CPS in a pickle over grants deductions

SOCIAL grants distributor Cash Paymaster Services (CPS) faces more woes, with investment management company Allan Gray lodging an investigation into the business conduct of Net1 UEPS Technologies for allegedly extending loans to poor beneficiaries.

Through Allan Gray clients, who include ordinary South Africans, have a 16% shareholding in Net1 UEPS , the parent company of CPS, who are accused of extending micro-loans to the poor and making illegal and unlawful deductions from their grants.

Chief investment officer Andrew Lapping said the company had launched an investigation into Net1’s affairs because the matter was viewed in a serious light.

“We cannot take what they tell us at face value. If new information comes to light, we will take strong action,” Lapping said, adding that the form of the action would be determined by the outcome of the investigation.

CPS making several deductions from recipients of social grants looks set to dominate proceedings in the Constitutional Court on Wednesday, when the application from advocacy group Black Sash will be heard.

Black Sash wants the Concourt to put a stop to these deductions and has made an urgent application to have oversight of the proposed contract before it is a fait accompli.

The organisation, which had accused the South African Social Security Agency (Sassa) of dragging its feet to find a lasting solution to the grant payments, also wanted the court to ensure that grant beneficiaries continue to receive payment of grants from April 1.

It also wants the court to protect the integrity of the social grant system; and to protect grant beneficiaries from harmful practices by, among others, CPS.

The advocacy group is not opposing the proposed new Sassa contract with CPS to distribute social grants when the current contract ends at the end of March. Its major concern is that the court should have oversight of the extension to prevent the new deal from being timeless, and that it should be in the interests of social grant recipients.

“In brief, the Black Sash submits that, given the situation Sassa has created, the court should compel Sassa to enter into a contract on terms designed to protect grant beneficiaries,” Black Sash’s Lynette Maart submitted in her founding affidavit.

Maart submitted that Sassa had failed to inform the Concourt that it was unable to distribute social grants after it promised to do so in November 2015.

“I submit further that both its conduct during the previous litigation and its more recent conduct, make it imperative that there be such oversight. The events indicate that whatever oversight the minister (Bathabile Dlamini) is able and willing to provide, cannot be relied upon to be adequate,” Maart said.

Dlamini faces a mammoth task to persuade the Concourt judges to endorse a new deal Sassa brokered with CPS to distribute social grants from April.

The deal is expected to last for the next two years.

Sassa and CPS have already agreed on a new deal, but it is up to the 11 judges to ratify it.

The deal entails that Sassa would pay CPS R17.64c for every beneficiary per month. Effectively, Sassa would pay about R300 million a month and R3.6 billion annually.

This was a nominal increase of R1.10c compared to the R16.54c CPS was paid under the current agreement, which ends on March 31.

But the Allan Gray investigation puts more pressure on CPS ahead of Wednesday’s court case.

Allan Gray started investing in the company in 2012 when, according to Lapping, Net1’s track record of implementing payment technologies globally, across different businesses and countries, was the main basis for the investment.

But CPS ventured into micro-lending and, because they have access to the database of millions of grant beneficiaries, they have sold what they call financial products, including funeral policies and loans, to the grant recipients – their sole clients.