Johannesburg - A ruling by the Constitutional Court, which has created uncertainty over the future of the R10 billion social grant tender held by Cash Paymaster Services (CPS), shaved more than 40 percent off the shares of its parent company, Net 1 UEPS Technologies, on Friday, albeit in extremely thin trade.
The contract award had been challenged by losing bidder AllPay, an Absa subsidiary.
The court ruled that the awarding of the contract, which is a significant contributor to Net 1’s income, was constitutionally invalid. But it did not set aside the contract pending a further hearing in February next year to decide a remedy.
The court intended to avoid disruption in the payments of grants to 15 million elderly, child support and disabled beneficiaries countrywide.
It found that the SA Social Security Agency (Sassa), which awarded the contract, had failed to regard the importance of black economic empowerment (BEE) in procurement and should have verified the BEE credentials of CPS before awarding the contract.
The second bidder’s notice, which Sassa issued during the tender process, was vague and uncertain and gave rise to procedural unfairness.
“We do not have comment at this stage,” said Dhruv Chopra, a Net 1 executive.
Lumka Oliphant, the spokeswoman for the Department of Social Development, said the outcome was not necessarily a victory for AllPay as the contract was not set aside.
“We welcome the court’s decision. We want to assure the beneficiaries they will still get their grants and their service will not be disrupted.”
Justice Johan Froneman said the outcome of the case was a matter of national importance and public interest because “procurement so palpably implicates socio-economic rights that the public has an interest in its being conducted in a fair, equitable, transparent, competitive and cost-effective manner”.
Mike Waters, a DA MP, said on Friday that he would write to Social Development Minister Bathabile Dlamini urging her to fire Virginia Peterson, the chief executive of Sassa, for “failing to meet constitutional and legislative requirements in the awarding of the tender”.
AllPay Consolidated Investment Holdings brought the matter to the Constitutional Court in July after the Supreme Court of Appeal ruled earlier this year that the award of the tender to CPS was not unfair. The Supreme Court also said it was not necessary to set aside the tender for “ minor inconsequential irregularities”.
AllPay has claimed that it was discriminated against when its scores were lowered during a second round of the bid evaluation process, that Sassa had made biometric verification capability mandatory only later in the process, which favoured CPS. It also claimed that CPS did not have proper BEE credentials.
The tender, which was to find a grant payment solution to limit the risk of theft and fraud, was issued in 2011. The contract was awarded last year.
Last month, Net 1 said it had signed a letter of intent for a new BEE transaction with a consortium led by Mosomo Investment Holdings.
Anthony Norton of law firm Norton Incorporated declined to comment on the way forward for AllPay, saying it would be premature to comment on his client’s submission before the hearing next year.
Norton said AllPay had no further communication with US authorities. They are investigating the awarding of the social grant contract because Net 1 is listed in the US.
AllPay had also asked the Hawks to investigate. Norton said AllPay had not had further communication with the unit.
Net 1 shares fell 40.65 percent to R73.93 on Friday, but only 300 shares were traded. - Business Report