Absa won ’ t quit Net1 welfare tender battle

HE scrap between Absa’s AllPay and Net1 over the lucrative contract to distribute welfare payments to more than 10 million beneficiaries each month could be heading for the Constitutional Court soon.

Government awarded the fiveyear contract last year to Cash Paymaster Services (CPS), owned by Net1 and listed on the JSE and Nasdaq. But AllPay appealed against the decision, citing “irregularities” and muttering darkly about fraud and bribery.

The stakes are high for Absa. Under the previous contract, Absa paid social grants to millions of people. But, under the new tender, Net1 plans to move these bank accounts to Grindrod Bank.

In September, the North Gauteng High Court ruled that the tender process was “illegal and invalid”, but would not be set aside for fear of throwing the social welfare system into chaos and endangering payouts to grant beneficiaries.

So AllPay appealed to the Supreme Court of Appeal.

On Wednesday Supreme Court judge Robert Nugent gave Absa’s company a tongue-lashing, saying that AllPay could not prove any of the dishonesty it had hinted at.

“The affidavits of AllPay evoke suspicion of corruption and dishonesty by innuendo and suggestion, but without ever making the accusation directly . . . it is unfair, if not improper, to impute malfeasance or moral turpitude by innuendo and suspicion, ” he said.

Nugent said the SA Social Services Agency was entitled to choose the solution it wanted. “CPS was able to provide that solution. AllPay could not,” he said.

“The SA Social Services Agency was entitled to award the contract to [Net1’s company Cash Paymaster Services]. It seems to me that it would be most prejudicial to the public interest if inconsequential irregularities alone were to be capable of invalidating the contract,” he said.

But Nugent found no “unlawful irregularities”.

This is a big victory for Net1, but it is not the last word.

For one thing, the US Federal Bureau of Investigation (FBI) is still probing whether Net1 broke any rules to get the tender.

Also, after this week’s ruling an AllPay representative said it would now consider approaching the Constitutional Court.

Net1 was triumphant. One of its advisers said it would use the judgment to “sue the pants off them”. While Net1 initially launched a R478-million damages claim against AllPay for “injuring Net1 ’ s reputation . . . and reducing Net1 ’ s share price”, it has since increased its claim to about R1billion.

CEO Serge Belamant said AllPay ’ s claims “hurt our share price, jeopardised our [black empowerment] participation and caused investors to question our integrity ”.

Belamant said the Supreme Court decision went a long way in repairing the damage, but “great harm has been done”.

Last year, when it emerged that the FBI was probing Net1, its share price plummeted in the US to $3.22, from $7.84.

On Thursday, after the judgment, Net1 ’ s stock price rebounded on the Nasdaq, closing at $7.65. On the JSE, it rebounded 20% from Wednesday — to R66.01.

Absa ’ s share price also responded to the news, falling by 3.1% from Wednesday.