How A Series Of Shrewd Acquisitions Gave Birth To Southern Africa’s No.1 Payment Services Provider
It looks like today is a good day for the African payments space. First, we were treated to mouthwatering news of Nigerian fintech giant, Flutterwave, linking up with Alipay to foster payments between Africa and China. But it turns out that was just the appetizer.
Today’s main course appears to be the news of Nairobi-based payment services provider, DPO Group, acquiring SA payments processing service PayFast, in a reported multi-million rand deal that some are already calling the biggest ever in the space.
This one has caused some fanfare, and perhaps rightfully so too. In truth, the acquisition was yet another watershed moment in a journey that has led to the coming to life of a quiet juggernaut in the African payments technology space; one that has taken on all-comers and steamrolled through without making too much noise.
Once Eran Feinstein and Offer Gat got Direct Pay Online (DPO) up and running back in 2006, the goal was to close the gap in the African online payments landscape.
At the time, merchants and consumers alike were basically crying out for an online arena that was open for payments, bookings and purchases, but reliable online payment processors were almost as difficult to find as a needle in a haystack at the time.
And why wouldn’t it be? The challenges were enormous — enough to faze anyone who was trying to fix things. But the folks handling the reins were not just ‘anyone.’ They had a plan.
And nearly two decades later, DPO has morphed into DPO Group; a big brand in the payments space encompassing up to seven Southern African payments services startups including PayGate, Virtual Card Services (VCS) South Africa, Namibia, and Botswana, PayThru, 3G Direct Pay, Setcom, and PayFast, most recently.
DPO now provides real-time, cloud-based processing platform, with state-of-the-art technology that supports multiple transaction types with online and offline capabilities. The technology supports a wide range of payment modes, cards, mobile money platforms, currencies, mobile apps, and card readers.
Surely, it has taken some doing but somehow the Kenya-based company is now running the payments technology space in Southern Africa, basically, having masterminded a series of shrewd acquisitions during a frenetic three-year period.
DPO may have had to set up shop in Kenya initially but its long term goal has always been to build a “truly pan-African payment solution” and to achieve this, it adopted quite the clever strategy of buying up all the good stuff it could find.
Having raised a private equity round worth USD 10 Mn from Apis Partners in 2016, it invested ZAR 100 Mn (around USD 7 Mn) in South African payment facilitator, PayGate, and effectively took over the company in a deal which saw both companies merge under the DPO name. This was back in September 2016.
At the time, PayGate was said to have more than 10,000 merchants on its payments platform — having seen it grow from 1,000 in 2012 — and the merger was aimed at making it possible for both companies to further spread across Africa. But DPO was just getting started.
Come March 2017, DPO Group was at it again. This time, it had paid an undisclosed amount to completely acquire the Motswana and Namibian operations of Virtual Card Service (VCS); a South African payments company that started operating in SA in 1998 before expanding into Botswana in 2008 and Namibia in 2010.
And this company was doing pretty good too. The VCS team had put the company in a strong position in both the Motswana and Namibian payments landscapes by offering a distinguished suite of services to various organisations requiring automated, high volume, and secure card payment processing.
The complete 100-percent-equity acquisition of VCS’s Southern African operations was aimed at combining VCS and PayGate under the DPO Group so as to provide a single contact point for merchants looking to accept payments across the continent. It proved a shrewd move and the DPO brand only got bigger.
In fact, between 2016 and 2017, the Nairobi-based company had completed some kind of acquisition spree by buying up PayGate, Setcom, PayThru, VCS in South Africa, Namibia, and Botswana as well as SID Instant EFT. This funding spree was facilitated by an additional USD 5 Mn equity round that was, again, secured from Apis Partners in 2017.
Now on a strong footing, DPO moved to further consolidate its position in 2018. The company consolidated the six Southern African payments services startups it had either acquired or bought a stake in into one brand, DPO PayGate — potentially creating one of Southern Africa’s biggest payment services providers.
The development effectively transformed DPO Paygate into one of the biggest payment service providers in the Southern African region, if not the biggest. Even before the consolidation happened, PayGate alone was said to have facilitated in excess of 10 million transactions and serviced over 25,000 merchants.
The new DPO PayGate was to now operate from Rondebosch, Cape Town, while its Johannesburg offices were to serve as the base from which region-wide operations would now be conducted. At the time, the DPO Group said it had “established legal entities in more than 10 countries throughout Africa”.
Well, it’s the year 2019 and DPO Group is not relenting. If anything, it’s getting even bigger. The company has just acquired SA payments processing service, PayFast, in a reported multi-million rand deal.
Today, DPO’s Co-founder and Chairman, Offer Gat, told a press conference in Cape Town that the deal had been carried out through a mix of shares and cash, and as part of the deal, the PayFast management team will remain key shareholders in the DPO Group.
This development saw PayFast become the fifth company the group had acquired outright since its inception in 2006.
Gat also spoke of the deal as the largest acquisition of a payments processing company in South Africa to date. This could imply that it is higher than the ZAR 100 Mn that DPO parted when it took over PayGate in 2016.
PayFast, the newest addition to the DPO fold was founded in 2007 by Jonathan Smit and Andy Higgins. The company boasts over 55,000 e-commerce merchants in SA, and as per their claims, they own the broadest range of shopping cart integrations on the continent.
The acquisition also meant that DPO Group will now serve over 100,000 merchants across 18 African markets, and there are talks of expanding to 10 more countries across Africa.
DPO Group has quietly carved a rather big niche for itself in the African payments space and it’s easy to see the company getting even bigger.
