Finance Minister Pravin Gordhan File picture: Ruben Sprich/Reuters

Johannesburg - A major showdown is looming between Finance Minister Pravin Gordhan and Social Development Minister Bathabile Dlamini over the distribution of social grants after the Cash Paymaster Services (CPS) contracts come to an end on March 31.

The row could have been sparked by a letter Gordhan wrote to Dlamini on February 1, in which he said CPS should not be part of the service providers to be considered for the distribution of social grants to 17 million recipients from April 1.

Gordhan wants a new contract awarded to commercial banks and the SA Post Office (Sapo), but it should “exclude biometric verification, which will favour CPS and discriminate against other potential bidders”.

He said he was informed that the SA Social Security Agency (Sassa) wants the R120 billion CPS annual contract to be extended.

“I am informed that the Sassa team and, in particular, the chief executive have argued for option 1 and 2 to be implemented as it is perceived this may be the only solution under the current circumstances.

“However, if this route is taken, it will certainly expose government to legal challenges. Our only interest at this stage is to help Sassa, and yourself, to ensure that social grants are paid out on April 1, 2017,” Gordhan wrote.

According to Gordhan, reconsidering the appointment of CPS was not an option, saying the government should instead appoint a service provider for cash distribution to grant recipients who were currently using cash paypoint systems.

He also said the Department of Social Development should disburse grants through the banking sector to those with accounts.

“This will involve a communication campaign for beneficiaries to come forward with their bank accounts. The SA Reserve Bank team supported this approach and there are detailed mechanisms to get the banks to participate in the process,” Gordhan insisted.

“Requirements must exclude biometric verification, which will favour CPS and discriminate against other potential bidders.”

However, sources told The Star that Gordhan’s proposals were likely to be rejected by Dlamini when she finally decides to answer him.

“The Department of Social Development wants to create a conducive environment without excluding other service providers because the system of CPS was working better.

“Biometrics are utilised to validate and authenticate the information provided by the grants applicants during registration. The department has used biometrics to eliminate fraud (double dipping) and for proof of life during the payment as well as ensuring the paying of the right social grant to the right person,” the source said.

The source further said that in the 2012/2013 financial year, Sassa managed to save the government R2 billion by eliminating fraudulent grant recipients during re-enrolment and registration of biometrics of all grant recipients and new applications.

They insisted that Dlamini was looking for a system that would eliminate fraud and corruption.

“It will not be possible for banks to take over 6 million beneficiaries without reissuing of cards and performing the Fica (Financial Intelligence Centre Act) within a matter of two months,” an insider said.

Insiders also said banks did not have footprints in all areas of the country, which would likely cause massive disruptions and panic to beneficiaries.

Dlamini’s spokesperson Lumka Oliphant said the minister had to study the contents of Gordhan’s letter before she could comment.

While Gordhan’s opinion on CPS is known, another state institution, the SA Post Office, is in a massive scramble to rope in CPS to help it to secure the R10 billion monthly social grant project.

The Post Office and CPS have now attempted to forge a joint bid but one that would not have the endorsement of Gordhan.

The Star has seen correspondence between former CPS employee Dave de Beer and CPS boss Serge Belamant in which De Beer has requested Belamant to consider joining a consortium which included Sapo’s chief executive Mark Barnes.

De Beer, in his initial correspondence with Belamant, wrote that “members in my group have very close ties with top management in the Post Bank and Sapo and we are extremely well positioned to move them.

“Mark Barnes made it clear that the system is still required and that card replacement will be a problem for them,” De Beer said.

In his next email, De Beer wrote to Belamant: “Your confirmation that the Net 1 (Cash Paymaster Services) can/may be employed to facilitate the payments is the only factor that prohibits definite developments towards acceptance of our solution by the relevant parties.”

Belamant confirmed the existence of these emails.

He, however, said no official confirmation had been made.

“I would partner with anyone for as long as the plan would serve the needs of the government,” Belamant said.

De Beer denied authoring the email but said Sapo was an ideal institution to distribute social grants.

He, however, said they would need Belamant’s CPS technology to reach each out effectively to 17 million social grant recipients.

The Star