SCA upholds Cash Paymaster Services' grants tender

A Supreme Court of Appeals panel of judges has unanimously overturned a high court ruling that a R10-billion social grant tender was “illegal and invalid”.

Wednesday’s finding authored by Judge Robert Nugent upheld a lucrative contract to Cash Paymaster Services for the payment of grants to 15 million South Africans.

Losing bidder Absa-owned AllPay had challenged the award in the North Gauteng High Court early last year, arguing that the process, run by the South African Social Security Agency (Sassa) was “fundamentally flawed”.

High court Judge Elias Matojane ruled that the process was indeed flawed, but he did not have the contract cancelled. This was appealed and cross-appealed by Sassa, Cash Paymaster and AllPay.

In the ruling, Nugent wrote that the alleged irregularities were nothing more than “inconsequential” and so not unlawful.

He hammered AllPay, accusing it of using “innuendo and suggestion” to “evoke suspicion of corruption” in the trial.

“When all is said and done there is no escape from the facts I referred to earlier: Sassa was entitled to have the solution it required if that solution was available.
Cash Paymaster was able to provide that solution. AllPay could not.”

While Social Development Minister Bathabile Dlamini said the ruling “vindicates” the department, AllPay said it was considering appealing to the Constitutional Court.

Corruption claims
Sassa awarded the contract to Cash Paymaster early last year. While AllPay challenged the validity of the tender process in the high court, several allegations of corruption were also levelled at Sassa and Cash Paymaster.

The Mail & Guardian highlighted questions over the role of Jacob Zuma’s legal advisor and personal lawyer Michael Hulley, who the agency hired as a “strategic advisor” on the bid.

The M&G also showed extensive links between a new BEE partner of Cash Paymaster’s parent company Net 1 UEPS and Human Settlement Minister Tokyo Sexwale’s Mvelaphanda Holdings. Sexwale, in turn, was linked to a member of the bid committee, and his partners in Mvelaphanda are also close to Hulley.

Deemed by high court Judge Matojane to be “hearsay”, no corruption allegations were heard in court.

However, such claims have sparked investigations by the FBI and the Securities Exchange Commission in the US, where Net 1 is listed. South Africa’s Hawks are also investigating.

“Innuendo and suggestion”
Early this month, in a last ditch attempt to have the supreme court consider some of the allegations, AllPay applied to introduce a clandestine 2012 recording of Sassa official John Tsalamandris describing how he believed the process had been rigged.

Tsalamandris had minuted the bid committee meetings as they deliberated on the bids.
The judges blocked AllPay’s attempt at the time and opened Wednesday’s judgement with a discussion of this, “to clear the atmosphere”.

According to them, Tsalamandris’s account “carries no weight at all”, and his chief allegations of dishonesty and bribery “were all inferences” drawn from facts already before the court.

Nugent wrote: “Whatever place mere suspicion of malfeasance or moral turpitude might have in other discourse, it has no place in the courts – neither in the evidence nor in the atmosphere in which cases are conducted.

“It is extraordinary that AllPay should disavow dishonesty [as the company’s arguments before the court had excluded corruption] and then think to place inferences before us through the mouth of Mr Tsalamandris.”

Of this, Cash Paymaster last week accused AllPay of running a “smear campaign” against it: “We have already initiated court action against AllPay for damages that will certainly exceed R1-billion. It is sad that Absa’s Allpay has resorted to desperate measures to discredit us, seemingly because it is unable to accept that it was beaten by a better company with a better product.”

Core argument
At the centre of AllPay’s application to the high court was a complaint that bid requirements were changed by an 11th hour notice—“Bidders Notice 2”—which stated that bidders would only be considered if they could biometrically verify the identity of grant beneficiaries before every grant payment.

This effectively knocked AllPay from the running.
Nugent wrote: “There was much debate on whether Bidders Notice 2 ‘amended’ the RFP (request for proposals) – which AllPay said it did – or whether it merely ‘clarified’ the RFP - which Sassa said it did.”

After this notice was issued, AllPay and Cash Paymaster were called to give technical presentations, where AllPay admitted it could not yet provide biometric verification.

Following the presentations, the evaluation committee members altered the company’s bid scores: AllPay’s were reduced to below a prescribed threshold; Cash Paymaster’s were raised.

AllPay argued that the scores were changed on technical issues unrelated to those discussed in the presentation. In his high court ruling, Matojane supported this, ruling the scores were changed “irrationally and unfairly”.

“Red herring”
The supreme court panel did not agree.
The judges ruled that an extension to the bid deadline had given AllPay enough time—17 days – to fix its bid following Bidders Notice 2.

And in any event, according to its own bid specifications, the agency was “bound to accept the Cash Paymaster solution in preference to that of AllPay even without Bidders Notice 2”.

Nugent said: “Bidders Notice 2 is a red herring in this case.”

He was scathing of the finding that the scores were “irrationally” lowered: “If there is anything remarkable in the scores it is only that those of [tender project manager Raphaahle] Ramakgopa remained much the same.”

In a broad comment that is likely to raise questions, Nugent wrote: “Irrationality means the absence of reason. The fact alone that the scores were lowered, even substantially, does not infer that they were not founded on reason.”

Dismissive
The supreme court also waved away a number of other concerns that had been supported by the high court:

  • On the finding that Sassa “irrationally” overlooked Cash Paymaster’s failure to follow certain bid specifications, the panel ruled there was “no merit” to this.
  • On alleged irregularities in the make up of the bid committees, which the high court ruled had “fundamentally” undermined the process, Nugent wrote: “Perhaps it was an internal ‘irregularity’ but it was not an unlawful irregularity.”
  • The high court had also found against Sassa for failing to properly assess Cash Paymaster’s BEE component and agreeing to manage this through a subsequent contract. Of this, Nugent wrote: “One might question the wisdom of its decision but the evaluation of the bid was its prerogative and a court cannot interfere only because it thinks its decision was unwise.”

“Vindicated”
A department of social development spokesperson said Minister Dlamini “believes that Social Development and government have been vindicated by the supreme court, and Sassa can concentrate on making the system function well.

“Several cabinet minister and senior government officials endured damaging negative publicity and the integrity of the ANC-led government was questioned.

“It was clear from the onset that this case was never about the alleged corruption but about money and greed. We are grateful that all efforts to destabilize the system were unsuccessful and we want to stress to our beneficiaries to use the extended time to come and reregister.”

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The M&G Centre for Investigative Journalism, a non-profit initiative to develop investigative journalism in the public interest, produced this story. All views are ours. See www.amabhungane.co.za for all our stories, activities and sources of funding.

Lionel Faull

Lionel Faull

Lionel is a reporter at the Mail & Guardian Centre for Investigative Journalism, Amabhungane.
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