South African welfare-grant distributor Net1 UEPS Technologies said a state agency has breached the constitution by amending regulations to prevent deductions from the payments to some of the country’s poorest people.
In May, the South African Social Security Agency, which oversees the payment of welfare grants to more than 16m people, amended its rules to prevent what it said were illegal deductions for goods and services directly from grants ranging from funeral insurance to mobile phone airtime.
The amended regulations “unjustifiably infringe beneficiaries’ right to contractual freedom and self-autonomy, which is an incident of the right to human dignity protected” by the constitution, Johannesburg-based Net1 and companies that it part-owns said in court documents filed with the high court in Pretoria last month in preparation for a case due to be heard on 17 and 18 October.
The assertion that the welfare agency, known as Sassa, has behaved unconstitutionally is the latest development in a dispute that has pitted Net1, its associates and insurance firms providing funeral cover, against the government.
While the welfare agency says that grant recipients are being taken advantage of because they don’t always understand what they are signing up for, Net1 asserts that they should be allowed to spend their money as they see fit.
The amendments were made as Sassa said it wanted to stop the sale of funeral insurance for children, which were paid for from child-support grants paid to their parents or guardians.
“Beneficiaries have been able to enjoy the security and convenience of electronic banking, as well as access to credit facilities, which were previously inaccessible to them under the cash-based payment system,” said Net1, which won the contract to distribute the payments in 2012. The amendments are “an unjustifiable and disproportionate intrusion on the individual autonomy of beneficiaries to regulate their own affairs”.
Sassa says it has not broken the constitution. The country’s central bank, which has been cited as a respondent in the case, has said in its own court documents that the activities of Net1’s associate companies may constitute a conflict of interest.
“The legislation clearly says that a social grant may not be transferred, ceded, pledged or in any other way encumbered or disposed of,” Dianne Dunkerley, executive manager of grants administration at Sassa, said by phone from Pretoria. “We are clearly saying that it is not unconstitutional, otherwise we would have not published it.’’
Net1 shares have declined by 15% in Johannesburg since the government said in May that it would amend the regulations. Over the same period, the benchmark stock index has gained 1,4%. — (c) 2016 Bloomberg LP
