Net1 UEPS CEO Serge Belamant has little doubt the grant distribution service provided by Net1 subsidiary Cash Paymaster Services (CPS) is the best on offer and recipients of social welfare will be worse off without his company.
He is dismissive of possible alternatives. The Post Office doesn’t have the track record or the footprint to match his 10,000 paypoints. And the banks may agree to a reasonable initial fee but that will quickly spike.
"Remember how we were promised ATM fees would be kept at a bare minimum?" says Belamant, bristling from the criticisms fired his way.
"Through our relationship with Grindrod [Bank] we have essentially banked everyone. Grant recipients can transact at any one of 10,000 paypoints across the country. The banks couldn’t do what we have done."
An exchange of letters this week also reveals that CPS urged the SA Social Security Agency (Sassa) almost a year ago to avoid several pitfalls that could lead to a social grants crisis.
The correspondence, attached to an affidavit submitted to the constitutional court by Belamant, shows that Sassa and CPS only agreed to meet on March 1 2017 — exactly a month before the CPS contract ends.
The five-year grant distribution contract held by CPS expires at the end of March. CPS is expected to sign a two-year contract with the social development department this week, despite a 2014 constitutional court ruling that a previous contract between the two was invalid.
Belamant says CPS can even help Sassa take grant distribution in-house, but only on the basis of a new contract.
In the company’s financial 2016 securities & exchange commission filings, Belamant describes a world-class system that is designed to provide access to financial services for millions of the poorest South Africans.
For Belamant, the next two years will be about building Net1’s cardholder base so that it can continue to provide financial services to millions of South Africans, even after the grant distribution has been prised out of CPS’s hands. It is why the company plans to invest R4bn to get a direct and indirect stake in CellC and Blue Label.
Commenting on the Cell C deal last year, Belamant talked of cross-selling opportunities and said the combined infrastructures would create "an offering that includes banking, transacting, debit and credit cards, microfinance, insurance, distribution of both airtime and electricity, and Web services".
But it is the social grants tender that is on everyone’s lips now.
In 2015 Belamant said that he’d withdrawn from the new tender for social grants distribution because he would rather have
2m-3m unrestricted EasyPay accounts than 10m Sassa accounts. The EasyPay accounts target the unbanked.
Three bidders did make it through to the final stages, but they were disqualified on tenuous grounds and the process was scrapped towards the end of 2015, leaving the country facing the current sorry mess.
Net1 has frequently been accused of blurring the lines between CPS and Sassa. Ask almost any of the 11m grant recipients where they can get a loan and chances are they will tell you from Sassa. This is no accident.
By blurring those lines Net1, which owns 87% of CPS, has been able to generate an estimated R6bn in revenue from Sassa-related services. More than half of this R6bn is believed to have come from the financial services Net1 subsidiaries "sell" to grant recipients. The R16.40 fee Net1 charges Sassa for each grant recipient per month is the smaller part of this pie.
Preventing the blurring is at the heart of the Black Sash’s recent application to the constitutional court. Black Sash advocacy manager Elroy Paulus said it is critical that personal information given to Sassa is not retained by CPS after the contract ends.
"Personal data obtained through the grant distribution process must remain private and can’t be used for any other purpose," he said.
The Net1 subsidiaries preying on grant recipients include Moneyline for loans, EasyPay Everywhere for smart cards, Umoya Manje for airtime and electricity, and SmartLife for insurance.
And because CPS controls the distribution of grant monies, it is able to make deductions from grants to pay for these financial inclusion services. With repayment thus guaranteed, there is minimal oversight, says the Black Sash, and widespread fraud. But for Net1 the margins are eye-popping.
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