Cash Paymaster winner in grants impasse

2017-02-26 06:10
ANCWL president Bathabile Dlamini. Picture: Deaan Vivier

ANCWL president Bathabile Dlamini. Picture: Deaan Vivier

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Astalemate between National Treasury and the department of social development over what kind of contract to give to contractor Cash Paymaster Services (CPS) means more time is being lost in the race to ensure social grants are still being provided by April 1.

Although President Jacob Zuma met with Social Development Minister Bathabile Dlamini last weekend, officials say they are no closer to a solution.

City Press has learnt that while both Treasury and Dlamini’s department realise that it would be practical to allow CPS to continue because of its experience, they differ on whether the company should get a new contract or continue its service under the old agreement.

According to officials, Treasury wants a short-term extension of the contract under the same terms – at R16.44 per beneficiary – but this has been opposed by the company, as it wants more.


CPS is a private company contracted by the state to disburse more than R10bn in social welfare grants to about 17 million people monthly.

In 2014, the Constitutional Court ruled that the process of awarding the contract to CPS by the SA Social Security Agency (Sassa) was flawed and had to be scrapped.

The state was given three years to correct the process or find a new service provider. That deadline ends on March 31. Sassa has not awarded a new tender and, with just over a month away from April 1, it remains unclear how are the grants are going to be paid.

Dlamini wants to enter into a new, short-term contract with CPS, although this would require a deviation from Public Finance Management Act regulations.

Dlamini’s department has denied being negligent in the handling of the matter, arguing that only three bidders responded to the readvertisement of the tender in 2015 after the Constitutional Court ruled that the contract was invalid.

However, Sassa spokesperson Kgomotso Diseko admitted that they had underestimated the time frames needed to put a new contract into place.

The three bidders were all disqualified in stage one of the evaluation process, which deals with administration. He said the tax certificates were either not provided or were invalid.

Responding to City Press, Diseko said: “Specialist work streams were appointed to look into every individual service such as IT, banking and cash distribution, among others.

"The reality is that for the function to be insourced, Sassa had to provide these services and that involves recruiting the appropriate people and obtaining the relevant industry accreditation and licences, among other things, and this takes more time than had been allocated.

“It is grossly unfair to accuse us of negligently taking so long,” he said.

“Due diligence was performed by the work streams and it was found out that some systems in Sassa were not adaptable to the required new systems.

“We needed adequate time and the time frames in our plans were an underestimation of what was actually needed. We sort of bit off more than we could chew.”

"The market has failed us"

According to media reports, Sassa and Dlamini’s department have been accused of having deliberately caused the delays in order to benefit CPS, which finds itself in a strong negotiating position. But Diseko said they had put out the tender to the market, but “the market failed us”.

Sassa presented six options to the social development portfolio committee this week and it believes that one of them – signing a new contract with the current service provider – was less risky.

Also hanging over government’s head is a potential lawsuit by technology company IT Lynx, which designed a replacement for the SOCPEN system – the backbone of the social grant distribution network.

IT Lynx was granted the tender in 2002, but it was later suspended pending a Public Protector investigation. After the matter was resolved, government failed to implement the new system.

The 15-year dispute has also turned to the courts.

The company has now threatened to sue government for R248m for loss of earnings and interdict the implementation of a new contract in April – regardless of whether it is with CPS – if IT Lynx is not involved.

Lawyers for IT Lynx last week wrote to the presidency, Treasury and Parliament urging them to intervene as the department of social development was not being responsive.

“The leadership of Sassa and the department are braided together to circumvent, frustrate, mislead and defeat the implementation of an award that is ... needed to build the capacity of Sassa,” Langa Attorneys said in a letter.

Read more on:    sassa  |  national treasury  |  jacob zuma  |  bathabile dlamini

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