/ 17 February 2012

R10bn grant tender sparks court battle

R10bn Grant Tender Sparks Court Battle

Five years of fraught tender procedures have culminated in the awarding of a social-grants payment contract worth more than R10-billion to a foreign-owned company with a chequered history in South Africa.

The high-stakes award has sparked a legal battle led by two losing bidders.

AllPay, owned by Absa bank, claims that the award was “irregular” and has demanded that it be set aside, whereas Empilweni Payout Services has asked the courts to order the release of all tender documents and records for scrutiny.

The national contract, issued last month by the South African Social Security Agency (Sassa), was awarded to Cash Paymaster Services, which, for 12 years, has held provincial contracts to pay social grants in Limpopo, KwaZulu-Natal, the Eastern Cape, Northern Cape and North West.

Over the same period AllPay and Empilweni have provided the same service in the Free State, Western Cape, parts of the Eastern Cape, Gauteng and Mpumalanga.

Now Sassa has contracted Cash Paymaster, wholly owned by the South African-based but United States-listed multinational Net1 UEPS, to pay grants in all nine provinces.

This entails enrolling about 15-million grant recipients, issuing them with smart cards, using biometric tools such as fingerprinting to prove their identities and paying them.

Major blow

The tender award is a major blow to AllPay and Empilweni, which has claimed it “threatens to completely destroy” its business.

In contrast, the victorious Cash Paymaster, which derives most of its profit from South Africa’s social-grant system, awarded stocks and $3.6-million in juicy bonuses to its executives. Chief executive Serge Belamant scooped $2-million and finance chief Herman Kotzé $1.2-million.

In its 12 years of activity, Cash Paymaster has courted controversy.

In 2009 the Mail & Guardian revealed how its black economic empowerment partner in Limpopo, Northern Corporate Investment Holdings, was central to serious corruption allegations against then premier Ngoako Ramatlhodi.

In 2008, while Sassa was still drawing up an earlier national social-grants tender, City Press alleged that Thuthukile Skweyiya, the wife of then-social development minister Zola Skweyiya, was in business with ANC stalwart Mazwi Yako, who was another of Cash Paymaster’s BEE partners, through his Born Free Investments 272.

Cash Paymaster had made a bid for this earlier national tender.

Thuthukile Skweyiya denied taking up a share allocation from Yako’s firm. Sassa reported to Skweyiya’s department, but the former minister has always insisted that he played no role in the adjudication process. The tender was ultimately cancelled.

Born Free Investments was again listed as a BEE partner in Cash Paymaster’s latest bid.


Between 2000 and 2003, Cash Paymaster also faced criticism in Parliament and in the press for allegedly providing poor quality services in certain provinces. The company disputed this.

Days after Sassa announced the new contract award last month, Net1 announced that it had finalised a major new broad-based BEE partnership, led by Mosomo Investment Holdings. Mosomo is led by Kgomotso Mosehla, a Coal of Africa director who formerly headed corporate finance in the Mvelaphanda group, established by Human Settlements Minister Tokyo Sexwale.

The tender awarded to Cash Paymaster last month has a long and tortuous history, going back to February 2007 when Sassa first advertised it under former minister Skweyiya.

Ironically, the department claimed at the time that the centralised tendering of social grants for all nine provinces would prevent the field being dominated by a few companies.

Said Lakela Kaunda, the spokesperson at the time: “In the current bid process, instead of looking for one service provider to ensure uniformity of services nationwide, we decided to subdivide the bid into nine provincial tenders. This will prevent the development of a monopoly and allow opportunities for new entrants.”

The bidders at the time included Cash Paymaster, AllPay and Empilweni. Sassa explained that the cancellation of the tender in November 2008, after several long delays, was because its adjudication committee had “rejected” the evaluation committee’s findings. It said there was “no hint of corruption”.

Claiming that the evaluation committee had recommended Cash Paymaster, chief executive Belamant took the agency to court in a case that appears to remain unresolved.

‘I want all nine’

He was quoted as saying: “We know we won all nine provinces on technical, financial and black-empowerment criteria. We deserve it and I want all nine.”

The tender was advertised anew in April last year, but in the intervening period Belamant sued Sassa over related issues.

In a Supreme Court of Appeal ruling on Cash Paymaster’s challenge to a Sassa decision to distribute some grants through the South African Post Office, Justice Zukisa Tshiqi said: “One is, unfortunately, left with a lingering impression that [Cash]Paymaster’s motive in wanting to have the letter agreement set aside is to perpetuate the expensive cash payment system and not because it is concerned about the costs to Sassa of the payment systems, or because it is a possible bona fide competitor of Postbank.”

Belamant could not be reached for comment on Thursday.

Following last month’s award, AllPay general manager Charmaine Webb claimed in court papers that Cash Paymaster’s contract should be set aside because:

  • It had been favoured by an inflexible “eleventh hour” requirement that all bidders had to be able to provide biometric verification — voice recognition or fingerprinting, for example — at ATMs.

    In a scathing response, Belamant said this was evidence that Cash Paymaster’s “technology is far superior to that offered by [AllPay] — I am surprised that AllPay made it as far as the technical demonstration and presentation. A tender cannot be set aside merely because a specific bidder is better equipped.”

  • Webb also argued that the questions AllPay submitted to Sassa during the process were never fully answered and that the company was given just 24 hours’ notice of a technical presentation it was required to make. Belamant said his company was also given short notice.
  • Webb said it appeared Cash Paymaster had altered its bid after the deadline by adding Mosomo as a BEE partner. However, Belamant said Cash Paymaster had already signed on different BEE partners before tendering.

AllPay’s application is due to be heard next week.

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