Net1 win sends shares soaring
Dual-listed payment provider Net1 UEPS Technologies has won a five-year deal to process social grants across SA's nine provinces.
The news sent the company's shares 24.14% higher yesterday, to close at R72. The company said in a statement to shareholders that the South African Social Security Agency (SASSA) awarded subsidiary Cash Paymaster Services the deal.
Finance minister Pravin Gordhan announced in February last year, during his budget speech, that spending on social grants would come to R147 billion in 2011, and rise to R172 billion in the 2013/4 financial year.
Almost 15 million people receive social grants in SA out of a population of about 50 million.
Net1, which operates in SA, Republic of Korea, Ghana and Iraq, provides a universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies.
Chairman and CEO Serge Belamant says the company is “overjoyed” by the award. He says the company will provide the solution for payment of about 15 million grants to 10 million South Africans across SA.
CFO Herman Kotze says, because of the “magnitude” of the deal, the company expects a “significant impact on the group's financial affairs when the contract period commences, as a result of new volume and pricing, additional costs, capital expenditure and additional contractual obligations”.
Kotze says more guidance on the financial effects of the deal will be provided during its earnings call on 10 February.
In August last year, the company's previous contract with SASSA to distribute grants in five of SA's nine provinces was extended for six months. Last January, the contract was extended to September.
The previous deal worked on a fee-per-transaction basis with a minimum amount of beneficiaries. The tender award is subject to a service level agreement to be signed by the end of this month.
Govt extends Net1's contract