Beneficiaries in 'disaster' countdown

Thokozani Magwaza repeats, like a mantra, that whatever happens, 17million social grant recipients will be paid on April 1. He's just not sure how.

In three days Magwaza, CEO of the South African Social Security Agency (Sassa), will ask the Constitutional Court to extend the agency's contract with Cash Paymaster Services, which has been doing the job since 2012.

In 2014, the court declared the contract invalid and told Sassa to come up with an alternative.

It has not. Now it is looking at a crisis; 17million people whose lives depend on receiving their monthly grants on time are looking at a crisis; and the whole country is looking at a crisis.    

If the court extends the CPS contract, Magwaza will have to grovel before Serge Belamant, CEO of Net1 UEPS, which owns CPS. Belamant holds all the cards, because although Magwaza talks about "other options" he admits they're not going to be ready in time.

story_article_left1

Belamant is expected to drive a hard bargain. He said this week in Business Day, the Sunday Times's sister newspaper, that he wasn't interested in extending the existing contract. He wanted a new contract, "and will certainly be firm about what will be in the new contract", he said.

Magwaza says: "Serge Belamant says so many things to so many people at any given time. I'll cross that bridge when I speak to him. We're not going for a new contract, that is not in our books."

Anyway, it wouldn't be up to him, he says. It would be a procurement issue and the National Treasury would have to give permission.

"We know Treasury is not in favour of that. I don't think they'll allow that to happen."

And then?

"It will depend on Belamant whether he wants to work with us or does not want to work with us."

Magwaza is sanguine about the prospects of persuading the Constitutional Court to overturn its ruling that the CPS contract is invalid.

"I hope they are not going to be negative to us," he says.

They may put conditions, they may say things, but I don't think that really they will end up not agreeing."

And if they do end up not agreeing? There are "other options", he says. "But most of the options we have are not helping us for April 1."

Most, or all?

"There is one option which we are going to look into which National Treasury has suggested." This involves using banks to roll out payments, and mounting a massive communication drive so that, in seven weeks, 17million welfare beneficiaries will know exactly what to do and where to go to open up accounts and access their money.

That's expecting rather a lot from an organisation that has so far demonstrated an inability to do anything.

Magwaza admits that Sassa itself has no confidence in this option. "We had put that option aside but Treasury feels it is one worth looking at. So we are looking at it," he says.

"At the same time we are going to be talking to CPS on the side." He hasn't begun talking to them yet, he says.

Net1 said in a stock exchange filing on Friday it had received an exploratory letter from Sassa about the possibility of a meeting, and it was willing to meet.

Magwaza said he will open negotiations when the Constitutional Court gives the go-ahead. If it does.

Belamant had been saying for some time that CPS needed to know by January if its services would still be required. That was when it would have to begin winding down its operations.

story_article_right2

"Coming to me in March will be too late; I've got to start closing down the operation in early January," Belamant said in December last year.

Magwaza laughs. "He has been saying they need to know before the end of December, he has been saying they need to know last year in November. He has been saying so many things. Serge Belamant is a businessman. He will say anything in order to secure business."

Magwaza, 54, was appointed CEO in June last year when his predecessor, Virginia Petersen, resigned. She was embroiled in allegations of financial impropriety including questionable payments to CPS that are being followed up by Corruption Watch.

Magwaza took office only in November, and confesses that he was unprepared for what confronted him, although he had been acting director-general in the Department of Social Development since 2015. Sassa reports directly to the minister, he says. He, as the director-general, was not in the loop.

Did he know what he was walking into?

He laughs. "I'm not too sure what to answer."

Did he understand the situation confronting Sassa?

"I was not fully informed. I knew what was taking place, but remember Sassa does not report to the DG, they report to the minister direct."

What did his minister, Bathabile Dlamini, say to him about the looming payment crisis?

"She said: 'Magwaza, please make sure that Sassa carries on paying the beneficiaries.' And we spoke about the issue of April 1. I said she must give me time to look into what is happening and then we will come to her. Which we did."

Even at that late stage she didn't appear to be very well informed herself. "I don't think she knew the whole background," says Magwaza.

This didn't stop her from giving regular assurances to the parliamentary oversight committee that Sassa had the situation in hand and would be ready to assume payments from CPS come April 1.

She did not attend the committee's meeting this month when Sassa finally admitted that it would not be ready.

Bridget Masango, the DA's spokeswoman on social development, says: "This was crunch time for her and she didn't come. She left it to her CEO to face the music."

Magwaza says he is quite used to facing the parliamentary committee without his minister.

"It's not the first time that the minister has not been with us. The minister has not been coming to the portfolio committee because of other commitments she might have been having.

"So what happened this time was not different from the other times."

Another indication of how seriously the Department of Social Development has taken the looming grant payment crisis is that its 2015-16 annual report devoted half a paragraph to the issue.

Magwaza says he cannot explain why Sassa is unprepared for the crucial April 1 deadline, although his predecessor, Petersen, told the parliamentary committee in June, before heading for the exit, that plans were in place.

"I am not privy to answer that. When I took over in November, I found what I found."

He says he doesn't want to comment on "what happened before that".

story_article_left3

So little, it seems, that his first action on taking over was to establish a technical team and start discussions with the National Treasury and the Reserve Bank about the options.

"I never knew that we had no options until I was in. That's why I set up a technical team to look into it."

How does he feel about being held accountable for a failure that is not his doing?

It comes with the territory, he says. "Like at Scopa [parliament's standing committee on public accounts], I took accountability for the irregular expenditure that was purported to have happened since 2005. It comes with the job. Of course I may not have the answers on certain things."

Such as why Sassa didn't tackle with more conviction and urgency the targets and deadlines it was given in 2014?

"I am not in a position to answer that. I never discussed it with the minister.

"What I got to know [after becoming CEO] is that we have got to pay on April 1."

He shares the blind faith of his minister that this will happen. Somehow.

"I am saying to the nation, on April 1 we are going to pay. Everybody is going to be paid like as usual on April 1. Nobody is not going to be paid."

How?

"The modalities of that are something else. I am just saying that my beneficiaries will be paid, 17million people will be paid."

The DA suspects that Sassa always intended that it would be business as usual with CPS.

"It is our contention that Sassa wilfully manufactured an emergency that would leave them with no choice but to extend the current, invalid, contract," says Masango.

Magwaza says: "I don't know anything about Sassa delaying purposefully or not because I was not there.

"But when I took over, we looked at all the options and came to the conclusion it might be the right thing to go with CPS and approach the court."

But with seven weeks to go, he has not yet spoken to the man whose help he will need to prevent what Masango says could be "a disaster of unprecedented proportions".

What if Belamant tells him he's left it too late?

"I don't think he will say that," says Magwaza.

"He's a businessman and, like any other businessman, he is in business to make money."