The share price of Net1 UEPS Technologies plummeted in Johannesburg and New York on Thursday afternoon after the constitutional court ordered that a tender for the management of South Africa’s social grants system be carried out again.
The R10bn contract had been awarded to Net1 subsidiary Cash Paymaster Services (CPS), but, following a challenge by losing bidder AllPay, a subsidiary of Absa, the constitutional court declared the deal “constitutionally invalid”. AllPay argued that the tender process was riddled with irregularities and that the terms of the tender were changed before the process closed to ensure CPS would win.
Net1’s share price fell by nearly 30% on the news, and was trading down by 28,6% at R70 in late afternoon trading in Johannesburg. It later recovered some ground to close down by 12,8%.
The massive tender was originally awarded to CPS by the South African Social Security Agency (Sassa) for the administration of social grants over a five-year period. An estimated 15m South Africans draw social grants monthly and any disruption to the system would have serious social consequences.
The constitutional court handed down its judgment in November, but suspended it “pending determination of a just and equitable remedy”.
According to a statement Net1 sent to its shareholders on Thursday, the court has upheld its declaration that the original contract between Sassa and CPS is invalid, but this continues to be suspended until a new tender has been awarded.
Sassa, Net1 said, must initiate a new tender process within the next 30 days and the associated request for proposal “must contain adequate safeguards to ensure that no loss of lawful existing social grants occurs, the payment of lawful existing grants is not interrupted, and personal data obtained in the payment process remains private and may not be used in any manner for any purpose other than payment of grants or for any purpose sanctioned by the minister of social development”.
The new tender must be for a period of five years and a new and independent bid evaluation and adjudication committee must be appointed to oversee the process.
The committee must file a status report with the court on the first Monday of every quarter of the year until the process is completed.
If the new tender is not awarded, the declaration of invalidity of the current contract between Sassa and CPS will be suspended until completion of the five-year year period for which the contract was originally awarded.
In this event, Sassa must lodge a report to the court setting out all the relevant information on whether and when it will be ready to assume the duty to pay grants itself.
In no tender is awarded, CPS must file an audited statement of expenses incurred, income received and net profit earned during the five-year completed contract period.
“We are relieved that the protracted two-year legal battle regarding the Sassa tender is finally over and that the court has provided guidance regarding the way forward,” Net1 CEO Serge Belamant said in a statement to shareholders, adding that the company will participate in any new tender process.
“Based on our experience during the last two years, we are convinced that our UEPS/EMV solution with biometric verification and offline capability is the most appropriate product to service the millions of South Africans who are reliant on this vital service, especially the most vulnerable citizens in the remote areas of the country,” Belament said. — (c) 2014 NewsCentral Media
