As fintech company Net1, enters the final payment cycle in its contract with the South Africa Social Security Agency (Sassa), all eyes are on the company to see how they will forge on after losing one of their biggest contracts to date.
Net1’s Sassa contract was called into question following an audit from KPMG which revealed that the company had made R1 billion in profit from what was found to be an unlawful contract.
eNCA reports that the company’s subsidiary Cash Paymaster Services (CPS) was ordered to appoint auditors and provide details of its finances after the court extended its contract with Sassa in March 2017.
The court later ruled that Sassa should fulfil its mandate and take over grant payments from CPS.
By the end of September, Net1, CPS and Sassa will no longer be in business.
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According to Fin24, Net1’s earnings for the 2018 fiscal year were down by almost half, with a drop of 48% in the lead up to the end of the Sassa drama.
The impending end to the contract also resulted in an 81% year-on-year decline in revenue from the contract as a result of the declining number of grant recipients who are slowly being introduced to the new system.
Speaking to Citizen News, Net1 CEO Herman Kotze says the company is looking to focus on the “unbanked population” of South Africa through a range of innovative products and services in the form of bank accounts, loans, insurance, and telecoms.
According to Kotze, Net1’s “unrivalled distribution network” allows them to operate within 5km of where everyone lives and they intend to continue using it to service the part of the population not serviced by the major banks.
“A lot of those are obviously social grant recipients and we know them well and we’ve provided them with a service for the last 20 years, so we know the people well, we know the areas well, a lot of our employees are local and they live there,” said Kotze.
During their Sassa contract, CPS serviced between 9000 and 10,000 pay points between 2012 and 2018. Most of those pay points have since been phased out.
“That’s aggressively being scaled back now. They’ve already closed four or five thousand of these pay points. From what we can see, the intention is to basically retain 1800 or so pay points which will be serviced by the post office and that in itself creates a few massive issues,” explains Kotze.
Among these issues include the need for grant recipients to travel further, stand in long queues, as well as introducing additional travel costs, and increased security risks.
Kotze went on to explain that this has a knock-on effect on the informal economy since grant recipients will no longer be able to use their money to purchase things from vendors who often used to set up shop near the pay points.
Sassa card issues
The post office has issued a number of different cards in recent months, with the most popular being the dedicated new gold card. However, it often runs out due to logistical issues.
When the gold card is not available, they might issue Mzansi cards which have a higher fee structure according to Kotze.
An unidentified caller from Pretoria called into Bongani Bingwa’s show on 702 on Wednesday morning to complain about the fact that Sassa has been having trouble issuing new cards to pensioners for weeks now. Sassa has yet to respond.
Kotze went on to state that there are a number of grant recipients who have been told they need to get themselves new South African Post Office (SAPO) cards which is not the case.
“Any social grant recipient has a choice, whether they want a SAPO card or whether they want a Standard bank card or an FNB or a Net-1 EPE card, it’s completely up to them,” explained Kotze, before adding “the message that SAPO and the minister is sending out though is that if you don’t have a SAPO card, you’re not going to get your grant and that all other cards expire at the end of September, that’s not true.”
He urged people not to panic.
Black Sash, the NPO currently embroiled in a legal battle with Net1 over the deductions the company has been making from grants, has explained the need for grant recipients to switch over to the new system.
According to Black Sash, the Grindrod bank account that Sassa beneficiaries use to access their grants in cash, points of sale or ATMS which are paid by CPS will no longer be used once the contract officially comes to an end in a few weeks.
As a result, beneficiaries have to migrate to the new SAPO card to receive their grants via the new Sassa disbursement account which forms one of three payment methods under the state-led national hybrid model. Additional payment methods include electronic transfers through a commercial bank account and cash payments at a cash pay point.
Sassa could not be reached for comment.
Job cuts for Net1 employees
Despite their reported earnings from the contract, Net1 has been operating at loss in the distribution of social grants and had to approach the court to allow for the restructuring of the contract in order to mitigate this.
Their bottom line has suffered further since the Sassa debacle began and this has caused serious concern about the jobs of their staff.
“We have not recouped the costs and we are still operating at a loss in CPS. We were allowed by the constitutional court in terms of the order to ask for a price adjustment from national treasury, which we did. National treasury has given a recommendation to the constitutional court and at this point in time, we’re waiting for the court to approve the recommendation. So as soon as they do that we can hopefully recover the costs for the last five months,” stated Kotze.
These circumstances remain a concern for the company, especially in the current economic climate but Kotze says there are no job cuts currently planned for the company.
“For us, it’s a particular area of focus. What we want to do in terms of re-deploying our infrastructure and still continuing to deliver a service in the rural areas, it implies that we will be able to retain most of those people. We are obviously working out the logistics of how this will continue,” he said.
Kotze stresses that Net1 is a fintech business and urges the public not to forget that. They are looking into delivering new innovations, especially in the blockchain and crypto space as well as exporting their pre-existing and future technologies into other countries facing similar issues to the ones solved by their offerings.
“If you look at Net1 going forward, the way that we can pull together all of the synergies from the mobile side of things, the financial services side of things and the technology side of things, that’s what we would like people to look at and focus on a measure us on,” said Kotze.