It’s still not clear how millions of social grants will be paid out after 31 March, the deadline set by the Constitutional Court for the contract for current supplier Cash Paymaster Services (CPS) to terminate.
CPS is a subsidiary of Net 1 UEPS, which is still in limbo as to whether it will proceed to pay out grants from 1 Afria.
“Our contract with SASSA ends on 31 March 2017,” reads a statement from the company. “In April 2014, the South African Constitutional Court declared the contract constitutionally invalid due to certain administrative irregularities by SASSA during its tender process.
“The Constitutional Court suspended the invalidity of our contract until SASSA awarded a new five-year contract under a fresh tender process. The Constitutional Court further ruled that if SASSA did not award a new contract, the declaration of invalidity would be further suspended until our contract expired on March 31, 2017, and SASSA was required to report to the Constitutional Court if and when it would be in a position to assume the grant distribution service.
“SASSA commenced a fresh tender process during 2015 but did not award a new contract as the three responses received were determined to be non-compliant. We did not participate in the 2015 tender process.”
At a Parliamentary briefing session on 1 February 2017, SASSA informed the meeting that it will not be ready to assume the payment function on 1 April 2017. SASSA expressed its intention to approach the Constitutional Court to obtain permission to extend our contract.
On 9 February 2017, CPS received a letter from SASSA stating: “After much deliberation and following due process the South African Social Security Agency (SASSA) is now in a position to formally express its intentions to hold an exploratory meeting with Cash Paymaster Services (Pty) Ltd (CPS) on probabilities to assist in the transition of SASSA operations (while ensuring grant payment continuity) towards a new service model that must be subject to a regular procurement process.
“Based on the above stated fact, SASSA requires a principle confirmation from CPS that it is amenable to agree to the proposed meeting to explore the possibilities to avail the company’s services as an interim arrangement regarding the payment of social grants for the period extending from 31 March 2017.”
“We have formally responded to SASSA indicating our willingness to convene an urgent meeting as requested,” the statement continues. “It is not clear if our contract could be extended under the Public Finance Management Act or if a new transition contract would be required.
“We cannot predict when or if SASSA will approach the Constitutional Court, what the outcome of such approach would be, or what the terms and conditions of any agreement between SASSA and us would be. We are fully aware of the critical nature of the services we provide to millions of South Africans and the need for uninterrupted service delivery and we remain committed to assist our social grant recipients, SASSA and the South African government within the ambit of all the relevant laws and regulations.”
Net I UEPS reports revenue of $151,4-million for the second quarter of 2017. Fundamental net income was $22,7-million, an increase of 15%.
“During the first half of fiscal 2017, we made demonstrable progress towards building a long-term, sustainable growth
business with reduced customer, currency, and political risks,” says Serge Belamant, chairman and CEO of Net1. “In South Africa, while we will continue to provide unwavering support to government and its citizens, our internal reorganization and investments with the likes of Blue Label, should significantly expand our addressable market, and create new business models that in turn we can deploy in other emerging markets.
“Internationally, we have been putting the pieces of the puzzle together so that we can own the value chain and thus maximize our returns. Our recent investment in Bank Frick plugs the last significant hole in our portfolio, and thus will allow us to facilitate new revenue generating opportunities in Europe, Africa and Asia,” he adds.
“There continues to remain a number of variables that will have an impact on our fiscal 2017 results,” says Herman Kotze, chief financial officer of Net1. “These include the status of our SASSA contract and the financial impact of the Blue Label transaction when completed, including the impact of its own acquisition of 45% of Cell C.
“We currently anticipate our fundamental earnings per share for fiscal 2017 to be at least $1.69. In formulating our guidance, we continue to assume that our existing contract with SASSA remains in effect for the full year on the existing terms and conditions, a constant currency base of R14.38/$1, a revised share count of 54,5-million shares based on the delay in sale of 5-million shares, and a tax rate between 33%-35%,” he adds.