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LONDON — Entrepreneurs are a rare breed. These critical cogs that make the job-creating wheel turn are mostly driven by an obsessive desire to create, to build, to change something for the better. So there is little sadder than seeing a successful business builder ejected from his creation after decades of investing his entire being. Worse, though, is when he leaves under a cloud, with his reputation tainted. That’s what happened to Serge Belamant, the former chairman and CEO of Net1, which he started as a one man show. In this often emotional interview, Belamant reckons he was a casualty of political infighting and unfounded attacks on his integrity, including by 16% shareholder Allan Gray. He points to Net 1’s succession of victories in the courts and the clean bill of health after investigations by the US and SA authorities. Despite all this, he says he’d do nothing differently. Fascinating insights from the man whose company is responsible for distributing monthly social welfare payments to 10m South Africans. – Alec Hogg
UPDATE FROM THE COMPANY: Net1 Chairman Chris Seabrooke commented on the BizNews interview by former CEO Serge Belamant. ‘We have noted with disappointment the recent uninformed and unauthorized interview on Net1 given by Serge Belamant notwithstanding that he is still under contract to us until the end of October and precluded from giving such interviews. He has apologized to us in writing and undertaken not to comment publicly on Net1 again. We regard the matter as closed.’
Serge Belamant, it’s good to see you again. It’s been a rough year for you. I think that 2017 is an annus horribilis I suppose, in a way.
How are you feeling now that you’ve left Net1?
It’s been three months now since I’ve retired. It takes a while to get used to it. After 27 years, it’s tricky to let the baby go away. You tend to – very much – still feel attached to it. You have these withdrawal symptoms (a little bit).
Do you talk to the guys still?
Some of them but you know, it’s like anything. One thing I’ve learned over the years is that when you are the boss, you’re the boss and people/friends/colleagues tend to treat you as the boss. Once you’re gone, you’re gone, which means that you find the conversation becomes very different.
How? How is it different, Serge?
Firstly, you perhaps don’t talk about the business in the same way as you used to. In other words; before, it was perhaps more that people saw it as ‘is this just a conversation or is it an instruction’ and now, it’s more of a conversation rather than an instruction so you have that type of flavour. Then you find of course, that the company might be moving way, which is not necessarily the way that I would have driven it, which is understandable as well You’ve got somebody new who has his own ideas (hopefully) otherwise it could be bad news. The people who are now working there might also see it and say, ‘Well, did we used to do the right thing or did we used to do the wrong thing? Are we now doing the right thing or are we doing the wrong thing?”
Has it changed that much?
Undoubtedly, the culture will change. As you know, my background is IT so everything was around new developments, R&D, new technology, and how you create a new system that bring value to a different group of people. That was the focus. My focus was always very much the IT department, rather than the financial department. Now Herman (Lotze – the new CEO), as you know, is a Chartered Accountant anyway and I think he’s got a good technological understanding but he’s not an IT guy so the focus is going to be more around M&A, how you optimise cash flows, and a lot of stuff that he used to do before. That might become far more important than what it would have been under my tenure.
Do you know what’s interesting about Net1? You built an incredible business there with lots of operations around the world, with a strategy in mind, such as banking licenses. What’s going to happen to all of that now? Surely, you’ve got new people looking at this and maybe not with your vision.
You know Alec, this is exactly the issue. Obviously, we used to write these things down so it’s not as if there’s no traceability of what it is. I always called it a puzzle. We’d build little pieces of the puzzle and by the time you’ve got enough fitting together, you’ll start seeing what the real picture is. It’s like building a puzzle without the picture. Certainly, the vision that I was creating was about getting things like a banking license purely as a means to an end rather than the end itself. Do I want to own a bank? No. Do we need a banking license in some countries in order to transact and do what we do? The answer is ‘yes’. You wanted to facilitate what we did and to get the bits and pieces that you needed to allow us to do what we wanted to do rather than to actually, use those bits and pieces in their own right in order to do what those bits and pieces do. I don’t know if that makes any sort of sense.
Pieces of a puzzle rather than…
If we bought, for example, KSNET in Korea, which is a great purchase: if we could not derive certain other synergies from this to say, “What else can we do with it? Did we just buy it because it’s a good investment?” Hallelujah, it’s fantastic. Its proven to be quite a good business but if we can’t build our technology into it…if we can’t extend on their business model…if we can’t change their business model to fit in with what we want to do, then what are we? We’re just a private equity house. We’re no longer an IT company. We’ve always been proud of basically using what we’ve built…using what we’ve created. Not so much using what other people have built or what they’ve created. We like to use what they’ve got as a launchpad to implement ours and not the other way around.
My question (and the obvious question for shareholders) is, “Are you still a shareholder in the company?”
A very small shareholder. I’ve kept a few shares in order to keep an eye on what’s going on.
A shareholder would be looking at this and saying, “Hang on. Here we have the guy who started the company 27 years ago. It’s got a business in Korea. It has various assets in different parts of the world. How does one bring all of that together if he’s gone, his vision’s gone, and new people are there now? What do they do with these assets? Do they just sell them off piecemeal?”
Well again, I think it’s too early to say what they will do. I think if you listen to the last quarterly result, which was a week ago, some elements of the previous strategy have come through. There’s no doubt about that. There are still some elements and you can also see that there are some changes. Specifically, for example, in the commitment of spending money in order to grow the international business. Now, it’s more a question of consolidating what the international business currently is and optimising that business rather than saying, “What else do we have to do? What people do we have to hire? Are we going to make sure that we can utilise these assets the way they were meant to be utilised? I think that is something that still has to be worked on by Herman and the board and I think they are working on this to say, “What are they going to do?”
Very possibly, you know, it’s one of those things that sometimes you have to take a step back and pause before you can take a step forward. It’s a question of ‘let’s first find out what we have and what it does’. Again, from an IT point of view, it was easy in my mind because everything fit in, but a new person comes in who doesn’t have that understanding. This means that firstly, they have to take a breather and say, “Let me try to understand what all this is about.” Because, as I said, of the financial and commercial accountancy background it’s more a question of, “Do they all wash their own faces?” That’s not always the way that you want to develop a business because sometimes when you buy something, it’s not washing its own face and it never will. It might just maybe add that small little element that we needed in order for the rest of the business to move forward. It’s a tricky situation.
Without pre-judging what Herman will do as the new CEO, he is an accountant and we understand that. What kind of… Where is Serge Mark 2? In other words, let’s just say that things had worked out differently and you had decided to take a complete back-step, what kind of person would you put into Net1 to pull the strategy that you had in your mind and all the building blocks? In other words, make them positive pieces rather than what might now turn out to be an accountant saying, “Well, we don’t need that. We don’t need this. Let’s consolidate. Let’s sell it off at a fire-sale.”
Again, I think there are different types of companies. Net1 is built on technology and it’s built on everything being able to create its own technology. In other words, nothing in Net1 is bought or borrowed. We’ve always loved that we’ve owned it. If you wanted to keep that model going, then you need to have someone that (1) is technologically focused. In other words, somebody that understands technology. Not only the old stuff, but the new stuff. Today, everything is about Facebook and WhatsApp. If you’re not in the mobile world then in the next ten years, you’re a dead duck anyway in any sort of technological platform. The focus, to me, should be around that type of thing in the marketplace. Perhaps the way Koos Bekker is trying to do it.
I think he took a lot of flak from what I can read but candidly, I think I understand what he’s trying to do. Well, many other people will say, “What is he trying to do? He’s spending a hell of a lot of money on doing something.” It’s the same thing in Net1. You need somebody that has that type of background, vision, and passion.
Isn’t that why the IFC came in? The IFC part of the World Bank put $100m into your business because they bought into that kind of philosophy rather than how we’re going to sweat the assets that we have at the moment.
I think again, you are 100% right. I actually didn’t take six to nine months investigating that one and what we did because of the fact that they didn’t like what we did. They actually believed that we were the only company that they had seen in the world, that were capable of implementing large systems, which were going to provide financial inclusion to millions of people. I know it’s been used over and over again but it’s actually true and that’s what they’re still looking for. When for example, the Cell C investment was made/contemplated, we didn’t like it. At that time, I was saying, “What has that got to do with the Net1 vision?” Rather go out there and implement your systems in Africa or South America, etcetera. It doesn’t mean that because you do one thing, you couldn’t do the other but sometimes it does mean that.
If you are going to spend billions into there, someone is going to say, “Well geez, you’d better make sure that you’re getting a return on those billions”, which means all of your teams. Over many years, we’ve spent so much time on SASSA and you couldn’t afford to drop that ball so as soon as anything was slightly in disarray on that…boom! You had to put everybody in the company focusing on it, which means that everything else took second place and you couldn’t therefore then develop it. To me, the fear would be that now you’ve got Cell C. It’s a big expanse. It’s a couple of billions Rands worth of investment. It’s all in the mobile world but Net1 doesn’t control any of it. It’s not as though they’re in charge of it and it’s not as though Net1 has ever been in sim cards. Well, we do manufacture them but we’re certainly not selling prepaid.
This is Blue Label’s business. You’re right. The problem could be that you’d get sucked into doing something because financially (or commercially) once again, you have to do it because you’ve made a large investment and therefore, you might actually drop the ball on everything else. Then the IFC might turn around and say, “Well, is it really the investment we wanted to make?” The answer is probably, “No.” It is problematic in my view, but the IFC is part of the World Bank. For all that they are supposedly independent, they still very much have to be careful of their P’s and Q’s in terms of who they talk to because who does the World Bank talk to?
You mentioned SASSA and you brought that up. Had we been talking a year ago, we would have had a very different conversation. You’d still be running the company. The SASSA contract of the social pensions into South Africa seemed to be… At the time, there were problems. The US department was having a go at you. All of this that developed over the past few months or the past year; where are we right now? You are accused of being corrupt. You’re accused of bribing. You’re accused of…
Just about everything.
Your reputation has been smashed.
It probably still is, in the minds of a lot of people. What I’m quite pleased about is that over the last six months, we’ve basically finalised all of these things. Before, people would say, “Oh, they’ve still got to be cleared by the FBI.” Well, we’ve been cleared by the SEC now. We have been cleared by the DOJ. We have been cleared by the FBI.
The United States Government was investigating you and we know that they take their time and they are pretty thorough.
Now they’ve said both sides… both the Nasdaq side and the SEC side as well as the DOJ side, (which is the accusation of corruption) – all of that is now gone.
The reason they investigated you is because you listed in America on Nasdaq. Had y you not been listed in America….
They probably wouldn’t have looked at it. Remember, at the time, we know that it was our friends from Absa that actually went to the United States.
To present the case – to actually say, “These guys are corrupt, etcetera” and of course, it must have been presented very well by the right attorneys. The DOJ was always looking for these types of cases so they said, “Why not? Let’s investigate it.”
DOJ meaning the Department of Justice.
Yes, and they’d normally bring in the FBI as a partner that does all of the interviews, investigations, and analyses etcetera.
I remember we spoke about this and you said it cost you a lot of money.
$14m or $15m for defending the company. When I say, ‘defending it’, it’s basically talking to other attorneys. Remember, in the US, I had my one attorney, Herman had his own attorney, the board had their own attorney, and the company had their own attorney. Everybody in the US – when these things happen – you always drop the other people. That’s the way they work. For example, “My guy is working for me and as long as we know that you’re not guilty, we can blame everybody else”, which is very different. Anybody that plays rugby, doesn’t play in that way. You’ve got 15 people and you all get together into the punch-ups. Now, that’s why it’s so damned expensive because every time it’s $1000.00/hr per person and you have 5/6/7 of them working at the same time. It cost us a fortune but the money is only one thing. It has cost us our reputation and you don’t recover that because now, they’ve written a three-line letter to say…
No, there’s no ‘sorry’ in it.
Not even a ‘sorry’.
No. There is no ‘sorry’. It’s more of a question. It’s very clinical. We’d like to inform you that after concluding our investigation, we will not continue with any sort of prosecution of the company unless, at some later stage, further information is provided, which is quite obvious. You don’t have to say it in law because it’s quite obvious. Just because you’re not a murderer today, if you get caught tomorrow then obviously, you’ll get sued again. Of course, lots of South Africans that read this say, “Oh well, it’s closed but not really closed because you know, they could open it again”, which is a silly thing to say because at the end of the day, as far as they are concerned the file is closed and it’s been put on the shelf. Finished. So, we’re done.
How much of what happened in the last year has been politics-driven? We know South Africa’s got turbulent politics at the moment. We know that certainly, for the ruling party, they’ve got to make sure that those social grants go out there because it’s perceived that the ruling of the ANC is the one thing that has the social grant. You’re the guys who are executing that payment. Now that you’re out of the company, you’ve always spoken clearly but can you talk candidly on that?
I’m still sometimes processing what actually happened and there’s no doubt that we know a political game has been played. You had the Zuma camp. You had the non-Zuma camp. Whoever the camp is (and I’m not into politics by the way) I apologise for that, but it’s not the greatest. However, I do know that there are multiple camps and we’re sitting, supporting government, be definition – the existing government – the government that is in power because they are the ones that we are providing the service on behalf of. By definition, if someone is attacking government, the best way to do it if they can’t do it directly, is that you do it through people like ourselves. If you could destabilise the pension and welfare system in South Africa…if you could stop people from being paid, it would be the best political arm that you could possibly have because immediately, it would be seen as ‘government needs to go.
It needs to be replaced’ because now they’re not even doing what they’re supposed to be doing. To me, we were part of this. Thinking about it, what I find very interesting… If you remember, the ex-Financial Minister Mr Gordhan came in with an interesting thing. At one stage, he said, “There is no way that he (as the Financial Minister) or Treasury can approve an exemption to give to SASSA to extend the payment contract to CPS.
So, in other words Net1 – your company.
In other words, they could not do it. It would be illegal, etcetera. What’s interesting is that we could not do that without the Constitutional Court’s approval. All of this was something which was absolutely critical because otherwise, ten million people were not going to get paid. On the other hand, everybody was putting pressure on that one to say, “We will pay anyway.” Regardless of what happens, we will be ready to pay on the 1st of April even if we don’t have a contract. Now, he could not – as the Financial Minister – commit to saying ‘we can extend this contract because it is the right thing to do on behalf of the nation’ but Net1 was being blamed for not coming out and saying, “Even if we do not have a contract, we will continue to pay.” It’s nonsensical. As a company, if the contract had been declared and was declared invalid, it could not be renewed or extended, even by Treasury with the power they have on the PFMA. Who were we, as Net1, to actually to say that we would continue to pay anyway? Even if we don’t get any money from Treasury, to actually pay the R120bn/year that we have to pay? It made no sense whatsoever.
More than that, your shareholders took a position.
Some of them. Not all of them.
Allan Gray was outspoken. They seemed to support you and then didn’t support you. How do you read that?
Allan Gray was interesting and I must admit; we really didn’t see that one coming, to be quite honest. The IFC I could still understand because IFC/World Bank/Treasury – you can see the relationships. You can see they have to tread very gently, which to some extent, makes a little bit of a farce of what they should or should not do. You have a vision and you want to do it and if it’s going to get influenced simply because of the fact that you’ve got to keep everybody happy, you’re never going to do anything. Right? Allan Gray was a different sort of thing. Allan Gray were there first, almost from Day 1 in the days of Simon Marais. Shame, I know that he passed away but he was a wonderful guy and one of the brightest people I’ve ever met – a very, very bright guy. They loved that one and what we were standing for and then suddenly, even the guard in Allan Gray weren’t saying anything.
Suddenly, this thing happens and the first thing they started to do was to complain about the fact that ‘how can Net1 even make a profit’. We would be quite happy as a shareholder if they continue to actually provide the service with no profit. Now, it’s nice to have investors of this type, but on whose behalf, were they talking? Were they talking on behalf of Allan Gray (a 16% shareholder) or were they talking about the shareholders in Net1 (most of which are American companies and are many hedge funds). I can assure you that they are only interested in profits. They aren’t interested in anything else. They made a big hoo-ha about Net1 and somehow, we were wondering why they were doing this. Were they doing it because they really believed that what we were doing was wrong? We had been doing it for ten years before that. Alternatively, was there pressure on them?
They said that they didn’t actually understand that you were profiteering. They said afterwards that you were profiteering. How does that sit with you?
I’m not too sure what they mean by profiteering.
Charging too much.
Charging too much to whom?
To the grant recipients.
Then surely, if they really believed that that was the case, all they had to do was to come to Net1 and to say to them, “Guys, let’s have a look at your products. Let’s compare your products to everyone else’s products.”
How do they compare?
You know, we went through that 20 times. On our loans, we are 50 to 60% cheaper than any other competitor, which is quite a big margin cheaper.
Is that the interest rate?
Remember again, the big argument about interest rates. We don’t charge interest rate.
Behind every ANC/Zupta scam you will find a white monopoly capitalist. Like Serge Belamant. Like KPMG. Like Austrian e-Toller. Like Bell P.
— Julius Cobbett (@jules52) June 30, 2017
So, no interest rate.
No. We only charge a fee per month, which is in line with the NCO fee. In other words, we don’t charge more than the NCO fee. In fact, we charge slightly less than the NCO fee and that’s the only fee we take. That’s it. Of course, the auditors would come back and say, “Yes, but you’ve got to convert it to interest in order to calculate what it is.” Now, you can do that if you want to try to compare product against product, but it’s not interest. On this one, we know we were cheaper by a long way. How do you pick up 1.8-million that are going to come to you if you really believe that those people are that dumb that at the end of the day, they would come to you if you were more expensive?
That’s a big issue that’s come through here – that the people who bank with you have no other option or are ignorant. That’s the argument.
You know, when there’s no other option, do you really believe the people who came to us didn’t have a loan before? It might have been a loan through a loan shark whereby they used to basically get it in cash and somebody used to collect it afterwards at 50% per month interest rate (or sometimes 100% per month) or they had loans with lots of other people. We’re not the only one. I think there were 1400 different people that do debit orders from pensioners’ accounts. I can assure you that not all 1400 of them, is with us. That doesn’t wash. 2. How do you force somebody to take a loan? It’s not as though we went to people in queues and said to them, “Guys, it’s a lovely day today. Why don’t you take a loan?” Our loan offices are completely independent of the pay points. They’re separate entities. Some of the offices are in town. The pay points are in rural areas in the middle of nowhere, so there’s no common ground. There’s no way that you can take people from one side and bus them in in order to give them a loan. It’s pure rubbish. The price is cheaper. Insurance: I think we’ve now sold over 300,000 policies. Why? It’s because we’re 25 to 30% cheaper than the nearest other policy for the same benefit. That’s why. Airtime. Electricity. Why? It’s because we make it easy to get and we make it cheaper. That’s why people come to us – no other reason. We could have made three times the profit we made out of all of those products and still be market-related, but we didn’t. If Allan Gray had come to us and said, “Guys, this is what I’m hearing from the Black Sash and from the ground up” and come to us and say, “Let’s talk about it” we could have shown them the numbers and it would have gone away, but they didn’t do that. Did they?
What happened to Black Sash? There was a court challenge.
Remember what I did at one stage, it was all about deductions and debit orders, and we’ve always said we’ve read the Act. We believe what it understands and there was a big confusion about what is a deduction and what is a debit order, right. A deduction occurs before the grant is paid. The debit order occurs after the money is banked. It’s not complicated actually, but if you want to make it complicated it you can, in order to confuse the issue. The bottom line is I said, “Let’s go and get a declaratory order.” So, we went to court and we got one and the declaratory order was very straightforward. We were right. This is correct. Debit orders, once the money is in the bank account continue according to the banking rules. Deductions are governed by SASSA and they are allowed to do those in any way they deem fit, before the money is transferred to bank accounts – not complicated.
Black Sash was part of all of this and they also appealed and the judge refused the appeal for saying, there’s no point in appealing something that you know you’re not going to win. So, once again, people go out with their own position, which they base on moral, or what they call morality or ethical behaviour, because it’s far more difficult to argue about that than it is to argue about the law because the law is the law. If the judge says it’s right then it’s right. What else do you do? The problem is that they seem to pick up a lot of airtime and I think that influenced Allan Gray in a big way, and I think a lot of people that give money to Allan Gray, be it pension funds or whatever the case might be. I think that put a lot of pressure on them. Including the PIC. If you look the PIC, well the last time I had looked in any case, the chairman of the PIC was in fact, the Deputy Financial Minister because that’s the way normally we used to say. So, you’re saying this is an interesting soup here.
But why did they go for you?
Because at the end of the day who else do they go for?
But why did they go for Net1? Why did this whole group go for Net1?
Because if you can kill the social payments out there politically, you kill the ANC, or at least you give them a hell of a slap and to me, it’s as simple as that. Is that social welfare or social security is fundamental?
So, that was the battle ground?
To me, that was the battle ground because you know what’s strange 3 or 4 months later after the big thing what does Net1 do today? They do exactly the same thing as they did a year ago. They still give loans, they still give insurance, they still do airtime and electricity. What’s changed? We still put out accounts for beneficiaries. We still pay pensions so, what has changed? Nothing, but where’s the noise? It’s gone.
Well, because you’ve gone.
Because I’ve gone so, maybe they were using me as the sacrificial lamb.
So, were you the sacrificial…?
Very possibly. I want to see what’s going to happen now when SASSA files in September, their new plan because that might reignite the fire. What is SASSA going to do? Is Net1 going to be getting the contract again? Because if you really think about it, logically, I’ve always said, ‘who else can do it?’ I’ve always said, ‘no one can do it.’ I’m still of the view that right now, no one can do it and now that I’m out of it. So, if Net1 gets it again who is going to be the next sacrificial lamb here because they’re going to have to go and attack it again. Then you’ve got the ANC elections coming in December so, it’s a good time to start this entire war again. I think social security will continue to be in the middle of the actual war. That’s my view so, I think that was only chapter one.
— Zapiro (@zapiro) June 5, 2017
If, everything you know, you come in from the outside now and let’s just say your clone becomes the new CEO, what would you do? Given everything that you know, how would you change things right now because surely, to be embroiled in the middle of a political fight doesn’t make a lot of sense?
No, it doesn’t. Then you face two issues, you face… If you get out, can you get out without knowing that somebody else can actually get in? That’s the first question. Constitutional Court, strangely enough, they came to that conclusion.
They said no one else can do this?
They said, “Until somebody else does it.” Not can do it but does it, you, Net1, you will remain an organ of State and you will remain with the responsibility of delivering the pensions so, they’ve worked this one out. Now, funnily enough, we never had any intention of pulling out and leaving 10 million people in the lurch. From a SA point of view, it would be atrocious. No one is going to do that so, on the one side you are saying, we have to continue to do the job – that’s clear. On the other side there’s someone saying, ‘we would love if somebody else could come in and do it.’
Would you, really?
Was that your view when you got…?
Absolutely and how do you do that? We said that Net1 is a technology company. We’re not a political organisation so, we want to be able to continue to provide the tech, it obviously works very well because otherwise we would be in a different type of trouble but let other people, let BEE partners, let other BEE companies, let the Post Office, or let SASSA themselves – let them run the operations. Let them take over what CPS is all about on the ground. We’ll continue, like IBM, we’ll continue to provide the tech at the back. To me that was the best possible solution because we no longer would be in the face of anybody. When we go to pay points, everyone applauds when we arrive with our trucks because everybody thinks we are the ones that are actually paying. Well, we are the ones who are paying them, but we’re not the one giving them the money. The ANC is giving them the money, which is really the SA Government that’s giving them the money. Actually, it’s the taxpayers that are giving them the money, which is quite interesting but it gets sold differently by different people. So, we don’t want to be there because immediately that’s where we create this friction.
So, now Serge’s clone has taken over as CEO. You know all the issues that are involved. What about selling the whole bang chute to the Post Office? That’s been speculated.
It could be done but the Post Office is not a technology company either so, if you had to sell, and this is what I’ve always said, our technology, every year we spend millions and millions refreshing it up, adding functionality, making it better and faster, and whatever the case might be. The Post Office can’t do that so, if you had to sell them everything, including the tech. The tech, by definition, would die because as you know today, every 6 months technology is different so, it would die out completely, which means within the next 2 to 3 years, this thing is a dead duck anyway, right. So, to me, we’re saying, run operations on the ground’ because that doesn’t die. You’re still going to have to do that and still give people cash. You’re still going to have to register people. You’re still going to have to do all of those difficult jobs, the transportation of money, the counting of money, cash management – all of that, you’re still going to have to do. Let them do that because candidly, it’s the sort of thing that they should be able to do but don’t let them worry about developing the new technology.
And then take that technology to other parts of the world, which was the original ideal anyway.
That was the plan and try to use the SA Government to assist the company to sell it elsewhere, right.
To say, ‘it’s worked for us so, it can work in Kenya.’
Yes, and in fact at one stage, we put in a nice proposal to SASSA to say to them, ‘if you help Net1 to become international, by the time we’ve sold it to 3 or 4 other countries, we would provide it to SA for free.’ We would have made enough money out of Brazil, we would have made enough money out of India, we would have made enough money out of Nigeria, or whatever the case might be, which I thought was a great way.
What happened with that?
You know, these types of things don’t, and again, when you go into the political world they’re not commercial people. Everything is about politics and who says what to the right person, at the right time, for the right reason. Nobody is that interested in, candidly other technological breakthroughs that are being made. Nobody really understands that.
Would you, 27 years ago, have followed the same path?
As now, as what we did?
Knowing then, what you know now?
I would have done some things differently but one thing I’ve learnt is that you don’t always do what you want to do. Sometimes you have to do what you have to do, and you have to sometimes do what other people are wanting you to do. As the company becomes bigger and bigger and generates enough money to pay salaries and to grow, and to put in R&D. You have more choices but then you start having other people that are influencing it. Now, you’ve got the Allan Grays of this world, who are the ‘so-called’ activists. Now, they want to tell you how you should run the company and to me, I just can’t get my head around this. I don’t understand how that can possibly work.
As a technologist, I started something and I was by myself, it was one person, and then we had 2 people, and then 6 people and then 10. Then we had money for one week, then 2 weeks, and then a month. Everything was built on what we could do and what we could create. Now suddenly because you want to raise money, which we never did funnily enough because we always made enough money anyway. But we wanted to list. We wanted to get the credibility of listing. So, you get all these shareholders that come in and now suddenly some of them are saying to you, ‘no, we don’t want you to do this – we want you to do that.’ But what do they know what the company is about.
You’re sitting on the outside. You’re investing 20, 30, 40, or 50 different companies – they can’t possibly know what any of these companies really do and where they come from and where they’re trying to go. It’s impossible so, for them to meddle, to me, it’s absolutely ridiculous and I think it will destroy companies, in general.
There has to be a limit in terms of what they can and cannot do because what one shareholder may wish you to do, might be good for them because they might have ulterior motives about why they’re pushing a particular scenario, for example sell this company and pay a dividend but there might be somebody on the other side saying no, don’t pay a dividend. Invest that money in international operations. Grow the business because we want you to get back to a 30 PE or to become like some of these 50 PE’s like Tencent. So, which one do you follow? They should not be involved in these types of decisions, it has nothing to do with them. If they don’t want the share they should sell it.
But surely, going back then, you wouldn’t have listed, ever, you would have stayed private?
You know, we went through many iterations. Initially, we were purely tech and we were struggling to sell it to anyone and then we said, we can’t sell it so, why don’t we actually do what we’re expecting those people to do with it? That’s how we got into financial services. We said, okay, you don’t want to do it then we’ll do it. Then everybody said, sure, you can try, and we did. We suddenly found out that that actually, makes far more money. Providing the services using the tech as the underpin, rather than to sell the actual tech because no one else out there could use it anyway or knew how to use it.
So, I would probably do very much what we did now. Except that I would protect, I’ve made a lot of mistakes. I would still run and control the company, like a lot of other people that manage to do, B shares, A shares. In those days, I was writing code. I had no clue about how any of these things actually worked. Candidly, I lost the control of it. Although, I kept the company, I believe, glued together because of the people around it. But over time, you lose complete control. Like now, a shareholder activism, 2 or 3 of them get together and they vote. Well, if I had any shares, and my shares are a thousand times more than theirs, well they can vote as much as they like. At the end of the day the only recourse they would have is to say, ‘we don’t like it – we’re selling.’
To me, that’s the recourse they should have and they should use that as the primary way of saying, ‘I’m not happy with what the company is doing.’ To try to change the board, you can imagine what that creates in the company or in fact, force the managing director, which happens to be the person that actually invented the company, for lack of a better world. Well, I would have retired in the next year or the next 2 years but, at the end of the day, make sure that there would have been someone that would have carried on with the vision that was prepped for that particular vision. Not to change the whole thing around because some people around him might be saying, ‘I think you should do this’ or ‘I think you should do that.’ I think, to me, there’s a certain… Net1 will probably never be the same again, which a lot of people might say, ‘we’re happy.’
Allan Gray will probably say that, because they were unethical and whatever the case may be. Now they can be ethical but they will never be the same again. Where is going to be the new creativity? Where is going to be the new product? Where is going to be the new solution? When are these things going to come out? If they don’t beef up that part of it will become a set of assets, I think. Which, candidly are probably worth more individually than in a combined fashion because I think you will be able to sell, manage acquiring 12, 13 or 14 PE. You might be able to sell KSNET to 10 or 12 times EBITDA, EasyPay at 15. Well, the whole company is working on a PE of 6 so, in my view the whole company, in pieces is worth a billion.
Is that the play? Is that the long play why they wanted you out of the way because somebody wanted you out of the way?
Yes, there’s no doubt about that and I don’t know. I think that one day I will know the truth of who actually, was Allan Gray just a piece of the puzzle? Was it Allan Gray and RMB that were going to lend a lot of money to Net1? That was putting pressure on Net1 to say, well, if this doesn’t happen we can’t lend you the money. Therefore, the Cell-C deal couldn’t have happened. Was this part of the greater plan, to have me out of the way or not? Was it more political or not? I can’t think of any other motivation, and I know that I talked about the pigeons with the Post Office. Candidly, you’re allowed to have a sense of humour from time-to-time. I think a lot of people, including a lot of my BEE partners and government people I spoke to, and they actually took it purely as a… It was just funny.
It was a quip?
Yes, and it was funny. At the time, we were going through the Constitutional Court, things were tense. You’ve got to again say to yourself, ‘do you say nothing’ and ‘do you allow the Post Office to convince everybody that they can do the job’ – which would have played in the hands of certain people because that means the whole thing would have been a disaster. Then candidly, we’re back to the political game to say, ‘look what the Government of today have done.’ So, do you do that and you say, let them fight politics? Or do you say, no, we still have a responsibility to the 10 million we pay and do you tell the truth?
One of the things that have come out of this conversation, Serge, and we’re closing up now, is how complex everything is. But just from a personal point of view. You started this business, you’ve given your life, your career to is. You are now at a point where you reputation has been…
Impugned, to be polite.
How do you deal with that? How do you, philosophically, you’re French, how does that kick in, when you go to bed at night that you can have peace of mind?
Alec, because we become hard in business we probably learn to manage that. It’s more difficult on my family than it is for me. You have a wife, she has friends. She sees this article and they see the articles. You’ve got your kids so, it hurts a lot more on how they feel rather than how you feel because at the end of the day you’re closer to it. So, you know in your head you’re saying, ‘have I really done anything wrong?’ Can I really look at myself and say, ‘what have I done wrong?’
I went through all the articles and everything I’ve said, I would say exactly the same thing again and some of them were with you, and I would repeat it in exactly the same way. I would not change one word in any of those things. I would say it the same way because I believe it’s the truth, right. Now, I’m that type of person, which is obviously, not always a good thing but you can’t create things, you can’t change things, you can’t disrupt things without making the statement that you’re going to do it or how you’re going to do it, you can’t. Through your actions you are going to take on a lot of people.
Now, when you’re doing it you’re taking on the real big boys, banks for example, which are not easy to take on in any form whatsoever. Then suddenly you find that you’ve become the political football. Plus, you might have people within the company that perhaps are seeing you as a barrier to commercialising things in a different manner, all right. In other words, maybe saying, well, that plan might work but it might be too long. We want a better exit or a quicker exit or do other investments, which we think are better for some of the shareholders.
Then you become an impediment and therefore, they’re going to get you out at all costs, which is really, at the end of the day, what they’ve done. So, philosophically I’m saying, you know what, I would have been much happier to walk out when I’m 65 and to actually have a big party at the office and to say, guys, I’m handing over the reins, I’m here if you need to talk, which seldom, people ever do anyway. But I’m here, if it’s going to happen, and candidly, I want to see this company really grow and become even bigger than it’s ever been before. And I want to remain friends with everyone in the company. People that have been with me for 20 years, to continue to be able to have conversations with me and to tell me how things are going. That’s the way I would have liked it to be.
It’s not like that and that is sad and it’s hurtful, to be quite honest because at the end of the day you’re saying, in a matter of 6 to 12 months the other 26 years of my life have counted for nothing. That’s really what it means and that does hurt your feelings, there’s no doubt about that and you tend to be really pissed off, for lack of a better word, about it. But you then say to yourself, but you know what, I’ve had a good life, I really had a good run. I really enjoyed what I did, I still think what I did was the right thing. I think we did a lot of things for lots of people, lots of poor people. We have been acclaimed worldwide. We have won many different awards, very important awards. We have people like the ANC buying into the company and it took a long time to convince them.
We’ve done some wonderful things so, why must I look back and be, for lack of a better word, to lose sleep or to have all of this negative energy, to continue to have it in yourself? It’s better to be, as you say, to be philosophical about it and to say, you know what, let them do what they want to do. What I do know is that Net1 continues to do exactly what it did when I was there, nothing has changed. Two, Net1 has been cleared of everything. It doesn’t matter what lawsuit, it doesn’t matter if the ANC attacks on us through the FSB, it’s got its FSB licences now, which we could never get before.
Everything Net1 wanted it got and every lawsuit that Net1 went into we won. So, legally nobody can actually accuse Net1 of anything and when it comes to the so-called ethicality of things. I would love to have a sit-down discussion with Black Sash, with GroundUp, with our friends from Allan Gray and to talk about ethics and to talk about what we did for the poorest of the poor. And to talk about should I give a 16-year-old, head of family, that looks after 3 siblings because of the fact that his parents died of aids and I must say to that person, no, you will not get a loan because according to the Black Sash you can’t afford it. So, rather starve to death or put your kids into prostitution situations.
Do you really believe that that’s more ethical than to actually say, let’s try to give them a loan at the cheapest, possible rate, right? I know what I would do, because it’s what I did do. They might have a different view. I would like that argument to be debated because it’s not law because we know everything is legal. I would love to have that discussion with them. Do you sell airtime or electricity at midnight, in the middle of nowhere, through a cell-phone where a person can top-up an electricity meter without having to queue on a Saturday morning, 20kms away, after catching a taxi in order to go and get a prepaid voucher? So, the kid can actually have a hot meal that particular evening or maybe hot water to wash themselves to go to school the next morning. Or being able, like some of them have done it, to be able to power their oxygen tank which then need to have in order to survive.
Should we not give them electricity and should we certainly not give them credit for that electricity. Why don’t we rather let them die, right? Ethics is an interesting discussion because it is philosophical in nature in any case and I believe everything Net1 has done is more than ethical because we could have actually made, we could have abused the system. Something we’ve always said to our BEE’s from day one, there are two things we don’t compromise on in Net1. One, we will never propose a solution that will not work. I don’t care how powerful you may be as a BEE. There are too many of them in SA that have gotten big contracts and could not deliver them. We will never do that. Secondly, our contract must be cheaper, and it must be better than anybody else, otherwise I’m not interested.
And thirdly, that contract must show that there is a social responsibility to it all because we are dealing with 20 million or 40% of the population, which are the poorest of the poor. If we cannot do those 3 things then get somebody else to do it because I’m not interested and even that did not appear that it was good enough.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.