Net1’s contract under US spotlight

Asha Speckman and Nompumelelo Magwaza

Net1 UEPS Technologies, the sole distributor of the national social grant, is being investigated by the US government on suspicion of having obtained the R10 billion tender through corrupt methods.

The investigation could throw disbursement of South Africa’s social grants, which go out to almost 15 million poor, disabled and elderly people and children, into disarray.

The dual-listed company said in a statement filed with the JSE and the US Securities and Exchange Commission (SEC) that it had received a letter on November 30 from the US Department of Justice (DoJ) criminal division and the Federal Bureau of Investigation. The SEC is also investigating.

The agencies informed the company that they had begun an investigation into whether Net1, including its subsidiaries, employees, agents or any other affiliates, had violated the provisions of the Foreign Corrupt Practices Act and other US federal criminal laws by making corrupt payments to government officials in South Africa to secure the contract with the SA Social Security Agency (Sassa).

Net1 plummeted almost 49 percent to $4 on the Nasdaq. It dropped 8 percent to R67.10 on the JSE yesterday.

The company’s Cash Paymaster Services (CPS) subsidiary won the contract in January this year.

The Department of Social Development said yesterday that Sassa had signed a five year contract with CPS and was committed to the contract.

Furthermore, it was the constitutional right of South Africans to receive social grants and Sassa had a mandate to pay social grants. “We remain committed to paying the right social grant, to the right person, at the right place and time. Njalo!”

South Africa’s image has been tainted by corruption, a scourge the government has vowed to fight but without much success.

According to the Treasury’s 2012 budget review, R104.9bn is allocated for social grant payments this fiscal year, and the cost associated with administering the scheme is projected at R6.3bn. The number of recipients is set to rise to 16.8 million by 2014 from 15.6 million in the prior fiscal year.

News of the investigation could cause worry among some grant recipients but the government was mum.

Jabulani Sikhakhane, the spokesman for the Treasury, which disburses the funds, declined to comment. “There’s a court process under way on this matter. Maybe we can comment after that,” he said.

Sassa did not comment.

Mike Waters, the DA spokesman on social development, said: “It’s very worrying to say the least… What we don’t want in our country is a repeat of the arms deal.”

Waters said he would be writing to the public protector, Thuli Madonsela, to inform her of the latest developments.

Dhruv Chopra, Net1’s spokesman, said the company would not comment beyond the statement. The company said it was unable to predict “what action, if any, might be taken in the future… as a result of the matters that are the subject of these investigations”.

The company said: “Net1 intends to co-operate fully with the DoJ and the SEC regarding these investigations.”

In August, Judge Elias Matojane of the North Gauteng High Court declared the tender process invalid and illegal, but did not set aside the contract because of the importance of the grant distribution system.

Absa AllPay, which lost the bid for the contract, is appealing the court’s decision.


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