Sassa deal not cut and dried - Minister's office
Publish date: 24 July 2017
Issue Number: 4269
Diary: Legalbrief Today
Category: Corruption
When Thokozani Magwaza cleared out his desk last week he did so confident his final act as Sassa CEO would ensure that grant payments come under government control after the contract with the current payment agency expires in April, but that is not a certainty, according to the Social Development Minister Bathabile Dlamini's office, notes Legalbrief. In fact, other plans are afoot (see report below). Last week Magwaza wrote to SA Post Office CEO Mark Barnes to formalise collaboration between the two state entities. Magwaza's letter to Barnes was ‘as good as a contract’, sources close to the negotiations reportedly told the Sunday Times. 'He ensured everything was legal – even getting support from Treasury to deviate from a tender. The only thing that is missing is for (the Post Office) to provide costing and timeframes of when work starts,’ one source said. Magwaza and his executive believe that using a government entity to distribute payments will save taxpayers millions and enable greater accountability. Dlamini's spokesperson, Lumka Oliphant, said Dlamini was on record as saying it was the position of the ANC that the Post Office must be part of social grant payments, and that as a deployee of the ANC she was tasked with implementing its policies. However, the Sunday Times claims its sources said Dlamini and Finance Minister Malusi Gigaba discussed grant payments when they met last month. Oliphant denied this. After the meeting, Dlamini wrote to Magwaza ‘suggesting an open tender would be the best option’, sources said. He told her that Sassa executives favoured the Post Office and he would take this route unless she instructed him not to. She did not reply.
Oliphant argues the letter cannot ‘be equated to an agreement' as the inter-ministerial committee on social development chaired by President Jacob Zuma wants the new and potential service provider for the payment of social grants to follow government procurement processes before any award can be made. A Weekend Argus report says Oliphant made the point that due diligence processes must be followed before any such decision can be made. ‘Sassa is a government entity and operates within the parameters of prescribed supply chain management procedures and regulations. It therefore goes without saying that any agreement that Sassa enters into must be subjected to these procedures and regulations,’ Oliphant said. She added: ‘The letter in question cannot be equated to an agreement as the Post Office is still expected to officially respond to Sassa’s RFP (request for proposals) process which will be evaluated in line with government’s procurement protocols. It is premature and misleading for the media to report as if it is a matter of fact that there’s an agreement between Mr Magwaza and Mr Barnes.’
The choice of the vehicle that government will use to pay social grants should be an operational decision, not a political one, according to Magwaza, who denied claims he sought to undermine his former boss and dictate policy. Bound by a non-disclosure clause since his sudden exit, Magwaza reportedly told City Press he could not comment in detail, but said he had always been clear that Dlamini had the latitude to determine the policy direction for Sassa. However, he insisted that the payment of grants and the mechanism used to achieve that was a procurement decision guided by the Public Finance Management Act and therefore the process fell squarely within his mandate as the accounting officer. ‘This is operational and nothing else. It is the day-to-day running of the organisation and therefore it cannot be a policy matter to pay grants,’ he said. ‘I have never disputed the issue of policy. But the Minister must concentrate on the policy side and leave the day-to-day running to the accounting officer.’ But what the report describes as 'a government insider' reportedly said Magwaza ‘was a problem and he remains a problem, which is why the Minister had to find someone who will do that task’. He said ‘the kind of animal that will replace the current contract with CPS must, at a policy level, be defined by Dlamini and not Magwaza’. The insider said Magwaza wanted to tell the Minister what to do and had on several occasions been asked to explain ‘who determines policy’. City Press notes it was informed that while Magwaza had favoured the Post Office to take over from CPS, Dlamini preferred ‘a hybrid model’ that involved commercial banks, local merchants, Sapo and ‘state agencies of relevance’.
Magwaza’s allies say his departure risked a repeat in 2018 of the March 2017 crisis and the department is now freer to push through a five-year plan favoured by Dlamini, notes a Business Day report. But the Ministry said Magwaza’s departure would allow the agency to pursue its plans to find a viable solution for the payment of social grants. The letter of intention to appoint the Post Office and a panel appointed by the Constitutional Court appear to be the only obstacles to Dlamini’s R6bn, five-year plan. A leading feature of the plan is the replacement of Net1 with another private sector partner, which will be paid several billion rands. Dlamini said the ANC had instructed her to work with the Post Office and she had always ensured it was ‘in the picture’. Friday’s press release repeated Dlamini’s belief that the Post Office ‘should assist in the disbursement of social grants’. However, the senior Sassa source reportedly told Business Day that Dlamini saw the Post Office’s role as limited to the actual cash disbursement to beneficiaries. It would have no strategic role.
The contract administered by CPS would be obsolete if banks were approved to distribute grants at a lower cost to taxpayers, an inquiry into the matter suggests, according to another Business Day report. Former Department of Social Development DG Zane Dangor, in consultation with the Reserve Bank and the Treasury, had proposed using the existing national payments system to deliver social grants. Allowing any member of the national payments system to pay social grants – provided certain requirements, such as cost of withdrawals, were complied with – would prevent abuse by a single service provider and reduce the cost. This would also mean Sassa would not need to duplicate infrastructure in order to insource the service. Postbank could provide the banking platform to pay money into bank accounts, while competing with commercial banks to win grant beneficiaries as customers, said Dangor. The Reserve Bank would regulate the banking platform, developing a biometric standard to be used for transacting. The central bank could impose strict conditions on cross-selling and deductions, he is quoted as saying. According to the Payments Association of SA, 88% of social grant transactions are processed through the payments system infrastructure, including ATMs and points of sale. The big four banks had expressed a desire to participate in grant payments, notes the report.
Meanwhile, the DA has raised questions about Pearl Bhengu's suitability to hold the office of CEO of Sassa – she has been appointed in an acting capacity. Specifically, says the DA’s Bridget Masango in a statement on the Politicsweb site, the Minister must answer when will the position for a permanent Sassa CEO be advertised; whether the allegations that the Minister’s daughter, Skhumbuzo Mazibuko, and Bhengu are business partners are true; and why has Bhengu been enjoying close protection, for how long and who did the threat analysis and what was the nature of this threat? ‘The fact is that the Minister must prioritise the appointment of a permanent and suitable Sassa CEO, says Masango. Scopa also wants Dlamini to come clean on the alleged business ties between Bhengu and Dlamini’s daughter. Scopa chair Themba Godi said the committee wants the Minister to set the record straight when Scopa meets with Sassa next month. A report in The Mercury says the company Umnotho Wabafazi Bz is still listed as ‘in business’ and that both Bhengu and Mazibuko are still listed as ‘active’ members. In a statement at the weekend, the Department of Social Development said the company, which was registered as an economic empowerment vehicle for black women in the maritime sector, never got off the ground.
