Net1 accused of overstating losses

Ray Mahlaka

Net1 repeatedly warned that subsidiary Cash Paymaster Services (CPS) would operate at a significant financial loss if Treasury didn’t increase the fees paid to it for distributing social grants on behalf of the SA Social Security Agency (Sassa).

The company is now locked in a dispute with Treasury over the fee it can invoice Sassa for services delivered in the six months ending September 30.

CPS requested that its monthly fee increase from R16.44 per beneficiary to R66.70. Without it, it said it would operate at financial losses of at least R70 million per month, jeopardising its ability to distribute social grants.

In a new twist – with CPS no longer paying social grants from October 1 – a report by a Constitutional Court-appointed panel has accused CPS of overstating its risk of financial loss.

It says CPS was able to pay social grants at R16.44 per beneficiary until its contract with Sassa ended.

“This suggests that the risks articulated by CPS in its submission to the court were overstated, and the profits derived by its parent company Net1 from its charges to beneficiaries more than made up for these losses,” the panel said.

The R66.70 per beneficiary fee CPS proposes was widely criticised as it would cost the national fiscus R166.7 million a month, or R1 billion for the six-month period. Former finance minister Nhlanhla Nene instead recommended a R46.46 fee.

The panel said although Net1’s SA transaction processing division, which includes CPS, saw its revenue and profits fall in the third and fourth quarters of 2018, the extent of the decline was lessened by other sources of income, including card transaction fees.

In determining an appropriate final fee, the panel wants the court to conduct a review of historical profits achieved by CPS/ Net1 and to take the profits generated by Net1’s SA transaction processing division into account.

Moneyweb

President Cyril Ramaphosa on Wednesday published the terms of reference for a judicial commission of inquiry into the Public Investment Corporation (PIC) that goes beyond the corruption allegations that have dogged the money manager and CEO Dan Matjila for over a year.

The inquiry will examine broader governance, corruption and mismanagement issues going as far back as 2015.

The PIC manages investments worth R2 trillion on behalf of the Government Employees Pension Fund and other government funds. It’s the first decisive action taken by Ramaphosa and former finance minister Nhlanhla Nene, who announced the inquiry aimed at fixing governance issues at the asset manager in July.

The terms of reference determine

The R66.70 per beneficiary fee CPS proposes was widely criticised as it would cost the national fiscus R166.7 million a month.