Johannesburg – The Constitutional Court stepped into the breech on welfare grants on Friday, with a ruling that Cash Paymaster Services (CPS) must continue to pay benefits to 11 million beneficiaries to avert what Judge Johan Froneman termed a potential catastrophe.
The majority judgment, penned and read by Froneman, rejected a demand by CPS for a two-year contract at an increased fee of R4.6 billion for the period.
It foresees a 12-month term instead and forbids the company's use of beneficiaries' personal data for financial gain.
The Net 1 subsidiary was ordered to continue at the same price set in 2012 when it began paying grants in lieu of the South Afrian Social Security Agency (Sassa) under a contract found the following year to be flawed by tender irregularities.
The court confirmed that social grants were a right and said it was forced to assume wide reach to safeguard it because the government had failed in this duty. Froneman warned that rights came under threat when institutions of state were undermined.
"A graphic illustration would be if social grants are not paid beyond 31 March 2017. It is to the practical avoidance of that potential catastrophe that we must now turn.
"This court and the country as a whole are now confronted with a situation where the executive arm of government admits that it is not able to fulfil its constitutional and statutory obligations to provide for the social assistance of its people," the judge said.
"And, in the deepest and most shaming of ironies, it now seeks to rely on a private corporate entity, with no discernible commitment to transformative empowerment in its own management structures, to get it out of this predicament."
The ruling followed an application by the Black Sash Trust for the court to compel Sassa and CPS to enter into a fair contract and to have both the agency and the deal with the Net 1 subsidiary placed under the supervision of the court.
Sassa was released from the court's supervision some 18 months ago, on the understanding that it was well on its way to ensuring that it could take over grant payment from CPS in April when its contract with the company expired.
The bench was scathing of how the agency and Social Minister Bathabile Dlamini handled the subsequent realisation that this would be impossible. Dlamini has consistently denied that there was any crisis, rejected any alternative proposal to retaining CPS's services and reprimanded Sassa CEO Thokozani Magwaza for seeking to alert the court of the difficulty the agency faced as the April deadline neared.
"Sassa have been aware that it could not comply with the undertaking to the court that it would not be able to pay social grants from 1 April 2017," Froneman. "The minister says she was informed of this only in October 2016. There is no indication on the papers that she showed any interest in Sassa's progress before that."
He said a welfare net was one of the biggest achievements of the post-apartheid state.
"This judgment is, however, not an occasion to celebrate this achievement. To the contrary, it is necessitated by the extraordinary conduct of the Minister of Social Development and of the South African Social Security Agency that have placed that achievement in jeopardy."
Dlamini was ordered to provide reasons why she should not be held liable for the cost of all litigants, which also included Corruption Watch and the South African Post Office.
"There is little doubt that the Minister and Sassa are liable in their official capacity for the costs, but in view of the possibility that individual conduct may have played a material role in the matter, the order will also provide for further opportunity for explanation in that regard."
The court allowed Freedom Under Law to intervene in the case. The rights group successfully argued that the court should rule that a 'no benefit' restriction imposed on CPS's current contract be extended to any new term.
According to the judgment, CPS could only apply to National Treasury for an increase in its fees. If it were successful, which seems unlikely, the Constitutional Court would have to approve the new fee structure.
Earlier this week, the director-general of finance, Lungisa Fuzile, dismissed CPS's stated demand for an increased fee of R22 per grant – from R16.44 – as bearing no relation to any known inflation forecast.
He also confirmed that National Treasury was investigating the possibility that CPS was skimming interest off the bulk sum of welfare grants, some R11 billion, before it was paid out to recipients.
On Friday, the Constitutional Court ordered a comprehensive, independent audit of CPS's finances to be instituted by Sassa and submitted to the court.
A minority, but concurring judgment came to the same conclusion that Sassa and CPS were constitutionally bound to ensure grant payment continued uninterrupted but arrived at it via a different formulation.
The judgment was widely welcomed.
In an interview outside court, Post Office CEO Mark Barnes said he was "delighted" that the court had ruled on CPS's controversial "data mining" of grant beneficiaries as it could opened an avenue of political influence. Barnes said he believed CPS had overplayed the logistical difficulties of transferring grant payment to another entity, adding that the Post Office would be ready to play a role in it in the near future.
The Black Sash called the ruling a victory for the poor and for constitutional democracy. It declined to comment on its criticism of Dlamini, saying it would not be fair until she has given the explanations demanded of her by the court.
But the Democratic Alliance said it would not cease calls for President Jacob Zuma to fire the minister, who is one of his key political allies.
On Thursday, Zuma had laughed off the opposition's demand.
“I thought the date that we are talking about has not arrived, the first of April. This is another kind of democracy that if you think a person is going to fail or make a mistake you must punish them, it is a funny democracy,” he told the National Assembly.