An amaBhungane report states that the Financial Services Board (FSB) is probing Net 1 over allegations that it abuses social grant beneficiaries and breaks financial laws.
Legalbrief Today reports that Net 1, the US-listed parent company of CPS which pays social grants for Sassa, has controversially used this access to sell loans, insurance, airtime and electricity to grant beneficiaries. The FSB probe comes after a whistle-blower and an amaBhungane reporter separately presented evidence and questions to the FSB suggesting Net 1’s sales staff might not be properly accredited to sell some of its financial products.
“Net 1 does not have its own financial services provider licence and outsources the role to a third party. The evidence presented suggests this third party might not have the capacity to make sure Net 1 sticks to the rules.”
“Critics have accused Net 1 of abusing grant beneficiaries through its business of debiting money from social grants to pay for financial products. Many beneficiaries say money is taken without their authorisation and that they have no clear recourse to stop this.”
The amaBhungane report details a number of associations Net 1 had with registered FSPs, most of which ended acrimoniously with assertions by registered FSPs that FAIS regulations were not always followed correctly.
In the report, amaBhungane also notes:
“In February 2013, (the FSB’s) long-term insurance registrar, Jonathan Dixon, ordered Smart Life to stop selling insurance policies immediately.
“Dixon pointed at Belamant, who he said “does not function within the confines and parameters of the [Smart Life] board as a collective, and unilaterally approves or rejects key decisions”.”
Dixon said Belamant was conflicted as both Smart Life chair and Net 1 executive chair, and this endangered Smart Life’s clients’ policies, which had to be sustained for the rest of their lives.”
A report in Die Burger this morning notes that, on Friday, Net 1 announced changes to the structure of its Board following severe criticism over its business strategy and practices.
- The roles of chairman of the Board and Executive Head, both held by Serge Belamant, will be split. Christopher Seabrooke, executive head and director of Sabvest Limited, will take over the chairperson duties. Seabrooke is currently a director of Net 1.
- The company also intends appointing additional independent directors, including one nominated by the International Finance Corporation,its largest shareholder.
Criticism also came from Allan Gray, another major shareholder, who threatened to call a shareholder meeting to have the current Board replaced.
An article in Die Burger also notes the following suggestions and requests from Allan Gray to Net 1:
- Net 1 should forfeit any profit to be made from the extension of the Sassa contract.
- Net 1 should consider cancelling all recurring payments for airtime from bank accounts opened for Sassa clients.
- It was suggested that at least 3 SMSs per month be sent to policyholders of Smart Life to explain in layman’s language how to cancel a policy.
- Net 1 was also requested to issue a comprehensive statement in reaction to suggestions of illegal and improper conduct concerning the use of personal information of social grant beneficiaries.
Click here to read the Media24 article on Allan Gray’s reaction.
Click here to read the Full amaBhungane report