Listen here.Lesaka grew out of Net1, whose subsidiary's social grants contract ended up before the Constitutional Court. Now it wants to take deposits from the same grant recipients it lends to. In a follow-up to their strategy conversation, Alec Hogg put the harder questions to executive chairman Ali Mazanderani: who carries the legacy of Cash Paymaster Services, what borrowers really pay on a R5,000 loan, and who protects the customer when one company is both banker and lender. Mazanderani gave little ground. He called the banker-and-lender criticism nonsensical, argued that for many rural borrowers the real alternative is a loan shark, and asked why a loan is fine for someone with a city job but not for someone living on a grant..Edited transcript of the interview.Alec Hogg (00:02): Well, good morning and welcome to the BizNews Edge. Ali Mazanderani of Lesaka, a company that's in the Ricardo portfolio and has already done very well for us since we brought it back. He's back with us, though, because last time we spoke strategy, and then we had somebody come to us with, if you like, a whistleblower report. I don't think it was a whistleblower report, really. It was information that's in the public domain saying, hey, you didn't ask the right questions. Well, this time we are going to be asking those harder questions.Lesaka's Bank Zero deal is through competition approval and is expected to close by December, but it is still pending the Prudential Authority and exchange control. Once that happens, a company that grew up paying social grants will hold grant recipients' deposits and collect their loan repayments. It's quite important.Meanwhile, the company's old subsidiary, CPS [Cash Paymaster Services], is in liquidation. And there was a Constitutional Court hearing [ruling handed down 8 April 2026] that came through in April, which we now need to get some clarity on. So particularly: who carries the legacy of the past? What does "no interest" mean when you're talking to borrowers who perhaps don't really know that much about interest and are more concerned about what they pay? And who protects the customer when one company is both banker and lender?Ali, welcome back. These are pretty interesting questions. And I guess the overriding thing is that Lesaka was born out of Net1, and Net1 had a really poor reputation, some of it deserved, some of it not deserved, and I'm sure you've got your thoughts on that as well. But what shareholders going into the future need to be pretty comfortable about is that you've dealt with this legacy of the past. Maybe we can start with that Constitutional Court finding in April. Was there anything there that you felt you had to deal with as the new organisation, Lesaka, looking at what you inherited?Ali Mazanderani (02:18): So, candidly, Alec, no. In the first instance, there is nobody in the senior executive suite at Lesaka who was with the previous Net1 business. And the Constitutional Court finding made it clear that there was no claim against Lesaka associated with the history of that subsidiary of Net1. So I feel like that is as close to an end to the journey as anybody could expect to have.Alec Hogg (03:02): Just tell us, though, about CPS, because that was kind of the original company, or part of the original company, with the loan grantees. It's in liquidation now and it owes 80-odd million rand [R81.3 million, per the April 2026 order]. Wouldn't it have been a good call from Lesaka's perspective to say, yes, we know we don't have to pay it, but let's just get it off the plate and get that out? Because if you look at the sore thumbs, that seems to be the only one that your critics can point to.Ali Mazanderani (03:34): But I'm not sure what the criticism is. I think CPS's liquidation is a specific matter. There was no, I suppose, connectivity between the Lesaka of today and the CPS of ten years ago. I'm not sure what obligations would be expected there, other than the legal ones, which were fulfilled.Alec Hogg (04:07): Okay. All right. The whole story of profit shifting, the allegation: the Constitutional Court said it wasn't proven that there were these connections, but it wasn't disproven either. What do you make of that?Ali Mazanderani (04:32): Alec, let me maybe say how I feel about the whole thing, and then I'll make a specific reference to that. So I became the executive chairman of Lesaka in 2014.Alec Hogg (04:40): No.Ali Mazanderani: CPS is, I think... the issue emerged more than ten years ago. So I became executive chairman in 2024. These things happened in 2014.Ali Mazanderani (05:02): It's a little bit like saying, how should you feel about the actions of your great-uncle? There's a connectivity between that CPS business and Lesaka, residually, but ultimately Lesaka is much more than a continuation. It was founded in 2022 with the merger of the Connect Group and the legacy of what existed within Net1 UEPS. And really, it was a vehicle, a listed vehicle, in which to execute against the strategy that we are pursuing. There is almost no connectivity between the way that Lesaka makes money and the way that the old Net1 UEPS business made money, and no connectivity between the senior leadership. So the first thing is, from a practical perspective, there's a complete break in that evolution.The second thing is how I feel about CPS's behaviour in the past. I'm candidly not sighted. All I can tell you is that what you can read in the legal rulings would suggest that there was no wrongdoing associated with it. To say that there was also no confirmation of no wrongdoing: you can't prove a negative. So I'm taking the judgments of the courts at face value. The judgments of the courts say that there's no wrongdoing on their part. The Constitutional Court has opined on the matter over an extended period of time and has, in effect, confirmed that, or neglected to pursue any claims as a consequence of that. So I feel it's the end of the matter.Alec Hogg (06:55): Mm-hmm. Yes, and I guess there was a huge media storm as well around that time that fed on itself. Did you ever meet Serge Belamant?Ali Mazanderani (07:06): I did meet him briefly, but many years ago.Alec Hogg (07:09): Okay, because he still maintains that he was the victim of nefarious media antagonism and that there were no laws that he broke. And I guess the courts have not found otherwise; if they had, there would presumably have been a criminal charge against him. So it is an interesting matter. But for as long as there is that relationship, people will be asking the questions, and that's why it's good to deal with them. Customers from that era, though, from the SASSA era, from the CPS era: have they followed through to the Lesaka of today?Ali Mazanderani (07:46): So what happened was that customers were given a choice, I think it was in 2018, to choose the bank, or the financial services party, that they wanted to have for their grants. At that time, I think about 800,000 elected to stay with EasyPay. There were about seven and a half million at that time who elected to go to the Postbank, and obviously the Postbank had a subsidised rate. That, in essence, was, if you like, the legacy that existed: 800,000 EasyPay customers.The subsequent years, I think, have demonstrated, in a free market where customers can choose the service provider they want to go to, which is a wonderful thing, that we have more than doubled that. We're averaging about 50,000 new accounts opened by grant recipients every month. We have more than a million net new customers over the course of the last four years or so who have joined us as Lesaka. And they're doing that based on the proposition that Lesaka is providing. The full onboarding process, the nature of what we're providing, I think, is fundamentally different. We are addressing the same customer base, but we're doing so in a free-market environment where the customer chooses who they want to go to. And our base is now far more customers that we've onboarded since Lesaka was created in 2022 than customers that were inherited.Alec Hogg (09:35): That seven and a half million that went to the Postbank, given the travails of the whole Post Office organisation: have you seen that as a potential area of growth?Ali Mazanderani (09:51): Not just us. I think every bank that operates within that environment, well, not everyone, but the vast majority of them, have taken market share from the Post Office, because the Post Office now has fewer than two million customers. And I think it's a testament also to the fact that value matters, and it matters especially to people who have the lowest disposable income. For many years the Post Office was subsidised, right? You could effectively have a free transactional account, and that wasn't the case with the commercial operators. But free, for something that doesn't work, is not very useful. So yes, we certainly had customers coming from the Post Office. What I would say now is that the proportion of customers we take from commercial banks is higher, simply because the Post Office's market share has diminished materially. So we are now the second-largest player in terms of absolute number of accounts in the market, after Capitec. And the Post Office is probably still the third-largest.Alec Hogg (10:57): What's got you there? Pricing?Ali Mazanderani (11:00): No, I think there are three things that really differentiate our offering. The first thing is actually the product. We offer a product that a lot of the commercial banks don't offer. Our largest loans are about R5,000. Usually about R10,000 is where the other banks start. So there's effectively a gap in the market. We're providing a transactional account. Commercial banks in South Africa also provide a transactional account, but they're seldom providing a credit product at the small quantum and short duration that we're providing, largely because I just don't think they have the capabilities, the systems, to do so profitably.Now, just to be clear, that credit product is a regulated credit product. We operate under the NCR [National Credit Regulator] rules. And to answer your second question, on pricing: I am very confident in saying that we provide the lowest cost of credit to this segment, by far, in the market. So do I believe that our credit product is very keenly priced? I do. On the pricing of the transactional account, we are competitive there, but we're not the lowest cost. And I think that's also important, because what we sell is a value proposition. I may not be the cheapest on everything I provide, but as a collective, I certainly expect to be the best value for that customer, because they don't have that product available elsewhere.The second thing, which I think we touched on before when we chatted, is the distribution model. Unlike our competitors, we go to the places where our customers are. Almost half of our employees are frontline. Most of our new account registrations happen with a customer going into a town hall, in a rural area. I go around the regions quite a lot, and there's a very memorable moment in my mind from last winter in the Transkei. We were about an hour outside Umtata [Mthatha]. It's a fairly rural, underserviced area. The local authorities organise what are called imbizos, where they basically invite service providers to come and offer their wares, effectively, to the local residents. And you had this environment there: an old, beautiful church perched up on a hill, mothers coming with their babies strapped on them, grandmothers coming up the hill. A far greater convenience. But even that process of coming from their village to that town hall, you could see, was a challenge.And we were the only service provider there, the only people who bothered to show up, the only people who offered something for them. Yes, they could get a taxi and spend R100 to get into town, which would probably be five percent of their grant. But I do think that demonstration of us showing up, and doing so in the language that the individual speaks, with dignity, is a very, very core differentiator. And it is the reason why we've taken more customers from this segment than anybody else, because it's extremely patronising to assume that those customers are voting with their feet for any reason other than that they're getting a better value proposition from us than from anybody else.And I would also say there's the control mechanism around that. We biometrically identify at the point of engagement. We KYC [know-your-customer checks] immediately by connecting into Home Affairs. It's a digital onboarding process, even though they're there in person. But the technology backbone has got a human interface, so there's not the intimidation for that customer. It's provided in their local language, it's simple and it's transparent. And then there's referral: people know, people learn. I think you'll find that if you go into these areas, the name Lesaka is overwhelmingly associated with the brand that is there for them, rather than the brand that is there to service other people but will deign to service them.Alec Hogg (15:25): I remember very well one of the comments that Serge Belamant made in an interview that we had. He said, "Just because people are poor, do not for one minute assume they are stupid." That stayed with me a long time, because there is an assumption in many parts of society that those who don't have a lot of money are not that bright. Serge said if you want to test something, test it with people who don't have money, because they will find the ways around it. So it supports what you were saying. But the whole story about the loans, and the fact that you don't charge interest, or you say there's no interest on the loan, but there is a service fee, which is regulated but can come up to quite a big number: what's your response to that criticism?Ali Mazanderani (16:15): So the first thing is, I don't think that it's true, right? We do charge interest, and we state that we charge interest. It depends on the product that you're offering. Our R5,000 loan has an interest charge. The interest charge, by the way, is 15% per annum. Per annum. And just to give you a sense, the NCR has a maximum for a first loan of, I think, about a 60%-plus effective rate, and for a second loan, about a 34% effective rate. So I would be very interested to find whether there's any service provider in our segment who's anywhere near that annual interest rate.Now, in addition to the interest charge, you do have origination costs associated with the loans. There are other fees that you're allowed to charge as a regulated entity, and again, any other fees we charge are below, and in many instances quite a lot below, what the regulation allows for. So I'm very confident that in aggregate our customers are getting an offer, not just in the friction of engagement but also in cost, that is better than they'll be able to get anywhere else. Now, when you're issuing short-duration, small-quantum loans, obviously the administrative and management costs can be disproportionately high as a percentage. But you have to compare it like for like. And our customers wouldn't be coming to us if they were getting a better proposition elsewhere.The things I would like to highlight, that I'm actually very proud of in that process: firstly, we don't ever chase non-performance. After three months of non-performance, a loan is written off, so there's no debt collections process associated with it. Secondly, on affordability, we make our own assessments. We do a bureau inquiry for every loan, and we apply our own haircut, over and above what is provided by the individual on their expenses, to make sure that we're not extending credit to people who don't meet the affordability criteria. So we do have material rejections associated with loan provisioning, and discipline around that. We don't lend unless they have a track record of receipts in their account, because we also want to make sure that they do have that affordability.But the thing that is, I don't know, presumptuous, again, is the perception that people are taking out loans for reasons that, in inverted commas, maybe they shouldn't be, or that they can't afford. I am here, and many of the team joined Lesaka, because we believe in the social purpose. We believe that creating financial access for people who have not been afforded that is not just a good thing but a great thing for our society: to be able to go to these people and provide them with the best-cost product, one they can understand, in a manner that gives them dignity and allows them to better their lives. Why should somebody who is living in a big city and has a job have access to financial services, and poorer people not? Why is it okay for you to take a loan? Why is it okay for me to take a loan, and it's not okay for somebody with far smaller resources to take that loan, provided it meets their affordability criteria, provided it's a sustainable process?The things that motivate me are the stories. The story of the lady whose brother dies and whose family wants to have some dignity associated with the funeral, and who takes a loan to pay for that funeral. The story of a lady called Innocent, whose brother died and who inherited the responsibility for his six children, along with two of her own, and who took a loan to pay for their school fees, their uniforms and their stationery at the beginning of the year. And who said that we didn't provide her with a loan; we provided her children with the ability to learn and to dream. And I don't understand why society doesn't want to be able to provide access to these people in a manner that is correct and fair. So I not only take umbrage, I feel the opposite. I feel that we should be championing businesses that are going out there and doing their best to make other people's lives better.Alec Hogg (21:22): But are you championing businesses as well, yourselves? When you were talking, I thought, hmm, here's another Grameen Bank, or a little bit of a Grameen Bank.Ali Mazanderani (21:32): We do both, Alec. We provide access to credit to grant recipients, to consumers, and I'm very proud of that proposition, but we also provide business credit to businesses.Are we a Grameen Bank? There are a lot of differences between the specifics of what Muhammad Yunus did in Bangladesh and what we provide, but in concept, yes. In concept, in the sense that financial access is something that creates positive outcomes if done well. And sometimes you have to do things differently from how traditional banks operate in order to create that virtuous cycle. Sometimes you need to rely on other mechanisms that ensure the model works and can scale. One of those mechanisms, which obviously was at the core of the Grameen Bank, is social sanction: basically, they created a forum of people, often women, because women tend to be the best credit risk. Honestly, mothers are usually far more reliable. In most of my experience in credit, gender is the single biggest predictor of repayment.But yes, the fact that a customer won't be able to get more credit if they renege on their commitments to us, and that their alternatives are far more expensive and often operate in cloudier environments, certainly creates that discipline. And I think we can do better, by the way, at creating more connectivity that is community-oriented in order to ensure the right behaviours. It's very interesting: when you go around these communities and understand how people prioritise their payments, usually the first payment they prioritise is their stokvel payment. And it's because of the social sanction associated with their collective responsibility, the fact that they're going to see everybody to whom they have an obligation as part of that lending club, to pay back when it comes to their time. And I think that's valuable, because trust is the most expensive commodity, and it's far better to have trust than it is to have legal enforcement.Alec Hogg (24:12): Hmm. Fascinating, a couple of the things that you've said. One, that you don't chase people if they don't repay, but there's clearly a social sanction there. And the points that you made about Grameen Bank and the way that they operate into the future: if the community is being let down by one or two people, the community is going to make sure that it doesn't get repeated. But all of this is also interesting from a broader perspective, because we have Capitec, who are the biggest player in this field. Are you taking market share from them as well?Ali Mazanderani (24:53): I think we are growing our customer base in that segment faster, in absolute terms, than any other provider, including Capitec. Capitec is the largest provider in this segment, so by virtue of that, the answer is yes, we are. There is probably a truth in that. I don't think that this is necessarily their focus. I don't think their strategic trajectory is to go down-market. You'd have to ask them specifically, but certainly from what I can see, I think they're focusing on going up-market.The reality is that Capitec is a $30-odd billion market cap bank that listed in 2002. They've got a long history of being able to build a base, and they need to evolve from where they are. We are a $400 million market cap business. I believe we're still in our infancy. I attribute the founding of Lesaka to 2022, and we're still evolving. We need to get better; we need to be better. But for us, this is our core. This is the heart of who we are. I think for them it's a residual, right? And I'm not even sure whether those customers clog up their branches, or whether they're beneficial for them or not. It's for them to...Alec Hogg (26:28): It's a very interesting point, because they disrupted the other banks by going to this segment, starting here. And now you're disrupting in the same area. So if you look twenty, thirty years ahead, given your experience, as we spoke about last time, this is your game, this is your sweet spot. Is it likely that you would grow into other areas of the banking community?Ali Mazanderani (26:56): I think that we have to earn the right. Lesaka at the moment targets more than one segment, in both the consumer and the merchant world. The vast majority of our business, and the core of our business, is focused on these underserved areas. But we also have consumers who are operating in the more urban, employed environment. And we are certainly evolving the offering to increase the proportion of our consumer base who are non-grant recipients. So if you ask me the specific question on the consumer business, do I expect the proportion of non-grant recipients to grow over time? Yes, I do. I suspect that the Bank Zero acquisition, on completion, would also augment that.In the business environment, we have today about 120,000 merchants, of which about 30,000 or so would be entities, versus sole proprietors. Do I expect to provide financial services propositions to both segments? Yes, I do. But do we expect to evolve our offering, certainly in the short run, to go head to head with the propositions of the large commercial banks in their core arenas? I don't think we need to or should. I think the TAM [total addressable market] is available in the segments that we address. I think we can grow a multibillion-dollar business by doing what we're doing better, and by augmenting it.So I would like us to be focused in our execution. I don't think every, in inverted commas, segment of banking is a segment that Lesaka is best placed to target. And I think that leaves plenty of room in the banking and insurance space for us to partner with third parties. We do have third-party banking relationships. I would like to maintain those relationships. I would like everything we do to be for the benefit of the ecosystem. Where we're electing to do it ourselves, it's usually because we believe that the value proposition that exists doesn't do justice to the customers, that value isn't provided to that segment. And we see that very, very clearly in the lowest-income and rural environments. Where we believe a bank has a fantastic offering that is fit for purpose for the customer segment, and they're getting a great value proposition, I have no business being there. It's not going to form the core of what we do next.Alec Hogg (29:58): And just to close off with the other criticism: Bank Zero. If all goes well and the authorities approve your licence application, or the purchase, you're then going to be the banker and the lender in the one place. And that was perceived as not a very good thing.Ali Mazanderani (30:16): I have absolutely no idea why it wouldn't be perceived as a good thing. I think it's a very good thing. My logic has failed. Basically, our capacity to provide credit is circumscribed by the fact that we are not a deposit-taking business.Alec Hogg (30:22): Uh-huh.Ali Mazanderani (30:37): And as a consequence of that, our cost of credit is higher than it would be otherwise. Why would we not want to be able to have a lower cost to serve, to provide financial access? That's the first thing I don't understand. I'd imagine that would be good. Why also would it not be better, given that we are the party that's engaging with the customer? We are the brand that the customer knows. If we're also responsible for the deposit environment, I'd imagine it would give greater regulatory confidence, because then there would be direct oversight of our engagement from the Prudential Authority.We already have direct oversight of our insurance proposition. We are regulated in our insurance business. We are regulated as a credit business. But ultimately, today we need to have a third-party bank sponsorship relationship for the transactional account, albeit that we provide all the technology associated with that customer engagement. And finally, it means that we're able to deliver a service without third-party dependencies that can fail our customers. So we will be the accountable party there. It completely baffles me why that would be the case. And if somebody is suggesting that being a lender and being the deposit-taking business is a bad idea, then that would apply to every single bank in this country: to Capitec, to TymeBank, to FNB. So, honestly, I think it's a nonsensical representation.Alec Hogg (32:11): So if we pull it all together, you are in a segment of the market which is not being well served, and by your description, you can serve it better. In fact, it's a segment of the market that's been ignored as unprofitable by many financial services providers. And...Ali Mazanderani (32:30): And I think it would be unprofitable for pretty much everybody else, honestly. The reason we are profitable is because of our business model, the time in which we evolved it and the purpose for which we evolved it. So it's not just that they have a perception of it being unprofitable because of the fixed infrastructure costs that other providers have. I think it is unprofitable for them.Alec Hogg (32:51): And you're also excited about that because there is a social benefit that you believe you are bringing to that area. Just closing off: what is the alternative? If a person in a rural area needs R5,000 and they can't get it from you, at the interest rates that you charge, the 15% plus the admin costs on top of that, where would they get that R5,000 from?Ali Mazanderani (33:17): There is obviously a microcredit, microfinance industry, which operates within a regulated environment, albeit, as I said, at a much higher cost, and without the transactional account linked to it. So as a whole value proposition, I think it's a weaker one. But there is that option. And then, the estimates vary, but the last estimate I saw was, I think, between 30,000 and 50,000 effectively unregulated mashonisas, or loan sharks, in the environment. The reality is that the informal environment, which has very different business practices, would thrive in that construct rather than anything else.It's the same as the digitisation of payments: with the provision of regulated credit, you want things to be visible, you want things to be seen, you want things to be overseen, in order to ensure best practice. And we are not only a JSE-listed business but a Nasdaq-listed business, with regulated subsidiaries, with individuals who have worked in all of the big financial institutions in the country, who are here with Lesaka because we believe what we do is good and we believe there should be more of it in South Africa.Alec Hogg (34:56): Well, what an interesting discussion. Ali Mazanderani from Lesaka. We do have Lesaka in the BizNews ZAR portfolio. We had it, we took it out, we brought it back in after doing some more research. And this is a follow-up to a conversation that we had a week or so ago, and I'm very pleased that we had the opportunity to dig deeper. We look forward to talking to you when the next set of results comes out, and we can then see how the progress has continued. I'm Alec Hogg with the BizNews Edge.