Net1 and BVI negotiating a new deal

Brian Khomotso Mosehla, of Business Venture Investments (BVI), has confirmed the consortium’s option to buy an approximate 19.9% stake in technology company Net1 has lapsed, saying: “the attack on Net1 by Absa subsidiary AllPay made it impossible to raise funding.’

However, Mosehla, whose Mosomo Investments leads the consortium, stressed that the partners have faith in Net1 and that BVI is actively negotiating with the company to find an alternative solution. Mosehla will remain a director of the Net1 board.

Last year Net1’s subsidiary Cash Paymaster Services (CPS) won a R10-billion tender from the government’s South African Social Security Agency (Sassa) to distribute social welfare payments to ten million South Africans every month for five years.

The company also owns the popular EasyPay service used by South Africans to pay electricity and other utility bills. BVI had a one-year option to purchase 8,955,000 Net1 shares at US$8.96 per share.

Mosehla said funding was assured until AllPay, a losing bidder for the Sassa tender process, complained to US authorities about alleged irregularities in the tender process. Net1’s share price collapsed by 60% in the US and 40% in South Africa.

“Overnight the deal became unviable,” said Mosehla, “but we never had any doubts about Net1’s integrity or doubted that AllPay’s accusations would be dismissed. Because of this we maintained our relationship with the company and have never wavered in our faith in it. We fully intend to become Net1’s BEE partners.”

Last month the Supreme Court found in Net1’s favour, dismissing every single one of AllPay’s accusations and issuing a judgment that said “smear and innuendo” have no place in the courts. Net1’s share price has since made significant gains even though an AllPay-inspired FBI investigation into the company is still underway.

“It seems that in the US such investigations are common when complaints are made and our consortium is not concerned about the outcome,” said Mosehla.
“It makes business sense for us to seek a new BEE deal with Net1 and that’s what we’re doing.”

Dr. Serge Belamant, Net1’s chairman and chief executive, said: “The protracted legal battle with Absa subsidiary AllPay regarding the Sassa tender, recently decided in favour of Sassa and Net1 by a unanimous ruling of the full bench of the South African Supreme Court of Appeal and the existence of the Department of Justice (DOJ) Securities Exchange Commission (SEC) investigations have thwarted any chance that BVI may have had to raise the funds required to exercise the option.

“I am disappointed that our attempt to embrace South African economic empowerment policies has failed due to circumstances beyond our control,” he said.

“Net1 remains committed to these critical transformative policies and we hope to conclude a new transaction in the near future which will achieve a similar result. We would like to thank Mr. Mosehla for his contributions and continued commitment to the company despite this unfortunate setback,” he said.

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Net1 set for legal action against AllPay

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Net1 under FBI investigation for corruption in SA

Net1 bemoans damage to its reputation

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Net1 and BVI negotiating a new deal