Net 1 chief under grants pressure

Second biggest shareholder Allan Gray says it is considering recalling embattled board

EMBATTLED Net1 UEPS Technologies mainstay chairperson and chief executive Serge Belamant’s position looks set for a challenge after the company’s second biggest shareholder, Allan Gray, said it was considering recalling the board of Net1.

Allan Gray chief investment officer Andrew Lapping said on Friday that the company had urged Net1 to publish a comprehensive statement clearly explaining its response to the allegations of illegal and improper behaviour by its management with regards to the social grants saga.

“We are working to fully understand issues around the integrity of management. We view these allegations in an extremely serious light. If they are not resolved to our satisfaction, we will not hesitate to call a general meeting and attempt to remove the board,” he said.

Belamant founded Net1 in 1989 and has been its chief executive since 2000 and its chairperson since 2003.

Ruling

On Friday the Constitutional Court ruled that Net1’s subsidiary, Cash Paymaster Services (CPS), and the SA Social Security Agency (Sassa) must continue paying social grants for a period of a year, until a suitable bidder was found.

The court further ordered CPS to release detailed statements on its finances.

CPS’S initial five-year contract, signed in 2012, was declared invalid in 2015 by the Constitutional Court. However, it was allowed to continue paying the grants to give Sassa enough time to get a new service provider.

A new company was supposed to take over the operations from the beginning of next month. Matters came to a boil this month after it became clear that Sassa had not abided by the court’s earlier decision to find a new service provider, which left 17 million grants recipients in the lurch.

Net1 has been caught in a web of controversies since its appointment. The group has been accused of illegally deducting money for airtime, loans and insurance from grant beneficiaries.

It has also since emerged that the company had been selling the grantees’ information to its subsidiaries.

Allan Gray, which had assets under management of R460 billion at the end of June 2016 and holds a nearly 16 percent stake in Net1, said it was looking forward to canvassing other Net1 shareholders to hold its board to account.

The value of assets Allan Gray has under management

We would be very interested to hear the views of those holding the 84 percent of shares that we don’t own on these issues,” Lapping said.

Shareholder activism has been on the rise in South Africa over the past few years.

In 2013, a last-ditch bid by Bidvest frustrated Chilean pharmaceutical company CFR’S R13bn offer to acquire Adcock Ingram. CFR’S offer had enjoyed the support of Adcock’s board but failed to convince shareholders who blocked the deal.

In 2014 Woolworths shareholders took aim at the company for buying some of its food items from Israel and supported calls to boycott the retailer.

Shareholder activist Theo Botha said the reality was that shareholders cared only about dividends and the company’s share price.

Net1 shareholders had let the country down by not asking questions of the company’s management sooner, he said.

Contact

“Shareholders should have played a role in 2014 already when the Constitutional Court nullified the CPS contract with Sassa.

“It’s good that Allan Gray has now begun to speak out,” Botha said.

International Finance Corporation (IFC), Net1’s largest shareholder, said it was regularly in contact with Net1’s management, board and other shareholders about issues affecting the company.

“Consistent with corporate governance requirements, IFC will engage with Net1’s management and other shareholders to promote responsible business practices and behaviour,” a spokesperson said.

Grindrod Bank, which was subcontracted by CPS to facilitate grants payments, distanced itself from allegations that grantees’ information had been shared with Net1’s subsdidiary companies.

Grindrod’s chief executive, David Polkinghorne, said the company had always acted ethically.

“Grindrod Bank has never provided Sassa account information to any third party.”

Net1 could not be reached for comment.