Concourt asked to ‘turn its back’ on unlawful grants tender

The Constitutional Court has been asked to set aside the awarding of a R10-billion social grants tender to Cash Paymaster Services (CPS) and order the South African Social Security Agency (Sassa) to re-advertise the tender afresh.

In a unanimous judgment in November 2013, the Constitutional Court found the tender awarded to CPS to be invalid, on the grounds that it was procedurally unfair.

The court then asked the parties concerned, including the losing bidder, AllPay Consolidated Investment Holdings (Allpay), to return to court on Tuesday with options for what the appropriate remedy should be.

The court must find a "just and equitable" remedy, given that setting aside the tender could disrupt the grant payment system, unfairly prejudicing millions of beneficiaries.

Ideally, the court seeks a remedy that would cause minimal, if any, disruption to social grant recipients. But it must also consider the implications of allowing CPS to continue to profit from a tender that was awarded to it in a procedurally unfair manner, and that is therefore unconstitutional and invalid.

Essentially, the court must decide whether the risk of disrupting the social grant system warrants leaving the tender in place, in spite of its unlawfulness, or whether it would be more "just and equitable" to set the tender aside.

Next step
Allpay wants the tender to be set aside and re-advertised, but Sassa and CPS disagree. Sassa argued on Tuesday that the appropriate next step for the court to make would be to award no further relief.

Furthermore, Sassa intends to administer the social grant system itself from 2017 onwards. Any new tender issued would therefore be for a period of less than five years, and probably not be profitable. Since all parties agreed that any new tender should be for a period of five years, a Constitutional Court decision which instructed a new tender to be awarded would, in effect, stop Sassa from going ahead with its plans.

Fanie Cilliers, senior counsel for Sassa, argued that the court would traverse the boundaries between the executive and the judiciary if it made such an order.

Gilbert Marcus SC, for Allpay, agreed that the relief sought by his clients would mean Sassa would have to outsource the social grant system beyond 2017. But Marcus said Sassa's own submissions, including admissions made in Parliament, indicated that the state organ would have to outsource some of its functions in 2017, in any event.

Sassa also could not foretell which functions these would be, and an advisory committee established to assist Sassa in taking over the management and administration of the social grant system would only complete its work in 2015.

Marcus also said Allpay's remedy was designed so that the current system, under CPS, remained in operation until the changeover occurred.

This was to ensure minimal disruption to social grant recipients. He also said the CPS system was exploitative, and that beneficiaries had an interest in a system which was fair as well as efficient.

"The risk of disruption is quite exaggerated and overstated. If CPS and Sassa are to be believed, then CPS will win the new tender without any disruption whatsoever. They in fact go into the new process with the massive advantage of being the incumbent operator," Marcus said.

The Centre for Child Law, the second amicus curae, have asked the court to disregard any remedy which would deprive child grant recipients of their monthly grants. Marcus said children would not have to be re-registered as CPS was required to capture their data, which remained the property of Sassa.

But Sassa disagreed, and said that while it remained in possession of the database, the changeover would result in the use of a different smartcard system which would be hugely disruptive for grant beneficiaries.

Cilliers added that the court had discretion about whether or not to cancel a tender once it had been declared invalid. It could, therefore, order no remedy at this stage.

But Justice Johann van der Westhuizen said the "logical" step for the court was to order remedy, although Cilliers said this was "private law thinking" and questioned why Sassa was opposed to Allpay's suggestion at all, given that it would be beneficial to Sassa to get the best contractor at the best price.

"If Sassa had a credible guarantee that we could get a new tender at the same price, for the same quality, without interruption, we would be neutral," said Cilliers.

Moseneke said the "default" position of a state agency like Sassa should be to "sustain the rule of law". He said nobody should benefit from decisions that violate the Constitution, and this would ordinarily be the point of departure for the courts.

"So you have to persuade us that we should not uphold the constitution and turn our back on an unlawful tender. Why won't a rerun of the tender advance the objectives of the Constitution and the grant recipients?" he asked. 

Deliberations continue.

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Sarah Evans
Sarah Evans

Sarah Evans interned at the Diamond Fields Advertiser in Kimberley for three years before completing an internship at the Mail & Guardian Centre for Investigative Journalism (amaBhungane). She went on to work as a Mail & Guardian news reporter with areas of interest including crime, law, governance and the nexus between business and politics. 

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