Net1 shifts focus from grants
NET1 says the decision not to bid for the controversial multibillion-rand social grants contract has freed it up to look for acquisitions in Europe, Latin America and Africa.
THE decision not to bid for the controversial multibillion-rand social grants distribution contract has freed up management time at Net1 to aggressively look for acquisitions in Europe, Latin America and in the rest of Africa, CEO Serge Belamant said in an interview last week.
Despite its withdrawal, the group would not be delisting from the JSE despite lack of trading on the bourse. Net1, which was founded in SA more than 20 years ago, has its primary listing on the Nasdaq in the US. It hopes its geographical expansion and its new products will attract more local investors. Its biggest shareholder in SA is Allan Gray, which owns 18.8%.
Apart from social grant distribution through Cash Paymaster Services (CPS), Net1’s business is in the financial services sector. It also provides a full spectrum of banking, including debit cards, cash withdrawals, card payments, micro loans and insurance. Its financial services are geared to the unbanked.
Net1 also owns the Easypay brand whose platform is used widely in the retail industry.
It also has mobile businesses under Zazoo, which offers products such as mobile virtual credit cards.
Net1 still sees promising growth in SA and could launch more products through partnerships. However, in terms of acquisitions, it is looking beyond SA and will ramp up its Nigerian business through partnerships.
“We are interested in Brazil and have spent a lot of time with government talking about what we have done in SA over the last 15 years in social development,” Mr Belamant said.
“If we find the right partner, we will definitely enter Brazil. The important thing is to find a partner that understands the culture of the country.”
Net1 has operations in South Korea, the US, India and across Africa. It recently bought a 43.88% share in Hong Kongbased payment services company Transact24.
Net1 has separated CPS from its other businesses to enable it to focus on its other financial technology businesses without being a direct contractor to the social grants distribution.
This means there will not be close working relationships or possible cross-selling between CPS and other subsidiaries.
When CPS hands over to a new distributor in a year or so, the business will be integrated into other Net1 units, a move that will help save jobs.
Net1 believes its expansion plans and the launch of new financial and mobile-related services will ensure a sustainable business model that will, over time, far exceed the benefits that could be realised from being the successful bidder for the grant distribution tender.
Mr Belamant said the tender contributed less than 20% of the revenues in SA.
“We took a decision that if losing 20% releases management time and allows us to focus on (expanding the business), how long will it take us to recover it? With the things we are busy with, we think we can recover that soon,” he said.
He added that the company would earn less each year as fees from distributing the social grants were being reduced.