After a request from the Democratic Alliance (DA), public protector Thuli Madonsela has confirmed that she will conduct a preliminary investigation into allegations that the company, which distributes millions of social grants in South Africa, Cash Paymaster Services (CPS), has allegedly been operating an illegal loan scheme targeting social grant beneficiaries.
Madonsela's letter to the party indicates that the preliminary probe, which should be done by 10 June, will indicate whether there is any merit to the allegations, and whether a full-scale investigation is called for.
CPS, a Net1 subsidiary, won a multimillion-rand tender last year to administrate and distribute South African Social Security Agency (SASSA) grants across the country. However, according to media reports, CPS has also been operating a loan scheme targeting grant beneficiaries, says the DA in a statement.
The party says, in the scheme, it is alleged that CPS officials offer and provide certain beneficiaries 'interest-free' microloans with repayments automatically deducted from their social grants. Media reports suggest that the interest rates on some of these loans are actually as high as 50%.
"These practices are not only a contravention of the Social Assistance Act, but a blatant manipulation of some of the most vulnerable members of our society," says the DA. It adds that there must be a full-scale investigation into these allegations to protect grant recipients from unscrupulous "loan sharks and mashonisas, and that all such practices are brought to an end".
Net1 CEO Serge Belamant says it welcomes the probe.
"I think it is key that an authority such as the public protector evaluates what our company does and importantly compares it to what is currently being done by other less scrupulous organisations," he says.
"Once the na"ive notion that ordinary people, including social welfare beneficiaries, should not be able to access loans and do not need loans is finally put to bed, our social programmes may start to get recognised for what the intention has always been: to provide affordable financial services to all."
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