Electronic payments company Net1 UEPS Technologies [JSE:NT1] has chosen to withdraw from an upcoming social grants tender process following years of controversy.
In April last year, the Constitutional Court ordered that the South African Social Security Agency (Sassa) re-issue the country’s R10bn grants tender, which was awarded to Net1 division Cash Paymaster Services (CPS) in 2012.
The Constitutional Court’s Justice Johan Froneman criticised Sassa for its “irregular” conduct regarding the Net1 deal.
Allegations of corruption swirled around the deal as investigations in the US were also previously launched against Net1, which is listed on the Johannesburg Stock Exchange (JSE) and New York’s Nasdaq. Meanwhile, Net1 has also been criticised for selling loans and pre-paid airtime to social grant recipients in South Africa.
Following last year’s Constitutional Court ruling, Sassa proposed new requirements for the social grants tender, which include prohibiting the future tender winner from selling airtime and loans to recipients.
Net1 subsequently challenged new requirements of the tender ahead of its planned reissuing in October this year.
However, Net1 on Monday has made an about turn, as it said it is not reapplying for the tender.
“Management has recommended to the company’s board of directors that CPS should withdraw from the Sassa tender process and the Board has accordingly agreed that CPS should not submit a bid,” said the company in a statement to shareholders on Monday.
“Management reached this conclusion after careful consideration of all the relevant factors, including financial feasibility of the RFP, further questions raised by prospective bidders, execution of the Company’s strategic plan, legal risks, reputational risk, and long term value creation for shareholders,” said Net1 in its statement.
The company further said that its plans on focusing more on providing products and services to South Africa’s “unbanked and under-banked citizens including social grant beneficiaries, but independently and without Sassa’s limitations and constraints”.
Net1 in its statement further said that the execution of its business plan “will no longer be limited by a five year contract (or potentially shorter if legally challenged) and provides the company with the ability to freely determine pricing that is both competitive and profitable and removes any unknown or contingent liabilities associated with government contracts”.
Dr Serge Belamant, chairperson and CEO of Net1, said that Net1 to date has helped bank 10 million people, registered 22 million on the social grants system, and “eliminated fraud in excess of R3bn per annum”.