Net1 Says Belamant Pay Justified as Shareholders Forced Him Out

  • Net1 pay committee doesn’t see ex-CEO’s deal as extravagant
  • Belamant was paid $8 million severance, premium on shares

Net1 UEPS Technologies Inc.’s new Chief Executive Officer Herman Kotze said a severance payment to the company’s founder and former CEO who was criticized by the company’s biggest shareholders was justified because they forced him into early retirement.

Net1 agreed to pay Belamant $8 million and about a 14 percent premium on more than 1 million shares that he owned after he agreed to step down amid a controversy over a contract it holds in South Africa to distribute billions of dollars of welfare payments to 17 million people. Belamant will also be paid $50,000 a month to consult for the company after his early retirement. Net1’s second-biggest shareholder Allan Gray Ltd. said it was outraged and the biggest investor, the International Finance Corp., said it was frustrated.

“We have to take cognizance of what they say, but on the other hand it’s as a result of the initial steps taken by them that we’ve ended up in a position where we’ve agreed with Serge that he must take this early retirement package,” Kotze told reporters in Kokstad, on the border of South Africa’s Eastern Cape and KwaZulu-Natal provinces, on Thursday.

Belamant’s three decades of service was taken into account, as was his income that was forfeited due to his early retirement, Kotze said. Belamant, who was paid $3.6 million in the 2016 financial year, was due to retire in 2018.

Outraged Investor

“There are accelerated stock options that had to be taken into account, restraint of trade, as well as the ownership of intellectual property issues,” Kotze said.

Net1 won a contract in 2012 to distribute welfare payments in South Africa. Two years later, the country’s Constitutional Court ruled the contract invalid and instructed the South African Social Security Agency to find a new provider. When it failed to do so by March this year, the court allowed the contract to be extended for 12 months under conditions.

The company has been accused by human rights groups of selling services ranging from loans to mobile phone airtime to South Africa’s poorest and least educated people without fully explaining how financial deductions from their social grants would work. It has denied the allegations.

“Allan Gray notes with outrage the financial settlement claimed by Serge Belamant upon his retirement as CEO of Net1,” the Cape Town-based asset manager said in a statement this week. “We are very surprised that Belamant was able to negotiate such an extravagant deal after such broad public censure, and believe that it is unjustified given current circumstances.”

Net1’s share price has slumped more than 40 percent in New York over the past two years. The company this week canceled a plan to buy 15 percent of Blue Label Telecoms Ltd. because it would have had to issue shares to raise funds and its stock price has fallen.

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