Firm denies exploiting the poorest of poor

CONTROVERSIAL technology company Net1 UEPS has brushed off criticism that it exploits South Africa’s 21.6-million grant beneficiaries, saying it will continue marketing “microloans” to the poorest of the poor.

Last year, Social Development Minister Bathabile Dlamini said she was considering “legal action” against Net1’s grant arm Cash Paymaster Services (CPS) for a “scam” in which it was allegedly deducting cash illegally from grant payments for products it was selling to welfare recipients.

Net1 was using the database of grant recipients it got when it won the grant tender to sell products such as microloans, airtime and funeral policies, and then allegedly deducting repayments. A furious Dlamini said it was illegal for CPS to deduct money from grants in this way, demanding that it stop.

But this week, Net1 CEO Serge Belamant said this was “ethically” defensible — and his company had no intention of stopping.

Dlamini and SA Social Security Agency CEO Virginia Petersen “are both social workers. They protect their people like sheep. People are free of mind, and you still have to allow them to do what they want with their grant money. If they want to spend money on airtime, they’re going to”, he said.

Net1 has a lot to lose if Dlamini halts CPS punting these products to grant recipients. Already, the welfare grant tender, which provides 40% of Net1’s tender, may yet be rerun after last week’s court decision.

Anything that eats into the profits it makes from its other business will hurt.

But Belamant said that if Net1 didn’t provide loans poor people would go to a charlatan on the side of the road. “Social workers say that people on a grant should not be able to get loans. Now, that’s a wonderful statement, but it’s also an unrealistic statement.”

You have to allow them do what they want with their grants

In any event, he argued, the products CPS sold to welfare beneficiaries were simply “emergency support”, meant to provide people with basic food and healthcare rather than cash for gambling or booze.

But a key criticism is that Net1 uses “customers” it got by default thanks to winning the tender to provide grants, and then makes money cross-selling products to people who are on the breadline.

Net1 then makes money on these loans by charging a monthly administration fee of R15 to R20 on these loans.

Belamant responded: “We’re not charging interest. So if we lend someone money, we’ll try and make a small turn on it.

“But the reality is that if someone needs to go to hospital, they’ll get a loan, and if it’s not from us it’ll be from someone else.”

It’s not just loans, however.

Net1’s products include airtime, prepaid electricity and other products which should not, arguably, be paid from grant money meant to provide cash for food and basic necessities.

The problem was clear from the case of Jessie Thage, a 76-year old pensioner of Bethanie in the North West, who told the Sowetan newspaper in October how CPS deducted R77 from her pension for airtime bought by her daughter.

“They told me it was for airtime, but I did not buy it. I don’t even have a phone,” Thage said.

In response to this, Belamant said: “From an ethical point of view, I would have a problem doing this if we weren’t the cheapest. But we’re giving them something they need, and we’re giving them something better and cheaper than they could get elsewhere.”

He said 3.2 million of the recipients used Net1’s cellphone interface to buy products such as airtime and electricity.

“We are the cheapest on every product. Why would 3.2 million people use our interface rather than buying airtime at Shoprite? They can’t all be being fooled by this terrible company Net1.”