Legal consultant backs Dlamini on ConCourt strategy for new CPS contract

2017-03-08 15:54
Bathabile Dlamini (Netwerk24)

Bathabile Dlamini (Netwerk24)

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Johannesburg - The advocate contracted to advise the Department of Social Development on the social grants debacle has defended Minister Bathabile Dlamini's decision not to apply for approval to the Constitutional Court to enter into a new contract with Cash Paymaster Services (CPS).

Tim Sukazi of Tim Sukazi Inc was leading the grants agency Sassa's legal stream when the agency realised it would not be able to meet its own deadlines to take over the payments of the grants in 2016.

"The view that it [Sassa] needed to go to court in order for it, in the very beginning, to enter into a contract with CPS is pretty much ill-informed. It was not the advice given to Sassa," Sukazi said in an interview with News24.

He maintains that the legal advice given to Sassa by Senior Counsel Wim Trengove in October 2016 to only report the "radical" change of plan to the court, still stands.

"We sought the opinion of Wim Trengove SC who is a renowned senior counsel... for obvious reasons. We needed the best silk in town to advise Sassa accordingly, so Trengove's opinion was received by on October 27th 2015."

Trengove wrote that Sassa was remiss in failing to meet the deadline of March 31 to take over the payments.

"We do not have clarity on the reasons for Sassa's inability to make the deadline. It seems prudent to assume, however, that Sassa has been remiss, either because its decision of October 2015 to go it alone after March 2017 was over optimistic in the first place, or because it has since then not been sufficiently vigorous in the implementation of its decision."

"We, accordingly, assume that Sassa has been remiss," Trengove wrote.

Payments of R10bn a month

He also advised Sassa that an interim agreement with CPS would be unlawful, but that they should report it without delay to the Constitutional Court, National Treasury and the Auditor General, to avoid interrupting the payment of social grants if they intended to continue using CPS.

"It is no longer under any formal duty to do so [report to the Constitutional Court] but, in our view its radical departure from the plan placed before the court by its report of 5 November 2015 which requires that Sassa disclose to the Constitutional Court that it proposes to enter into a further arrangement with CPS," Trengove said.

Sassa had written to the court in 2015, informing it that it would take over the payments of the R10bn a month worth of grants, after abandoning the tender process when it did not receive any compliant bids. Following that submission, the court discharged its jurisdiction to oversee the process.

"A court of law is not the procurement functionary of the state in first instance, and in any event given all the circumstances as of February 2017, Sassa appeared it had no choice but to procure from CPS, and the process leading to that new contract had to be facilitated and embarked upon immediately," Sukazi said.

Insiders have told News24 that Sassa had established various work streams that developed elaborate models to take over the payment function in-house. One of these models was that Sassa become a bank. However, the model was too expensive and too time consuming.

"It would cost R6bn and take five years to design," the source said.

The social development department and Sassa have faced criticism for not approaching the court to apply for an extension or a new contract with CPS in time, with opposition parties saying it created the crisis that forced it to negotiate a new contract with CPS. This they said was to avoid a potential crisis of more than 17 million grants not being paid out come April 1.

Dlamini, Sassa accept responsibility for delays

The department only filed the progress report with the Constitutional Court on March 3, five months after Trengove's advised them to do so.

The papers state that it was only in late August or early September 2016, that Sassa officials started to fully appreciate that they would not be able to take over the system, with Dlamini only realising it in October.

In the papers, Dlamini and Sassa accept responsibility for delays in identifying and redressing deficiencies in the plan since November 5.

"The minister and Sassa accept that they ought to have been so aware earlier," the papers say.

Days before that, Dlamini had withdrawn an application to the court by Sassa CEO Thokozani Magwaza, who is currently on sick leave. He wanted the court to approve the extension of the CPS contract by a year.

Magwaza's application was seen as breaking rank. It was submitted without Dlamini's consent, leading to a breakdown of relations between the two.

He had also written to Treasury, informing it of the application for a contract extension. Treasury responded that it would only support the extension if the court further extended the invalidity beyond March 31.

However, Sukazi said the application was not necessary, and he defended the negotiations between CPS and Sassa. It is understood the two have agreed in principle on an agreement, but the details are yet to be made public.

"It became an urgent matter, meaning that the negotiations had to take place, and there was no way Sassa would not have allowed for those negotiations not to happen, pending the outcome in court," Sukazi said.

Sukazi's Sandton-based law firm was bought in July 2016.  

'Interests of transparency'

In 2014, the Constitutional Court ruled that the multi-billion rand contract with CPS was unlawful after it found that the tender process that led to CPS being awarded the tender was flawed.

However, the highest court of the land suspended the invalidity until Sassa had a new service provider or until March 31 (when the CPS contracts ends). It also ruled that Sassa had to report to the court on progress.

However, Sukazi argues that the court discharged its duties to oversee the process in 2015 when Sassa told the court it would take over the distribution of grants.

He said this only forced Sassa to provide a report to the court "in the interests of transparency", because it was "radically" changing its tune on paying the grants itself.

"We advised Sassa that it owed it to justice and fairness to file a report to the court and tell the court that they had reported this…  and now there is a change of plan and these are the reasons for the change, and because of this radical change we are now reporting our new plan," Sukazi said.

Sukazi said the legal opinion, even from Trengove, indicated that it would be illegal for Sassa to enter into an interim agreement with CPS because of the 2014 Constitutional Court judgment, and because there had been no competitive bid for the interim contract.

"The advice indicated there would be no way out on that, however, Sassa should be able to limit the scope of illegality… in other words, Sassa had to limit CPS's new interim contract in scope and time to limit as far as possible the illegality of that contract," Sukazi said.

Sassa and the social development department, however, will be in the Constitutional Court later this month after political parties and civil society groups - including Black Sash - filed papers asking it to supervise the deal with CPS.

Black Sash also wants to ensure that the deal does not cost too much and that beneficiaries' details are not used by the company as a database for potential customers.

Read more on:    sassa  |  bathabile dlamini  |  judiciary  |  social grants

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