CPS fights Sassa’s liquidation bid

Cash Paymaster Services (CPS), which previously managed the distribution of 17-million social grants, wants an application to halt its business rescue process in favour of liquidation dismissed and struck off the roll.

Cash Paymaster Services (CPS), which previously managed the distribution of 17-million social grants, wants an application to halt its business rescue process in favour of liquidation dismissed and struck from the roll.

The SA Social Security Agency (Sassa), in its high court application to have the company liquidated, argues that CPS did not follow proper processes and should be wound-up.

The agency also argues that there is no prospect of a successful business rescue.

However, in an affidavit to the court, business rescue practitioner Ralph Lutchman said Sassa has not provided any evidence that the business cannot be successfully rescued, especially at an early stage when the rescue plan has not even been published.

“Without a published plan, Sassa’s diagnosis of the prospect of rescuing CPS is speculative and premature,” Lutchman said.

“Sassa is an outsider to CPS’s financial affairs and does not possess direct or personal knowledge of CPS’s financial position. Sassa and the court will only be able to meaningfully assess whether there is a reasonable prospect of rescuing CPS once the business rescue plan has been published.”

PREJUDICE

If the court hears the matter on an urgent basis, as requested by Sassa, it would prejudice the plan, it was argued

CPS used to manage the distribution of social grants on behalf of Sassa, but in 2018 the contract came to an end after a number of Constitutional Court judgments. Sassa has now partnered with the SA Post Office to distribute grants.

Sassa claimed in its application that CPS owes the agency about R1.5bn but has not paid a cent back.

Freedom Under Law has claimed that CPS is underreporting profit by almost R1bn and has approached the Constitutional Court asking that it force the company to give auditors appointed by Sassa complete access to its financial records.

Lutchman said in his affidavit that CPS has a pending claim against Sassa for about R338m, excluding interest, which it is confident it will win.

“If this claim is litigated diligently and effectively, it could significantly reduce or set off entirely CPS’s liability to its main creditor Sassa.”

Lutchman said that the joint business rescue practitioners, himself and Lebogang Mpakati, will propose a plan that focuses on the efficient litigation of this and other potential claims that CPS could still bring, and that the proposed plan would likely result in a better return for CPS creditors and shareholders than would immediate liquidation.

CPS HAS A PENDING CLAIM AGAINST SASSA FOR ABOUT R338M, EXCLUDING INTEREST, WHICH IT IS CONFIDENT IT WILL WIN

He said CPS also has a potential claim against Sassa for R82m plus interest.

Lutchman said that litigation aside, CPS assets have a current value of about R58.9m.

Financial services and technology group Net1 UEPS, of which CPS is a subsidiary, has undertaken to give the company R50m to ensure efficacy of business rescue. It will also make a contribution to CPS’s litigation costs for its pending claims and fund the company’s ordinary operating expenses leading up to and during the business rescue process, he said.

Lutchman said Net1’s contribution means there is no downside to CPS being placed in business rescue.