Social security agency Sassa wants to give Net1 subsidiary Cash Paymaster Services (CPS) more powers in the distribution of social grants if its invalid contract is extended for an additional six months from 1 April.

Sassa acting CEO Pearl Bhengu asked the constitutional court earlier this month to lift the invalidity of the CPS contract to pay a portion of 10.7m social grant beneficiaries until September 2018.

Under the extended contract, CPS would be the paymaster for only 2.5m elderly and disabled beneficiaries.

In justifying CPS’s involvement, Bhengu said Sassa had been unable to find an alternative service provider to pay elderly and disabled beneficiaries that don’t own bank accounts but access their social grants in a physical cash format via CPS’s vehicles kitted with its biometric UEPS/EMV technology. The remaining eight million beneficiaries access their social grants via bank ATMs or retail points.

However, it appears that Sassa wants to give CPS more powers, asking it to offer services that are beyond processing payments to elderly and disabled beneficiaries.

A Sassa letter, dated 13 February, asked CPS to continue to provide a system of support for existing Sassa/Grindrod Bank cards, which grant recipients use to withdraw their money at ATMs, retail and CPS pay points. The letter was contained in CPS’s submission to the constitutional court on Wednesday as it responded to Bhengu’s affidavit.

The agency also asked CPS to issue Sassa-branded Grindrod cards to new beneficiaries, which would require CPS to maintain its beneficiary enrolment services.

However, in an interview with Moneyweb, Net1 CEO Herman Kotzé said CPS is not in favour of a six-month extension.

The main reason for rejecting the extension, Kotzé said, is that Net1’s reputation has been sullied for scoring the contract in an invalid manner. “We don’t want to be continuously trapped in an arrangement that is seen to be an extension of an invalid contract. It has really been damaging to us.”

Must be legal

Net1 might consider the extension if there is no other way to pay social grants as “we don’t want to be responsible for the failure of the grants system”. The process to extend the contract must be regularised and legal, Kotzé added.

CPS also wants the court to revise the fee it is paid by Sassa. Under its current contract, CPS is paid R16.44/beneficiary by Sassa to pay more than 10m beneficiaries.

In court papers, CPS director Nunthakumarin Pillay said the company would be required to pay only 2.5m beneficiaries when its contract is extended for six months, resulting in its revenue being “reduced by approximately two-thirds”.

“Imposing the same price per beneficiary (R16.44) paid over the extension period would result in CPS operating at a significant loss, since it would be required to incur largely the same costs as before,” said Pillay.

The costs associated with running its services includes salaries, security for cash-in-transit vehicles at pay points, insurance vehicles, equipment maintenance and more.

Essentially, CPS wants to be paid more for its services but didn’t disclose its preferred amount. Instead, Pillay asked the national treasury to determine a “reasonable price”.

Many observers had expected CPS’s involvement in the social grants payment network beyond 1 April given Sassa’s delays in contracting the Post Office and commercial banks, which were meant to take over the full payment of social grants from CPS.

Embattled social development minister Bathabile Dlamini has been blamed for the delays. Dlamini’s former advisor, Zane Dangor, and former Sassa CEO Thokozani Magwaza have testified at the constitutional court-mandated inquiry into the social grants fiasco that the delays were designed by Dlamini to pave the way for CPS to still be the paymaster.

Net1’s Kotzé rejected the assertion that Dlamini favours CPS.

“She (Dlamini) is concerned that there is no clear replacement plan (for CPS’s contract). In the minister’s mind, the last thing she wants to see is for the system to fail and people not to be paid on her watch. There is something that works, like clockwork and replacing it without a bulletproof plan in place is a very daunting task,” said Kotzé.