Grant crisis has social development running in circles

At the end of October, the South African Social Security Agency (Sassa) was told that, “without delay”, it had to turn to the Constitutional Court to avoid a legal disaster in the paying of social grants.

Sassa ignored this advice — for 112 days, available evidence suggests — leaving it scrambling this month to do so. But by Thursday it had yet to approach the court.

This was not the only delay, according to documents seen by the Mail & Guardian. It was only in early February that Social Development Minister Bathabile Dlamini formally approached the treasury, which by law must be involved in any emergency measure to ensure social grants are paid from April, when the current contract expires.

Correspondence suggests that Dlamini’s approach was to make Finance Minister Pravin Gordhan jointly responsible for Sassa’s plan of action, which according to its own legal advice would be unlawful.

“I am seeking your concurrence with Sassa’s intended [plan of action],” Dlamini wrote in one letter. “I look forward to our successful resolution of this matter in the public interest, and more particularly the 17-million South Africans whose lives are dependent on social grants.”

Under the plan, which Sassa and Dlamini now contend is the only option, social grants will continue to be paid by the current outsourced provider, Cash Paymaster Services (CPS), for at least one year. This will come with a hefty expected price hike of 50%. CPS’s current contract expires on March 31.

This came on the back of several meetings convened in January, which intensified in February with the task teams of treasury and Sassa meeting almost every day, treasury spokesperson Yolisa Tyantsi said.

The court previously found that the contract had been unlawful from the start but allowed it to continue to prevent any disruption in payments.

But there is simply no way that such an extension could be legal, Sassa was told by senior counsel Wim Trengove in a legal opinion dated October 27.

“We have concluded that Sassa’s proposed arrangement with CPS [to carry on after March] will be unlawful,” he wrote, saying Sassa and its board had to act within the law.

“Sassa is in our view obliged, within reason, to minimise the duration of its unlawful arrangement with CPS, if needs be by running a competitive bidding process and appointing a new contractor without delay,” he wrote.

Sassa has yet to launch a bidding process. Instead, it has been asking for requests for information, which would allow it to frame a tender request. That process is ongoing.

Trengove also recommended that Sassa immediately start discussions with CPS to explore an interim arrangement — which it failed to do for the following three months — and inform others involved, such as the treasury, the auditor general and the Constitutional Court.

On February 10, CPS head Serge Belamant told investors that the company had received a letter on the previous day “that is asking us if we were willing and able to engage with them to assist them with what they call is a transition plan, which may occur over the next year to two years”.

Only on February 7, did Sassa chief executive officer Thokozani Magwaza write to the treasury to request a deviation from the strict procurement rules to allow it to appoint CPS without any competitive bidding process.

In the letter, Magwaza said Sassa had not yet negotiated a price with CPS but it anticipated that it would have to pay up to 50% more for CPS’s services than it had in 2016. At that rate, maintaining social grant payments would cost the government just short of R3.5-billion, he said.

CPS has made it clear that it would only consider extending its services if it could do so profitably.

The treasury took a dim view of Sassa’s request. “Requesting ... treasury to extend a contract that was declared invalid by the highest court will not only be seen as being defiant to the judicial system but may further be seen as perpetuating the illegal and unconstitutional actions reprimanded by the highest court in the land,” the treasury’s chief director, Solly Tshitangano, replied.

The treasury said it would only support an application to the court to extend the CPS contract on its current terms, which could earn the company R1.26-billion less than Sassa admitted it may have to pay.

In reply to questions, Sassa confirmed receiving the legal opinion but said: “Legal opinion is just that and not an instruction. This specific legal advice was not the final word at that point, notwithstanding that we did take it seriously and acted on it.”

Sassa said it could not have acted earlier than it did. “It was only at the beginning of February that we became sufficiently convinced that the option with the least risk was the way to go under the circumstances. In the long term, a new tender will be advertised and awarded.”

It also disputed that chief executive Magwaza had suggested a price increase of up to 50% for CPS, despite the M&G having seen a letter signed by him.

Requesting national treasury to extend a contract that was declared invalid

… may be seen as perpetuating the illegal actions reprimanded by the highest court