South Africa’s Mergence Group bought a 26% stake in local customer reward start-up 2Engage as part of global expansion plans targeting retail consumers.
Mergence, which started out as an asset manager in 2004, is diversifying revenue away from institutional clients and expanding into commodity finance, investment management and corporate solutions.
“What we are looking for is a way to grow our financial services platform, grow it fast and grow it across borders,” Managing Director Masimo-a-badimo Magerman said in a phone interview. “That’s the big attraction for us here.”
Mergence plans to increase its stake in 2Engage by about 25% by the end of next year, which would make it its largest shareholder, Magerman said. 2Engage’s Retail Engage unit runs rewards and loyalty programs in supermarkets and wholesalers for low- to middle-income earners, that it says accounts for 60% of South Africa’s economically active population.
“We can go anywhere in the world with this technology and it’s an LSM that we love and we are going to focus on,” Magerman said. “It’s the last mile. And the last mile, as the brands will tell you, is very difficult to penetrate.”
2Engage operates in about 15 African countries and Mergence plans to spend around 150 million rand ($10 million) to expand in Asia and South America.
In the next three years, the company plans to expand “as fast as possible and then integrate simultaneously our financial services products,” Magerman said. “We want to grow our footprint roughly to 30 to 40 million people around the world.”