CPS in red as grant receivers plunge
Net1 believes it has not been allowed to charge a "fair" fee while Sassa reduces the number of recipients
Net1’s Cash Paymaster Services (CPS) business has been running at a loss of about R60m a month due to the decline in the number of grant beneficiaries receiving cash at paypoints.
Earlier in 2018, the Constitutional Court gave the SA Social Security Agency (Sassa) permission to extend its contract with CPS for six months, allowing it until the end of September 2018 to find an alternative disbursement method.
"We’re finalising the submissions that we have to make to the court in terms of the overall financial performance of CPS over the six-month extension period," Net1 CEO Herman Kotze told investors on Thursday.
Net1 believes it has not been allowed to charge a "fair" fee while Sassa reduces the number of recipients dependent on cash paypoints, and is waiting for "final pricing confirmation" from the Constitutional Court.
It is still charging R14.42 per payment, but instead of doing that for 10.8-million beneficiaries, it facilitated payments to just 1.9-million people a month in the quarter to end-June.
"We’ve obviously tried to reduce our cost base accordingly, but I’d say we probably ran at a loss of around R60m a month over the past quarter."
Those losses would rise in the quarter to the end of September, "but that may be offset partially or in totality once we get the pricing finalised for the last three months of the contract period".
CPS warned on Wednesday that about 1.7-million beneficiaries were at risk of a "possible disruption of grant payments" for September.
About 800,000 recipients with old Sassa cards had been removed from the CPS pay-point file, while about 900,000 beneficiaries who had chosen to receive their grants via an EasyPay Everywhere bank account might not receive their grants in those accounts, as Sassa had not processed the paperwork, CPS said.
"From our point of view, we believe that some of these actions are contrary to what the regulations and the relevant banking acts and rules state, and as a result we will be taking the necessary legal action to ensure that those regulations are not contravened, on an urgent basis," Kotze said.
Net1 was gearing up for life after the Sassa contract, having enabled its payment vehicles to become "interoperable with the banking system".
Net1 said on Thursday its net income in the year to end-June nearly halved to $38m.