Retention of grants-distribution contract sees Net1 shares rise

SHARES in NET1 UEPS Technologies rose 11.32% on the news it will continue to distribute social grants after a decision by the South African Social Service Agency (Sassa) not to appoint a new distributor.

Net1’s subsidiary Cash Paymaster Services (CPS) won the multibillion-rand tender to distribute social grants. But early last year, the Constitutional Court cancelled the tender and ordered Sassa to start a new tender process.

Net1 was allowed to continue distributing the grants until a new supplier was appointed.

According to Net1, the bid adjudication committee recommended that the tender “not be awarded as a result of the nonresponsiveness” of all the bids received with the mandatory requirements contained in the request for proposal.

In May, Net1 withdrew from the tender process to focus on its other businesses.

The bid adjudication committee recommended that Sassa allow the existing contract with CPS to continue until completion. The five-year contract ends in March 2017.

The committee also recommended that Sassa should file a report to the Constitutional Court within 14 days of the decision not to award the tender, setting out all the relevant information on whether and when Sassa will be ready to assume the duty to pay grants itself.

Net1 has separated CPS from its other businesses to enable it to focus on its other financial technology operations without being a direct contractor to the social grants distribution.

This means there will not be close working relationships or possible cross-selling between CPS and other subsidiaries.

Apart from social grant distribution through CPS, Net1’s business is focused on the financial services sector.

It also provides a full spectrum of banking, including debit cards, cash withdrawals, card payments, micro loans and insurance. Its financial services are geared to the unbanked.

Net1 is expanding its business, especially its mobile businesses under Zazoo, which offers products such as mobile virtual credit cards. Zazoo has formed partnerships that will expand its virtual card payment platform to countries such as Cyprus, Singapore and the Philippines. Net1 has also expanded into Nigeria through an investment in One Credit.