Allan Gray mulls over removal of Net1 board
Allan Gray, which owns 16% of Net1 moved on Thursday to limit the damage caused by the company’s involvement in the social grants saga, saying it would consider calling a shareholders’ meeting and attempt to remove the board.
Such a dramatic and unprecedented move could see Serge Belamant losing his position as CEO of the group he founded.
On Thursday, Andrew Lapping, chief investment officer at Allan Gray, told Business Day that the investment manager had urged Net1 to make every effort possible to find an interim solution to ensure that grants were paid by April 1.
“As shareholders, we would be happy if this meant Net1 foregoing all profits on the extension to ensure it happens,” Lapping said. This response is in stark contrast to Belamant’s claim that Net1 subsidiary Cash Paymaster Services (CPS) had to be paid more money for a new contract because his investors were demanding more.
Belamant told journalists on the sidelines of Wednesday’s Constitutional Court hearing that
he should be making 20% profit on the contract.
“In fact that’s actually low for my investors, they would prefer a 30% or 40% (profit). Investors always want more, government always wants less.”
Allan Gray has also asked Net1 to consider cancelling all recurring monthly deductions to Net1 subsidiaries for airtime. And in a move to address crossselling by other Net1 subsidiaries he said, “We have also asked them to consider such measures as sending three SMS messages per month for the next three months to all Smart Life policyholders, in their home language, offering a simple, easy and button-pushing way for policyholders to cancel their policy,” Lapping said.
He said his team was working to fully understand issues around the integrity of management. “If these issues are not resolved to our satisfaction, we will call a shareholders’ meeting and attempt to remove the board.”
He said that as a shareholder Allan Gray had some influence to hold Net1 accountable.
The investment manager’s move may have been behind a conciliatory SENS announcement released by Net1 late Thursday in which it apologised unreservedly if any comments were perceived offensive.
Chris Seabrooke, a Johannesburg-based director of Net1, which has a primary listing on Nasdaq and a secondary listing on the JSE, did not respond to a number of phone calls.
The International Finance Corporation, which is a division of the World Bank, would not be drawn on the matter other than to state that it continued to monitor Net1’s activities.
Earlier this week Finance Minister Pravin Gordhan and several members of the standing committee on public accounts made damning comments about Belamant’s arrogant attitude towards the South African government. And on Wednesday the Constitutional Court made more damning comments about the CPS.
While Belamant has played a critical role in Net1 he may have become a liability. As one corporate governance expert said, “We all thought African Bank would not survive without Leon Kirkinis. In fact it turned out that if he had stayed it would not have survived. We may be looking at the same situation here.”