How Net1 has innovated its way to global success despite some bad press

Net1 has had some very bad publicity over the last few weeks, with a slew of articles criticising its practice of making various deductions to the social grants that it pays out using its proprietary payment solution, and for making what some have called predatory loans to social grant recipients. The kerfuffle has involved the department of social welfare and various non-governmental organisations, who say that Net1’s subsidiary CPS, which handles millions of social grant payments in South Africa, has behaved badly, and the department of social welfare has called on CPS to stop making loans to grant recipients, a request that CPS has so far declined.

However, bad press aside, Net1 is a pretty remarkable company, with some very innovative services that it is successfully marketing in places like India and the US. It’s one of a handful of South African companies that has made a success of an innovative and technology sophisticated service, and is worth learning more about. – FD  

ALEC HOGG: Net1 has been selected by the World Economic Forum as one of the 16 African companies that qualify for the Global Growth Company inclusion. Yesterday, we spoke with the Chief Executive, Webber Wentzel…another of the companies but this time, a listed one, is Net1 Chief Executive Serge Belamant is with us in the studio. Serge, you guys have really done some interesting things in the last little while: listing in the United States, a R7bn company today, and you’ve been going all the way to the Constitutional Court in a boxing match with someone. This deal or this accolade: is it something that you rate highly in your list of achievements?

SERGE BELAMANT: Obviously, you can’t say that it means nothing. At the end of the day, we were selected. There was obviously an evaluation criterion in terms of what we were doing. Did we fit in the right profile for a company that they were looking for? They decided that Net1 is the right type of profile, not only for Africa but also for more developing economies around the world. It’s something we’ve been trying to do, as you yourself know, for the last 20-odd years or more.

ALEC HOGG: You’re an incredible innovator. I don’t think many people know the Serge Belamant story, going all the way back to integrating the ATM’,s and what you did in the social side. It’s almost as if the bad publicity lately has tarnished that.

SERGE BELAMANT: You’re right. Publicity…unfortunately, we don’t write the articles in the newspapers and candidly, I wish the journalists would actually look a little bit better at what they write, maybe come and ask us a few questions, and see what we’ve done not only here, but also in a number of other countries around the world. You’re right. Twenty/twenty-five years ago, we were trying to do something new, which was to build this alternative payment system for the poorer population of the world. I rather think we’ve achieved this now. We’ve done it in a number of countries in Africa. We’ve done it in South Africa. We’re even doing it now as far as the United States. We’re doing it in Mexico. We’re doing it in India. We’re doing it in a number of other countries, so it’s becoming nice, I think. It’s taken a long, long time to actually get to that. We started this in 1989, so it’s been a long, long time but I think we’ve made the right breakthroughs. We’re getting the scale. We’re getting the number of customers. The products are working very well. The technology is working, we keep inventing new stuff, and we keep innovating with mobile technology obviously, which is now taking over all over the place, so you have to stay in the game all the time. You have to keep reinventing yourself and I think we do quite a good job of that.

GUGULETHU MFUPHI:  This reinvention that you allude to and remaining relevant: how do you get it done?

SERGE BELAMANT: Well, you need to have a good team of people. That’s the main thing. Companies don’t work because of anything else, but people. We’ve had some people in Net1 who have been with me for 20 years or 25 years in fact, and they’re still there. They’re still innovators and they still create new things. There’s a trust going in the company. There’s an ethos. We’ve always focused on what we want to do. We’re not side tracked by bad publicity. We aren’t frightened by what people say about us. We believe that what we do is right. We believe it is right for the majority of people, in not only South Africa but the majority of poorer people as well. This means you have to challenge the big organisations that have a huge market share today and candidly, control it and control it in a way that it becomes very difficult to penetrate, but we’re starting to make that penetration. We’re starting to win some of that customer base, and that’s what’s exciting.

ALEC HOGG: Serge, CPS – your business that’s been in the news here in South Africa. If it doesn’t get the tender, which is now going out to tender, what does it do to the business as a whole?

SERGE BELAMANT: Well, that’s obviously a big thing because for us, CPS is still about 60 percent of our total revenue, so obviously it would be a big thing. We focused, over the last year-and-a-half in really deploying technology for example, in places like India, Korea (where we are the second largest switching system in Korea), much like the Easy Pay system in South Africa. We have two very good contracts with our virtual card product in the United States, so we’re now starting to diversify in terms of making sure that in fact, we can’t continue to simply rely on a major contract in South Africa. We do not intend to lose the major contract in South Africa because what we’ve done, works. We have registered 21.5-million people in 13 months, which is not bad going if you think about it because it’s never been done by anybody anywhere in the world. We’ve done it and we do pay ten million people without any problem whatsoever every single month.

ALEC HOGG: So you have the model.

SERGE BELAMANT: The model works and I think people are starting to believe in it. We are being approached by many different countries in the world that are saying ‘gee, how the hell did you do this’. Obviously, they don’t have SASSA. We provide technology and we also provide operations on the ground, so people are starting to realise that this technology actually works and we are capable of actually delivering massive systems over a very short period of time. That is starting to become exciting for us. Brazil is talking to us. The Indians are talking to us and they have major populations, too. Nigeria is talking to us. Many people in this game are focusing on what we’ve achieved, but we have to keep this balance between profitability and social responsibility because we are dealing with the poorest of the poor everywhere we go. Of course, that’s creating lots of talk and lots of conflict, but at the end of the day you have to try to make this omelette somehow, and you can’t make omelettes without breaking a few eggs, so you are going to upset people. You’re going to upset banks. You’re going to upset micro lenders and insurance companies because you’re taking over their business.

ALEC HOGG: Gugu and I were in Davos this year, so we know the World Economic Forum and the clout it takes, and to have a WEF stamp of approval, which they’ve now given you, would offset some of the concerns other people might have.

GUGULETHU MFUPHI:  And the bad publicity, surely. Well, the story you’re telling us is that you’ve managed to get your staff upbeat on the international community, but how about shareholders?

SERGE BELAMANT: Funnily enough, I don’t know if you saw our share price, but the last article we had in the Mail & Guardian, which was another bad article – that’s the only thing they are capable of writing anyway, to be totally honest… At the end of the day, the share price went up by a Dollar after that particular article.

ALEC HOGG: Sixty percent in the past year, so somebody believes in you. Where are your major shareholders?

SERGE BELAMANT: We used to have many more in South Africa. We’ve lost many of them, although we have one or two – about 30 percent now – that are South African-based. They dropped down to less than ten percent and then a couple of big ones came in. Most of them come from the U.S., so most of our big investors are U.S.-based. We have a few in Europe, England, Germany, and France etcetera, but most of them are U.S.-based.

ALEC HOGG: We used to be neighbours at the old President Place years ago. Are you still going to stay in South Africa? Is Johannesburg remaining your base?

SERGE BELAMANT: Of course. There’s nothing wrong with South Africa. We have a lot of business in South Africa. We believe that South Africa gives us the opportunity to actually try out things. The nice thing about it is, if that doesn’t work, nobody really knows about it. If they do work, people somehow find out, and come and see it. It doesn’t give you a ticket because you did it here…that people are going to believe you can do it in India, but at least it gives us a chance to stabilise technology and to test things. The regulations in South Africa are very tight as well, albeit banking laws or any other type of laws. They’re very difficult. Very often, for a new entrant to actually come in and participate…we probably have one of the tightest here in the world. If we can do it here, then we actually feel we can do it anywhere, and that’s very good.