SUNDAY TIMES - Sassa debacle bad news for private sector, too
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Sunday Times Opinion By Bruce Whitfield, 2017-03-12 00:00:00.0

Sassa debacle bad news for private sector, too

Beyond the social catastrophe and inevitable political fallout that will occur if Social Development Minister Bathabile Dlamini fails to ensure that grants are paid on time from April, the principle of public-private partnerships will also be undermined.

This cannot be allowed. Public-private partnerships, done properly, make sense.

Real partnerships between the state and private sector should be symbiotic. The state should benefit in that it can outsource complex functions to risk-taking private companies at a decent price and, in return, get a far better and more efficient service than it could deliver itself. Private companies should achieve a suitable return for the amount of risk and investment they are putting into a project.

Turns out it's a lot more complicated. In a competitive economy, it should lead to transparency, good governance, keen pricing and high service levels. That's the theory, at least.

South Africa remains a highly concentrated economy. It's a legacy of the sanctions era when a handful of conglomerates controlled everything from mining to brewing, media and financial services. Nearly a quarter of a century into our new democracy, there is still too little competition across industries.

It's not helped by a sub-1% growth economy, which has deteriorated annually for the past seven years. It's also not helped by political infighting, which undermines policy certainty.

The Constitutional Court ruling that Cash Paymaster Services (CPS) should continue delivering grants to avoid the calamity of nonpayment, despite the flaws in its original contract, illustrates just how little competition there is. It's an indictment less on CPS than the state of rivalry in the economy.

When the Department of Social Development was not able to find a private-sector alternative to CPS, despite having five tenders presented to it, a further extension of a lucrative deal for the listed company became inevitable.

The state prevaricated despite knowing three years ago that it was facing an April 2017 deadline. Instead of taking firm action, it sat on its hands, seemingly incapable or unwilling to find alternatives, and now it looks ready to pass the buck to the Post Office, which itself is trying to figure out how to get letters from A to B.

The original battle for the contract between Net1 UEPS subisidiary CPS and a division of Absa was a fraught affair. But since then the appetite to take over social grants distribution - incidentally done very effectively by CPS over the past five years - has waned.

It's easy to bash CPS, easy also to slam asset manager Allan Gray, Net1's biggest shareholder, at 15%, for investing in the company that also saw an opportunity to provide microloans, airtime and prepaid electricity services to the people it served. Allan Gray says social-grant beneficiaries have a right to access these services. In a more competitive economy, they might have got a better price for those.

Responsibility for the mess sits squarely with the department and its minister. They are responsible for distributing social grants.

And the private sector can and should provide more services. It does it well.

If we learnt anything from the Gauteng government's disastrous rehousing of more than 1000 psychiatric patients from Life Esidimeni to ill-equipped facilities in a cost-cutting drive that killed more than 100 people it is that there needs to be more co-operation.

The private sector can also do its bit to ensure it is a more palatable partner: price keenly and fairly; review its relationships with government departments regularly to ensure a healthy balance between profit and service; and prosecute corruption .

It's the ultimate in self-interest.

If the private sector does not police its own and rivals' behaviour, all of us will be the losers.

Whitfield is a public speaker on the political economy and an award-winning financial journalist and broadcaster