Social grants service provider Cash Paymaster Services (CPS) is being investigated by public protector Thuli Madonsela over allegations that it is linked to, or running, a facility that offers illegal loans to grant beneficiaries.
Madonsela confirmed yesterday that a preliminary investigation had been launched to determine whether CPS, which holds the R10 billion contract to distribute social grants to more than 10 million South Africans, was involved with the illegal loans, on which interest of up to 50 percent was charged and payment collected from recipients prior to grant disbursements.
“My decision is informed by the fact that media reports indicate that the SA Social Security Agency (Sassa) management is looking into the matter,” Madonsela wrote in a response to the DA, which had asked her to look into the matter.
The preliminary investigation should be concluded by June 10 to determine if there was merit in pursuing a full-scale investigation, she said in a letter dated May 24.
Madonsela’s spokeswoman, Kgalalelo Masibi, did not provide further details, saying only: “The complaint is still being assessed.”
JSE-listed Net1 UEPS Technologies, the parent of CPS, said it would welcome the investigation. The allegation is the latest headache for the company, which has faced many challenges since the contract was awarded in January last year.
Madonsela, the US Department of Justice and the US Securities Exchange Commission are also investigating potential corruption in the award of the contract. These allegations were levelled by losing bidder AllPay, a unit of Absa.
Yesterday Serge Belamant, Net1’s chief executive, said: “I think it is key that an authority such as the public protector evaluates what our company does and importantly compares it to what is currently being done by other less scrupulous organisations.
“Once the naive notion that ordinary people, including social welfare beneficiaries, should not be able to access loans and do not need loans is finally put to bed, our social programmes may start to get recognised for what the intention has always been: to provide affordable financial services to all.”
The Department of Social Development and Sassa did not immediately respond to questions.
Recently Sassa published full page advertisements in newspapers advising beneficiaries that only one deduction, not exceeding 10 percent of the value of the social grant amount, was permitted for funeral insurance.
With effect from June 1, Sassa would not be responsible for processing deductions for microloan repayments, the government agency said.
Mike Waters, the DA’s spokesman onsocial development, called for a full investigation. He cited media reports that certain beneficiaries had received interest free microloans and repayments were automatically deducted from their social grants, but that on some loans interest rates were as high as 50 percent, which was in contravention of the Social Assistance Act.
“Social grants are a necessary safety net to assist poor South Africans. The fact that some of our most vulnerable citizens, who are in desperate need of assistance, are being treated this way leaves me angered,” he said.
The Sowetan published the initial report on May 15.
Net1 also owns Moneyline Financial Services, which in turn is the parent of financial services firm Friedland 035.
In a statement Net1 issued in response to the story, the company said: “CPS does not endorse Friedland 035 because its policy is not to endorse any financial services company. But it is aware that Friedland 035 operates ethically, observes all laws and monitors the loans it makes to ensure that debtors do not fall into a debt trap.”
Net1 shares closed unchanged at R69 yesterday.