Last-minute deal may still secure grants for 17million

A last-minute deal between the South African Social Security Agency (Sassa) and Cash Paymaster Services may be stitched together to ensure that 17million social grant recipients will be paid from April 1.

An emergency intervention had to be devised after Sassa told parliament earlier this month it would not be ready to take over disbursement of social grants when the Cash Paymaster contract expires at the end of March, although Sassa has had three years to prepare.

This revelation meant that besides the existing service provider there was no other system in place to pay social grant recipients. The contract with Cash Paymaster Services, which pays out almost R12-billion a month to pensioners, disabled people and children, was declared invalid by the Constitutional Court after Sassa tender irregularities.

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But on Friday, Net 1 UEPS Technologies, the parent company of Cash Paymaster Services, confirmed it had agreed to meet Sassa urgently.

Serge Belamant, Net 1 UEPS Technologies chairman and CEO, said the company received a letter from Sassa on Thursday saying that after much deliberation and following due process, Sassa "was now in a position to formally express its intentions to hold an exploratory meeting" with Cash Paymaster Services "on probabilities to assist in transition of Sassa operations towards a new service model that must be subject to a regular procurement process".

Belamant said the challenge was that it was unclear whether the contract could be extended under the Public Finance Management Act or a new transition contract would be required. There was no existing contract as the Constitutional Court had declared it invalid.

"We cannot predict when or if Sassa will approach the Constitutional Court, what the outcome of such approach would be, or what the terms and conditions of any agreement between Sassa and us will be," Belamant said at a presentation of Net 1's second-quarter results.

Sassa is expected to approach the Constitutional Court this week for permission to extend the contract.

But even though an interim deal is not yet a sure thing, and the Constitutional Court has not yet given permission for an extension, Net1 is banking on the business.

Herman Kotzé, chief financial officer of Net 1, indicated the company had factored the Sassa contract into its full-year 2017 financial performance, when it reported results on Friday.

"In formulating our guidance we continue to assume that our existing contract with Sassa remains in effect for the full year on the existing terms and conditions."

Lumka Oliphant, spokeswoman for the Department of Social Development, said she would not comment until Sassa had approached the Constitutional Court. The Treasury has said contracting with CPS without a fair and competitive procurement process would lead to irregular expenditure and it did not support this.

Other options considered recently are using Grindrod Bank or using all the banks, but the Reserve Bank has said special accounts would need to ready by April 1, and this would be a more expensive option for the government. The Post Office is another option, although it does not have a large enough branch network.

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According to the Constitutional Court ruling in April 2014, the invalidation of the Cash Paymaster contract was suspended until Sassa awarded a new five-year contract under a fresh tender process. If Sassa did not award a contract, the declaration of invalidity would be further suspended until the Cash Paymaster contract expired this year.

Sassa started a fresh tender process in 2015, but did not award a new contract because the three responses received were noncompliant.

It later issued a request for further information to potential new bidders, including all the major banks and the Post Office. The deadline for submissions was Friday.

Absa said it would not bid, but "we stand ready to assist in delivering this critical service to those who need it". Standard Bank said it was not in any discussion about social grant payments.

FNB said it was not in a position to submit a response.

Esmé Arendse, spokeswoman for Nedbank, said it had decided not to submit a response now. "But clearly given the importance of social grants ... Nedbank would consider a long-term contract if it was a feasible and sustainable industry solution."

Post Office CEO Mark Barnes would say only that it had submitted a response on Friday morning.