As a deadline of April 1 looms, the South African Social Security Agency (Sassa) must approach the Constitutional Court if it wants to extend the controversial social grants tender awarded to Cash Paymaster Services (CPS).
As time runs out, it appears Sassa may have no other option but to extend or risk a crucial lifeline to millions of people.
The treasury said this week that an institution may not extend an invalid contract and that Sassa needs to approach the court for clarity.
The tender given to CPS, and its parent Net1, was ruled invalid by the court in 2014 and it has remained mired in legal challenges and controversy, including allegations of unlawful deductions made from grant beneficiaries’ accounts.
Sassa declined to answer detailed questions but its spokesperson, Kgomoco Diseko, said: “We will make a submission to the Concourt [Constitutional Court] very soon about our plans.”
Although the court ruled the contract invalid, it suspended its finding to allow Sassa either to award a new tender or begin paying grants itself. Until that happened the CPS contract continued to ensure that grant payments were not interrupted.
A legal expert said it could be argued that Sassa is not required to go to the court for guidance and could negotiate a new contract with CPS. But, legal niceties aside, “the reality is we are now left in a world where they have to do a deal with CPS, and promptly, because a delay of even a month would have catastrophic consequences. It’s a scandal.”
Since 2014, when Sassa first intimated in court papers that it aimed to do grant payments in house, there has been concern over whether it has capacity to do so.
Yet the agency and the department of social development recently assured Parliament that it was well on the way to taking over the process.
But, last Friday, at a request-for-information session, it appeared that little more than an “architectural framework” was in place. (See “Last-minute rush for new providers beggars reason”.
This apparent lack of readiness, the vague assurances given by Sassa and in the light of comments made by Net1’s chief executive, Serge Belamant, to United States-based analysts in November have fuelled suspicions that Sassa will be forced to roll over the contract.
Belamant claimed Sassa had asked Net1 for a plan to extend the life of the cards that grant beneficiaries use to access their grants for another 24 months.
It is not clear how easily Sassa will be able to do this. Besides getting the court’s approval, the treasury has said no contract may be extended without its support if it equates to more than 15% of the original
In his 2016 budget, Finance Minister Pravin Gordhan announced that state contracts valued at more than R10-million must be reviewed by the office of the chief procurement officer, which has not received an application from Sassa to extend the contract, the treasury said.
Should Sassa extend Net1’s contract, it is not clear how long it would be for, what it would cost the government and whether it would be under the same terms and conditions.
It is also not clear why Sassa and its political principals have left the in-sourcing process so late, in effect giving itself no option but to extend Net1’s contract.
“We will call a presser [press conference] before end of this month to address all the issues you are raising,” Diseko said this week.
In November, Belamant told analysts he did not believe Sassa could “simply terminate our engagement” by April and that this “might take quite some time before this will actually happen, if at all”.
He added that the firm welcomed continued business with Sassa “if under favourable terms”.
What these are is also unclear and Net1 did not respond to questions.
Sources who attended the request-for-information session on Friday, but who cannot be named for fear of repercussions, said the April deadline was too tight. There would have to be some kind of transition period, which would include working with the incumbent, one of the sources said.
The Mail & Guardian understands that interested civil society organisations have approached Sassa to get clarity on the issue.
The history of social grants payment is extraordinarily fraught with problems, made more so because it is so vital — most are child-support grants. By conservative estimates, about half of all South Africans are, to some extent, reliant on recipients who regularly receivetheir slice of the roughly R128-billion paid out in the past financial year.
Unlawful deductions on social grant accounts have also fuelled controversy.
Despite changes to the Social Assistance Act and its regulations, announced in May last year and aimed at protecting grant recipients, the civil society organisation Black Sash alleged at the time that the deductions were continuing.
In June last year, Net1 applied for a declaratory order in the high court for clarity on changes to the Act and its regulations. The changes are seen as a material risk to Net1’s microlending and insurance activities, according to the company’s risk statement.
Last-minute rush for new providers beggars reason
The South African Social Security Agency (Sassa) is on the brink of reneging on its long-held promise to insource the payment of social grants when the current contract expires in 11 weeks’ time.
Social grants provide a lifeline to almost 17-million South Africans.
The fast-approaching deadline will not, in itself, mean that the tap of social grants will be closed. But it does raise some vitally important questions, none of which Sassa can answer.
As far back as February 2014, Sassa told the Constitutional Court that it intended to take over the social grant payment system from the current holder of the tender, Net1, by April this year.
That commitment has wavered at times but as recently as November last year, both Sassa and the person ultimately responsible for it, Social Development Minister Bathabile Dlamini, assured Parliament that work on the mammoth task was well underway. In fact, they said, it was being finalised.
But, last Friday, speaking to potential suppliers, Sassa’s assessment was very different. It had only an “architectural framework”, a wish list of sorts, for how it would like payments to be handled, it told possible bidders during a request-for-information briefing.
And much of that wish list is not set in stone.
“We really need you to tell us what you can provide,” consultant Manie van Wyk said on behalf of Sassa, reiterating what he had been saying in different ways for the previous 40 minutes.
“They’re crazy if they think we can get this thing done in a month,” said a potential bidder for related tenders. “They’re on drugs. Hard drugs.”
His identity is being withheld in case it might prejudice his company’s chances.
The briefing on Friday was compulsory for those who wish to influence how upcoming, related tenders are constructed — tenders for the many services that Sassa would require to meet the April deadline.
But the request-for-information window closes on February 10 — 50 days before the deadline for implementation, an almost certainly impossible task.
The last time Sassa put out a similar tender, it took nine months to adjudicate and was later found to have been adjudicated unlawfully.
Compulsory briefings for information requests tend to be poorly attended but this one drew more than 80 people — a collection of bankers, lawyers and technology service providers, their amount of experience unprecedented.
“You have to keep in mind that this is the biggest public-sector contract ever on this continent, from Cape to Cairo,” said the potential bidder.
The attendees, some of whom had travelled from other parts of the country for the day, were treated to a 40-minute presentation during which Van Wyk, the only person to speak, other than to make introductions, read almost exclusively verbatim what appeared on slides marked “confidential”.
No questions were entertained, and no discussion was allowed.
Van Wyk never mentioned an April deadline, or that it was a matter of urgency. Instead, he explained that Sassa intended to move from having a single provider for the whole process of paying social grants to an ecosystem in which one company would manufacture special Sassa cards, another company would issue them, a third would manage the accounts linked to those cards, and so on.
In total there would be at least six different service providers involved. For each of these service areas, Sassa has asked potential providers “to submit information on how they can support” the agency.
Some attendees took furious notes and took cellphone photographs of the slides, others sat back and occasionally shook their heads.
“I don’t know if we should get involved in this thing,” one muttered to a colleague as they walked out after the presentation.
“Who knows if we’ll still be in business by the time it gets off the ground?” — Phillip de Wet