South Africa’s Lesaka hits first profit since 2022 despite merchant slowdown

Lesaka Technologies, a South African digital payments fintech, has met its first profit target since launching in 2022, even as revenue from its merchant division fell by double digits.

The company reported a net profit of R61 million ($3.6 million) in the second quarter of its 2026 financial year, compared with a loss of R589 million ($34.7 million) a year earlier, according to its financial results.  

Lesaka’s merchant unit, which serves small and mid-sized businesses through its Kazang and Connect brands, saw revenue fall by 13% year-on-year to R2.26 billion ($131.9 million). While the merchant base grew 8% year-on-year, average revenue per merchant fell 10%. 

“The parts where we are having challenges are in the volumes in airtime, the margin compression in the airtime space, and the margin pressure in acquiring,” Lincoln Mali, CEO of Lesaka Technologies Southern Africa, told TechCabal in an interview.

Card transaction volumes rose to R12.1 billion ($654 million), cash volumes increased 5% to R31.9 billion ($1.72 billion), and the number of merchants accepting cards climbed to 73,500. However, that growth has not been enough to offset weaker margins in airtime, a category Lesaka historically dominated.

Mali said airtime sales are down because customers now have more options. Competition has intensified, with many users relying on free Wi‑Fi, promotional airtime offers, and public hotspots instead of purchasing airtime.

From scale to depth

Lesaka is now less reliant on single-product airtime sales and is  more focused on layering multiple services onto each merchant, according to Mali

The company has consolidated its merchant operations under a single leadership structure and is reshaping how it measures success, prioritising active merchants, aggregated output, and product penetration over sheer footprint.

Alternative Digital Payments (ADP), which include supplier-enabled payments, surged 27% year-on-year to R14 billion ($870 million), driven largely by a jump in supplier payments. More than 102,000 merchants are now using these services.

Lending is also emerging as a key lever. Merchant loan originations rose 35% to R205 million ($12.1 million), while the outstanding portfolio increased  28% to R389 million ($22.9 million). 

Mali sees a compounding effect, with merchants who borrow more likely to route supplier payments through Lesaka’s platform.

Diversification cushions the blow

While growth in the merchants slowed, Lesaka’s consumer and enterprise divisions surged, cushioning the group.

The Consumer segment, which serves underserved individuals and small merchants through loans, accounts, payments, and insurance, saw its revenue rise by 38%.

Adjusted earnings more than doubled, driven by growth in accounts, lending, and insurance. Lesaka says it now serves more than 2 million active consumers, with market share rising to 14.3%.

“We have seen our market share in this space jump from 11.9% a year ago to 14.3%. That now makes us the second largest business in that space after Capitec,” said Mali.

The enterprise unit, selling payment, data, and software services to corporates, grew revenue 58% to R253.2 million and swung into profitability, posting R24.3 million ($1.43 million) in adjusted earnings. New clients include Shoprite and Investec, expanding Lesaka’s distribution footprint well beyond informal retail.

Lesaka expects its planned R1.09 billion ($56.3 million) acquisition of Bank Zero, a digital lender, to further reshape the merchant offering. By funding merchant loans with bank deposits rather than wholesale capital, the group expects lower funding costs.

“The bank is applying for a licence to do lending,” said Mali. “The most profound implication is that today we borrow money from commercial players and order lending to our merchants. That’s not a very efficient way of lending. But if we now have a bank that will be able to lend at the back of deposits that sit in the bank, that will be about a billion rand swing.”

Mali said the strategy would have a stronger impact on the merchant division, as the fintech would be able to offer merchants more flexible cash solutions.

Despite the drag, Mali said the merchant business is expected to end the year flat on a year-on-year basis. 

The diversification is set to deepen if Lesaka completes the  Bank Zero acquisition, which would bring a banking licence and a fully digital infrastructure into its ecosystem.