Although the South African Social Security Agency (Sassa) has given the Post Office an offer to distribute social grants, a scathing report by a panel of experts and the auditor-general has warned that incumbent Cash Paymaster Services (CPS) might still be the paymaster beyond April 2018.
On Thursday, Sassa said it had authorised a contractual offer to the Post Office after the conclusion of its due diligence process into the state-owned enterprise’s ability to distribute social grants to 17m beneficiaries. Its offer to the Post Office expires on Monday.
Sassa has missed four self-imposed deadlines since August 2017 to sign the Post Office deal, which raised fears that the agency might not comply with the constitutional court’s order to phase out its unlawful contact with CPS in the next six months.
The first report to the constitutional court by a panel of experts and the auditor-general — appointed by the court to oversee the process to phase out the CPS contract — has unveiled “serious risks” in Sassa’s conduct, which might jeopardise social grant payments by 1 April 2018.
The risks include Sassa’s unrealistic timeline in assessing tender bids by prospective service providers, conducting a technical and evaluation due diligence process and the absence of a plan to manage a smooth exit of CPS, the subsidiary of US-listed Net1 UEPS.
“The measures taken so far by Sassa, together with the proposed timelines, are unlikely to enable a seamless transition to a new system for the payment of social assistance by 1 April 2018,” the panel of experts said in an affidavit.
The panel includes the auditor-general, Kimi Makwetu, and Anthony Felet, Gill Marcus, Tim Masela, Heinz Weilert, Angela Bester, Werner Krull, Mavuso Msimang, Doris Tshepe, Mmamolatelo Mathekga and Barend Taute. They are supported by secretariat Marissa Bezuidenhout assisted by Walter Bhengu and Paklo Leung.
The experts said that given the failure of Sassa to meet its deadlines, it’s possible that CPS may still be required for the payment of social grants or might be indirectly involved beyond 31 March 2018. “CPS owns the infrastructure and technology used in the payment of social grants, used primarily in rural areas, and would probably attempt to lease or license this new service provider.”
Another possibility is that Net1 might establish a new company with black empowerment partners that could bid on a Sassa contract.
Awarding a contract to the Post Office is widely viewed as a cost-effective measure for the fiscus. The Post Office has more than 2 000 outlets across the country and operates Post Bank, which has 5.8m clients with savings accounts.
However, the panel has questioned the readiness of the Post Office to take over social grant payments given its challenged financial position. It cites the company’s latest annual report (2016) in which it reported financial losses of R1.1bn for the year to 31 March 2016 and has enjoyed government guarantees of R4.4bn since 2014 for its ongoing turnaround strategy.
According to the expert panel, the Post Office has a temporary banking licence and an application for a full banking licence has been submitted to the Reserve Bank. “The Post Office being a service provider operating without a banking licence and being exempt from certain banking requirements presents a risk. It is, therefore, necessary that it and its banking division, Post Bank, be fully licensed and regulated, and not operating under exemptions.”
The panel initially met with axed CEO Sassa Thokozani Magwaza and other executive committee members on 14 June, where Sassa presented its long-term plan to take over social grant payments in the next five years. A second meeting followed on 24 July with Pearl Bhengu, Sassa’s acting CEO who replaced Magwaza, and her other executive members.
The report reveals the incompetence of the social grant agency’s executive committee in fulfilling their constitutional mandate of paying social grants without a glitch. “The panel was surprised at the second meeting with the Sassa executive committee delegation to learn that the delegation was not sure why they had been invited to the meeting, despite the panel secretariat having provided a list of issues it required the delegation to respond to.
“The panel is of the opinion that the Sassa executive committee does not have the adequate appreciation of the scope of activities required to ensure a successful and seamless transition to a new service provider.”
It also found that Sassa had repeatedly failed to provide timeous access to information relating to the Post Office’s proposal on how it intends to pay social grants and the cost structures involved. Since the panel first made a request for the proposal on 4 July, it has never had sight of it or evaluated the Post Office’s bid for the Sassa deal. “The failure, for whatever reason, to provide the relevant information calls into question the integrity and competence of Sassa, which must reflect on its ability to execute its responsibilities.”
The social grants agency and the Post Office didn’t respond to a request for comment on whether the panel was eventually given information on the Post Office’s proposal before Thursday’s announcement by Sassa.
- This article was originally published on Moneyweb and is used here with permission