UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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DOCUMENTS INCORPORATED BY REFERENCE
Certain
portions
of
the
definitive
Proxy
Statement
for
our
2021
Annual
Meeting
of
Shareholders
are
incorporated by reference into Part III of this Form 10-K.
1
NET 1 UEPS TECHNOLOGIES, INC
INDEX TO ANNUAL REPORT ON FORM 10-K
Year Ended June 30, 2021
Page
PART I
PART II
PART III
PART IV
2
PART I
FORWARD LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements that involve risks
and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied in the forward-
looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Item
1A—“Risk Factors.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the
negative of such terms and other comparable terminology. You should not place undue reliance on these forward-looking statements,
which reflect our opinions only as of the date of this Annual Report. We undertake no obligation to release publicly any revisions to
the forward-looking statements after the date of this Annual Report. You should carefully review the risk factors described in other
documents we file from time to time with the Securities and Exchange Commission, or the SEC, including the Quarterly Reports on
Form 10-Q to be filed by us during our 2022 fiscal year, which runs from July 1, 2021 to June 30, 2022.
All references to “the Company,” “we,” “us,” or “our” are references to Net 1 UEPS Technologies, Inc. and its consolidated
subsidiaries, collectively, and all references to “Net1” are to Net 1 UEPS Technologies, Inc. only, except as otherwise indicated or
where the context indicates otherwise.
ITEM
1.
BUSINESS
Overview
Our vision is to build and operate the leading South African full-service fintech platform offering payment processing and
financial services to underserved merchants and consumers.
Our core purpose is to improve people’s lives by bringing financial inclusion to South Africa’s underbanked customers and
helping small businesses access the financial services they need to prosper. We will achieve this through our unique ability to
efficiently digitize the last mile of financial inclusion and to provide a full-service fintech platform, across cash and digital, serving
the needs of both, while also facilitating the secular shift from cash to digital that is taking place.
In South Africa, our core competencies are centered around the provision of low-cost financial services to underserved consumers
and payment processing. We have developed and own most of our payment technologies, and we aim to utilize this technology to
provide financial and value-added services to our customers by including them into the formal financial system.
Low-cost financial services to consumers
—We provide a suite of low-cost financial services to underserved and unbanked
customers today, through a combination of digital and brick-and-mortar distribution platforms. We provide unsecured micro-credit,
transactional banking, funeral insurance and airtime and value-added services.
Payment
processing
—
Our
core
technologies
leverage
biometric
authentication,
last
-
mile
distribution,
and
cash
handling/distribution to enable payments, while EasyPay is a transaction switch and bill payments platform. We also own and operate
POS and ATM networks.
End-to-end fintech platforms layer multiple services into their merchant and consumer propositions, increasing revenue and
customer stickiness. We believe our consumer proposition is well-positioned for organic growth, and we intend to rapidly expand our
cardholder base and our transacting network. Despite being well-positioned to serve the micro, small and medium-sized enterprise, or
MSME, market, our MSME merchant offering is less well-developed. We plan to substantially grow our presence in the MSME
merchant space through a focus on building a leading POS distribution capability to MSMEs. We will seek to achieve this through a
combination of organic growth, acquisitions and partnerships, as appropriate, in order to accelerate the implementation of our business
plan.
3
Building the Leading Full-Service Fintech Platform for South Africa
Market Opportunity
Secular shift to electronic payments:
Globally, there is a secular shift from cash and checks to various forms of electronic
payments and while most developed economies perform the majority of their consumer payments electronically, developing economies
remain largely cash driven countries. South Africa too, remains predominantly a cash-based economy, with an estimated 60% of
consumer payments made in cash.
Consumer financial services for the unbanked:
Africa, which represents approximately 26 million adults in the country. The total addressable market for consumer financial services
is an estimated ZAR 57 billion including transactional banking, short-term and unsecured lending, and insurance.
Total Addressable Market for Consumer Financial Services in South Africa for LSM 1-6
Source: South African Reserve Bank Long-Term Insurance Industry (2017), Solidarity Bank Charges Report (2019), Finscope South Africa (2013), NCR Consumer
Credit Report (2019)
4
Merchant payment and financial services for MSMEs:
one of the leading bill payment platforms in South Africa. The total addressable market for merchant payment and financial services
is an estimated ZAR 100 billion including bill payments, merchant payments, and merchant lending.
Total Addressable Market for Merchant Payment and Financial Services in South Africa for MSMEs
Source: Genisis Analytics (2018), BIS Data, Electrum, IFC Report (The Unseen Sector – A report on the MSME Opportunity in South Africa)
We believe there is a big opportunity for neo-, or challenger, banks and fintech companies to improve reach and coverage for
MSMEs and accelerate access to, and reduce the cost of, banking and financial services. Estimates suggest that approximately 33% of
South Africa’s 700,000 formal MSMEs are unable to accept electronic payments. Tier 1 merchants are actively serviced by the large
local banks while Tier 2 to 4 merchants are underserved. In addition, it is estimated that there are a further 1.4 million informal
merchants active in South Africa that have similar needs but are currently largely ignored by the traditional market players.
Competition
We intend to differentiate our value proposition for our end-users by offering a seamless financial and technology platform for
underserved consumers and small merchants while leveraging a multichannel distribution network. In South Africa, there are
competitors for individual products, services or technologies, though few, if any, with an end-to-end offering, particularly for our
target customer segments.
For consumers, there are a number of traditional and digital providers of low-cost transactional bank accounts and micro financial
services. These include the large South African banks such as FNB, Standard Bank, Absa, Nedbank and Capitec, the South African
Post Office, or SAPO, and digital banks such as Discovery Bank, African Bank, Tyme and Bank Zero. Other financial services
providers include Old Mutual, Sanlam, Capfin, Letsatsi, Bayport and Finbond.
For EasyPay, our South African transaction processing business, competitors include BankservAfrica, Pay@, eCentric and
Transaction Junction. BankservAfrica is the largest transaction processor in South Africa, which processes all transactions on behalf
of the South African banks and processes more than 2.5 billion transactions annually.
In the South African ATM network market, we compete against the South African banks, ATM Solutions and Spark ATM
Systems, which collectively have a market share in excess of 90%.
Intellectual Property
Our success depends in part on our ability to develop, maintain and protect our intellectual property. We rely on a combination
of patents, copyrights, trademarks and trade secret laws, as well as non-disclosure agreements to protect our intellectual property. We
seek to protect new intellectual property developed by us by filing new patents worldwide. We hold a number of trademarks in various
countries.
Human Capital Resources
We have been able to bring on board high-caliber individuals, from different organizations, to form our leadership group. This
leadership group is deeply committed to building a high-performance culture that is based on a foundation of care and development
for
our
people.
5
As such we are on path towards building an aspirational work environment that is characterized by:
•
Open and honest engagements;
•
Flat organizational structures;
•
Humility and respect;
•
Embracing diversity, inclusion and a sense of belonging;
•
A spirit of generosity for our people, customers and our communities;
•
A willingness to partner with our stakeholders towards common goals;
•
A deep connection to our shared purpose of inclusive financial services; and
•
A culture of learning and curiosity.
Employee training and skills development
We strongly believe that learning is an ongoing process and that the majority of learning is in the doing. As such, while we offer
a range of formal programs (as listed further below), more importantly, we continue to build a culture of lifelong learning in everything
that we do.
Sustainable employee training and development programs impact employee retention, and we believe that our willingness to
invest in employee development contributes to employee satisfaction and belonging. This increases loyalty, which will in turn
contribute to employee retention. We offer the following development programs to enhance employee performance and skills:
•
unemployed and employed learnerships;
•
leadership development programs;
•
training programs;
•
mentorship programs;
•
other in-house and cross-functional training to aid with career advancement; and
•
succession planning – training interventions.
Equal opportunity
Having an inclusive and diverse workforce which reflects our economically active population and society in general, is crucial
for helping the organization attract and retain talent and is important for long-term organizational success. Our human resources team
emphasizes recruiting and retaining a talented and diverse workforce with special focus on hiring previously disadvantaged groups
whenever possible. We are committed to hiring qualified candidates without regard to their personal status, while taking into account
the unique circumstances affecting our operations in South Africa and the need to uplift previously disadvantaged groups. This
commitment extends to all levels of our organization, including within senior management and our board of directors.
As of June 30, 2021, the composition of our workforce was:
•
54% female and 46% male;
•
41% between 18 and 34 years old, 56% between 35 and 54 years old, and 3% over 55 years old; and
•
76% Black, 14% two or more races, 5% Indian and 5% White.
We have no female named executive officers.
In the last year we have taken positive strides to help build a more inclusive workforce and to enhance our pay structures by
taking measures to eliminate potential discrimination in our pay structures and to help close gender pay gaps in order to progress
towards gender equality at work. We have implemented a job evaluation system that allows the corporate hierarchy and functions to
be mapped out in an objective manner. In this way, remuneration levels can be set for every function with reference to the external
market, and people in similar functions can be paid equally.
Employee compensation programs
We are committed to ensuring that all of our employees are paid fair and competitive remuneration. To that end, we offer the
following to our employees:
•
Access to a comprehensive medical, dental, and vision plan that our employees have the option to join;
•
Access to a defined contribution retirement plan that our employees have the option to join;
•
Paid sick, annual and family responsibility leave;
•
Maternity benefits;
•
Life and disability insurance coverage;
•
Employee assistance programs; and
•
Product
discounts.
6
Annual
increases
and
incentive
compensation
are
based
on
merit,
which
is
communicated
to
employees
upon
hire
and
documented as part of our annual performance review process.
Our number of employees allocated on a segmental basis as of the years ended June 30, is presented in the table below:
Number of employees
2021
2020
2019
Management
164
167
179
Processing
(1)
1,108
1,141
1,227
Financial services
1,778
1,531
1,443
Technology
29
36
40
Total
3,079
2,875
2,889
(1) Processing includes employees allocated to corporate/ eliminations activities.
On a functional basis, three of our employees were part of executive management, 17 were employed in sales and marketing,
116 were employed in finance and administration, 175 were employed in information technology and 2,768 were employed in
operations.
Health and safety laws and regulations
We are subject to various South African laws and regulations that regulate the health and safety of our South African-based
workforce, including those laws monitored by the South African Department of Employment and Labour which stipulates the legal
framework within which we need to function. This framework comprises the Occupational Health and Safety Act, Act 85 of 1993, or
OHSA, the Compensation for Occupational Injuries and Diseases Act, Act 130 of 1993, or COIDA, the Basic Conditions of
Employment Act, Act 75 of 1997, or BCEA and the Labour Relations Act, Act 66 of 1995, or LRA. Compliance with COVID-19
regulations remains regulated by the National Institute of Occupational Health, or NIOH, and the Occupational Health Surveillance
System, or OHSS, the Centre for Scientific Industrial Research, or CSIR and the National Institute for Communicable Diseases, or
NICD.
People are ultimately the most important assets in any organization, therefore successfully managing health and safety in the
workplace remains paramount. Successfully managing health and safety in the workplace relies on commitment, consultation, and co-
operation.
In order to maintain OHSA compliance, we ensure that:
•
Internal health and safety policies remain regularly updated and accessible to all staff;
•
All departments/branches keep a summary of applicable Health and Safety legislation and display a summary of such at their
respective premises for ease of reference;
•
Each of our branches has a designated health and safety representative, a first aider and fire marshal tasked with ensuring
compliance as well as being able to assist in an emergency situation when required, each of whom is trained every two years
as per stipulated regulations.
•
Every branch manager is a delegated assistant to our Chief Executive Officer: Southern Africa who ensures OHSA
compliance and that employees have the necessary knowledge and understanding of applicable health and safety rules and
procedures.
•
Quarterly inspections are conducted by delegated officials at the respective branches so as to report on any non-compliance
or health and safety issues which need tending to.
•
Quarterly meetings are conducted with our National Health and Safety Officer to report in on company-wide compliance and
any health and safety issues which require tending to.
•
Managers are trained in in the correct reporting procedures and proper incident/ accident investigation.
Our Executive Officers
The table below presents our executive officers, their ages and their titles:
Name
Age
Title
Chris G.B. Meyer
50
Group Chief Executive Officer and Director
Alex M.R. Smith
52
Chief Financial Officer, Treasurer, Secretary, and Director
Lincoln C. Mali
53
Chief Executive Officer: Southern Africa
Chris G.B. Meyer
the Head of Corporate & Investment Banking and Joint Managing Director at Investec Bank Plc, an LSE-listed specialist bank and
wealth manager, having served in many different roles within the Investec Group since 2001. He was also an executive director
for various international and regional subsidiaries of Investec Bank Plc. Mr. Meyer is a member of the South African Institute of
Chartered Accountants, holds an MSc Finance from the London Business School and a Post Graduate Diploma in Accounting from
the University of Cape Town.
7
Alex M.R. Smith
Smith was employed by Allied Electronics Corporation Limited, or Altron, a JSE-listed company, from 2006 to 2018 and, from August
2008 until February 2018, served as a director and its Chief Financial Officer. Prior to joining Altron, Mr. Smith worked in various
positions at PricewaterhouseCoopers in Edinburgh, Scotland and Johannesburg from 1991 to 2005. Mr. Smith holds a Bachelor of
Law (Honours) degree from the University of Edinburgh and is a member of the Institute of Chartered Accountants of Scotland.
Lincoln C. Mali
executive with over 25 years in the industry. Until April 2021, he was the Head of Group Card and Payments at Standard Bank Group,
and previously served in many different