Enter many a small, rural town in South Africa, and on the main road you will find the only industry in town – the South African Social Security Agency (SASSA) office building.
Some 17 million human beings (usually referred to as “beneficiaries”) receive state social grants in South Africa, ranging from the R360 (US$27) per month for child support to the R1,510 (US$115) old age pension.
Most of these people, a third of the country’s population (and double the number it was in 2004), now depend for their very survival on these monthly payments. In addition, countless women and men aged 19 to 59, with little or no prospect of employment and who do not qualify for grants, depend on pooling their grandparents’ pensions and the grants of their children to keep their families going.
A World Bank Report in 2014 showed that social grants halved the number of South Africans in “extreme poverty” (as defined by the bank) and reduced the Gini coefficient (which measures inequality) to 0.59, which is still extremely high, but nothing close to the astounding 0.77 it would have been without the social grant system.
The grants are paid every month to around 10 million recipients and can be accessed via ATMs on a SASSA smart card. It is a staggering accomplishment for a developing country. Without it, the country would have imploded. The social grant system, like the window of a shop, is the fragile, glass pane that keeps the social order.
All of this has been put in jeopardy by unconscionable incompetence and enough unexplained behaviour to raise suspicions of corruption.
The history in brief is that a decentralised system of grant payments was amalgamated into a single biometric database to be administered by a private company. In 2012, Cash Paymaster Services (CPS) won the tender, one which seemed to have been authored with it in mind and excluded all competitors.
In 2014, the Constitutional Court ruled that the contract was unlawful, but fully aware that it was a matter of life and death for people and the stability of the state that payments continued, the court ruled that government had three years to rectify the situation. That deadline is at the end of this month, March 2017.
What has the Minister for Social Development Bathabile Dlamini and Zuma’s cabinet done in this three-year interim? Nothing of consequence.
Millions have been left agonising over whether they will get paid or not. And it seems, now, the only way they will be paid is through an extension of an invalid contract based on a dubious tender at the expense of good governance and with contempt for the Constitutional Court’s clear instructions.
CPS has been operating the social grant system for the past five years was paid R2.2 billion in fees in 2016, a fifth of parent company Net1’s revenue. The company did not bid on the latest tender, and Net1’s CEO has been smugly confident since June last year that CPS would see its contract extended.
The Court had also ruled that CPS should not profit from this unlawful contract. How much profit from the nearly half a billion US dollars it has collected in revenue for administering the grants for these past years remains hidden.
Net1 also said that the fees would have to go up by between 33% and 52%. SASSA has said the (as far as we officially know) still to be negotiated contract will be inflation linked with only a 6.6% increase.
It was only late last year that SASSA even put out a call for tenders – an impossible deadline.
In the end, no tender was awarded. The minister and SASSA vacillated and the entire process has been marked by opacity. At various times, SASSA was itself going to take over the payment system, and then again it wasn’t. Reports on negotiations and whether a new contract had been signed by CPS and SASSA have been affirmed and then contradicted again. SASSA filed papers at the Constitutional Court then tried to withdraw them the same day. The chaos spread to the Reserve Bank and the Treasury, which cannot legally honour the contract. There was talk of “emergency procurement” under the Public Finance Management Act.
Throughout this process, Minister Dlamini has shown bold disrespect for parliamentary oversight.
How much of this is corruption and how much mere incompetence has not yet been established. South Africa’s democratic experience has shown that there is sometimes a reason why an incompetent minister is appointed and then kept in place. It was certainly all too much for the director general of the department, Zane Dangor, who to his credit resigned. What relationships exist between cabinet members, certain SASSA officials and CPS or Net1 ought to be investigated.
Last week, the Post Office said it could take over the contract in six months and that its involvement would be a significant saving to the country. South Africa’s moribund postal service, another crucial state entity the poor depend upon and which the government has all but allowed to collapse, could do with the business. There is serious risk, and the entity would have to be reinvigorated. It should probably have been tasked with the job in the first place when the grant system was consolidated.
The case will be heard in the Constitutional Court on Wednesday 15 March. Minister Dlamini had best beware the Ides of a March.