26 March 2018

South Africa: Sassagate - Net1 to Challenge Order to Repay R317 Million - but Can CPS Afford It At All?

analysis

No sooner had judgment been handed down in the matter brought by Corruption Watch for Net1 UEPS Technologies Inc to refund R317-million which Sassa had unlawfully paid to CPS to register "additional" biometrics from grant recipients, the Net1 announced it was appealing the judgment. The case could now drag on and on, Stalingrad Strategy-style. And considering CPS's only income is the payment of social grants, the question is how will it repay Treasury when the current extended contract to pay social grants comes to an end, six months from now?

So here's the thing.

In August 2017, during Net1 CEO Herman Kotze's first presentation to analysts after succeeding Serge Belamant, Kotze highlighted the extent to which the Nasdaq-listed Net1 UEPS Technologies relied on the contract with Sassa to pay social grants for its 2018 earnings outlook and profitability.

But two significant court rulings last week will no doubt directly affect this outlook.

The first is the judgment handed down in the North Gauteng High Court in the matter brought in 2015 by Corruption Watch, and the second is the Constitutional Court ruling that the contract for Cash Paymaster Services (CPS) to make cash payments to grant beneficiaries...

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