In a victory for Absa and its subsidiary AllPay Consolidated Investment Holdings, the constitutional court has declared “constitutionally invalid” the awarding of a R10bn tender to Cash Paymaster Services (CPS), a subsidiary of the Johannesburg- and New York-listed Net1 UEPS Technologies.
The tender was awarded to CPS by the South African Social Security Agency (Sassa) for the administration of social grants over a five-year period. It was aimed in part at addressing fraud and theft problems within the system. An estimated 15m South Africans draw social grants monthly and any disruption to the system would have serious social consequences.
“It is declared that the award of the tender to CPS to provide services for payment of social grants over a period of five years for all nine provinces is constitutionally invalid,” the constitutional court says in its judgment. The declaration is, however, suspended “pending determination of a just and equitable remedy”.
The parties involved in the dispute have been ordered by the court to furnish a range of details before a further hearing scheduled for 11 February next year.
Among other things, the court wants details of the time and steps necessary, and the costs likely to be incurred, in a new tender process for a national grant system.
It also wants input on the “just and equitable arrangements that should be made for the continued operation of the payment of social grants until a new system is implemented”.
AllPay, which had argued that the tender process was riddled with irregularities, took the matter on appeal to the constitutional court after losing an appeal at the supreme court. AllPay was a rival bidder to CPS for the Sassa contract.
Absa argued in court that Sassa’s tender process was flawed and that the terms of the tender were altered before the process closed to ensure CPS would win the lucrative deal.
Last year, the bank took exception to CPS’s winning the tender, filing papers at the high court in Pretoria. In October 2012, high court judge Elias Matojane found that the Sassa tender process was “illegal and invalid”, but didn’t set aside the awarding of the contract to CPS because he was concerned that doing so could disrupt the payment of social grants, on which millions of South Africans rely for an income.
Net1 subsequently won the right to appeal the high court judgment and filed its own suit against AllPay at the high court in Johannesburg claiming its rival’s intention was to tarnish its reputation.
The supreme court of appeal dismissed Absa’s appeal with costs. The judgment was critical of the banking group, saying that the affidavits submitted by AllPay evoked “suspicion of corruption and dishonesty by innuendo and suggestion but without ever making the accusation directly”.
The US Securities and Exchange Commission (SEC) and US department of justice have both launched investigations into Net1 following Absa’s initial victory at the high court. At the time, Net1 said in a statement to shareholders that it intended to cooperate fully with the investigations.
The constitutional court had heard argument from AllPay that there had been several alleged irregularities with the tender process. David Unterhalter SC, for AllPay, argued that the tender process was procedurally flawed, unfair and even irrational.
Neither Absa nor Net1 spokespeople could immediately be reached for comment. — (c) 2013 NewsCentral Media, with Sapa