ATM use lifts Net1’s revenue

• Increase not enough to offset declines in other segments, while earnings per share drop 53% after rise in number of shares in issue

Increased use of Easy Pay Everywhere ATMs helped boost Net1’s South African revenue 7% to $64.1m in the three months to the end of December.

Increased use of Easy Pay Everywhere AT Ms helped boost Net1’s South African revenue by 7% to $64.1 min the three months to end-December.

The South African division of the controversial US-based payment solution and transaction processing group also benefited from a rise in intersegment transaction processing activities. But the South African increase was insufficient to offset decline in other segments, with total revenue down 4% in rand terms in the period and earnings per share down a hefty 53% after an increase in shares in issue in February 2017.

On the local front, Net1 management noted that revenue and operating income were “driven by ongoing Easy Pay Everywhere adoption as we further expanded our customer base utilising our ATM infrastructure”.

In its presentation to analysts on Friday, management referred to last week’s application by the South African Social Security Agency (Sassa) for a six-month suspension of the invalidity of its contract with Net1 subsidiary Cash Paymaster Services (CPS).

“Sassa continues to evaluation options to in-source distribution of grants as per the Constitutional Court’s instructions and has asked the court to extend our services,” said Net1.

However, the Sassa application, which would extend the contract for the six months to end-September, envisages a considerable reduction in the involvement of CPS in the distribution of social grants. CPS had earlier indicated to Sassa it would oppose such a reduction, as this would have a significant effect on its profit margin. This was because CPS would be required to continue grant distribution to 2.5-million beneficiaries through cash points without the benefit of crosssubsidisation of payments made through ATMs and merchants.

Net1’s presentation noted that CPS had a nationwide distribution footprint and an unmatched distribution network in rural areas. “We have the last mile connectivity and presently can reach every South African within a three-mile radius,” it said. The panel of experts appointed by the Constitutional Court to interrogate the payment of social grants noted in its latest report submitted to the court on January 29 that 10.7-million grant beneficiaries were paid through Sassa Grindrod bank accounts, including Easy Pay Everywhere accounts.

“The number of beneficiaries with Easy Pay Everywhere bank accounts continues to increase and passed the 2-million mark in December 2017,” the panel said. Sassa had raised concerns about the aggressive roll-out of Easy Pay Everywhere accounts by CPS and Grindrod, but Sassa had not addressed other issues.

“The panel remains concerned about Sassa’s seeming inability to stem the misinformation about the Easy Pay Everywhere card as the‘ new’ Sassa card and to investigate and take action where Sassa staff and CPS staff at Sassa offices are alleged to have marketed the Easy Pay Everywhere accounts on Sassa premises and at cash pay points.”

THE NUMBER OF BENEFICIARIES WITH EASY PAY EVERYWHERE BANK ACCOUNTS CONTINUES TO INCREASE