Sassa chief financial officer Tsakeriwa Chauke and director-general of the Department of Social Development Zane Dangor. Picture: David Ritchie
Parliament – The South African Social Security Agency on Wednesday, formally entered into negotiations with Cash Paymaster Services (CPS) to renew its contract to distribute welfare grants though National Treasury has signalled it could not sanction the last minute deal.

“The talks started this morning,” Zane Dangor, the director general of social development, said on the sidelines of a briefing to Parliament’s portfolio committee on social development Dangor confirmed that Sassa lodged a statement of intent to seek a new contract with Net1 subsidiary CPS with the Constitutional Court — which declared their current contract invalid in 2014 - on Tuesday but later withdrew it.

“It is my understanding that they needed to file supplementary documentation, and will approach the court again later,” he said. Dangor also confirmed that Sassa would not seek the court’s permission for a new contract but would instead appeal to National Treasury to allow a deviation from public finance rules for a procurement process that involves a single bidder.

“That is the approach, it then hinges on Treasury’s agreement,” he said, before excusing himself to return to Pretoria for a meeting with President Jacob Zuma on the impending welfare crisis. Zuma told television reporters he found it “a little bit irresponsible not to deal with the issue because we knew it was coming as it was coming”.

“We said no pensioner must not earn on that day.”

It sees the State with no mechanism to continue payment of welfare grants to more than 17 million beneficiaries beyond April 1. Deputy President Cyril Ramaphosa was emphatic that a way out of the impasse would be found.

"Armageddon you are talking about will be avoided," he told Inkatha Freedom Party MP Liezl van der Merwe as he answered questions in the National Assembly.

"We will make sure those 17 million people in our country who rely on these payout grants, child grants and old age pensions do get their pay. We are fully aware of the Constitutional Court requirement of going back there. We are going to make sure the wheels don't come off."

The Constitutional Court declared Sassa’s contract with CPS invalid in 2014 but subsequently suspended its ruling for the duration of the contract to prevent the grant payment system being disrupted. The contract runs out at the end of the month.

But on Tuesday, Sassa officials informed Parliament’s watchdog public accounts that it would not seek the court’s permission to deviate from the order as it was not technically extending the contract with CPS but seeking a new agreement.

It was expected to file a full disclosure motion to the court, based on the advice of Advocate Wim Trengove, who has penned a legal opinion stating that Sassa was not months but years away from being ready to take over grant payment itself as it had intended.

Sassa national spokesman Kgomoco Diseko said it would resubmit a court application soon, with additional documentation.

"Our submission to the [Constitutional Court] Concourt was meant to give the court feedback on the process followed since it issued a court order and also what we intend doing in taking the process forward to ensure that social grants are paid without a hindrance from April," Diseko said.

"We will re-submit in the near future and include the inputs of all stakeholders concerned."

Sassa officials reluctantly conceded before Scopa on Tuesday that the crisis was self-made, prompting the chairman of the committee Themba Godi to say it was “a ruse” to leave no option but contracting again with CPS. He expressed distrust of Social Development Minister Bathabile Dlamini's perceived preference for CPS to continue paying grants.

National Treasury has advised her ministry and Sassa of a range of other options, including using commercial banks and the Post Bank as an interim measure but these have not found favour with the minister.

At the Scopa meeting, Treasury official Solly Tshitangano said the responsibility rested with her and the department, and warned that should they breach the law, they would have to face the consequences.

On Wednesday, the South African Reserve Bank briefed MPs on the technicalities entailed in implementing a new system, but also on the difficulties that had accompanied CPS's contract. This included unwanted deductions from recipients' accounts by micro-lenders and insurers linked to Net-1.

Tim Masela, the head of the national payment system department at the central banks, said: "On deductions there is abuse in this space."