Net1 cleared of non-compliance

Johannesburg - Electronic payments company Net1 UEPS Technologies [JSE:NT1] has been cleared of contravening the South African National Credit Act with regard to two compliance notices.

Net1 division Cash Paymaster Services (CPS) won South Africa’s R10bn social grants tender in 2012 to distribute electronic payments to over 10 million social grant recipients.

Since winning the contract, Johannesburg Stock Exchange (JSE) and Nasdaq-listed Net1 has been under the spotlight.

Last year, the Constitutional Court criticised the South African Social Security Agency (Sassa) for its “irregular” conduct in awarding the tender to Net1. The court also ordered Sassa put the country’s social grant contract up for tender again.

Meanwhile, concerns have also been raised about Net1 selling loans to social grant recipients. The National Credit Regulator (NCR) has previously accused Net1 division Moneyline Financial Services of granting credit to social grant beneficiaries without conducting proper affordability assessments.

And in September last year, the National Credit Regulator (NCR) applied to the National Consumer Tribunal to cancel the registration of Net1’s subsidiary Moneyline Financial Services for breaching the South African National Credit Act (NCA).

Net1 says that “pursuant to the investigation” it received two compliance notices – one to Cash Paymaster Services (Pty) Ltd (CPS) and one to Moneyline.

“The compliance notice issued to Moneyline accused it of ‘having access into the Grindrod bank accounts of social grant beneficiaries which enables them to see the spending patterns of beneficiaries and deposit loan amounts into such accounts’,” said Net1 in a statement this week.

“The compliance notices demanded that both CPS and Moneyline take the appropriate steps to address the alleged non-compliance with the NCA and to report in writing to the NCR, along with an independent audit report, that they were no longer non-compliant as alleged by the compliance notices,” said Net1.

Subsequently, Net1 says CPS and Moneyline both objected to the compliance notices and said they never contravened the NCA. Net1 then applied to the National Consumer Tribunal for a review of the compliance notices.

“The tribunal has now delivered judgment in both the Moneyline and CPS cases and has granted the requested order that the compliance notices be set aside,” said Net1.

“In its judgments, the tribunal stated that ‘there appears to be no evidence to support the respondent’s (NCR) conclusion that CPS committed a contravention of section 68(1) of the Act’ and ‘the Applicant (Moneyline) has not been found to be engaging in an activity in a manner that is inconsistent with this Act, the National Credit Act’,” said Net1.

NCR responds

In a response to questions from Fin24, the NCR said that “these compliance notices did not relate to the provision of credit by the two entities”.  

“The decision is about the compliance notices issued to Cash Paymaster Services (CPS) and Moneyline Financial Services because the NCR had reasonable grounds to believe that CPS is sharing social grant beneficiary information with Moneyline,” spokesperson for the NCR, Didi Sebothoma, told Fin24.

“The compliance notices required an audit report to be submitted to NCR. The audit report was submitted and the NCR was satisfied with the report and issued compliance certificates to the two entities,” Sebothoma said.

Sebothoma further told Fin24 that the matter regarding compliance will not be taken further and that it had also already issued compliance certificates for the two entities before the tribunal decision.

The NCR, though, has still expressed concerns.

“The NCR is concerned about the sharing of personal information of social grant beneficiaries for money-lending purposes and would like this practice to be stopped one way or the other,” said Sebothoma.

“The NCR will continue to conduct inspections and take the necessary steps to prevent the unlawful sharing of the personal information of social grant beneficiaries for money-lending purposes,” she said.

Meanwhile, Net1 says that the NCR has applied to amend its original statement of claim regarding an application to cancel the registration of Moneyline.

This is said to have been done “shortly” before the scheduled date for the hearing into this matter.

The tribunal is expected to schedule an exception hearing to decide whether the NCR will be allowed to amend its original statement of claim.

“The Company cannot predict when these hearings will take place, or what the outcome will be,” said Net1.

Net1 on Friday also reported its third quarter financial results which pointed to its revenue growing 9% in dollar terms from $138.1m in the three months ending March 2014 to $151.1m this year.