Johannesburg - Three of South Africa’s biggest banks are considering bidding to distribute government welfare payments to more than 17 million people as a contract with a unit of Net1 UEPS Technologies comes to an end after years of legal battles.
The existing contract earned Net1 about R2 billion a year, its annual reports show. Barclays Africa Group, Nedbank Group and a unit of FirstRand are contemplating bids, according to e-mailed responses to questions from the Johannesburg-based lenders.
The state-owned Post Office has already said it will bid.
While it is yet to issue a formal bid, the South African Social Security Agency (Sassa) has asked potential bidders to submit requests for information as it mulls how to distribute R139.5 billion of welfare payments a year.
Ruled invalid
The current contract with Net1 unit, Cash Paymaster Services, expires at the end of March, but may be extended until Sassa’s own systems are in place or an alternative provider is found, according to the Social Development Department.
While CPS’s contract was ruled invalid by the Constitutional Court in 2013, it continued, because Sassa did not issue a new request for proposals and there were unresolved legal disputes.
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“The government deals come with a lot of costs,” said David Shapiro, deputy chairman of Sasfin Securities in Johannesburg.
“I imagine there will be a number of bidders. It’s too big a contract to disregard.”
African Bank and Capitec Bank Holdings said they are not bidding, while Standard Bank Group said it has not engaged in the Sassa process to date.