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Net1 made R700m from SASSA, defends CEO payout

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 02 Jun 2017
Former Net1 CEO Serge Belamant.
Former Net1 CEO Serge Belamant.

Net1 UEPS Technologies' subsidiary Cash Paymaster Systems (CPS) made R700 million over the five-year period as the distributor of social grants on behalf of government.

This is according to Net1 CEO Herman Kotz'e, who said the amount is a lot less than what was originally projected in its tender documents.

"Our original tender document that was submitted reflected or estimated that we would make a profit of roughly R1.1 billion, so the R700 million is significantly less.

"I am sure that you can appreciate, as a public-listed company, we endeavour to run our operations at a profit," he stated.

Net1 has a primary listing on the Nasdaq in the US and a secondary listing on the Johannesburg Stock Exchange.

Kotz'e said the reasons for the less-than-projected profit can be attributed to the fact that there were fewer beneficiaries paid over the last five years, and the company incurred significantly higher expenses in terms of legal and investigation fees as the tender became a highly controversial subject.

"What is also important to note is that we invested more than R1.3 billion in the creation of this system for this tender, our fingerprint biometrics verification system, and we managed to save government R2 billion a year according to their own calculations. So the total saving in the last five years is in excess of R10 billion."

Smiling to the bank

The $8 million (R105 million) exit package of former Net1 CEO Serge Belamant and repurchase price of his shares in the company sent shockwaves through the industry, even resulting in major shareholder Allan Gray issuing a statement saying it has noted the offer "with outrage".

Kotz'e said the company's remuneration committee believed Belamant's severance package was in line with industry practice for an international Nasdaq-listed company, and the committee did not view it as extravagant or unjustified.

"The lion's share of the settlement relates to the purchase of the shares that he already holds in the company. As far as the remainder of the settlement package is concerned, this was calculated after deliberations between our remuneration committee and Serge over a period of time.

"It took into account a number of factors: founder of Net1, 30 years of service, income that is being forfeited due to early retirement, accelerated stock options that had to be taken into account, restraint of trade, as well as ownership of IP issues.

"With all of this taken into account, our remuneration committee was of the opinion that the package was in line with industry practice."

He also clarified reports that Net1 is paying a 14% premium for the repurchase of Belamant's shares. "On the day that the principles that were agreed with Serge, which was 3 May, the average share price on the previous day was $10.80 - that is the price on which the shares will be repurchased."

Last month, Net1 announced Belamant's retirement as the company's CEO, to be replaced by Kotz'e. The Net1 founder was only due to retire at age 65, in 2018.

Although Net1 said Belamant's resignation "was not due to any dispute or disagreement with the company over any matter relating to the company's operations, policies or practices", the former CEO drew criticism for his comments in the media, when he reportedly said unless government uses pigeons to deliver social grants, it wouldn't happen, as only CPS has the capacity to fulfil payments.

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