Cape Town - South Africa’s government is facing a legal
demand that the nation’s top court oversee a planned renewal of a
welfare-distribution contract with Net 1 UEPS Technologies after the state
failed to comply with a 2013 ruling that it stop doing business with the
company.
The Black Sash Trust, a South African human rights
organization, on Tuesday asked the Constitutional Court to supervise the
renewal of the contract and its terms to ensure more than 17 million people
continue to get their welfare payments in April after the current contract
ends. The association, represented by the Centre for Applied Legal Studies,
named the country’s social development and finance ministers as respondents as
well as the state welfare agency and Cash Paymaster Services, a unit of Net 1.
The payments, which amount to more than R140 billion a
year, are a signature policy of the ruling African National Congress, which
says the grants are an important measure to reduce inequality. An interruption
to their payments could dent its support.
The Constitutional Court four years ago ruled that the
Net 1 contract was invalid because of the way it was awarded, and by giving the
company a new contract the South African Social Security Agency is effectively
trying to circumvent the nation’s highest court.
‘Oversight role’
“The court should compel Sassa and CPS to enter into a
contract on terms designed to protect grant beneficiaries,” Black Sash said in
court papers. “It would be appropriate for this court to re-instate its
oversight role.”
Zodwa Mvulane, an official at the welfare agency, told
lawmakers that the agency had decided to conclude a new contract with Net
1 because no one else was capable of stepping in to pay the grants at short
notice.
In documents filed in a separate lawsuit on Tuesday,
Thokozani Magwaza, the welfare agency’s chief executive officer, asked the
Constitutional Court to approve talks over a “transitional arrangement,”
whereby CPS would continue paying the grants for another year.
Read also: Sassa to seek new deal with CPS to pay grants
“SASSA’s endeavors to procure a new tender had been
unsuccessful and its own ability to administer the grants is presently
limited,” Magwaza said in the court documents. “Come April 1, 2017, if an
agreement is not procured with CPS to continue rendering the services for another
year” the grants won’t be paid.
Magwaza refuted a report in Johannesburg’s Star newspaper
that he had been suspended, saying he was on sick leave when called by
Bloomberg.
Opposition parties, including the Democratic Alliance,
have said that Sassa’s inaction to comply with the 2013 ruling was designed to
ensure that Net 1’s contract was extended. The Treasury, which falls under
Finance Minister Pravin Gordhan, warned Social Development Minister Bathabile
Dlamini in a Febuary 1 letter that extending the contract
without Constitutional Court approval would open the government to legal
challenges.
Protect poor
In addition to demanding that Dlamini and Sassa regularly
report to the court on progress on finding a new provider, Black Sash is
seeking an order that any information on welfare recipients gleaned by the Net
1 unit be handed to the government when the contract ends. It also wants the
company to be prevented from encouraging recipients to allow their data to be
shared.
Black Sash wants to prevent South Africa’s poorest people
from being targeted for the sale of goods and services by financial companies,
it said in the application.
Net 1 shares fell as much as 1.4 percent in New York to
$13.38.
Dlamini declined to answer questions on the Net 1
contract on Tuesday, telling reporters she would hold a media briefing on
Wednesday. The government will ensure there is no disruption to the payments,
she said.
Higher price
Tim Brauteseth, a lawmaker for the main opposition
Democratic Alliance, said he had obtained correspondence between CPS and
the welfare agency that showed the fee it will charge per beneficiary under a
new or extended contract may rise to 22 rand to 25 rand, from 16.44 rand
currently. Mvulane said formal negotiations with CPS will only start Wednesday
and no terms have been agreed.
“No reasonable person or institution will oppose this
application because it is an earnest plea to the court to permit the
facilitation of the payment of social grants to the poorest of the poor,”
Magwaza said in the court documents. “I accept there may be criticism as to the
tardiness of Sassa’s conduct but this should not prevent the right decision in
the circumstances.”