In early November 2013 hundreds (some say thousands) of pensioners descended on the Bizana municipal offices in the Eastern Cape to protest against inexplicable and possibly fraudulent deductions from grants they’d received a week earlier.
They started to assemble from early morning; by early afternoon the mood was turning ugly. At about 5pm municipal officers started paying out cash to the protesters. Most of them hoped to be paid out what had been deducted from their grants the previous week. No-one expected what did happen: the protesters were paid their full grants. No-one complained.
SA has a world-class grant-distribution system, and that’s largely thanks to CPS
Social development minister Bathabile Dlamini may or may not know the Bizana story, but it’s impossible to imagine she and her fellow cabinet members don’t know what to expect if grant payments are disrupted. Which is why, come April 1, Net1 subsidiary Cash Paymaster Services (CPS) will still be in charge of distributions.
But there’s a chance CPS will be involved long after that. The thing is, SA has a world-class grant-distribution system. And that’s largely thanks to CPS. Every month CPS pulls off a remarkable logistics feat. Within a matter of days 11m people receive grants on behalf of 17m beneficiaries. The distribution occurs through ATMs, merchants and rural-based pay-points. It really is a slick operation.
That, of course, is the great side of the story. It’s the side Allan Gray uses to explain why it is one of the biggest shareholders in Net1. (While Net1’s website reveals Allan Gray and its associate, Orbis, each hold 17%, Allan Gray states its stake is 15.58% and Orbis has no Net1 shares. This puts Allan Gray second to the International Finance Corp’s 18%.)
Last week the fund manager said its Net1 investment is "based on the company’s track record of successfully implementing reliable and robust payment technology, which comfortably handles millions of transactions both on and offline, across various different businesses and countries". It went on to say the R1.8bn paid to CPS is "small" in the context of the value of the grants distributed or the harm that would be caused if they weren’t paid. And, reckons Allan Gray, a fee increase wouldn’t be unreasonable given it’s been fixed for five years.
It’s a clinical financial explanation. And tone deaf to the point of sociopathy. There was no mention of the tragic social concerns that have dogged this company for five years. It is true that Net1 has never been found guilty (not surprisingly, given its partner, the SA Social Security Agency, was the target of court action, not Net1) and it may be that the questionable deductions from grants have nothing to do with the many Net1 companies set up to sell profitable services to grant recipients. It may even be that there’s no truth to the talk of corruption in the awarding of the contract in 2012.
Even if Allan Gray believes everything Net1 CEO Serge Belamant says in public is 100% accurate, it should have had the sensitivity to acknowledge there might be some issues around this company. It’s sad to think that ignoring issues may have helped Allan Gray to become so successful.
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