Net 1 to venture into money-lending market

Asha Speckman

NET 1 UEPS Technologies, the technology company that distributes government social grant to millions of South Africans nationally, will pilot money-lending services from next month. It will also pursue prepaid electricity, money transfers and other bill payments more aggressively through its subsidiary EasyPay, according to Serge Belamant, Net 1’s chief executive and chairman.

Belamant gave the road map and a report on the company’s results for the fourth quarter and full year to June on Friday. Net 1 holds a primary listing on the Nasdaq Stock Market in the US and a secondary listing on the JSE.

He told investors on a conference call that the North Gauteng High Court would announce a decision tomorrow on litigation against Net 1 by Absa subsidiary AllPay and Mpumalanga-based Empilweni.

Earlier this year the parties asked the court to interdict Net 1’s Cash Paymaster Services division from rolling out the R10 billion social grant contract from April this year. AllPay claimed there were irregularities in the award of the contract.

Empilweni sought to stop nationwide implementation of the contract otherwise it would encounter financial hardship and be forced to shut down.

Belamant said Net 1 intended to target the database of nearly 10 million social grant beneficiaries as an additional market for its services.

He said the SA Social Security Agency (Sassa) added about 40 000 beneficiaries to its database monthly and “at least 2 million more would be coming onto the database in the next two to three years”.

Net 1 faces competition from Blue Label Telecoms, a JSE-listed technology firm that also facilitates sales of prepaid airtime, electricity vouchers and money transfers.

Net 1 intended to offer one- to six-month loans, an area where Belamant said there was “huge opportunity”, and the pilot of this service would run over three to six months.

Over the next 18 months Net 1 would launch other products. Belamant said another potential source of revenue was the substantial transaction fees it could gain from social grant beneficiaries who used various points of presence at merchants that did not belong to Net 1’s distribution network.

Net 1 recently concluded a deal with electronic payments facilitator MasterCard, which allows grant beneficiaries using Net 1-issued smartcards to collect their social grants and make purchases and payments at other facilities.

Net 1 reported revenue of $390 million (R3.3bn) for the year to June, an increase of 14 percent in dollar terms and 25 percent in rand. Fundamental net income fell 7 percent to $45m, and fundamental earnings a share fell 7 percent to $1.42.

The group attributed the earnings a share decline to implementation costs that included infrastructure expenditure and remuneration for temporary workers. Chief financial officer Herman Kotze said that although financial performance in 2013 was expected to improve sequentially, results would be “lumpy”.

Belamant said all business units had “a robust pipeline of new and existing opportunities that were expected to deliver improving financial contributions in the short to medium term”.

David Koning of Robert W Baird rated the stock outperform, saying that despite “choppiness” from the ramp-up of the Sassa contract over the next few quarters the stock remained “favourable for high-risk investors”. It leapt 12.43 percent to R78.70 on Friday.