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Social grants

The Constitutional Court has called South Africa's social assistance programme “one of the signature achievements of our constitutional democracy.” The programme is one of the tools we have for addressing a long history of inequality and assisting the most vulnerable people in our country. Over 18 million people – including older persons, people living with disabilities and those caring for children – depend on the monthly grants provided by this programme. There are, however, a number of threats badly affecting the social grants system. CALS is assisting our partners at the Black Sash Trust and individual grant beneficiaries to address a number of these problems. 

Constitutional Court

One of the main threats to the social grant system involves a contract between the government agency responsible for paying social grants, the South African Social Security Agency (SASSA), and a corporation called Cash Paymaster Services (CPS). This contract to distribute grants began in April 2012 and was set to run until the end of March 2017. By April 2014, the Constitutional Court had ruled the contract was invalid and that CPS had no right to benefit from it. The Court suspended its order of invalidity, allowing the contract to continue, to ensure that grant beneficiaries were not impacted and to give SASSA time to either insource the payment of grants or to run a competitive tender process.

It became clear in early 2017 that SASSA would not meet its April deadline and that there was no plan in place to continue paying grants once the unlawful contract with CPS had ended. At the time, CPS was the only entity capable of distributing social grants and this put them in an ideal position to negotiate a further uncompetitive contract exploiting the grant system.

CALS, on behalf of the Black Sash Trust, therefore approached the Constitutional Court in February 2017 bringing the matter against SASSA, CPS and the Minister of Social Development. We hoped to find a way to protect the social grants system and ensure there was no interruption in grant payments. We asked the Court to oversee the contract with CPS to confirm it would not be exploitative of the grant system, and to ensure grant beneficiaries’ data would be kept confidential. The Court heard our application on 15 March 2017 and handed down judgment two days later.

The judgment granted all the relief we sought, confirming the importance of the constitutional right to social assistance and the role civil society can play in holding the public and private sectors to account. The Court ordered that CPS had a constitutional obligation to continue distributing grants for a further 12 months; that the state must develop a plan to pay grants after the 12 month period and report on its progress every three months; that a panel of experts chaired by the Auditor General must be established to assist the Court in reviewing these reports; and that grant beneficiaries’ data must be protected.

The Court further asked the Minister of Social Development, Bathabile Dlamini, to explain why she should not be joined to the litigation in her personal capacity and personally pay the costs of the application since she had failed in her duties. On 15 June 2017, she was indeed joined to the matter and the Court established an inquiry in terms of Section 38 of the Superior Courts Act to investigate any outstanding issues related to her role in the crisis. More information on can be found in the ‘Inquiry’ section below.

In early 2018, despite the oversight mechanisms in place, it became obvious that SASSA would, once again, miss the deadline to take over paying social grants. SASSA applied to the Court for a further extension to the unlawful contract with CPS to allow time to migrate SASSA bank accounts to the South African Post Office. CALS and the Black Sash were unable to oppose the application given the significant risk posed to grant beneficiaries.

On 6 March 2018, we returned to Court to argue that grant beneficiaries and their personal information must be protected and there was no justification to pay CPS any additional fees for fulfilling its constitutional obligations. On 24 March, the Court handed down judgment allowing the extension for a further six months – but only for cash payments, with the Court’s supervision and on the same conditions as the previous contract. The Court further ordered that the Minister and SASSA must file monthly reports on their progress and must ensure beneficiaries’ data is protected.

The Court once again called on then-Minister of Social Development, Bathabile Dlamini, as well as Acting CEO Pearl Bhengu to explain why they should not be joined to the case in their personal capacities and held liable to pay costs for the litigation. 

On 30 August 2018, the Court handed down a further judgment providing reasons for the March ruling and ordering SASSA and its CEO to pay costs in her official capacity. 

Inquiry

On 15 June 2017, the Constitutional Court ordered that Minister Bathabile Dlamini should be joined in her personal capacity to the litigation brought by CALS on behalf of the Black Sash against SASSA, the Minister and CPS. The Court further established an inquiry in terms of section 38 of the Superior Courts Act to investigate any outstanding issues in the case. These issues relate to the Minister’s role in the social grants crisis and whether she should be held personally liable for the costs of the resulting litigation.

The Court appointed Justice Bernard Ngoepe as the referee for the inquiry on 2 August 2017. The Court ordered that the inquiry should be open to the public, the costs should be covered by SASSA, and the inquiry should specifically investigate:

  1. Whether the Minister sought to appoint individuals to lead ‘work streams’ to work on insourcing social grants that would report directly to her;
  2. Details of when the individuals were appointed, who they reported to and the dates and contents of these reports; and
  3. Why the Minister did not disclose this information to the Court.

The inquiry initially ran from 22 – 26 January 2018 with closing arguments heard on 19 March. CALS presented evidence that clearly shows the Minister did not approach the Court when she became aware that SASSA would not meet its deadline. In addition, the Minister instructed SASSA to appoint work streams costing in excess of R700 million, outside of lawful procurement processes, for targets the work streams could never have met. This means the Minister failed in her duties. She failed to ensure SASSA carried out the undertakings it made to the Court, and she failed to report to the Court when she became aware that SASSA would not be able to carry out those undertakings.

Justice Ngoepe filed a report on the inquiry with the Court in April 2018. The report describes Minister Bathabile Dlamini as an ‘evasive’ witness, answering simple questions with, “I don’t understand” or “I don’t remember” or simply failing to answer at all.

The report finds that the Minister did give instructions to appoint work streams and identified the individuals to lead them, and that they were duly appointed in July 2016. In addition, the report shows the Minister intended for the leaders of these work streams to report directly to her – and they did so. When addressing the question of why the Minister did not disclose this information to the Court, the report finds her explanation that she did not understand the Court’s request ‘unconvincing’.

“The appointment of the work streams and their role was central to the whole exercise of meeting the deadline. Therefore, in dealing with any aspect relating to the crisis, it is difficult to understand how the Minister could have justifiably left out the issue of the appointment of the work streams, their role, who appointed them, when and to whom they reported”

The report finds instead that the fear of being joined to the case in her personal capacity and being liable for costs must have factored in to the reasons the Minister failed to report all this information to the Court. Justice Ngoepe makes no finding about whether the Minister should pay the costs, but leaves this to the Court to decide.

Read the full report here. 

The Court handed down judgment in this matter on 27 September 2018, ordering Minister Bathabile Dlamini to pay 20% of the costs of litigation resulting from the social grants crisis in 2017. The Court further ordered that this judgment and Judge Ngoepe’s report be forwarded to the National Director of Public Prosecutions to consider whether Minister Dlamini lied under oath and should be prosecuted for perjury. 

Read the full judgment here. 

CPS report

In its April 2014 judgment, the Constitutional Court not only declared SASSA’s contract with CPS invalid, it also found that CPS had no right to benefit from this unlawful contract. The Court ordered that the company must provide an audited financial statement of their expenses, income and net profit earned under the five year contract when it was completed.

CPS duly submitted a statement to the Court, audited by KPMG, in May 2017. CALS and the Black Sash Trust commissioned the Alternative Information and Development Centre (AIDC) to analyse the statement. The critical review shows CPS has not provided enough information to draw a definite conclusion on how much net profit the company made from the unlawful contract to pay social grants.

In particular, the review finds:

  1. Based on two different methods of calculating net profit, the statement appears to underestimate the pre-tax profits of CPS from the unlawful contract by between R214.2 million and R614.4 million. The figures in the statement do not match the revenue from social grant distribution in South Africa outlined in Annual Reports from Net1 (its parent company) to its shareholders. The figures appear to include a BEE transaction for R1 million and cash bonuses for senior managers related to the contract of R41.8 million that should not be defined as CPS’ expenses.
  2. The statement does not indicate whether the figures outlined are for Cash Paymaster Services (Pty) Ltd alone or include the profits of its subsidiaries which are also involved in grant distribution and security. This ought to be clarified by CPS and its auditors at KPMG.
  3. Net1 clearly outlines in its Annual Reports that its proximity to social grant beneficiaries is used by its other South African subsidiaries for targeted advertising. It seems clear that these affiliates of CPS have also profited from its unlawful contract.
  4. The statement does not include any financial information to show when CPS started making a profit in terms of the unlawful contract – which the Court’s judgment indicated it ought to disclose.

Significantly, the report demonstrates that CPS may not have disclosed the full extent of its profits from the unlawful contract with SASSA as directed by the Constitutional Court. CALS has submitted this report to the panel of experts led by the Auditor General appointed by the Court to assist in reviewing the evidence in this matter.

The Court has not yet made a ruling on the profit made by CPS.

Grant deductions

In order to distribute grants, CPS has access to the personal information of grant beneficiaries, including their banking details, phone numbers and addresses. Under its unlawful contract with SASSA, this information became the property of the company. CPS is owned by US-based company, Net1, which has a number of other subsidiaries in South Africa marketing financial services. Net1 acknowledges in its Annual Reports that these subsidiaries uses their ‘proximity’ to grant beneficiaries in South Africa for targeted advertising. In other words, these subsidiaries use the beneficiaries’ personal information to target grants and make money from our country’s most vulnerable people – the people who can least afford it.

Many grant beneficiaries have found that money is deducted from their grants without their informed consent before they are even paid. SASSA has tried to regulate these deductions from social grants. But, in June 2016, Net1 and some of its affiliates – Money Line, Manje Mobile, FinBond and SmartLife – brought an application against SASSA and the Minister of Social Development in the Pretoria High Court seeking to challenge the interpretation of these regulations.

CALS, on behalf of the Black Sash Trust and six individual grant beneficiaries, sought to intervene in the case to assist the Court. We asked to submit evidence from the grant beneficiaries and to present arguments on the importance of having regulations limiting deductions to maintain the integrity of the social grant system. On 9 May 2017, the Court found in favour of Net1 and dismissed our application.

We sought leave to appeal his judgment, believing that the Court’s decision left grant beneficiaries vulnerable. The application was heard on 20 June 2017 and was refused. We have therefore approached the Supreme Court of Appeal.

Our application for leave to appeal was heard on 16 August 2018 and judgment was handed down on 27 September 2018. The ruling grants our application to intervene and acknowledges the importance of having legislation in place that does sufficiently protect social grant beneficiaries against “unscrupulous vendors and corrupt activities by employees of service providers.” The judgment concludes that what is urgently needed is legislation that provides “clearly defined, enforceable protective measures to ensure that social grants are not unlawfully depleted.”

Read the full judgment here. 

Roundtable

CALS has been involved in extensive litigation around social grants, which has achieved a number of positive results. Given the scale of the challenges to the social grants system – from unlawful deductions to lack of capacity at SASSA – we recognise that we need more than litigation. We need a multidisciplinary approach to these problems.

CALS therefore hosted a roundtable on 21 May 2018 to brainstorm and develop solutions which put pressure on those responsible for providing social grants. The participants ranged from grant beneficiaries to representatives from community based organisations, legal entities, public interest organisations, academics and others. The conversation focused on accounts of lived experiences, litigation on social grants to date, the protection of personal information, and successful media strategies. The roundtable acted as a platform for fostering engagement between social grant stakeholders and helped to develop advocacy strategies to complement litigation. Read the full concept note here. 

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