Over three days next week, the South African Social Security Agency (Sassa) and its supplier, Cash Paymaster Services (CPS), must achieve an astonishing feat: in negotiating a new contract to pay social grants, they must agree on matters on which they are diametrically opposed.
Both sides say they are not open to negotiation.
If they fail to reach an agreement by the time the talks are scheduled to end, on March 3, Sassa will have just 28 days to come up with another way to pay social grants to about 17-million beneficiaries.
It has previously said there is no other way.
The current CPS contract expires on March 31. At risk is the payment of the roughly R10-billion in grants due to be distributed in April. The grants are a lifeline that by conservative estimates support the poorest half of South Africa’s population.
But all will be well, Social Development Minister Bathabile Dlamini reassured the nation this week, because anything is possible if you are pure of heart.
“If you negotiate in good faith, you do get, most of the time, what you want,” Dlamini told a parliamentary portfolio committee on Wednesday. She also guaranteed that grant payments would not be interrupted.
Even suggesting there could be hiccups with grant payments amounted to “terrorising the poor”, said the social development portfolio committee chairperson, Rosemary Capa.
But the prospects of reaching an agreement with CPS seem bleak. “Any new engagement with CPS should ensure that there are no deductions [before grant payments are made] and work within the given budget,” social development director general Zane Dangor told Parliament.
But dismantling the current system of deductions — debit orders against social grants — is “not negotiable”, said Serge Belamant, the chief executive officer of CPS’s parent company, Net1, speaking from London.
Whether these debits are allowed in law is currently before the courts, and Net1 would cause itself legal trouble if it was even to consider such a request, Belamant said. That aside, it would be logistically difficult to dismantle the system, used by “thousands of other companies”, in anything less than several months, even if it was declared illegal.
Belamant was similarly unyielding on price, saying an increase was inevitable. CPS has its own contracts with suppliers, which all expire on March 31. “They’re not going to come back and say ‘we’ll give you the same price for another year’,” he said.
Meanwhile, his shareholders will require a return on the capital that will have to be invested to keep fleets of trucks running and to maintain the machinery of grant payments.
“We will behave like any profit-making organisation, which we are,” he said. “But, at the end of the day, we’re not going to go and use this as a wonderful opportunity to overcharge Sassa and overcharge South African taxpayers. That is obviously not the intention.”
In a February 7 letter from Sassa chief executive Thokozani Magwaza to the treasury, he said the cost of maintaining grant payments in 2017 could rise by as much as R1.26-billion.
In his annual budget speech on Wednesday afternoon, Finance Minister Pravin Gordhan made no mention of Sassa, or of any emergency allocation to fund such an amount.
To negotiate on the supposedly non-negotiables of deductions and price, Sassa and CPS will also have to overcome a history of bad blood. As recently as November, Sassa obliquely accused CPS of acting in its own “narrow business interests” and of offering social grant recipients “dubious loans”.
The undiplomatic Belamant, who will himself be on one side of the negotiation table, said such beliefs are rooted in an insulting misapprehension. “They believe that, because these people are poor, these people are stupid,” he said.
If that, too, can be overcome, the parties still face the prospect that their agreement will not be legal (See “When all else fails, shift the blame”), or could be legally challenged — one of the reasons Belamant has sometimes dreamed of simply walking away, he said.
All he can foresee from an extension of CPS’s tenure are “more lawsuits, more wasting of company money and time, more investigation into allegations” — and a hit on its share price.
The American Net1 has previously told its shareholders that they would profit considerably if it were to start using the infrastructure used to pay social grants — all of which it owns — to start pushing its own financial services instead.
Sassa and Dlamini this week suggested that there was an alternative to securing an agreement with CPS, but gave no detail on how it would be done.
There had to be an alternative, Magwaza said, “in case CPS does not go the way that we want them to go”. Three weeks before, he was part of a Sassa team that sought to convince the same committee that there was no alternative to using CPS, which would guarantee grant payments went off without a hitch come April.
When all else fails, shift the blame
From as far back as 2012, the South African Social Security Agency has intended to pay social grants itself instead of using an intermediary such as Cash Paymaster Services (CPS), it told the Constitutional Court in a filing two years ago.
Signing CPS to a multibillion-rand contract was intended to “serve as a springboard for the future payment system”, Sassa said.
But, it said, it was pushed off course by a legal challenge in the highest court, which ultimately found the CPS contract had been invalid all along.
Although the ConCourt found the contract to be invalid, it suspended its finding, saying it could not jeopardise the payment of grants.
After it failed to find a suitable bidder to replace CPS, Sassa committed to insource grant payments by April 1 2017.
Meanwhile, this week, Social Development Minister Bathabile Dlamini said the relationship between her department and the treasury was healthy, but again appeared to be preparing to blame the treasury for delays.
Among the problems she highlighted was the treasury’s unwillingness to sign off on a “deviation” for a new CPS contract before the ConCourt was approached to approve such a plan.
Sassa this week said it would now take “about five years” to insource grant payments entirely, a task it had previously promised to complete in less than two.
Sassa and Dlamini also this week confirmed that they have known since October that they could not meet the April 1 deadline. Sassa nonetheless continued to say formally and publicly that it would do so. — Phillip de Wet & Sarah Evans