Awarding of social grants tender ‘illegal, invalid’

The awarding of a R10 billion social security contract by the government to Cash Paymaster Services (CPS) to manage the nationwide distribution of social grants to millions of poor people, including children, was procedurally flawed, inconsistent with the constitution and invalid. This was the finding of Pretoria High Court Judge Elias Matojane, who on Tuesday declared the tender process illegal and invalid. It was, however, a bittersweet victory for banking giant Absa subsidiary Allpay Consolidated Investment Holdings, which challenged the tender process. Although Judge Matojane declared the process invalid, he, for practical reasons, did not set aside the agreement between the South African Social Security Agency (Sassa) and CPS.

This, in effect, means that the distribution of social grants across the country will continue as usual. Allpay proposed that in the event of the court remitting the entire tender for reconsideration by Sassa, the court should in the interim allow CPS to continue with the current contract for a short period, so as not to leave the 14.8 million people who receive grants in the lurch. But the judge said this remedy wasn’t just and equitable as it didn’t ensure that there would be no interruption in the payment of grants. “Practicality and certainty, in my view, does not require the setting aside of the agreement which Sassa has entered into with CPS.” The judge said it wasn’t clear how long it would take for a new tender to be commenced with, as the applicants had argued that the current tender was fundamentally flawed at every level and new terms of reference had to be formulated.

He said that according to CPS, they now have 10 million people in nine provinces in their system and have issued smartcards costing R190m which would go to waste if a new bidder took over. The judge ordered Sassa and CPS to foot the hefty legal bill resulting from this application. The applicant (Allpay) has handled payments of pensions and grants in the Free State, Western Cape, Gauteng and the Eastern Cape for the past decade, but in January it lost the contract as the tender was awarded to CPS. Allpay turned to the court, asking for the tender (for the provision of payment services for social grants in the entire country) to be set aside, claiming there had been several fundamental flaws in the tender process - a view which was shared by the judge.

The tender, worth about R10bn, is for a five-year period and involves the distribution of social grants worth nearly R500bn to the poorest of the poor. The Centre for Child Law, which entered the battle as a friend of the court, earlier said that at the end of February this year, 10 789 595 children were receiving child support grants and 524 378 were getting foster child grants. About 114 000 children got care dependency grants. The centre said that as children were the largest group who benefited from these government grants, measures should be put in place to prevent disrupting the process. The judge agreed that the rights of these children had to be protected. Judge Matojane found a number of irregularities regarding the tender process, including that one of the requirements was that the bulk of the work was due to be done by CPS’s BEE partners.

Yet, no assessment of the capability of those partners to perform was made before the tender was awarded. “This decision [to award the tender to CPS] is [thus] unlawful and taken for an ulterior purpose,” the judge said. Allpay spokesman Anthony Norton meanwhile told the Pretoria News the fact that the judge found that the tender process was flawed in a number of respects vindicated their stance in the matter. “We, from the [outset], said the process was flawed, and the judgment vindicates our position. The judge called in question the lawfulness of the entire process. “We are disappointed that the court did not set aside the award of the tender due to practical considerations, and we are considering our options in this regard,” Norton said.