Legal View

Win for SASSA in R1.3bn lawsuit

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CPS has been ordered to pay arbitration costs of its R1.3 billion lawsuit against SASSA.
CPS has been ordered to pay arbitration costs of its R1.3 billion lawsuit against SASSA.

The legal spat between the South African Social Security Agency (SASSA) and Cash Paymaster Services (CPS) has resulted in a win for the embattled social grants custodian.

CPS, a Net1 UEPS Technologies subsidiary, lodged various legal claims against SASSA that resulted in a R1.3 billion lawsuit brought against the agency.

However, yesterday, judge Robert Nugent ruled in favour of SASSA in all the claims that CPS had lodged. Furthermore, the former social grants paymaster was ordered to pay all the costs of the arbitration.

SASSA welcomed Nugent’s judgment, noting it brings a close to a case attempting to “monopolise the payment of grants and shut SAPO [South African Post Office] and other commercial banks out”.

“The fiscus has been saved a whopping R1.3 billion and we are of the belief that this money will be put to good use by the state, which needs every cent in these financially trying times,” said SASSA in a statement.

Tumultuous history

Prior to September 2018, the social security agency relied on the services of CPS to pay 10.8 million beneficiaries through cash payments, direct deposits and electronic payments.

Over the years, however, the business relationship soured and was characterised by litigation, as well allegations that CPS authorised deductions on beneficiaries' accounts before their social grants were paid out. The paymaster always refuted these claims.

SASSA pointed out CPS’s main claim was that it was entitled to enrol all beneficiaries on its computerised system, irrespective of whether they were to be paid by CPS.

CPS also claimed SASSA was not entitled to pay grants by electronic transfer to bank accounts of beneficiaries. It claimed SASSA wasn’t entitled to cause grants to be paid in cash at SAPO facilities, and by electronic transfer to Postbank and other bank accounts of beneficiaries, and that the SASSA was not entitled to enrol all beneficiaries on its database, the agency revealed.

CPS lost on all three claims and was ordered to pay the costs in each case, noted SASSA.

Furthermore, CPS alleged SASSA breached contracts concluded during the 2009/2010 and 2010/2011 financial years for the Eastern Cape, KwaZulu-Natal, Limpopo, Northern Cape and North West. It was reported the contracts were breached when beneficiaries were moved from receiving their grants at CPS pay points to commercial banks.

“The claims were for a total capital claim of R1 362 429 942.00 and based on the alleged deprivation of an opportunity for CPS to earn full service fees for the period April 2006 to June 2010 as a result of the contract concluded between SASSA and certain banking institutions and SAPO for the rendering of social grant payment services,” stated the social security agency.

Out with the old

With CPS no longer the designated social grants paymaster, SASSA has relied on SAPO and local banks to distribute payments to beneficiaries.

After announcing SAPO as the social grants partner, the social security agency began phasing out the SASSA/Grindrod Bank-branded cards, requiring social grant beneficiaries to swap to modernised payment cards by 14 December 2018, ahead of the January payment cycle.

The cards, developed in partnership with SAPO, were introduced in line with efforts to take over the grants payments function from CPS.

Describing the new cards, SASSA has said they don’t allow deductions to go through, and beneficiaries can also enjoy benefits such as one free withdrawal at post offices per month and free balance enquiries at stores with point of sale machines.

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