Corruption Watch questions Sassa's R317m payment to Net1

Johannesburg - Civil society group Corruption Watch wants the High Court to reverse a decision by the South African Social Security Agency (Sassa) to pay e-payments company Net1 R317m.

In 2012, Cash Payment Services (CPS) - a subsidiary of Net1 UEPS Technologies- won a R10bn social grants tender to distribute electronic payments to over 10 million South Africans.

But the deal has been mired by controversy.

The Constitutional Court in 2014 criticised Sassa for its “irregular” conduct regarding the Net1 deal and ordered that the tender be reissued. The Constitutional Court's decision was made in light of a legal challenge by losing social grants bidder AllPay, which is a subsidiary of Absa

Bidders are expected to apply for a new social grants tender in October this year.

Meanwhile, Net1 - which is listed on the Johannesburg Stock Exchange (JSE) and New York’s Nasdaq - has also drawn controversy for selling airtime and loans to social grant recipients.

Now, a decision by Sassa CEO Virginia Petersen to pay CPS R317m for services rendered for the re-registration of social grant beneficiaries is also being questioned.

“The reasons provided by Sassa to explain this payment were unfathomable to say the least,” said Corruption Watch’s David Lewis in a statement earlier this week.

“The initial contract between Sassa and CPS, concluded in 2012 and since set aside by the Constitutional Court, clearly provided for the registration of all beneficiaries but not for a re-registration process.

“We were unable to find any contractual basis for the payment and no new contract had been concluded between the parties which could have justified the payment,” said Lewis.

Corruption Watch further says that an on-site inspection Sassa “revealed that there were serious irregularities surrounding both the payment and the re-registration process”.

But Corruption Watch says that Sassa has failed to co-operate further with the group, resulting in a move by the group to “review her decision on certain administrative law grounds”.

Net1 responds

Responding to Corruption Watch’s move to file a Notice of Motion, Net1 on late Thursday afternoon issued a Sens update on the JSE to its shareholders.

In the response, Net1 says:

“The Company announced on June 6, 2014 that it had received approximately R275m, excluding VAT, (or $25.7m at prevailing exchange rates) from Sassa, related to the recovery of additional implementation costs incurred during the beneficiary re-registration process in fiscal 2012 and 2013.

“At the time, Sassa requested Net1 to biometrically register all social grant beneficiaries (including all child beneficiaries), in addition to the grant recipients who were issued with the Sassa-branded UEPS/EMV smart cards.

“As a result, Net1 performed approximately 11 million additional registrations that did not form part of its monthly service fee and claimed a cost recovery from Sassa, supported by a factual findings certificate from an independent auditing firm. Sassa agreed to pay the R275 million as full settlement of the additional costs incurred."

Net1 further says that the reregistration of recipients has limited ‘ghost’ recipients in the social grants system.

“Sassa’s decision to re-register all 21 million social grant beneficiaries has enabled it, through the use of Net1’s biometric search engine and data analysis tools, to identify and remove any duplicate, invalid and non-existent grant recipients from the grant system,” says Net1.

Net1 ended its response by saying it is taking legal advice regarding the Notice of Motion by Corruption Watch.