How Sassa paid R316-million to a
A detailed inspection of the paper trail finds that the work claimed for was covered by an all-inclusive fee
The former head of the South African Social Security Agency (Sassa) appears to have lied to support a dubious claim by contractor Cash Paymaster Services (CPS) that it did extra work worth R316-million.
CPS pays out social grants nationwide on Sassa’s behalf.
It claimed in 2014 that it had enrolled more grant recipients and beneficiaries than it was contracted to do. Sassa and its then chief executive, Virginia Petersen, purportedly accepted the claim at face value and paid over the money.
AmaBhungane analysed more than 7 000 pages of records to verify their justifications. These include tender documents, contracts, court files, stock exchange disclosures, Sassa data and internal correspondence.
They show that the contract already included the “extra” work in the bid price and that Petersen was armed with detailed agreements that she could have used to refuse CPS’s claim.
But instead of fighting for the public purse, she has backed CPS.
The relationship between Sassa and CPS has given rise to much controversy over the years, most recently last year when Sassa effectively handed the national payments contract back to CPS after the Constitutional Court had, in 2013, invalidated its original award to the company.
Petersen and Sassa would not comment because the matter regarding the payment is before the Pretoria high court where the nongovernmental organisation Corruption Watch is challenging it, albeit on largely procedural grounds.
AmaBhungane’s conclusions were vigorously disputed by Serge Belamant, the chairperson and chief executive of CPS’s listed parent, Net 1.
He said: “Your claims are conjecture and there is no basis for it in the papers before court or anywhere else … CPS acted in good faith at all times … We can assure you that there was absolutely no unlawful intent on the part of CPS.”
He threatened to sue for defamation, but he repeated claims that contradict his own earlier certified
statement made under United States securities law and other evidence that amaBhungane extracted from publicly available records.
In June this year, the treasury “condoned” the payment, which had been marked as irregular. But immediately after amaBhungane contacted treasury staff with detailed questions, it wrote to Sassa and withdrew it.
Sassa confirmed the treasury’s reversal, saying it was “based on factors including the pending status of the outcome of the court proceedings”.
The treasury did not reply to questions.
Born in sin
CPS’s R10-billion grants payment contract is already steeped in controversy.
Immediately after Sassa, under Petersen, awarded the contract in 2012, the losing bidder AllPay appealed to the courts.
Bribery allegations were also raised by a Sassa official and in news reports, but they were not proved.
Despite the litigation, Sassa and CPS went ahead and implemented the contract. But the Constitutional Court eventually invalidated the tender. It found that Sassa had made irregular decisions that favoured CPS and “knocked AllPay out of contention”.
A scathing ruling by Judge Johan Froneman accused Sassa of being “unhelpful and almost obstructionist” in its defence of CPS. He said: “[Sassa’s] conduct must be deprecated.”
Although the court made no finding against CPS, it ordered Sassa to issue a new tender, which it did. But it disqualified every bidder last year, meaning CPS kept its contract, which Froneman had described as being “unlawfully obtained”.
Petersen has since left Sassa after her contract expired.
At the heart of CPS’s claim that it did extra work is the distinction between grant “beneficiaries” and grant “recipients” and the related question of whether or not it had to enrol children under the 2012 Sassa contract.
Belamant and Petersen’s versions, then and now, could hardly be more different.
In 2012
The requirements were clear in February 2012 when Belamant and Petersen signed the grants payment contract and service level agreement (SLA).
A “beneficiary” is a person who qualifies for a social grant. Many are children who do not collect grants themselves. A “recipient” collects the actual payment. Some are beneficiaries collecting for themselves, but many are parents, guardians or procurators collecting the money on behalf of others, mostly children.
The contract and SLA recorded that CPS had to enrol all beneficiaries — the definition explicitly “includes children” — and recipients.
There was for a good reason for this, as emphasised in Sassa’s tender documents: to cut down on fraudulent grant claims, the biometric and other details of every recipient and beneficiary needed to be on the database so Sassa could pay “the right social grant to the right person” — its slogan.
While the tender was still being decided, Petersen stressed this requirement when she told Parliament that “Sassa would ensure that the design mapped end-to-end solutions, with Sassa ownership of the biometric data of each individual on the system being a priority”.
The contract and SLA specifically declare that, in addition to paying recipients every month, enrolment is part of CPS’s service to Sassa. For this service, CPS was to be paid “an allinclusive fee of R16.44” for each grant payment, no more.
Belamant appeared to agree back then. Net 1’s financial returns filed in November 2012 reported: “Under our agreement with Sassa, we have to enrol both the grant recipients as well as the grant beneficiaries.”
And crucially: “We do not receive additional compensation for the enrolment of grant beneficiaries who are not otherwise grant recipients because the pricing under our Sassa contract is based on the number of grant recipients we pay, rather than the number of grant beneficiaries.”
Belamant personally certified the accuracy of this statement under US securities law.
So CPS’s about-face in 2014 is surprising.
Two years later
In March 2014, CPS invoiced Sassa for R316-million. It claimed to have enrolled 11.9-million people “in excess of tender requirement”. A four-page report by KPMG accountant Marlene Pappas was attached, confirming the numbers.
Pappas’s calculations were based on the incorrect understanding that CPS was contracted to enrol only recipients, not beneficiaries such as children who do not collect their own grants.
In particular, she relied on an extract from the Sassa tender, which projected that the number of “grant recipients” in 2012 would be about nine million.
Pappas compared this number of recipients with the 22-million grant recipients and beneficiaries that CPS had enrolled. She subtracted one million new enrolments and agreed with CPS that there were 11.9-million enrolments “in excess of the tender requirement”.
In effect comparing apples and oranges, she agreed with CPS’s estimation that the “extra” enrolments cost R316-million, value-added tax inclusive.
Pappas and KPMG refused to comment.
The next month, April 2014, a Sassa bid committee approved the payment subject to confirmation by its own audit. But that was completed only a year after the payment and, based on the same defective premises, agreed in broad outline with the payment.
Petersen signed off on it in May 2014 and CPS was paid soon after.
Corruption Watch immediately put questions to Sassa. It took Petersen three months to write back, when she said: “In terms of the [Sassa tender] as well as the tender proposal submitted by CPS, the requirement by Sassa