Net1's Biggest Shareholder Asked It to Assess Lending PracticesBy and
International Finance Corp. bought stake in Net1 last year
South African court barred Net1 from using data from welfare
The International Finance Corp., the biggest shareholder in Net1 UEPS Technologies Inc., said it asked the company last year to hire consultants to assess its practices as a responsible lender after it became embroiled in court cases over deductions from the South African welfare payments its distributes.
Net1 last year sued the South African government over a plan to halt deductions from welfare grants that the company distributes to more than 17 million people on behalf of the state. Human rights groups have accused Net1 of making illegal deductions for goods and services that its subsidiaries sell. The IFC, which owns about 18 percent of Net1, disclosed that it made the request in an emailed response to questions on Friday.
The IFC, a branch of the World Bank, last year bought the stake in Net1 for $107 million, its biggest-ever investment in the financial technology industry.
On March 17, South Africa’s Constitutional Court ordered the nation’s welfare agency to extend Net1’s contract, which it had previously ruled invalid, to distribute the monthly grants for a year to avoid an interruption to the disbursement of more than 150 billion rand ($12 billion) in payments annually. The welfare agency didn’t comply with a 2014 court order to find another service provider.
Net1 is also facing pressure from its second-biggest shareholder, South African fund manager Allan Gray Ltd., which has said it’s concerned about the allegations.
“Allan Gray has written two letters to Net1’s board, highlighting a series of concerns including communication with shareholders about loan charges and deductions,” Andrew Lapping, the fund manager’s chief investment officer, said in an interview. Allan Gray owns about 16 percent of Net1.
Net1 fell 29 cents, or 2.2 percent, to $12.63 as of 11:30 a.m. in New York.
In its ruling last week, the court said that Net1 is barred from using data gathered on welfare beneficiaries to market products its subsidiaries sell such as mobile-phone airtime and loans.
Serge Belamant, Net1’s chief executive officer, declined to comment. Calls to the Johannesburg office of Burson-Marsteller, a public relations firm hired by Net1, weren’t answered.