High noon for Net1 over grants

14 September 2014 - 02:31 By ANN CROTTY
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A SHOWDOWN is looming between Net 1 UEPS Technologies and Social Development Minister Bathabile Dlamini over whether third parties should be allowed to "deduct" money from social grant payments.

A SHOWDOWN is looming between Net 1 UEPS Technologies and Social Development Minister Bathabile Dlamini over whether third parties should be allowed to "deduct" money from social grant payments.

Net1's Cash Paymaster Services (CPS) won a tender in 2012 to distribute R120-billion in grants a year to 16million people. But the Constitutional Court found the tender was invalid and unconstitutional due to short cuts taken in granting it.

The government has been infuriated by CPS providing "financial products", including microloans and cellular airtime, to beneficiaries and then deducting repayments from the grants that it administers.

At a hard-hitting media briefing this week, Dlamini said she would give CPS 14 days to sign the "reviewed service-level agreement" that she sent to the company six months ago.

"The main issue in it is the issue of deductions; they've refused to sign it," Dlamini said.

After the briefing, Net1 CEO Serge Belamant came out swinging, saying he would reject any bid to amend the service-level agreement, which Net1 signed shortly after winning the R10-billion five-year tender in 2012.

Despite this threat, its share price has risen 27% in the two weeks since it announced a 189% spike in annual net income.

The $100-million (R1.1-billion) profit was boosted by a R280-million payment from the SA Social Security Agency (Sassa) for "implementation expenses" of the grant contract, "low-margin transaction fees" from grant beneficiaries and more money from higher prepaid sales and loans it grants to individuals.

The Department of Social Development bills this as a battle to protect grant beneficiaries from "unlawful and immoral deductions" as it releases guidelines for rerunning the tender.

The minister would not comment on the reissue of the tender, which the Constitutional Court required earlier this year.

But Dlamini was distressed that a grant system intended to facilitate financial inclusion had "provided a new frontier of exploitation of the most vulnerable members of our society".

CPS provided accounts at Grindrod Bank for beneficiaries.

A ministerial task team found that since CPS won the contract "debit deductions from grant beneficiaries appeared to increase significantly (from) Sassa-branded Grindrod bank accounts into which the social grants are paid", Dlamini said.

The task team found evidence that financial institutions, which may be linked to Net1, had offered products including microloans to grant recipients.

Earlier this year, Belamant said 3.2million grant recipients used Net1's cellphone service to buy airtime and electricity, saying it was "ethically defensible" as "people are free of mind".

But the social assistance and Sassa acts allow only funeral insurance deductions of up to 10% of grants.

Net1 denied that CPS "made unlawful, illegal or unauthorised deductions ". It threatened to sue members of the task team, which probed the deductions .

An added complication is that Bidvest is due to buy Grindrod Bank. Dlamini called this week on the Reserve Bank, National Treasury and Competition Commission to scrutinise the deal "to protect beneficiaries' bank accounts from further unlawful and immoral debits".

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