Net1 denies subsidiary has behaved illegally

NET1 UEPS Technologies, which has been accused of exploiting the poor, on Thursday denied its subsidiary Cash Paymaster Services (CPS) had made unlawful or illegal deductions from the bank accounts of social grant recipients.

Reports that micro loans (the kinds of loans that led to the collapse of African Bank in August) were being peddled to grant recipients sparked controversy this week. Shareholders are closely watching the drama unfold as the company's share price struck a one-year high of R151 on Tuesday.

Social Development Minister Bathabile Dlamini on Thursday threatened CPS with court action if it failed to sign a service-level agreement within 14 working days. The agreement would protect beneficiary data and prohibit third-party deductions from grant payments. CPS distributes about R10bn a month in social grants to about 16-million beneficiaries.

The minister suggested that the financial services companies in the Net1 group were using the social grant data to market their services.

According to weekend reports from various organisations, including the Black Sash and the Association of Community Advice Officers of SA, service providers had been able to access personal information from the database controlled by CPS.

Financial inclusion
But Net1 on Thursday reiterated its support for financial inclusion and said it remained committed to assisting the government in eradicating any illegal or unauthorised deductions that were made by third parties from beneficiaries' bank accounts.

The company's share price slumped in April when a review of the social grants tender process was ordered, but then surged 18% to R140 on September 1 when it reported a rise in earnings based on a $26m recovery due to the South African Social Security Agency (Sassa) contract.

Earlier this year the Constitutional Court cancelled the R10bn social grant tender awarded to CPS and ordered Sassa to start a new tender process.
The company said on Thursday it "confirms" that none of the financial services provided by the Net1 group contravened any South African laws or regulations.

A copy of the Thursday's media release was filed as an exhibit on a Form 8-K with the US Securities and Exchange Commission on Thursday.