For years, the dominant exit narrative for African startups pointed outward: success meant acquisition by a foreign strategic buyer or a listing on an international exchange. South Africa seems to be rewriting that script in recent times. This year, in a concentrated wave of dealmaking, local corporates have become the most active acquirers of homegrown innovation, creating a self-sustaining exit ecosystem that contrasts sharply with patterns elsewhere on the continent.

Between December 2024 and mid-2025, South African financial institutions and conglomerates deployed over R4.6 billion (approximately $257 million) to acquire local startups. This activity represents a fundamental market shift. Data from a survey by Launch Base Africa of recent 101 African startup acquisitions reveals that of 26 South African startups that achieved an exit, 13 were purchased by domestic buyers — a 50% local acquisition rate that is unmatched in other major African tech hubs.

This surge is not a collection of isolated transactions but a coordinated movement driven by strategic necessity. Banking incumbents, payment processors, and retail giants are engaging in competitive acquisitions to rapidly digitise their offerings, secure regulatory licences, and capture growth in underserved markets.

The Deal Flow: A Domestic M&A Market in Action

The scale and strategic nature of recent acquisitions illustrate a mature exit pathway is now operating.

The largest deal saw Nedbank acquire payments fintech iKhokha for R1.65 billion ($98m) in April 2025, providing exits for investors Apis Partners and Crossfin Holdings. Capitec paid R400 million ($23m) for payment processor Walletdoc in late 2024, delivering a return for early-backer AlphaCode.

The most acquisitive player has been Lesaka Technologies, which completed three recent deals totalling over $174 million. Its strategy is one of vertical consolidation: acquiring payments platform Adumo (119,000 merchants), prepaid utility specialist Recharger, and digital bank Bank Zero to build a comprehensive financial ecosystem.

Beyond banking, retail corporates are leveraging their scale. Pepkor, following regulatory approval to launch a bank, acquired core banking software firm Cloudbadger. The retailer plans to transform its 6,000+ PEP and Ackermans stores into banking access points. Similarly, Smollan purchased e-commerce platform Yebo Fresh to digitise South Africa’s vast informal township retail sector, combining a digital marketplace with a physical agent network.

The Drivers: Why South Africa Developed a Local Exit Lane

Three interconnected factors explain why this local acquisition market has crystallised in South Africa ahead of other regions.

1. The Pressure of Digital Disruption: Seven of the most recent deals involve payments, merchant services or banking infrastructure, reflecting South Africa’s gradual shift away from cash. SMEs remain underbanked, long viewed by incumbents as high‑cost, low‑margin customers. Fintechs addressed this gap with mobile point‑of‑sale devices, digital payment acceptance and lightweight business tools. Acquisitions now offer banks immediate access to merchant networks and transaction flows they failed to capture organically. Also, incumbent banks are now facing unprecedented competition from agile, digital-first challengers like TymeBank and Discovery Bank. Nedbank’s management explicitly described the iKhokha deal as a “fast-track ticket” to capabilities it lacked. Acquisition has become the fastest route to innovation for corporates that cannot build with similar speed.
2. Regulation as a M&A Catalyst: South Africa’s rigorous financial regulatory environment, while protecting consumers, creates high barriers to entry. Obtaining a banking licence or building certified payment infrastructure can take years. Acquiring a company that has already navigated this process — such as Bank Zero, which spent three years securing its licence — is a strategic shortcut that makes M&A more attractive than organic building.
3. Targeting the Underserved at Scale: Fintechs first succeeded by building affordable, tailored solutions for small and medium-sized enterprises (SMEs) and informal retailers — segments traditional banks often deemed unprofitable. As digital adoption accelerated, these once-marginal segments became recognised as substantial growth markets. Corporates now seek to buy, rather than build, the specialised platforms that serve them.

Continental Contrast: South Africa vs. The “Big Four” Hubs

This local dynamic sets South Africa apart within Africa’s top tech ecosystems, often grouped with Egypt, Nigeria and Kenya as the “Big Four.”

• Exit Dependence: While South African startups now see roughly 50% of exits go to local buyers, the exit markets in Nigeria and Kenya remain more reliant on foreign strategic buyers — often U.S. or European companies — or international private equity firms. Local corporates in those markets have historically been less active in large-scale tech M&A in recent times. 
• Corporate Capacity: South Africa hosts a concentration of large, cash-rich listed companies on the Johannesburg Stock Exchange (JSE) with balance sheets capable of funding significant acquisitions. The scale of deals like the iKhokha purchase is often beyond the immediate capacity of all but the largest corporates in other African markets.
• Strategic Urgency: The competitive pressure from within South Africa’s own sophisticated financial and retail sectors is particularly intense, creating a burning platform for incumbents to act. This internal competitive catalyst is less pronounced elsewhere.

Unanswered Questions

The rise of a local acquisition market has profound implications for South Africa’s venture ecosystem and offers a potential model for the continent.

For Venture Capital, these exits provide critical validation and liquidity. Firms like AlphaCode, with multiple successful domestic exits, can demonstrate proven returns to limited partners, potentially increasing capital allocation to funds focused on the South African market. It proves that building for a domestic audience can be a viable, lucrative strategy.

For Founders, it creates a clearer exit pathway and may shift the types of startups that get funded. The notable exit of iKhokha, built by non-technical founders focused on SME pain points, suggests deep market insight and execution can be as valuable as pure technical innovation in certain contexts.

However, significant questions about sustainability remain:

• Ecosystem Impact: This concentrated exit path raises a critical question for the ecosystem’s future: could the allure of lucrative, domestic buyouts ultimately discourage entrepreneurs from pursuing riskier, more ambitious pan-African or global ventures? Available data indicates South African founders have historically demonstrated less appetite for continental expansion than their counterparts in Nigeria or Egypt. Pursuing a pan-African strategy could, in theory, increase their valuations by offering access to larger markets. However, concrete data confirming this as a consistently more effective or profitable approach remains limited. The central dilemma for the ecosystem is therefore whether fostering a reliable local exit market might come at the cost of nurturing globally competitive champions.
• Integration Risk: The long-term success of this model hinges on whether corporates can successfully integrate acquired startups without destroying the innovative culture and agility they paid for. The retention of founders like Bank Zero’s Michael Jordaan post-acquisition is a positive signal, but the true test will unfold over years.
• Regulatory Scrutiny: As consolidation accelerates, competition authorities may examine whether market concentration risks reducing innovation or raising barriers for new entrants. Regulatory approval remains a key hurdle for pending deals.

A Replicable Model?

South Africa’s R4.6 billion buyout spree demonstrates that domestic exit markets can flourish in Africa when specific conditions align: the presence of large, cash-rich corporates; regulatory environments that inadvertently favour acquisition; and startups that solve acute problems for large, underserved market segments.

For now, it positions South Africa’s ecosystem as uniquely mature, offering a playbook that observers in Lagos, Nairobi, and Cairo will watch closely. Whether this wave represents a permanent reshaping of Africa’s exit playbook or a phenomenon specific to South Africa’s advanced economy will depend on one critical factor: the ability of local corporates to not just acquire innovation, but to successfully harness it.