Grindrod Seeks to Retain Welfare Customers With Cheap Accounts
(Bloomberg) -- Grindrod Ltd. is seeking to retain as many as possible of the 5.4 million bank accounts it’s set to lose following South Africa’s decision to appoint a new distributor of welfare grants, tempting recipients with affordable banking services such as EasyPay.
The government has asked the Post Office to handle more than $10 billion of annual social security payments after cancelling an arrangement with Net1 UEPS Technologies Inc. earlier this year. Grindrod’s banking arm had a partnership with Net1’s Cash Paymaster Services, in which millions of welfare beneficiaries that used banks were automatically Grindrod clients because that’s how they accessed their cash.
Remgro Ltd., the investment vehicle of Johann Rupert, owns about 23 percent of Grindrod, which also has investments in transportation. The businessman has a net worth of $7.4 billion and is South Africa’s richest man, according to the Bloomberg Billionaires Index.
Grindrod Bank’s profit is likely to decline by 20 percent if the company can’t retain welfare recipients as customers in some capacity, according to David Polkinghorne, the managing director of the division. EasyPay accounts charge customers monthly fees of 6.91 rand ($0.51), lower than welfare recipients are currently paying to Grindrod and CPS combined.
“This part of the business can still become very important for the bank,” Polkinghorne said in an interview Thursday. “If welfare customers decide to open permanent accounts we can do a lot more for them.”
Grindrod Bank, which mainly focuses on corporate finance and lending, investments and property, started its retail arm seven years ago when it struck the CPS partnership. The welfare contract -- the only form of income for millions of poor families -- has since been disputed and was ruled by the Constitutional Court in 2014 to have been incorrectly awarded.
Grindrod Bank earned 0.5 rand per account per month under the CPS agreement, according to Polkinghorne.
Separately, Grindrod Bank is one of four preferred bidders for Portuguese-owned Caixa Geral de Depositos SA’s Mercantile Bank, which mainly serves small- and medium-sized enterprises. If the company and partner Arise (Pty) Ltd. are successful, Grindrod will bolster its financial services offering and have almost 13 billion rand more in assets under management.
“We certainly see Mercantile as a very complementary business that would provide scale,” said Polkinghorne. “I would like to think we have as good a chance as any when it comes to the bid.”
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