ELECTRONIC payment provider Net1 UEPS Technologies said on Friday the allegations of corruption against it had caused reputational damage to the group and had impacted its ability to execute some parts of its strategy.
Net1 is being investigated by the criminal division of the US justice department, the Federal Bureau of Investigation and Securities and Exchange Commission (SEC), on allegations of violating the US’s Foreign Corrupt Practices Act.
This investigations relates to the R10bn South African Social Security Agency (Sassa) contract, which the North Gauteng High Court ruled in August was "illegal and invalid." The company, however, was allowed retain the contract. Net1 is appealing the ruling, with the Supreme Court expected to hear the matter next week Friday (February 15).
Net1 is currently registering social grants beneficiaries and has so far enrolled 12-million people. The total number of beneficiaries is estimated at to be 21.6-million.
Serge Belamant, chairman and CEO of Net1, said the company continued to cooperate with the US authorities on their investigations. "But as a result of these investigations, we are experiencing some adverse impact from the damage caused to our reputation, including our ability to execute certain aspects of our strategic plan," he said.
During the three months to December last year, Net1 incurred direct implementation expenses of about $18m (R157.1m) — including staff, travel, temporary infrastructure hire, fixed premises hire for enrolment and stationery costs — related to the registration of social grants beneficiaries.
Mr Belamant said the implementation costs were "materially but proportionally higher" than anticipated.
Since inception of the implementation, the company has incurred cumulative capital expenditures of $25.2m and expects the total costs to reach $105m by the end of next month, Mr Belamant said.
Net1 increased revenue for the three months to December increased by 29% to $111m, with transaction-based activities garnering $60.8 million in revenue for the three months to December, up 31% compared with the three months to September last year. In rand terms, the increases in segment revenue were primarily due to higher revenues earned under new Sassa contract.