Sassa must reopen social grant tender

2014-04-20 15:00

The SA Social Security Agency (Sassa) has been ordered to rerun the controversial five-year, R10?billion tender to distribute welfare grants to about 15?million beneficiaries.

On Thursday, the court delivered a final judgment including a proposed remedy that would avoid disrupting the grant system. This puts the ball firmly in Sassa’s court.

Net1’s share price took a hit on Thursday, falling as much as 30% to a low of R70 on the JSE, where the company has a secondary listing.

On the Nasdaq Stock Market, where Net1 has a primary listing, it fell by 12% to $8.70 (R91.25) on the back of massive trading volumes.

The Constitutional Court had already declared as invalid the tender awarded to Net1 subsidiary Cash Paymaster Services (CPS) in November last year.

Sassa will have to reopen the tender within in 30 days and report back to the court at each “crucial stage” of the process in terms of a structural interdict. It will also have to appoint new members to its adjudication committee.

The court added CPS would have to file an audited statement of the expenses incurred, income received and net profit earned.

Sassa will have to weigh the cost and benefits to decide which will cost the taxpayer less money, and also consider any further grounds for litigation against Sassa.

The judgment comes after a bruising two-year legal battle initiated by AllPay, an Absa subsidiary.

The social grants contract was previously shared between AllPay and CPS.

Sassa and CPS said they welcomed the judgment.

According to Lumka Oliphant, the spokesperson for the department of social development, the judgment is pro-poor. “The distribution of social grants to poor and vulnerable people will not be interrupted and this is good,” she said.

The judgment gave Sassa control, which was also a good thing, she added.

Net1 chief executive Serge Belamant said: “We are relieved that the protracted two-year legal battle regarding the Sassa tender is finally over and that the court has provided guidance regarding the way forward.”

According to Belamant, Net1 looked forward to participating in a new tender process. Based on its experience in the past two years, he believed its solution was still the best.

Allpay’s lawyer, Anthony Norton of Nortons Inc, said his client was also ready for a new tender.

“We think it’s a really important judgment, more important than this case. It has sent a message

that courts will deal precisely with procurement where the process hasn’t been followed, and where tenders are irregular, they will have to be redone.”

According to AllPay, Sassa could have saved about R926?million over five years due to the price discrepancy between its offerings and that of CPS.

But the department countered in its court papers that CPS’s reregistration of beneficiaries had resulted in larger savings.

One of the reasons the tender was declared invalid was Sassa’s failure to ensure CPS’s empowerment credentials were objectively confirmed.

This might be helped by the announcement by Net1 this week that it had concluded a previously announced R264?million BEE deal.

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