Dual-listed Net1 UEPS is set to approach the Constitutional Court in response to a recent ruling by the Supreme Court.
The company says its wholly-owned subsidiary, Cash Paymaster Services (CPS), will ask for leave to appeal a Supreme Court of Appeals' judgment, handed down on 11 March.
The judgment overturned a previous court's decision to prevent the South African Social Security Agency (SASSA) from using the South African Post Office (SAPO) to provide payments to social grant beneficiaries.
In November last year, Net1 said lower revenue from its social service contract in SA impacted earnings in the first quarter of the new financial year. The company reported revenue down 2%, from $65.5 million to $64.3 million, in the three months to September.
Net1 explained that the deal it signed at the end of August allows for a fee-per-transaction and a minimum amount of beneficiaries; however, the amount to be paid and the number of guaranteed beneficiaries are lower than in the previous contract.
Now, the company wants to take on the post office in SA's highest court to stop it from being used by SASSA as a payment provider, because it argues the social services agency didn't follow the correct procedures.
Won before
In 2009, the North Gauteng High Court ruled that SASSA had not followed the proper procurement process to comply with the South African Constitution and the Public Finance Management Act (PFMA) when it signed up with SAPO to process payment of grants. The complaint was filed by Net1 subsidiary CPS.
“Net1 believes that the final outcome of the case could have a significant impact on broader interpretation of government procurement laws in SA,” the company says of the Supreme Court decision.
The court found it was common cause that SASSA didn't follow a competitive process, but found that it intended to collaborate with another government department by entering into a contract with SAPO.
“One is, unfortunately, left with a lingering impression that Paymaster's motive in wanting to have the letter agreement set aside is to perpetuate the expensive cash payment system and not because it is concerned about the costs to SASSA of the payment systems or because it is a possible bona fide competitor of Postbank.”
Net1 says CPS's average price per social security recipient, on a national basis, is “more competitive than the contract price agreed between SASSA and SAPO”.
The company argues that, until its appeal has been heard, SASSA cannot contract with the post office to provide banking or payment services relating to grant beneficiaries “until SASSA follows a proper procurement process, which complies with the Constitution and the PFMA”.
However, it adds, the social security agency could issue a new tender in the meantime.
Last year, CPS filed a similar suit against SASSA regarding contracts SASSA entered into with some commercial banks. The North Gauteng High Court ruled in favour of CPS and found that SASSA's procurement procedures were inadequate. The social security entity didn't appeal the ruling.
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