloved 17-year-old Corsa utility bakkie when I struck up a conversation with Waven. 

It was at the scrapyard that he told me his inspiring story about how he survived retrenchment. Waven’s story put in perspective the vital role Capfin plays in SA’s informal economy. 

Capfin, JSE-listed retailer Pepkor’s lending arm, offers accessible loans to individuals seeking financial stability or funding for entrepreneurial ventures. 

In the financial year to end-September Capfin’s loan base reached 320,000, with its unsecured loan book growing to R3.3bn from R2.5bn in 2023. Non-performing loans decreased from 23.9% to 8% and its return on equity exceeded 20%, showcasing a stellar performance in the lending space. 

These results highlight Capfin’s growing foothold in SA’s unsecured lending market. Given this growth, is it time for Pepkor to redefine Capfin’s trajectory and establish it as a stronger player in the financial services sector? 

One potential move could be listing Capfin on the A2X stock exchange. As a stand-alone entity Capfin could raise capital to expand its loan offerings, potentially increasing loan limits above R50,000. This would cater for South Africans seeking financial support for home renovations, education or starting side hustles. 

Capfin’s existing synergies with Pepkor’s brands, such as Pep, Ackermans, HiFi Corp and Dunns, already provide a solid foundation. For instance, Capfin’s partnership with Abacus Insurance — a Pepkor business — has introduced credit life and funeral cover, activating 1-million policies in the 2024 financial year. 

Such initiatives could serve as a launch pad for broader financial inclusion. Moreover, listing Capfin could enhance its profile, elevate compliance standards and address concerns about  irresponsible lending. This move could position Capfin as a responsible lender akin to Capitec Bank and empower customers to manage their financial wellbeing effectively. 

By raising its profile and leveraging Pepkor’s extensive retail network, Capfin could tap into new revenue streams and increase shareholder value. Its ability to address the financial needs of South Africans, from education and home improvement to entrepreneurial ventures, emphasises its potential as a transformative force in the lending market. 

It’s now up to Pepkor’s leadership, led by Pieter Erasmus, to explore innovative strategies for Capfin. Whether through an initial public offering or other bold moves, a reimagined Capfin could not only create value for shareholders but also empower countless South Africans striving for financial stability and growth.

It could also be positioned as a digital bank with a potential to grow through Pep and Pep Cell. The time for Pepkor to rethink Capfin’s future is now.

• Lourie is founder and editor of TechFinancials.