Johannesburg - South Africa’s Constitutional Court
ordered the nation’s welfare agency to extend Net1 UEPS Technologies’ contract
to distribute grants to the poorest third of the nation’s people for a year to
avoid a “potential catastrophe” and slammed the government’s handling of the
The ruling on Friday effectively ends the threat of an
interruption to a signature program of the ruling African National Congress but
leaves President Jacob Zuma’s administration with a stinging condemnation by
the nation’s top court of its performance. Social Development Minister
Bathabile Dlamini must explain before the end of the month why she shouldn’t
pay personally the costs of the case. The court said it would supervise the new
“This court and the whole country 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,” Justice Johan Froneman said in the ruling.
“And in the deepest and the most shaming of ironies, it now seeks to rely on a
private corporate entity with no discernible commitment to transformative
empowerment to get it out of this predicament.”
In the ruling, the court said the South African Social
Security Agency’s contract extension with Net1’s Cash Paymaster Services
unit must continue on the same terms as the previous agreement that expires on
March 31, although the company can ask the Treasury to review the pricing. CPS
has a constitutional obligation to continue dispersing the monthly
stipends to more than 17 million people, Froneman said.
“The court has basically said the minister and Sassa
cannot be trusted to do what they are supposed to do and it is going to
supervise the process to make sure they do their job in a very hands-on
manner,” said Pierre de Vos, a law professor at the University of Cape Town.
“It is an excellent judgment because in a way it saves the day and it tries to
protect the country from the incompetence of the minister.”
The system of payments of more than R150 billion a year
was on the brink of collapse because Dlamini and Sassa failed to find a new
company to administer the program after the court declared the original
contract with Net1 invalid more than two years ago.
“We dropped the ball, we apologize to the nation,” Sassa CEO
Thokozani Magwaza told reporters outside the court in Johannesburg.
The fiasco is the latest in a series of missteps by
Zuma’s administration that have curbed growth, dented investor confidence and
stoked conflict between government officials and departments. Zuma on Thursday
rejected criticism of Dlamini, saying there is no crisis.
This is the second time the nation’s highest court has
censured the government following its ruling a year ago that Zuma violated the
constitution for failing to repay taxpayer money spent on his private home.
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Dlamini will follow the Constitutional Court’s ruling,
her spokeswoman Lumka Oliphant said by phone.
“We’d like to apologize for the anxiety and the fear that
the people of South Africa, who are beneficiaries of the social grants, had to
endure in the past few weeks,” she said.
Human rights groups and opposition parties have accused
Net1 of using information gathered on grant beneficiaries to sell services
ranging from mobile-phone airtime to loans to some of South Africa’s poorest
people without them always understanding what they were agreeing to. It has
denied the allegations.
The court ruled that personal grants data must remain
private and not be shared for the purpose of marketing goods and services.
Net1’s second-biggest shareholder said that while it
welcomed the court ruling and its oversight of the new agreement, there should
be changes in the company’s board if it doesn’t alter is behavior.
“It has done things that may be legal but are not, to my
mind, ethical,” Andrew Lapping, chief investment officer of Allan Gray, said by
phone from Cape Town. “There must be accountability. If we cannot see firm
proof they’re taking up that responsibility there has to be action.”
Lynette Maart, national director of the human rights
group, Black Sash, which brought the case to the Constitutional Court, called
the ruling a “victory.”
“What is quite significant in this instance is the
protection of confidential data and dealing with all these rogue marketing
devices,” she said. “All of that is now protected.”