Pressure on Net1 to comply with lending practices
TRADE and Industry Minister Rob Davies yesterday said transformation should be supported by the automotive industry to ensure that black industrialists are given space to operate and play a role in growing the South African economy.
Davies was speaking at the inaugural National Association of Automotive Component and Allied Manufacturers of South Africa (Naacam) conference at the Durban International Convention Centre.
Unearth
“We have set a target of getting 100 black industrialists over a period of three years. We have managed to promote and unearth 30 in our first year, but we are not happy because we believe we can do better in the following year. As a result, we have set the target of getting 70 next year,” said Davies.
The industry will host the show every two years as a platform from which to grow the automotive component and related manufacturing sectors in South Africa.
Davies said the transformation of the industry was non-negotiable and could never be compromised.
He said companies would be expected to comply with the broad-based black economic empowerment (BBBEE) regulations.
Raising the local content value in locally manufactured vehicles was robustly discussed.
“I was very pleased to see a number of black industrialists, some of whom had started to enter this space as a result of the initiatives of the Original Equipment Manufacturers (OEMs). This is important because auto programmes will have to deliver a quid pro quo in terms of empowerment and in fact we are setting level four (of the BBBEE codes) as the requirement for entry,” said Davies.
The original OEMs are Toyota, Volkswagen and Mercedes-Benz. One of the issues discussed by the conference was how to find ways to raise local content in manufacturing in the automotive sector.
The conference heard that sector depended largely on imports and was only able to achieve between 38 percent and 39 percent of local content.
It has set itself to achieve a 60 percent local content. If they reach the 60 percent target it will be easier to create jobs for the country and introduce small companies in the sector.
“Small companies will have to come in and replace the imports. If we achieve 60 percent in localisation, we will be able to add 50 000 jobs or around that. That would make a huge impact on reducing unemployment in the country,” Davies added.
The critical matter of raising the local content value in locally manufactured vehicles was robustly discussed by OEMs, supplier, government and labour representatives. The sector is important in job creation, not only in the province but in the country as a whole.
eThekwini mayor Zandile Gumede said: “The automobile manufacturing sector in KZN directly employs 17 000 people and indirectly a further estimated 51 000 people. It is a sector renowned for providing good jobs and imparting significant technical skills while also providing career progression opportunities.” THE WORLD Bank’s International Finance Corporation yesterday said it was pressing Net1 UEPS Technologies to complete an assessment of its lending practices this year, as human rights organisations allege that the company’s subsidiaries were improperly marketing goods and services to the more than 17 million South Africans on welfare.
The corporation last year bought a 17 percent stake in Net1 for $107 million (R1.46 billion), its biggest-ever investment in the financial technology industry, making it the largest shareholder in the company that distributes welfare payments to the poorest third of South Africans, on behalf of the government.
Net1’s second-biggest shareholder Alan Gray, which has a 15.6 percent stake in the company, has raised concerns over Net1’s communications with shareholders about loan charges and deductions.
Held to account
Net1, which has denied behaving improperly, holds stakes in a range of companies that sell services and goods such as loans and cellphone airtime to welfare recipients in South Africa.
Human rights groups, including The Black Sash Trust, say that the company uses personal information gleaned from the payments it makes to help its associate companies market their services.
“We pushed the company to look again at their processes and have a third party certify them as a responsible lender.
“We started a process in September last year,” said Andi Dervishi, global head of financial technology investments at the IFC, last week.
“In the light of what we have seen and what we are hearing in public we are pressing harder. It should happen this year,” Dervishi added.
Net1’s Cash Paymaster Services unit won the contract to distribute welfare payments in 2012.
In 2014, the Constitutional Court ruled the contract invalid because of the way it was awarded.
By the end of last month, when the contract expired, the South African Social Security Agency had failed to comply with an order to find a new distributor and the court ordered Net1 to continue making the payments for another year.
The Constitutional Court also stipulated that it couldn’t use data gathered from welfare recipients for the purposes of marketing.
In another court case, in which a ruling has yet to be made, Net1 is challenging an amendment made by the government to regulations that would stop deductions being made from the social welfare grants.
The controversy from the court cases and the criticism of its lending practices have resulted in increased scrutiny from its biggest shareholders.
“IFC is working alongside other shareholders in urging the company to increase its transparency on marketing and lending practices and engage more constructively with a wider range of shareholders,” Dervishi said.
Claims of improperly marketing goods and services to 17 million on social welfare grants in SA
“We will continue to make our voice heard and exert pressure on the company to adhere to good lending principles to which the IFC is committed.”
Net1 was not immediately available for comment.
The IFC and other shareholders need to do more to scrutinise the company, said Bonita Meyersfeld, head of the Centre for Applied Legal Studies at Wits University.
“The source of their information cannot come solely from the company. Are they engaging with the grant beneficiaries?” said Meyersfeld, whose organisation is representing the Black Sash in the court cases.
“The IFC is a development organisation that has rendered antiseptic a company that has made billions of rand off the poorest people in this country. As a development organisation it is disingenuous,” Meyersfeld added. – Bloomberg