/ 11 January 2018

CPS is now claiming over R1-billion from Sassa

Lawyers for Black Sash
Lawyers for Black Sash

Net1 subsidiary Cash Paymaster Services (CPS) is demanding that the South African Social Security Agency (Sassa) pay it more than R1‑billion, in a dispute the state agency seems to have tried to keep under wraps.

But according to some inside the agency, Sassa has settled with CPS on numerous previous occasions, parting with millions of rands.

Sassa spokesperson Moabi Pitsi said the agency does not believe it owes CPS any outstanding amounts but because the dispute is ongoing, he could not divulge the reasons.

In a statement released by Sassa after the Mail and Guardian requested comment on the claims, the acting chief executive officer, Pearl Bhengu is quoted saying that the initial amount claimed by CPS was R1.3-billion but has decreased to R792 853 000 after CPS withdrew its other claims.

But Pitsi said the agency could not provide details about their defence at this stage as the arbitration process is still pending.

Revelations contained in documents and correspondence between the embattled Sassa and CPS show that the two entities have been at odds over the claim since 2006.

Though the R1‑billion-plus claim has been hanging over the agency for years, there has been no mention of it in its financial statements, in which it should ordinarily be noted.

“The agency has not — based on, among others, the prospects of its defence — disclosed any amount in relation to these claims as contingent liability,” said Pitsi.

According to a series of letters CPS wrote to Sassa between 2009 and 2010, the company claims it suffered damages because the agency, with which it had a contract, sidelined it by concluding agreements with banks to provide services to new social grant recipients, with CPS losing out as a result.

“It has recently come to our client’s attention that the department concluded unlawful agreements with certain banking institutions in breach of the service level agreement, contracting these banking institutions to render payment services to beneficiaries,” reads a lawyer’s letter dated August 2010.

“Sassa, after 1 April 2006, perpetuated the aforementioned breach by continuing to give effect to the unlawful agreements. Moreover, during or about June 2007, Sassa concluded similar unlawful agreements … with the South African Post Office.”

The claims, CPS states in documents seen by the M&G, arose during the time the company was paying grant recipients in 
parts of the Eastern Cape, North West, KwaZulu-Natal and Limpopo.

CPS’s claims are broken down as follows:

  • In the Eastern Cape, CPS makes two claims amounting to more than R465‑million;
  • In Limpopo, it claims more than R300‑million; 
  • In North West, CPS says it incurred damages of more than R300‑million; and
  • In KwaZulu-Natal, CPS claims that the agency failed to pay certain invoices on time and, as a result, owed more than R18‑million.

Sassa and CPS have long been in talks to resolve the dispute and, according to letters, an arbitration process has once again been postponed, this time to July 2018.

The latest delay, the M&G understands, is as a result of the South African Post Office taking over the grant payment system from April.

“There were postponements initiated by either party in order to focus on other pressing issues, which includes processes towards the payment of grants from 1 April 2018,” said Pitsi.

But this claim is just one of many CPS has instituted against Sassa during its time as a service provider.

In 2014, Sassa’s former chief executive officer, Virginia Petersen, accepted a claim made by CPS that it was owed R317‑million. CPS reportedly claimed that it had enrolled more beneficiaries than it was mandated to in its contract.

A year later, Corruption Watch launched an application in the North Gauteng High Court to set aside the payment and make CPS pay back the money. The case is due to be heard in February.

According to the documents, CPS made another claim prior to it being awarded the invalid 2012 contract. The company claimed R35‑million from Sassa for the agency’s failure 
to allow it to register beneficiaries timeously. Sassa paid the full amount.

Regarding the current R1‑billion claim, CPS said it could not comment because “the matter is sub judice”.

For its part, CPS says the almost decade-long delay in resolving the matter is “complex in nature”.

“There are many reasons for the nine-year delay … these matters precede the formation of Sassa in 2007, when CPS was the paymaster in the various provinces.

“Communication has been ongoing; however, there have been many changes in structure which has complicated the resolution of the matters,” its statement reads.

Last week, Sassa said it would approach the Constitutional Court to ask for a further six-month extension to the invalid CPS contract while the Post Office service is being phased in.

But this week, Pitsi claimed that Sassa had already started phasing out CPS and that a new payment card would be issued from March.

“[The Post Office] will take over certain functions of CPS, including the printing of the new Sassa payment card and beneficiaries [about two million] will be receiving their grants through commercial banks and will be paid directly by Sassa from February 2018,” he added.