No word on R21bn Sassa tender

Audra Mahlong
By Audra Mahlong, senior journalist
Johannesburg, 25 Nov 2009

No decision has been reached on the fate of its R21 billion electronic payment system tender, says the Department of Social Development (DSD).

The tender, which is worth R7 billion a year, for a period of three years, was cancelled in November 2008, due to a lack of clarity on certain requirements in the request for proposals. The tender marked an attempt by the department to co-ordinate payment for social grants nationally.

Social development minister Edna Molewa previously stated the tender would only be awarded once the South African Social Security Agency (Sassa) had been cleaned up. However, the department now says the project will be “reprioritised”.

Sassa CEO Fezile Makiwane faced disciplinary measures and was placed on special leave in July, pending an investigation into alleged irregularities. The agency is also facing an investigation by the Special Investigating Unit (SIU) into alleged misuse of funds managed by pay-point service providers.

The department says provincial departments will continue to be responsible and accountable for the administration and payment of social grants. All departments outsourced payment services to independent contractors, but there are problems with variations in the existing payment systems.

While not divulging any detailed plans, the department says its focus will be on implementing recommendations made by the SIU, improving financial management controls, assessing all major contracts, and re-evaluating funding allocated to the projects.

Escalating costs

The payment of social grants was taken over by Sassa, which said it had been awarded special approval from National Treasury to conclude 12-month contracts with its current service providers.

While the payments of social grants were centralised, the DSD still relied on several service providers to disburse funds directly to households via the post office, commercial banks and payment contractors.

Treasury estimates it cost the department R5 billion in 2009 to administer the R80 billion in grant payments. This number is expected to rise to R6 billion next year, and will largely be spent on private service providers to distribute the grants.

The department says that, while the costs of disbursing social grants could be cheaper with the tender, the discrepancies identified in tender processes and in the agency, will be dealt with first.