S. African Treasury Says Net1 Charge for Welfare Too High

(Bloomberg) -- South Africa's National Treasury has recommended that Net1 UEPS Technologies Inc. be paid 24 percent less than it's requesting for a six month extension to pay social welfare grants at cash pay points.

In documents submitted to the Constitutional Court, the country's Finance Minister Nhlanhla Nene recommended that the company's Cash Paymaster Services unit be paid a monthly 51 rand ($4.02) per welfare recipient at a cash pay point compared with the company's request for 66.70 rand. It also said that CPS had failed to furnish it with “material information.”

The South African Social Security Agency requested the extension after if failed to make adequate arrangements for a replacement for Net1. A tender to do so has been canceled because of complaints about the omission of information by Sassa and will be reissued, Social Development Minister Susan Shabangu said in court documents last week.

South Africa is seeking a new distributor of social security payments that cost the government more than 150 billion rand ($11.8 billion) annually, after the Constitutional Court ruled in 2014 that the contract with Net1 was unconstitutional because correct processes weren't followed.

Sassa failed to find a new service provider and the court intervened again last year to demand that action be taken amid accusations by civil society organizations that Net1 used the information it gleaned on grant recipients to sell services to some of the country's poorest and least literate people. Net1 denied the allegations.

The ruling African National Congress has held up the social security program as one of its greatest successes to alleviate poverty in one of the world's most unequal nations. An interruption in the processing of payments could undermine the party's support in national elections next year.

Former Social Development Minister Bathabile Dlamini has been asked by the court to explain why she shouldn't pay the costs of the court cases personally because of her negligence.

Nene also recommended that Net1 receive 19.48 rand for other methods of payment and 108.75 rand for the enrollment of new welfare recipients.

Currently 2.25 million out of 10.85 million recipients are paid at cash pay points, Sassa said in a separate court document.

The agency is also in a dispute with Grindrod Bank over the fee it charges to pay 5.34 million recipients through the so-called Sassa card. Grindrod raised its monthly fee per recipient to 10 rand from 6.91 rand without telling the agency, Sassa said, adding that it has demanded that the lower fee be used.

To contact the reporter on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Gordon Bell

©2018 Bloomberg L.P.