Sassa crisis: Can CEO Serge Belamant, directors survive? Fund managers might call for his head

Private investment firm Allan Gray has changed its tune about the South African Social Security Agency (Sassa) contract with a Net1 subsidiary, saying that it might push to have the board of the Nasdaq-listed company removed. Sassa has been embroiled in a controversy involving a lucrative contract for paying out social grants to the country’s poorest people. Investors in Allan Gray funds own a stake in Net1. Magda Wierzycka, an Allan Gray competitor and founder of passive investment fund house Sygnia, highlighted Allan Gray’s links to the Sassa saga in editorials. Initially Allan Gray stood its ground on its decision to invest in Net1. Its fund managers have obviously had a rethink. Can Serge Belamant and his team survive the growing row over the social grants fiasco? It looks like Belamant and his directors are facing a shareholders’ revolt. – Jackie Cameron

From Fin24

Cape Town – Net1 shareholder Allan Gray is demanding that certain actions occur at Net1 subsidiary Cash Paymaster Services (CPS) to ensure social welfare recipients receive grants or it will seek to remove the board.

Andrew Lapping, chief investment officer at Allan Gray, revealed this move to Business Day companies’ journalist Ann Crotty. Removing the board could also see Net1 CEO and founder Serge Belamant losing his position.

Lapping said Allan Gray, which owns 16% of Net1, is working to understand issues around the integrity of management. “If these issues are not resolved to our satisfaction, we will call a shareholders’ meeting and attempt to remove the board.”

Lapping said Allan Gray would be happy to not receive any profits to ensure the extension occurs before April 1, when the current contract expires.

Serge Belamant, CEO, Net1 UEPS Technologies

This is in contrast to Belamant’s view expressed outside the Constitutional Court on Thursday, where he said he expected the new agreement with Sassa to give CPS a profit margin of at least 18%.

“We’ve said from the beginning with this particular contract, we would make an average of 20% bottom-line profit which is not unreasonable if you think about it,” he told News24.

“In fact that’s actually low for my investors, they would prefer a 30% or 40% [profit]. Investors always want more, government always wants less.

“We are on around 17% – 18%. Going forward I want to maintain at least my 18% and I can’t do it without the CPI increase.”

Allan Gray chief operating officer Rob Dower spoke to Radio 702’s Xolani Gwala on Friday morning and said that he was astounded to hear these profit figures. “We would be happy for him to not make any money at all on the extension and only to cover costs,” he said.

“We have to hold management to account and we are most definitely doing that.

“We have had some pressure to sell these shares,” he said. “I don’t think that’s the right thing for us to do.”

Net1 board apologises for ‘perceived’ offensive remarks

Following this interview, the Net1 board issued a statement, saying from that moment no one from Net1 would be allowed to be interviewed until after the negotiations are complete.

The statement could have been made to stem criticism from shareholders like Allan Gray.

The Net1 board said it is deeply concerned about “certain comments made by senior South African government officials, Members of Parliament, shareholders and reporters concerning the alleged ‘unacceptable and arrogant’ attitude displayed by Cash Paymaster Services, the Net1 subsidiary that distributes welfare grants in South Africa on behalf of Sassa”.

“The board is also aware of the media coverage, including interviews given by CPS relating to the grant payment crisis and, in particular, the comments made after the Constitutional Court proceedings yesterday.

Constitutional Court of South Africa.

“The board reiterates its commitment to assist Sassa to insource the grant payment function during the anticipated interim grant payment period.

“The board regrets any arrogance, perceived or real, by CPS relating to the grant crisis, directed at Sassa, other government bodies or potential solution providers.

“The board is of the view that any of the comments made were meant most sincerely and only with the intention of providing transparency regarding the solution currently provided by CPS and to assist in ensuring uninterrupted service delivery to the 10.5 million grant recipients.

“The board, including its chairman, apologises unreservedly to the South African government, Sassa and all grant beneficiaries to the extent that comments made by CPS were perceived as offensive, or in any way criticising the vital process currently underway.”


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