Net 1 Asks Court to Tell Government To Release Funds

(Bloomberg) -- Net 1 UEPS Technologies Inc. has asked the country’s chief justice to order the welfare agency to release money to one of its units under conditions it suggested be recommended by the government after the subsidiary said it would struggle to keep operating amid a dispute over fees.

The unit, Cash Paymaster Services, said in court papers dated May 11 that it needs the Treasury to set a minimum fee for the provision of cash payments to the more than 2 million welfare recipients that rely on this system. The agency plans to cut the number of cash recipients to 800,000 and hasn’t told CPS to reduce the number of pay points, CPS said, adding that this could result in a month loss of 111.7 million rand ($9 million).

“CPS cannot sustain these losses,” it said in court documents. “Its continued operation under these circumstances will constitute reckless trading on the part of its directors.” It hasn’t been paid since April 1.

While South Africa is seeking a replacement for CPS to distribute welfare payments of more than 150 billion rand ($12 billion) a year to over 17 million people through a variety of methods, the company is still providing the service. Net 1’s contract has previously been ruled invalid by the Constitutional Court, but the welfare agency didn’t comply with orders to find another service provider, necessitating the continuation of its services.

“Our instructions are that CPS requires cash income urgently to sustain its operations for the month of June,” CPS’s lawyers said in the letter to the chief justice dated May 23.

CPS would like Treasury to set a minimum monthly fee it can charge Sassa, and once a final ruling is made it could be compensated for any shortfall.

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