Net1 investor’s principles queried
• World Bank unit flouts standards it sets for others, says Corruption Watch
Corruption Watch, which is taking legal action against the South African Social Security Agency about its contract with Net1, has queried the International Finance Corporation’s apparent disregard of its own standards with private-sector investments.
Corruption Watch, which is taking legal action against the South African Social Security Agency (Sassa) about its contract with Net1, has queried the International Finance Corporation’s (IFC’s) apparent disregard of its own standards with privatesector investments.
The IFC, which is part of the World Bank Group and invests in private companies across the world, is the single largest investor in Net1.
Unlike Allan Gray, which has been subjected to criticism in SA, the IFC has maintained a low profile in the controversy.
In stark contrast to Allan Gray’s engagements, the IFC has demonstrated no urgency in tackling the matter. Earlier this month it said it was pushing Net1 to complete an internal investigation into its lending practices. It also wants a third party to certify Net1’s as a responsible lender. “In light of what we have seen and what we are hearing in public, we are pressing harder. It should happen this year,” Andi Dervishi, IFC global head of financial technology investments, said at the time.
The IFC, which says its mission is to fight poverty with passion and professionalism, acquired an 18% stake in Net1 in April 2016.
It described Net1’s recent board changes as “a positive step” and said it would continue to make its voice heard and exert influence on Net1’s board to promote robust management, good lending practices and governance and transparency.
Corruption Watch executive director David Lewis said although the IFC was using public money to invest in Net1, it seemed unconcerned about enforcing governance standards on its investee companies.
“The World Bank is extremely robust in defending itself from malfeasance around its own service providers. Why is the IFC not applying the same standards?” he said.
Corruption Watch was encouraged by Allan Gray’s engagement but disappointed about its limited influence, Lewis said. “Welcoming the split in the roles of chairman and CEO seems rather lame given that it is merely confirmation of the most basic of good corporate governance practices, regardless of US tolerance for it.”
Allan Gray chief investment officer Andrew Lapping told nongovernmental organisation Equal Education that with the benefit of hindsight, and given the allegations and Net1’s business model, it would prefer not to have invested in Net1.
“That said, as a shareholder we have some influence to hold Net1 accountable and this is what we remain committed to doing,” he said.
Net1 had agreed to improvements on its contract with Sassa, such as deleting the optin functionality.
Net1 would not comment on Equal Education’s statements, but said it would be tackling “all these matters in an update, which we will be making by the end of the week”.
The IFC did not respond to requests for comment.