The corporation last year bought a 17 percent stake in Net1 for $107 million (R1.46 billion), its biggest-ever investment in the financial technology industry, making it the largest shareholder in the company that distributes welfare payments to the poorest third of South Africans, on behalf of the government.
Net1’s second-biggest shareholder Alan Gray, which has a 15.6percent stake in the company, has raised concerns over Net1’s communications with shareholders about loan charges and deductions.
Net1, which has denied behaving improperly, holds stakes in a range of companies that sell services and goods such as loans and cellphone airtime to welfare recipients in South Africa.
Human rights groups, including The Black Sash Trust, say that the company uses personal information gleaned from the payments it makes to help its associate companies market their services.
“We pushed the company to look again at their processes and have a third party certify them as a responsible lender.
"We started a process in September last year,” said Andi Dervishi, global head of financial technology investments at the IFC, last week.
“In the light of what we have seen and what we are hearing in public we are pressing harder. It should happen this year,” Dervishi added.
Net1’s Cash Paymaster Services unit won the contract to distribute welfare payments in 2012.
Read also: Net1 inks addendum with Sassa
In 2014, the Constitutional Court ruled the contract invalid because of the way it was awarded.
By the end of last month, when the contract expired, the South African Social Security Agency had failed to comply with an order to find a new distributor and the court ordered Net1 to continue making the payments for another year.
The Constitutional Court also stipulated that it couldn’t use data gathered from welfare recipients for the purposes of marketing.
In another court case, in which a ruling has yet to be made, Net1 is challenging an amendment made by the government to regulations that would stop deductions being made from the social welfare grants.
The controversy from the court cases and the criticism of its lending practices have resulted in increased scrutiny from its biggest shareholders.
“IFC is working alongside other shareholders in urging the company to increase its transparency on marketing and lending practices and engage more constructively with a wider range of shareholders,” Dervishi said.
“We will continue to make our voice heard and exert pressure on the company to adhere to good lending principles to which the IFC is committed.”
Net1 was not immediately available for comment.
The IFC and other shareholders need to do more to scrutinise the company, said Bonita Meyersfeld, head of the Centre for Applied Legal Studies at Wits University.
“The source of their information cannot come solely from the company. Are they engaging with the grant beneficiaries?” said Meyersfeld, whose organisation is representing the Black Sash in the court cases.
“The IFC is a development organisation that has rendered antiseptic a company that has made billions of rand off the poorest people in this country. As a development organisation it is disingenuous,” Meyersfeld added.