Johannesburg - South Africa’s finance minister told his
cabinet colleague in charge of welfare that her plan to extend a contract with
a unit of Net 1 UEPS Technologies would be “unlawful,” a letter seen by
Bloomberg shows.
On February 1 the South African Social Security Agency,
which Social Development Minister Bathabile Dlamini is responsible for, told
parliament that the only viable option to ensure that 17.2 million people keep
getting their payments in April in the R139.5 billion ($10.7 billion) a year
programme would be to extend the Net 1 contract that expires at the end of
March. That contract has been declared invalid by the country’s Constitutional
Court because of concerns over how it was awarded and extending it would need
the court to overturn its 2013 decision.
“Sassa’s proposed interim agreement with Cash Paymaster
Services will not be lawful,” Finance Minister Pravin Gordhan said in a letter
to Dlamini dated Febuary 1. “The options proposed by the Sassa team cannot be
supported unless the Constitutional Court were to approve such an option.” Cash
Paymaster is owned by Net 1.
‘Legal challenges’
“We have not had sight of the letter allegedly written by
Minister Gordhan,” Serge Belamant, the chief executive officer of Net 1, said
in an e-mailed response to questions. “I am quite sure our Constitutional Court
could sanction such an extension if this were to be in the best interest of 17
million beneficiaries.”
Gordhan said that should Sassa press ahead with its plan,
it would open up government to “legal challenges” and pointed out that Sassa
had asked that Treasury approval for its proposal be waived.
The Treasury proposes that a service provider be
appointed for distribution of payments to welfare recipients through cash
points or bank accounts, he said. Allowing banks to take over from CPS without
a tender would breach the rules of the Public Finance Management Act, Belamant
said.
Post Office
The Treasury was asked for its advice by the Department
of Social Development and Sassa and provided various options that they could
take, it said in an e-mailed statement. The final decision is up to the agency,
the Treasury said.
“National Treasury is happy that the DSD has committed to
seek the view of the Constitutional Court insofar as the option it prefers is
concerned on which the court has previously made a determination,” it said.
Read also: Grants will be paid, Sassa promises
Elements of the letter were earlier reported by
Johannesburg’s Star newspaper. The Star also reported that a former CPS
employee had asked Belamant to join the South African Post Office in taking over
the contract. That was refuted by the Post Office.
“Sapo did not approach either CPS or Net 1 in relation to
Sassa grants,” the post office said in an e-mailed statement. The Post Office
has said it would bid to distribute the payments.
‘Illegal avenue’
Almost 23 years after it was democratically elected into
power, the ruling African National Congress government should have built
internal capacity for Sassa to distribute welfare payments and cannot resort to
illegalities to avoid an impending crisis, according to Ndangwa Noyoo, an
associate professor at the University of Johannesburg’s social work department.
“It’s ridiculous to even champion or propagate for an
illegal avenue,” Noyoo said by phone on Wednesday. “Treasury is very clear
that it operates on laws and legislative policies. If the millions of South
Africans who are grant recipients are not paid, it would be a catastrophe and
an indictment of the ANC government that sees itself as a caring government.”