Johannesburg – Allan Gray, one of South Africa’s biggest
money managers, said it’s “increasingly concerned” over the running of Net1
UEPS Technologies, a company whose lending practices to people on welfare have
been criticised as unethical by human rights organizations.
The second-biggest shareholder in Net1, with a 15.6
percent stake, said its research into the company shows that the business
doesn’t always answer its phones when called by clients, who are among South
Africa’s poorest and least educated. Net1 has the contract to distribute
welfare payments to more than 17 million South Africans and has been accused of
illegally using information it gleans to help its subsidiaries sell those
people services such as mobile-phone airtime and loans.
“It’s not illegal not to answer your phone but it’s not
good business practice,” Andrew Lapping, Allan Gray’s chief investment officer,
said in an interview on Thursday. “We’ve been trying to find out exactly how
beneficiaries are treated. If you have a problem how easy is it to get hold of
them? How easy is it to cancel debit orders?”
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“We’re increasingly concerned. Our concerns have not been
alleviated,” he said.
Investment changes
Last month, South Africa’s Constitutional Court ordered
the nation’s welfare agency to extend Net1’s contract, which it had ruled
invalid in 2014, to distribute the monthly grants for a year to prevent the
system from collapsing after the government failed to comply with an order to
find a replacement. It expressly prohibited the use of information about grant
recipients for marketing purposes.
The Cape Town-based fund manager is compiling research
into how Net1 treats its customers and areas for improvement, which it will
present to the Net1 board.
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Bridget von Holdt, an official at Burson-Marsteller, a
public relations company employed by Net1, wasn’t immediately available when
called by Bloomberg.
Allan Gray wants Net1 to appoint several non-executive
directors to strengthen the board. The company currently has five directors,
three of whom are non-executive. “It’s extremely important because we need
change,” Lapping said.
More oversight
Allan Gray will also make changes to the way it makes its
investments and has hired someone to investigate companies’ social and economic
impact.
“We’ve had introspection and looked at our processes
extremely carefully and we’ve made a few changes in our investment process in
terms of oversight,” Lapping said. “There’s stuff we should have known and we
didn’t know it. We need to be on the ground getting the facts.”
Equal Education, a South African non-governmental group,
said in a statement on Wednesday that it has met with Allan Gray and asked it
to sell its investment in Net1, saying its members have been affected by the
activities of the company.
Net1 said April 7 that it split the chairman and chief
executive officer roles and would appoint “additional independent directors.”
Net1’s biggest shareholder is the International Finance
Corp., the private finance arm of the World Bank. IFC has also asked the
company to improve its lending practices. The IFC declined to comment.