Net 1 UEPS Technologies, the company that administers the national R10 billion social grant contract, has finalised a black economic empowerment (BEE) deal for R264 million, more than a year after it was first mooted.
Net 1 said yesterday that all conditions on the relationship agreements with its BEE partners had been fulfilled. The transaction was delayed last year to allow the company to deal with reputational damage and negative publicity concerning the social grant contract.
The payments implementer has issued 4.1 million shares to Business Venture Investments No 1567 and 300 000 shares to Born Free Investments at R60 a share. The consortium is led by Mosomo Investment Holdings.
The US company’s wholly owned subsidiary, Net 1 Applied Technologies South Africa, will lend the funds at a market-related interest rate.
The shares will act as collateral for the loan, which is repayable over five years.
Shares in Net 1 surged 4.14 percent to close at R98 yesterday, which left the firm with a market capitalisation of R4.49bn on the JSE, where it holds a secondary listing. Its primary listing is on the technology laden Nasdaq.
Head of investor relations Dhruv Chopra was not immediately available for comment.
Last year, Serge Belamant, the chief executive, anticipated that the deal would boost the firm’s empowerment rating to level three or four from level six or seven.
Companies operating in South Africa are required to have a portion of their shares owned by black groups in an initiative by the government to redress historical economic imbalances.
The company is the subject of an investigation by the US Justice Department and Securities and Exchange Commission, which are probing whether Net1, through its subsidiary Cash Paymaster Services, won the social grant tender put out by the SA Social Security Agency using corrupt methods.
The firm first disclosed the investigation on December 4, 2012. The US authorities launched a probe after complaints by former Absa subsidiary AllPay, a competing bidder for the tender.
Recently, the Constitutional Court found the award of the contract by the government to be invalid but did not remove the contract from Net1 as this would disadvantage the beneficiaries, who include children, the elderly and the disabled.
The contract is for the roll-out of new smartcards to recipients. The parties appeared before court on February 11 to present various remedies. The outcome is yet to be announced.
Net 1 provides alternative payment systems to leverage its universal electronic payment system to facilitate biometrically secure, real-time electronic transaction processing to unbanked and underbanked populations of developing economies around the world in an offline and online environment.
It operates payment processes in South Africa, South Korea and Ghana. Through its subisidiaries MediKredit and XeoHealth it offers real-time claims adjudication systems for the health-care sector.