Serge Belamant is the founder of NET1 Technologies, financial technology firm currently worth USD $180 million in July 2020. NET1's first major project was processing social grant payments from the South African government, which was controversial from its start. It remained under intense scrutiny and was investigated by multiple agencies, including the US Department of Justice (DOJ), Securities Exchange Commission (SEC) and the South African authorities (Hawks). Belamant believed he was the victim of a misinformation campaign since 2012 but specifically in 2018 when he learned of an academic paper alleging that he was involved in government corruption. This article describes how Belamant recovered and how his case teaches the concepts of post-truth, misinformation and disinformation.

NET1 Technologies

Belamant developed financial control systems for one of South Africa's largest banking groups during the late mid and late 1980s. He founded NET1 Technologies in 1989, which used his own patented technology to authorize electronic payments without communicating with the card issuer. NET1 acquired Cash Payment Services (CPS) from the First National Bank of South Africa in 1999, allowing NET1 to pay grants to more than 1.2 million beneficiaries in South Africa. NET1 was incorporated in 1989, listed on the JSE in 1996 and listed on the NASDAQ in 2005.

Social Grants in South Africa

Poverty and unemployment rose significantly in South Africa after the end of apartheid in 1994. The constitution adopted by the African National Congress (ANC) in 1996 guaranteed social security to all citizens. It established the South African Social Security Agency (SASSA) in 2006 to administer these grants, which was challenged by the fact that each of the nine South African provinces previously used their own system to distribute these grants. The lack of infrastructure in rural South Africa also made it difficult to service grant beneficiaries in semi and rural areas. NET1 was able to overcome these problems with its universal electronic payment systems (UEPS) technology, which effected grant payments using more than 10000 pay points throughout South Africa, merchant stores and bank ATMs.

Payment System Tender

SASSA placed its social grants payment system out to tender in 2011, which would be worth a total of $1 billion. Contractors submitted bids for each province based on the Request for Proposal (RFP), after which SASSA issued a bidder's notice clarifying the RFP. Of particular significance was the requirement that the system must biometrically verify the beneficiary's identity before disbursing the payment. Only NET1 could provide this capability, so all other bidders either withdrew or were eliminated from consideration. Accordingly, SASSA awarded the tender for the entire project to NET1 on January 17, 2012.

Legal Challenge

AllPay, one of the losing bidders, issued a legal challenge a few days after the tender award. The primary grievance was that the bidder's notice violated a law governing the administration of public finances (PFMA). Specifically, AllPay alleged the bidder's notice had been introduced specifically for the purpose of excluding AllPay. The basis of this complaint was backed by a tape recording of a government clerk opining that the award had been manipulated. South Africa's High Court ruled the recording to be insufficient evidence after learning that it originated from AllPay. This court also ruled the tender to be invalid for technical reason but still legal and allowed the award to stand.

Appeals

AllPay and NET1 both appealed the High Court's ruling to the Supreme Court of Appeal, which confirmed that the award process was valid since it didn't break any laws, despite its flaws. The court's primary reasoning was that NET1 had a solution that SASSA needed, while AllPay did not. It also criticized AllPay for alleging corruption through innuendo without ever making any direct accusation. The court also questioned AllPay's acquisition of the recording and its failure to present other evidence at its disposal.

AllPay then challenged the Supreme Court of Appeal's ruling in early 2013 before the Constitutional Court of South Africa, the highest court in the country. Belamant responded by saying, "It is abundantly clear in the CPS request for tender response that CPS and other NET1 subsidiaries would provide financial services and products to beneficiaries at costs that are better than market prices." The Constitutional Court ruled on November 29, 2013 that the tender was invalid, but not illegal. It also placed the blame squarely on SASSA, saying NET1 wasn't responsible for the PFMA breaches in any way. It further ruled on April 17, 2014 that NET1 would continue to process social grant payments in the interim until a new tender was awarded.

Response

Belamant was concerned that AllPay was unwilling to defend its allegations in court, especially since they had caused NET1's share price to drop by more than 45 per cent the day after their accusations were published. In December 2012, NET1 announced it would sue AllPay for about $45 million to protect its reputation. AllPay responded by claiming it was obliged to report the alleged wrongdoings and denied it had orchestrated any investigations into the tender. The SEC informed NET1 in May 2015 it had concluded its investigations and wouldn't be taking the case any further. The Hawks conclude their investigations and cleared Net1 entirely. The DOJ also closed its investigation in 2017 after finding no evidence of wrongdoing by NET1.

Results

Non-government organization (NGO) such as the Black Sash and Ground-Up both of which were funded by the same organization claimed in 2016 that NET1 was exploiting its position in processing grant payments by marketing its products to beneficiaries. Belamant expressed puzzlement as to why the Black Sash or/and Ground-Up would target NET1 by saying, "we could not comprehend why NGOs that are meant to work in the best interests of the poor would ... rebuke our products and services that were designed to be the most affordable in South Africa." In response to great social media and South African largest shareholder's the board of Net1 preplaced Belamant as its chairman. He remained CEO but resigned from the company in May 2017.

Additional Claims

Belamant was exploring new business opportunities in August 2018, when he saw a report in a South African publication that attempted to link him to corruption involving former President Zuma and the Gupta family. He was particularly unhappy with the fact that the report relied heavily on information from AllPay and its NGO supporters, while failing to address the failure of those claims to hold up in South African courts and US investigations. Belamant's responded to the report by saying, "Our competitors ran a harmful campaign against NET1 and CPS by using the press and NGOs as leverage, and [using] the national and international courts to apply further pressure on the company and continue to tarnish its name and motivation."