South Africa

South Africa

SassaGate Reloaded: CEO signed a final letter with us before being axed, says SA Post Office CEO Mark Barnes

SassaGate Reloaded: CEO signed a final letter with us before being axed, says SA Post Office CEO Mark Barnes

South African Post office CEO Mark Barnes confirmed that SAPO had received a signed final letter from Sassa CEO Thokozani Magwaza expressing the agency’s intention to appoint the post office as part of the plan to “in-source” the payment of social grants after March 2018. On Monday Minister of Social Development Bathabile Dlamini fired Magwaza, refusing publicly to provide reasons for the drastic move only eight months before the current extended contract with CPS/NET1 expires. By MARIANNE THAMM.

South African Post Office CEO Mark Barnes on Tuesday expressed surprise at Thokozani Magwaza’s sudden exit from Sassa but said SAPO had already received a signed final letter from the Sassa CEO expressing the agency’s intention to appoint SAPO on a “build, operate and transfer” model and that this would, as far as he was concerned, still stand.

It is exciting for us because it is the right thing to do and it saves government money. We would be delighted to be of service to Sassa, we see it as a public service and we would not be doing it to make any profit,” Barnes told Daily Maverick.

Barnes has worked hard since his appointment as SAPO CEO in 2015, pitching the post office and Post Bank as a solution to Sassa’s continued social grant payment woes. Barnes has always maintained that it is preferable to keep such a massive amount of public money circulating intra-governmentally rather than allowing private commercial interests to benefit and profit.

Barnes would not, however, be drawn into commenting on Dlamini’s sudden ousting of Magwaza on Monday more than mid-way through Sassa’s negotiations with SAPO.

These negotiations, led by Magwaza, have been complex and detailed with various aspects already agreed to by May this year. Magwaza had previously told Scopa as well as the Social Development committee that he was confident SAPO could deliver on its promises.

All of this is now in danger of being reversed by Dlamini’s unilateral decision to sideline Magwaza and his authority as Sassa’s accounting officer.

In May this year with Dlamini in attendance and Magwaza seated beside her, Zodwa Mvulane, Sassa’s Special Projects Executive Manager, reported back to Parliament’s standing committee for social development on a workshop between Sassa and SAPO that took place as “part of the initiative to explore government to government collaboration for the payment of social grants”.

Mvulane told the committee that the aim of the “build, operate and transfer” model was to institutionalise the payment of social grants, to minimise Sassa’s dependence on external parties “for the execution of its constitutional mandate”, to minimise the risk of illegal sharing of beneficiary data, as well as the duplication of government infrastructure and to “ensure that the payment functions within Sassa is [sic] incubated and offered specialist support for development and implementation of industry approved systems.”

Sassa’s executive committee had agreed that while Sassa was “building capacity” the processing of payments would be done through existing banking, SAPO and Sassa infrastructure.

What is interesting, however, is the not-so-small matter of the potential for anyone outside of government to rake in enormous profits should the intra-governmental deal between SAPO and Sassa conveniently collapse.

This would potentially create another “manufactured emergency” that might result in the need for an outside company (BEE compliant of course) to take over current payment infrastructure, owned by NET1 and CPS, who will in turn be paid for the use of their intellectual property.

One of the key conditions of the ConCourt’s 12-month extension in March this year of the illegally awarded CPS/Net1 Sassa contract is that it may not profit from the deal as it is effectively regarded as an “organ of the state”. The court also ordered CPS to file an audited statement of expenses incurred and income and profit received under the contract.

In May CPS filed a sketchy one-page statement revealing the value of potential profits that can be made. The statement – audited by KPMG – revealed that CPS/Net1 had made R1.1-billion in profit during the five years it had paid out social grants on behalf of government.

CPS/Net1 claimed it had received an income of R8.9-billion, minus operational costs of R7-billion and administrative costs of R889-million, leaving it with R1,091,666,503 in profit.

What is also interesting is that while controversial CPS/NET1 CEO Serge Belamant agreed to an “early retirement” in May this year (he was due to retire in 2018), raking in R263-million in cash in the process, he still lurks in the background.

Over and above his R263-million windfall, CPS/NET 1 also announced a two-year “consulting” agreement with Belamant for which he would be paid around R651-000 per month. The agreement allows for Belamant to provide services to Net1 for half a day for at least two years.

The company also forfeited the right to “control the manner or determine the method of performing the services in no event shall [Belamant] be required to provide services in excess of 20 days/hours per month/week.”

Shortly afterwards Belamant outlined plans for Net1’s future which included the potential sale of the group’s social grant infrastructure distribution technology to a BEE partner.

Belamant told Business Day that his plans included the introduction of a new BEE partner to Net1 “or possibly a private-public partnership and then completely separate grant distribution from the provision of financial services”.

It is believed that this is the option that is favoured by Minister Dlamini and her backers. All questions directed at Dlamini and her spokesperson Lumka Oliphant have remained unanswered.

Magwaza was dead against the deal, saying “CPS was CPS in whatever guise”. On June 29 Magwaza terminated Dlamini’s “workstreams” which have always favoured CPS. Insiders say that Dlamini may attempt now to revive the workstreams in some form or other.

In March this year, presenting to Scopa and then still Minister of Finance, Pravin Gordhan, noted that the budget for social grants in 2017/18 was R151.6-billion, growing to R175.6-billion in 2019/20.

Gordhan told Scopa that this meant that “there was no shortage of money in the system to do what needed to be done”.

He also set out the flow of money from National Treasury to the Department of Social Development account at the Reserve Bank. After this the money was transferred to Net1/CPS’s Nedbank account and from there moved to Grindrod Bank. The first four transfers took place in a single day and then, for on average of five days, the money was held by Grindrod Bank, gathering interest that Gordhan remarked did not accrue to government.

At the time Gordhan had said he hoped this issue would “receive further attention” after the March payment crisis had been resolved by the Constitutional Court.

Former Finance DG Lungisa Fuzile at the presentation to Scopa reiterated that procurement by Sassa is a responsibility of the accounting officer, the CEO, in other words, Magwaza.

Gordhan elaborated, adding that this meant that “politicians ought to keep their noses out of procurement because that was the job of the administration, and not a political decision”.

Dlamini’s personal interest in the payment of social grants, regardless of the Constitutional Court’s scathing indictment of her behaviour, has been linked to her relationship with Lunga Ncwana, who in turn is connected to CPS’s BEE partner Brian Mosehla, who was handed R83-million in cash in 2014 by NET1, apparently in return for nothing.

The ConCourt ordered in March that a panel of technical experts be set up to oversee the phasing out of the CPS contract and also ordered Sassa to report back regularly on progress in this regard.

Daily Maverick has confirmed that the panel met on Monday but could not confirm whether Dlamini’s dismissal of Magwaza was discussed.

Dlamini on Tuesday avoided answering any questions with regard to her decision to fire Magwaza and old journalists who attempted to quiz her at a Mandela Day event to stop “harassing” her.

This is not the end of the saga as Dlamini will most certainly be called by Scopa to explain her decision. Over and above this Dlamini will still face a public inquiry into her role in the crisis earlier this year where Magawaza and former DG Zane Dangor are expected to testify.

Meanwhile Dlamini has once again provoked uncertainty with regard to the payment of grants to 17-million of the country’s most vulnerable citizens and this in spite of a scathing judgment by the ConCourt of her behaviour leading up to the crisis in March this year. Dlamini, like her ally President Jacob Zuma, appears to have difficulty understanding her constitutional obligations as a servant of the people. DM

Photo: A South African boy stands with his mother and thousands of South Africans as they wait in line outside Guguletu Social Services office to register for a Social Relief of Distress Grant, Guguletu, Cape Town, South Africa 28 January 2009. EPA/NIC BOTHMA

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