Dlamini denies work streams evidence
Social Development Minister Bathabile Dlamini remains adamant that the controversial work streams hired to help the South African Social Security Agency to formulate a plan to take over the administration of social grants, did not report directly to her.
Social Development Minister Bathabile Dlamini remains adamant that the controversial work streams that were hired to help the South African Social Security Agency (Sassa) formulate a plan to take over the administration of social grants did not report directly to her.
This was despite three former senior officials from her department insisting that she was controlling the work streams and that they were running parallel processes to Sassa.
The officials — Dlamini’s former special adviser, Sipho Shezi; former social development director-general Zane Dangor; and former Sassa CEO Thokozani Magwaza — have laid the blame for the social grant crisis at the minister’s feet.
“Explain why all three of these senior people would come to this hearing and lie about your involvement with the work streams,” said advocate Geoff Budlender, appearing for the Black Sash.
“Why would they all come here and say something which is not true?”
Budlender was cross-examining Dlamini on the second day of the inquiry into whether she should be held personally liable for the Sassa crisis.
Dangor and Magwaza are expected to testify at the inquiry. Both former officials have accused the minister of lying in affidavits submitted to the Constitutional Court.
A visibly frustrated Dlamini was evasive and indirect when answering questions.
She said all three officials were in a meeting at which the work streams had reported back to the department and Sassa. It was up to them to pull her aside and tell her as a minister that she could not be involved in the process.
Budlender then referred to 10 separate official documents that he said proved what the three officials had said and that the work streams were reporting directly to the minister.
The documents referred to the teams as “the ministerial work streams”. There was also a letter to former Sassa CEO Virginia Peterson in which Dlamini stated that they would report directly to her.
The minister put this down to inconsistency. “Now I can understand why I am put under such pressure. On some documents, the work streams are described as being mine, but elsewhere they are described as belonging to Sassa, so there is no consistency,” Dlamini said.
“As far as I can see this is just word play,” she said.
Dlamini stood her ground and said there was nothing sinister about the appointment of the work streams and that they were doing government work. She also emphasised that their appointment was accepted and adopted by Sassa’s executives.
Dlamini was caught in a contradiction on Tuesday.
On the first day of the inquiry, she said no one had ever raised concern with her about the work streams. But on Tuesday, she conceded that she had received a letter from Magwaza in which he raised issues.
Dlamini admitted to receiving the letter, but when asked again whether it was ever brought to her attention that there was disquiet over the work streams, she responded by saying that she wanted to see Magwaza’s submission.
Judge Bernard Ngoepe, who is leading the inquiry, had to step in on numerous occasions and direct Dlamini to answer simple questions directly.
During cross-examination by Seena Yacoob for Freedom Under Law, Dlamini was asked about an e-mail she had received from Dangor in which he also pointed to issues with the work streams and said it seemed that they were producing parallel documents.
This, he noted, was not helpful to the process of finding a solution to Sassa taking over the paying of social grants.
On the issue of when Dlamini became aware that Sassa would not be able to meet the April 1 2017 deadline to take over the process, the minister said the agency had kept her in the dark until October 2016.
A VISIBLY FRUSTRATED DLAMINI WAS EVASIVE WHEN ANSWERING QUESTIONS
Quietly, the Net1 share price has been easing off the 12-month low of R115 it reached in August 2017.
As expected, given the company and circumstances involved, the uptick has not been smooth. In November, the share spiked at R183 before quickly falling back to R140. On Tuesday, it was trading at R138.58.
Given the importance of its controversial contract to distribute social grants in SA, and given that this contract is due to be terminated at the end of March, the share price performance looks remarkably sturdy. Management is working hard to develop alternative sources of income and has made significant progress on this front. Just how significant should become apparent with the release of the group’s second-quarter 2018 results in early February.
In recent trading periods, strong performances from Cash Paymaster Services, which manages the social grant payments, combined with a relatively strong rand provided a significant contribution to overall group results. Management believes that even if it loses the South African Social Security Agency (Sassa) contract, it will continue to enjoy attractive margins from associated business, in particular its Easy Pay service and the continued rollout of its ATMs.
But Sassa might continue to support the share price for a little longer than expected. Thanks almost entirely to the panel of experts appointed by the Constitutional Court, much progress has been made in planning Sassa’s exit strategy from Net1. At this stage, it looks as though a combination of the banks, the Post Office and cash payout points will be used to pay recipients. But it is a major logistical challenge and much hangs on it being done successfully.
While things are moving rapidly, it is hard to imagine Sassa being able to make a clean break on April 1. As much as everyone, except perhaps Bathabile Dlamini, would like to see the back of Net1, it may take a little longer than expected.
Investment companies are prone to trading at marked discounts to the intrinsic or net asset value of the underlying portfolio. The size of the discount can vary, depending on the quality of the assets in the portfolio as well as the reputation of management for value unlocking and inspired dealmaking. Some of the JSE’s biggest investment counters have attracted discounts as narrow as 5% and as wide as 30%.
The Rupert family-controlled offshore investment company Reinet finds itself lumbered with a most dismissive discount.
On Tuesday Reinet published an updated net asset value of €5.7bn, which translates into about R84bn, or R43 per share.
Reinet’s market capitalisation on the JSE — based on a share price of about R267 — is R51bn. This translates into a discount of 38% on the value of its portfolio, which is largely underpinned by a holding in British American Tobacco (BAT).
There are some things the market seems to hate about Reinet. There are the fees earned by CEO, major shareholder and asset manager Johann Rupert as well as the measly dividend flows and the continued portfolio domination by BAT.
With deal making coming through in dribs and drabs, it is unlikely the discount will close up anytime soon.
Still, at the prevailing discount, investors are essentially buying BAT (without the commensurate dividend flow, though) at a small discount and getting the remainder of Reinet’s portfolio gratis.