Cash crunch can lead to grant fiasco

Net1 UEPS CEO Herman Kotzé has downplayed the cash crunch faced by its social grant-distributing subsidiary Cash Paymaster Services (CPS), yet fears are growing that nearly two million elderly and disabled beneficiaries might find themselves empty-handed from June.

CPS – whose contract to administer the payment of cash social grants was extended for an additional sixmonths ending September 2018 by the Constitutional Court – is locked in a dispute with the National Treasury over the fee to be paid for distributing social grants, while continuing to incur losses.

CPS hasn’t been able to invoice the South African Social Security Agency (Sassa) for its services and has not received any payment from the agency or Treasury since March.

CPS director Nunthakumarin Pillay warned if Sassa didn’t pay its invoice for March, the company would only have “sufficient cash reserves to cover its operational costs until May 31”.

Close watchers of the social grants fiasco questioned whether CPS would continue or halt its grant payment services if it did not receive a payment from Sassa.

Although Kotzé didn’t answer whether its services might be halted, in a statement to Moneyweb he said CPS’s letter was intended to allow the company and Treasury to “re-engage in respect of a fixed monthly service fee for the servicing of social grant recipients at pay points”.

Treasury recently slammed CPS’s request for an increase in its monthly service fee as too high, as the company would score R1 billion per month.

CPS will invoice Sassa at the Treasury-recommended rate of R45 per beneficiary – earning more than R90 million per month for the six-month contract.

If its monthly fixed fee does not increase, CPS would operate at a loss of at least R70 million a month.