First published by GroundUp

A compulsory briefing session was held in Pretoria on Friday 13 January for “service providers” interested in tendering for “the Social Grant Payment and Banking Services”.

South Africa’s 17-million social grants are currently paid over monthly from the National Treasury by Cash Paymaster Services, part of listed company Net1. But in terms of a commitment to the Constitutional Court in 2015, SASSA itself is due to take over payments from the end of March.

Scepticism about SASSA’s ability to take over the complex system has been increased by evasive responses to questions in Parliament from Minister of Social Development Bathabile Dlamini and SASSA officials. The agency has been mired in staffing problems, fraud, failure to curb illegal and unauthorised deductions from social grants by private companies preying on grant recipients, and findings of wasted expenditure by the Auditor General.

The lateness of the approach to possible partners, only 11 weeks from the scheduled handover, will boost speculation that SASSA does not intend to take over payments and that the contract with CPS will simply be rolled over.

SASSA’s invitation to possible partners to issue Requests for Information (RFIs) was published on December 9, and the closing date for the tender is February 10, which would leave any new partners less than one month to put systems in place.

DA MP Lindy Wilson, who attended Friday’s briefing session, has no doubt that SASSA is just going through the motions and that the CPS contract will be extended, for two years at least. “SASSA can’t take over the payments in April: it has no bank, no cards, no system. It’s impossible.”

“This is all just a smokescreen,” she said.

SASSA spokesperson Kgomoco Diseko had not responded to requests for comment by the time of publishing.

Net1 CEO Serge Belamant has said he believes the contract will be extended. “We believe that at the end of the day, SASSA may not simply terminate our engagement for what’s planned on 1 April. It might take quite some time before this will actually happen, if at all,” Belamant told shareholders on November 3.

The company sent out a similar message in a recent report to the US Securities and Exchange Commission for the year ended June 30. Net1, which is listed on stock exchanges in both South Africa and the US, warned shareholders that the company would lose “a significant portion of our revenues” if SASSA took over the payment system. But, the report noted: “It is possible that SASSA might request us to enter a transition agreement in order to phase out our services.”

Net1 decided in 2015 not to tender again for a social grants payment contract, and rather to shift its focus to the provision of financial products and services “independently of SASSA” through its subsidiaries, including EasyPay

But the payments contract is hugely lucrative for the company.

In 2015-16, South Africa accounted for more than 70% of Net1’s revenue of $591-million (about R8-billion at the current exchange rate). And more than one-fifth of its total revenue came from the social grants payment contract. This amounts to about R1.6-billion at the current exchange rate. DM

Timeline

• 2012: social grants payment contract awarded to CPS, a Net1 company. Frustrated bidder AllPay brings case to Constitutional Court;
• US Department of Justice launches investigation into possible violation of Foreign Corrupt Practices Act by Net1/CPS, which is accused of bribing SA government officials to get contract, and possible violation of securities laws;
• Securities Exchange Commission also launches investigation;
• 2013: Constitutional Court declares tender was unlawfully awarded;
• Net1 asks SAPS to investigate allegations of corruption in some newspaper reports. Hawks tell Net1 in 2015 they have decided not to prosecute;
• 2014: Constitutional Court orders tender process be re-run, but no disruption to grant payments in the meantime. SASSA asks for proposals;
• National Credit Regulator (NCR) applies to National Consumer Tribunal to cancel registration of Net1 subsidiary Moneyline for breach of National Credit Act. Moneyline contests procedure. Procedural argument heard in 2015 and Tribunal finds against Moneyline. Moneyline takes matter on appeal. Hearing (on procedure only) set for December 2017;
• NCR also accuses Moneyline of getting access to Grindrod bank accounts of beneficiaries; and accuses CPS of providing info about beneficiaries to Moneyline in breach of National Credit Act. Issues notices demanding they comply with the act. Tribunal sets both notices aside;
• 2015: Constitutional Court orders SASSA to award social grants payment tender by October;
• Net1 announces it has decided not to bid;
• SASSA decides not to award tender. CPS contract to continue until March 2017, when five year contract expires. Then SASSA is supposed to take over grant payments itself;
• SEC investigation concluded without further action. Department of Justice investigation continuing;
• Corruption Watch applies to court to set aside payment by SASSA to CPS of R317-million in 2014 for re-registration of beneficiaries in 2012 and 2013. Net1 named as respondent;
• 2016: SASSA brings criminal charges against Net1 and Grindrod Bank for contravening regulations under Social Assistance Act on debits from social grants;
• Net1 files for declaratory order on interpretation of the act and regulations;
• Gauteng High Court tells SASSA not to pursue criminal charges pending order. NPA decides not to prosecute. Declaratory order still awaited.

Photo: Carol Dlamini and Jeannette Makhanya protesting in October 2016 against deductions from social grants. The current contract with SASSA for the payment of social grants expires at the end of March. Photo: Nomfundo Xolo