Bathabile Dlamini’s Game of Chicken

Another week passes and social development minister Bathabile Dlamini still rushes headlong at South Africa’s future. Is it a game of chicken, or is it Russian roulette? Most disturbingly, President Jacob Zuma’s lawyer Michael Hulley is quietly advising her. She is hiding him, just like in 2012, when Sassa bent a tender in Cash Paymaster Services’ favour.

On Wednesday, the South African Social Security Agency (Sassa) and Dlamini again presented their plans – for how welfare grants will be paid from April 1 – to members of parliament’s social development portfolio committee. 

MPs and observers left confused. amaBhungane did some footwork to try to understand Sassa’s message. It seemed officials and the minister were not clear themselves. They have been at loggerheads for weeks, and on Wednesday appeared to try to present a delicate truce. It is already unravelling.

Dlamini and her favoured Sassa manager Zodwa Mvulane dominated the floor. For the first time, Dlamini took charge. She was authoritative and appeared to speak for Sassa. Mvulane, who project manages the grant payment transition – evidently she does a bad job – was also given time, however.

This was unlike Sassa’s previous round with MPs when Dlamini bunked and Mvulane skulked in a corner after officials allegedly disregarded Dlamini’s proposals and defied her attempts to cancel the meeting.

On Wednesday, Sassa’s newly appointed CEO Thokozani Magwaza looked dikbek and said little. He is being sidelined, it appears. This morning The Star reported that Dlamini was thinking about suspending him for communicating with the South African Post Office about future grant payment models. It is not clear what about this angered Dlamini.

There are two inter-playing conversations.

One is: who will pay grants after March 31, when the present contract with Cash Paymaster Services (CPS) expires?

Two is: who will pay grants in the medium to long term?

Obviously the most pressing question is the first.

But the crisis has also diverted attention from doubts about Dlamini’s approach to the medium-term solution. This is dangerous because Dlamini has externalised the work on Question Two to a shadowy group of consultants. Dlamini appointed them on the sly last year and finally admitted on Wednesday that she did not follow proper processes.

The short answer given for Question One is that CPS will continue to pay grants. It stands ready and able to do the job and Sassa and Dlamini have presented no other coherent option.

But to confirm that CPS will pay the grants on April 1, Sassa is battling to move three pieces into place.

First, Sassa must report to the Constitutional Court and explain why it feels it has no choice but to reappoint CPS despite the court ruling that the original CPS appointment was unlawful. The current contract was declared invalid after Sassa botched a 2011 tender in CPS’s favour, but the court gave Sassa time to get its own system in place. Sassa failed to do so.

It remains unclear why this report was not submitted to the court last October, when Sassa admitted to itself there was a problem, or in December or January or last week, when an application was ready.

Sassa and Dlamini’s department are staffed by experienced, motivated bureaucrats, so ineptitude can’t be the only explanation. Many other indicators point to malfeasance, as amaBhungane has previously reported. A more innocent explanation, however, might be that the job is simply complicated and the “factions” have failed to agree.

Second, Sassa needs treasury approval to deviate from open, competitive tender standards – the only way to appoint CPS is without going to the market. There is no time for that. But Treasury has told Sassa it will not approve until the court has given direction.

Third, Sassa must negotiate terms with CPS: cost, length of contract and whether CPS’s parent Net 1 can leverage the contract to sell financial services to beneficiaries – its current business model.

They plan to start formal negotiations only next week, with less than five weeks to go before a possible 1 April Doomsday.

Back in 2016, when it dawned on Dlamini and Sassa that they were not ready to take over from CPS on April 1 2017, it would have made sense for them to try to come to terms with CPS. If successful, they could have taken that option to the court and treasury for approval. If CPS demanded too much from the state, Sassa could have worked on plans B and C.

Instead, Dlamini sat on her hands. Most disturbingly, even though cabinet appointed Sassa CEO Magwaza in June 2016, Dlamini only installed him in November. For five critical months, she left Sassa without a leader. 

Now things are different. Plans B and C don’t really exist, and CPS holds all of the cards.

Nevertheless, Department of Social Development director-general Zane Dangor drew a line in the sand on Wednesday. He told MPs negotiations with CPS would rest on two basic terms. The fee had to be within Sassa’s budget, and there could be no deductions for loans, insurance and the like. He also said Treasury would be part of the negotiations.

It looked like Dangor was trying to pre-empt any backroom deals with CPS, giving Sassa a small amount of leverage in negotiations – though a commitment to Parliament is hardly battle-proof in the Age of Zuma.

If Sassa put these negotiating terms before the court – setting them “in stone” – before sitting down with CPS next week, its hand would be strengthened. Conversely, if Sassa does not file to court, CPS’s position becomes formidable. In other words, the timing of Sassa’s constitutional court report is critical.

Enter a Durban attorney named Michael Hulley.

Sassa’s court report was ready for filing last Wednesday, but Dlamini intervened and stopped this. She did it again the next day and then again. This Wednesday – with the fierce protection of ANC portfolio committee chair Rosemary Capa – Dlamini refused to commit herself to a date for the court filing.

AmaBhungane has learned that Dlamini dispatched Sassa officials to consult with Hulley – not just in December, as amaBhungane previously reported, but in the days before Wednesday’s portfolio committee meeting. 

Hulley is not Sassa’s attorney of record. It uses the state attorney and it has engaged senior counsel Nazeer Cassim who drafted Magwaza’s court affidavit last week. Hulley, it is said, is pushing Dlamini and Sassa to negotiate with CPS before filing to the court. It is understood Cassim advised the opposite.

Hulley’s alleged advice firmly favours CPS. This is obviously suspicious. Adding to suspicions is the fact that Hulley is President Jacob Zuma’s lawyer and is central to a number of high profile South African scandals – notably including the illegal appointment of CPS in 2012.Hulley did not respond to amaBhungane’s emailed questions. Neither did Sassa or Dlamini.

But with or without a court report, if CPS refuses Dangor’s terms, what will Sassa do? Magwaza told MPs: “We still hope CPS will listen to us and negotiate in good faith.”

This is wildly optimistic. CPS’s parent Net 1’s revenue streams rely in large part on its ability to leverage the Sassa contract to sell loans, insurance, air-time and other financial products to beneficiaries. This depends on Net 1’s ability to easily deduct money from the grants.

If Net 1 executive chair Serge Belamant cannot substantially increase the social grant payment fee and maintain his financial services business, the US-listed Net 1 is likely to lose value.

Belamant made it clear in media statements – publicly taunting Sassa – that he will not accept anything less than a fee increase and a long contract extension. He is well known for getting his way and suing when he does not.

However, on Wednesday, Sassa project manager Mvulane alluded to a fall-back position should negotiations fail. Sassa would run a “short” tender to distribute cash to deep rural areas and have the banks open accounts for the rest of the beneficiaries – which could be done in two weeks. Mvulane was vague, but fundamental questions follow.

If it’s so simple and quick to distribute through the banks, why has Dlamini caused so much gnashing of teeth over extending an invalid CPS contract? Why would she expose beneficiaries to CPS’s allegedly abusive grant deductions for loans and other “services”? Why the expensive and opaque consultants twisting themselves in knots to find a long-term proprietary payment system – effectively replacing CPS with another version of the same?

Why not just pay the grants through the banks and “bank the unbanked” once and for all – using accounts of their own choice?

The amaBhungane Centre for Investigative Journalism produced this story. Like it? Be an amaB supporter and help us do more. Know more? Send us a tip-off.