Cash Paymaster Services (CPS) has twice given government a two-day ultimatum to agree to its demands to ensure grant payment is not disrupted, the Constitutional Court heard on Wednesday.
David Unterhalter SC, appearing for Freedom Under Law (FUL), told the court that the company on December 28 told the South African Social Security Agency (Sassa) that unless it agreed to an extension of its contract it would start dismantling its systems.
The company hinted that it hoped that this would not “cause major disturbances”, Unterhalter said, adding that this clearly carried an implicit threat.
He submitted that this was the stance of a company that felt secure in its bargaining power vis-a-vis the South African state.
“The two-day threat in December is a clear manifestation of their power and it is precisely that power that we propose the court to discipline,” Unterhalter argued on behalf of the rights group.
FUL, as well as the Black Sash, were arguing before the court on Wednesday that it should resume its supervision of the grant payment system, which is hanging in the balance as Sassa finds itself unable to take over from CPS when the company’s contract expires at the end of the month.
Unterhalter then referred to an affidavit made by Net 1, the holding company of CPS, that unless Sassa agreed to a new contract on its terms on Wednesday, it would not be able to pay out grants to 17 million beneficiaries at the end of the month.
The company is also demanding an increase of its administration fee from R16.44 per grant to at least R22 to allow for inflationary adjustments.
The increase was on Tuesday dismissed by National Treasury as bearing no relation to the consumer price index.
Unterhalter argued that the Constitutional Court had the power to extend CPS’s contract as an emergency measure, since the company incurred a constitutional duty when it signed up to carry out a function of state that guarantees the rights of beneficiaries.
Judges questioned whether the court indeed had the power to keep intact a contract that was only valid until April.
The advocate replied that there was scope to do so. He proposed that the court could extend the order by which the court had suspended an earlier ruling, handed down in 2013, that the deal was invalid because of tender irregularities.
A lawyer for Corruption Watch argued for the same solution.
Judge Edwin Cameron suggested that rather than use this formula it would be “more candid” not to extend a period of suspension because the contract to which it pertained was gone, but to impose a contract on CPS to continue grant payment in April and beyond for “compelling reasons”.
The looming grant crisis has prompted the establishment of a ministerial task team this month to ensure beneficiaries are not left empty handed.
It has set aside eleventh-hour negotiations with CPS earlier this month, driven by Social Minister Bathabile Dlamini, because there was no condonation from National Treasury for a deviation from public finance rules for a single-bidder process.
Dlamini has maintained that CPS was the only entity that could carry out grant payment for the foreseeable future. But critics say she ignored an unfolding crisis until it was too late to find an alernative.
Finance Minister Pravin Gordhan on Tuesday said a formal application for a deviation was being considered by National Treasury, and if approved talks with CPS could start afresh. However, he pointed to ethical problems with the company’s conduct.
FUL has argued that any future contract should, contrary to CPS’s demands, be stipulated to be of “no benefit”, prohibiting the company from making a profit.
It argued that CPS should not be allowed to make financial gains from an extension of a contract that was found to be invalid.
It has asked to be joined to an application by the Black Sash Trust for the court to return to its supervisory role.
“This court is entitled to impose contractual conditions with regards to the new contract between Sassa and CPS, in order to ensure compliance with the Constitution. The court should reinstate the supervisory jurisdiction,” Budlender said.
“The Court should not sanction a contract it has not seen. But the court must supervise to ensure that Sassa does its job.”
Budlender also argued that the court should protect welfare grant recipients from third-party marketing for loans, funeral plans, airtime and electricity, saying CPS subsidiaries derived benefit from the sale of such.
The sharing of personal details of grant recipients was among the concerns flagged by Gordhan.