Net1's earnings improve as it moves beyond SA

Net1's Herman Kotzé says that the company is actively pursuing other interests in Africa and India where its payment systems are already being used. Image: Techcentral

Net1 was dealt a blow early this year when the Constitutional Court cancelled the R10bn social grant tender awarded to the group's subsidiary Cash Paymaster Services. It ordered Sassa to start a new tender process.

Net1 has completed the implementation of the tender and will continue distributing the grants until a new supplier is appointed.

Chief Executive Serge Belamant told Bloomberg that Net1 spent more than R1bn implementing systems for Sassa‚ which constrained prior year earnings. He said: " The social grant service is becoming a smaller and smaller part of our business. It used to be 70% to 80%" but now it is 27%."

Net1 said it is pursuing two new mobile payment deals in India to reduce its reliance on the South African market where it has the multi-billion rand social grant tender‚ and is aggressively pushing its mobile payment solutions mainly in emerging markets. The mobile business enables users to‚ among other things‚ make money transfers and secure payments.

Net1 Chief Financial Officer Herman Kotzé said the contract was still important to the group. "We would love to keep it. We would love to remain in some way a part of the pension payment process in South Africa‚" he said.

New tender expected soon

Sassa is expected to reissue the tender in the coming months.

Kotzé said India was a huge opportunity for the group even though margins were low‚ but volumes were available for future revenue growth.

In Africa it is active in Botswana‚ Namibia and Malawi and is looking to expand through partnerships in key countries in East and West Africa.

Kotzé said: "We will be disappointed if we can't get it (the mobile payment and technologies business) to contribute between 30% and 40% of group's revenues in the next three to five years."

About 5m people are using Net1's technologies and related products and services for mobile payment.

Net1's revenue rose 54% to $581.7m on the back of higher revenue resulting from a rise in low-margin prepaid airtime and electricity sales. About 25% of Net 1's revenue is from the KSNET business in South Korea.

The South African transaction processing segment reported revenue of $88.3m in the fourth quarter up 52%‚ lifted by the $26.6m paid back by Sassa and more low-margin transaction fees generated from beneficiaries using the South African national payment system.

Source: BDPro via I-Net Bridge