Constitutional Court gives social grant payment company six-month extension

High Court rules that CPS must pay back its profits

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Photo of Bathabile Dlamini
Former Minister of Social Development Bathabile Dlamini faces the prospect of having to pay another cost order in her personal capacity. Archive photo: Ashraf Hendricks

In a judgment handed down by the Constitutional Court on Friday, Cash Paymaster Services’ (CPS) contract with the South African Social Security Agency (SASSA) has been extended by another six months. This is to ensure that cash payments of social grants are carried out on 1 April.

SASSA applied for the extension in February this year to allow for a transitional phase between CPS and the Post Office. In a submission to the court earlier this month, SASSA’s Lawyer Nazeem Cassim said there would be “chaos” if the court did not extend the contract because SASSA had no alternative plan to make cash payments of social grants by 1 April.

Although the extension was granted, the court also listed conditions to the extension. One condition was that former Minister of Social Development Bathabile Dlamini and acting SASSA Chief Executive Officer Pearl Bhengu submit affidavits to the court stating why they should not be held personally liable for costs.

An inquiry into Dlamini’s role in the social grants crisis ended on Monday and Retired Judge Bernard Ngoepe is expected to submit a report on the inquiry to the Constitutional Court. It will then make a judgment on whether Dlamini will have to pay the costs of the application.

The Constitutional Court also ruled that CPS may approach National Treasury to negotiate a “reasonable price” for the remainder of the contract. But within 30 days after the contract is completed, CPS and SASSA must submit a full audit of the contract to the court.

The CPS contract was declared “unlawful” by the Constitutional Court in 2014 but it was impractical to end the contract immediately, so the court allowed CPS to continue paying social grants until March 2017. In 2015, SASSA promised the court that it would take over the payment of social grants by April 2017. But a month before the deadline, the court had to extend the CPS contract by another year because SASSA was not yet ready to take over the social grants payments.

Pay back the money

In a separate judgment handed down by Judge Moroa Tsoka on Friday, CPS was ordered to pay back about R317 million it received from SASSA. The arguments for this case were heard at the Gauteng High Court in Pretoria last month.

Advocate Steven Budlender, representing Corruption Watch, argued that the payment was “unlawful” because the Bid Adjudication Committee (BAC) did not approve the variation agreement before it was signed by both SASSA and CPS. The BAC evaluates and adjudicates all tenders awarded by government entities.

Budlender said the BAC was only informed about the agreement a year and a half after it was approved. By this time, Budlender said CPS had already completed the work and the BAC was forced to make a retrospective decision on whether the variation agreement was valid or not. He said this went against the procurement processes stipulated in the Supply Chain Management.

In a statement released on Friday, Corruption Watch said “This case represents a significant win for civil society and demonstrates the importance of pursuing unlawful transactions that stem from irregular procurement processes, where public funds have been abused to benefit private interests”.

In the judgment, Judge Tsoka said that as a result of SASSA’s “unlawful conduct”, the national fiscus had been robbed of a substantial amount of money intended for the “most vulnerable and poor people” of South Africa.

“It is just and equitable that the payment of R316-million made by Sassa to CPS, together with interest, be returned to the fiscus for the benefit of those for whom it was intended in the first place”, said Judge Tsoka.

TOPICS:  Social Grants

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