Johannesburg - South
Africa’s government may extend its deal with Net 1 UEPS Technologies, a company
that it has been embroiled in legal battles with, because it’s not ready to
make welfare payments worth about $9.4 billion a year when the contract ends in
April.
The South
African Social Security Agency, which was due to take over the monthly payments
to more than 16 million people, “will not be the paymaster or operating as the
bank that takes the cash or makes the payments,” Social Development Department
Director-General Zane Dangor said by phone on Tuesday. “We have come up with
some really good models, but those models will only be able to kick in from
October or November next year,” he said, without giving more details.
Net 1 has had
the contract to distribute the payments electronically for four years. The
South African Constitutional Court said Net 1’s contract was invalid in
November 2013 and Sassa was expected to start a new tender process. Due to
legal challenges Net 1 has continued to operate the system.
Activist challenge
Last year human
rights activist group, Black Sash Trust, sued the government to ask it to
protect welfare recipients from companies it alleges are selling the nation’s
poorest people goods and services they don’t need and deducting payments from
grants paid to them by the state. Earlier in the year, South Africa changed
regulations to try and halt most deductions. Net 1 filed a lawsuit to block
those regulations from coming into force.
The contract won
by Net 1 was seen by the government as a way of including more people in the
financial system and ending a practice where recipients had to travel to payout
points to receive their payments.
Read also: Net 1 battle with Sassa continues
Payments “will
continue as normal” until a new model can be put in place, Dangor said. The
Social Development Department and Sassa are in talks with the central bank and
National Treasury to set up bank accounts for those receiving welfare payments.
Calls to Net 1’s
offices in Johannesburg weren’t answered. Its shares were unchanged as of 10:18
a.m. on the Johannesburg Stock Exchange.
BLOOMBERG