Net 1 UEPS Technologies Inc.
NASDAQ : UEPS
JSE : NT1

Net 1 UEPS Technologies Inc.

March 25, 2011 08:59 ET

Net1 to Approach Constitutional Court in Response to Supreme Court Ruling

JOHANNESBURG, SOUTH AFRICA--(Marketwire - March 25, 2011) - Net1 UEPS Technologies Inc. ("Net1" or "the Company") (NASDAQ:UEPS)(JSE:NT1) today announced that its wholly owned subsidiary, Cash Paymaster Services (Proprietary) Limited ("CPS"), intends to apply for leave to appeal the South African Supreme Court of Appeal's recent judgment on March 11, 2011, which overturned a lower court judgment delivered on December 10, 2009, prohibiting the South African Social Security Agency ("SASSA") from contracting the South African Post Office ("SAPO") to render banking or payment services relating to social grant beneficiaries. The lower court, the North Gauteng High Court, had ruled in a suit commenced against SASSA by CPS that SASSA had not followed a proper procurement process to comply with the South African Constitution and the Public Finance Management Act ("PFMA") when the previous executive management team at SASSA contracted with SAPO for the payment of grants in 2009.

Net1 believes that the final outcome of the case could have a significant impact on broader interpretation of government procurement laws in South Africa and in particular the application of section 217 of the South African Constitution and section 51(1)(a)(iii) of the PFMA which prescribes a fair, equitable, transparent, competitive and cost effective procurement process.

During 2010, CPS filed a similar suit against SASSA, with regard to contracts SASSA entered into with certain commercial banks. In this instance the North Gauteng High Court also ruled in favour of CPS by finding that the procurement process followed by SASSA was not adequate. SASSA did not appeal this judgment and it remains effective.

On March 13, 2011, the South African newspaper, The City Press reported that CPS and other contractors charge SASSA an average of R32.11 per transaction, which the article stated is more than twice that charged by the South African Post Office. Despite the inaccuracies of the reported prices, at least in regard to CPS' prices, the article failed to mention that the price charged by SAPO is for the delivery of welfare grants through magnetic stripe based bank accounts opened at SAPO branches, predominantly located in urban areas of the country. In contrast, CPS delivers social welfare grants in all areas, but primarily in deep rural areas, using secure biometric-based smart card technology, guarded mobile payment vehicles and equipment, and through biometric point of sale devices installed at medium, small and micro merchant enterprises. SASSA issued a tender for the payment services in 2007, but decided to cancel the tender after a long and drawn out process, which decision is currently also the subject of a review application launched by CPS. Notwithstanding the aforementioned, CPS's average rate per recipient on a national basis quoted in its tender submission in the now cancelled tender, was more competitive than the contract price agreed between SASSA and SAPO.

CPS remains one of the incumbent service providers to SASSA and our existing Service Level Agreements with them remain in effect. CPS continues to deliver a high quality service to SASSA and provide the most suitable solution tailored to the various challenging environments where the most vulnerable South African citizens reside. Until the finalization of the appeal process, the judgement granted by the North Gauteng High Court on December 10, 2009 remains in full force and effect and prohibits SASSA from contracting with SAPO to render banking or payment services relating to grant beneficiaries, until SASSA follows a proper procurement process which complies with the Constitution and the PFMA.

SASSA is, however, not prevented from issuing a new tender in the interim in which SAPO could participate, and which would allow SASSA to select the most cost effective and efficient system available.

Forward-Looking Statements

This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A discussion of various factors that cause the Company's actual results, levels of activity, performance or achievements to differ materially from those expressed in such forward-looking statements are included in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

About Net1 (www.net1.com)

Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System, or UEPS, to facilitate biometrically secure real-time electronic transaction processing to unbanked and under-banked populations of developing economies around the world in an online or offline environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll, remittances, voting and identification.

Net1 operates market-leading payment processors in South Africa, Republic of Korea, Ghana and Iraq. In addition, Net1's proprietary Mobile Virtual Card technology offers secure mobile payments and banking services in developed and emerging countries.

Net1 has a primary listing on the Nasdaq and a secondary listing on the JSE Limited.

Contact Information