CPS spreads its wings after Sassa contract

Net1, parent company of social grants distributor Cash Paymaster Services (CPS), plans to roll out banking services to under-served consumers after its contract with the SA Social Security Agency (Sassa) ends.

Although Net1 isn’t rushing to launch a fully-fledged bank, CEO Herman Kotzé said CPS’ underlying technology, which has been mainly used to distribute over 10 million social grants, could be used to offer banking products and services.

The CPS business would focus exclusively on large-scale financial inclusion opportunities for unbanked and lower-income earners located in far-flung areas.

“We aim to expand our reach beyond just providing services to social grant recipients. They [social grant beneficiaries] will still be able to use our banking services – the way they have been doing in the past,” said Kotzé.

He said CPS is currently prohibited from offering banking services due to its contract with Sassa; this condition falls away when the contract expires and is phased out.

CPS’s contract with Sassa, declared invalid in 2014 by the Constitutional Court for not going through proper tender processes, expires on March 31. Sassa has asked the court to extend the contract for an additional six months. However, Net1 isn’t in favour of this, mainly as Net1’s reputation has been sullied for scoring the contract in a flawed manner.

However, Net1 might consider the extension if there’s no other way to pay social grants, as “we don’t want to be responsible for the failure of the grants system”, Kotzé said.

Net1 will continue its partnership with Grindrod Bank, which currently has 10.8 million bank accounts that social grant beneficiaries use to access their grants via ATMs and retail pay points, to underwrite and rollout its banking services. Its EasyPay business will support it.