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SA may extend Net 1's welfare contract

South Africa’s government is considering a one year extension to a contract with Net 1 UEPS Technologies to make welfare payments to 17.2 million people even after legal battles with the company, according to a government official with knowledge of the matter. Net 1’s contract expires at the end of March and the government would need to ask the Constitutional Court for permission to extend it as the agreement was ruled invalid in 2013 because of the way it was awarded a year earlier. The Johannesburg-based company has offered to keep distributing R139.5 billion ($10.4 billion) a year to welfare recipients as criticism from opposition parties has mounted because the Social South African Social Security Agency hasn’t held a tender to find a replacement for Net 1.

While the government considered six options to ensure the payments aren’t interrupted, extending Net 1’s contract and then allowing the nation’s banks to take over the distribution once they have set up the appropriate systems is seen as the most practical solution, the official said. The banks would offer accounts designed to protect welfare recipients, often poor rural citizens with little understanding of how financial systems work, from companies that offer services such as funeral insurance for children and mobile phone airtime and then make deductions directly from state payments. Net 1 has been in legal battles with the government over the right to allow deductions and it part owns some companies that offer the services. Sassa officials will appear in parliament on Wednesday to explain what they plan to do.

Opposition parties including the Democratic Alliance have opposed proposals that Net 1’s contract be extended. The human rights group, Black Sash Trust, sued the government last year to force it to protect welfare recipients from companies it alleged were selling goods and services to them that they didn’t need, and deducting payments from grants paid by the state. Some of those companies are part-owned by Net 1. The company said that it is giving poor people access to affordable financial products. Net 1’s CEO, Serge Belamant, said in an interview on Tuesday that he would be willing to sell the unit that carries out the payments to the government, adding that a failure to extend its contract would be a “national disaster.” He said the government is yet to contact Net 1 about extending the contract. Kgomoco Diseko, a spokesman for Sassa, declined to comment.

Source: www.iol.co.za

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SA may extend Net 1's welfare contract

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