Ex Sassa CEO’s agreement with SA Post Office rescues deal

The South African Post Office (Sapo) CEO, Mark Barnes, has pulled a trump card in the state-owned enterprise’s fight for a contract with the South African Social Security Agency (Sassa) to distribute social grants.

Negotiations between Sassa and Sapo have reached a deadlock after Social Development Minister Bathabile Dlamini said an eleventh-hour tender process would begin in November to replace the incumbent social grant distributor Cash Paymaster Services (CPS).

Effectively, Sapo would be ditched as the potential paymaster after months of negotiations, with Dlamini saying that it doesn’t have the capacity to take over social grants to more than 17-million beneficiaries.

In his appearance on Tuesday before the Social Development Committee and the Standing Committee on Public Accounts in Parliament, Barnes found refuge in a letter dated July 14 and signed by former Sassa CEO Thokozani Magwaza in which he extended a collaboration offer between Sassa and Sapo on the payment of social grants.

Magwaza, who was a key player in awarding a contract to a new service provider after the CPS contract expired on March 31 2018, was fired by Dlamini days after he made an offer to Sapo, which was supported by the National Treasury.

Read: Sassa CEO: ‘I didn’t resign, my contract was terminated’

Rumours emerged that Magwaza’s plans to cooperate with Sapo was one of the reasons for his abrupt termination and breakdown in relationship with Dlamini.

Barnes told MPs that Magwaza’s letter was legally binding as it demonstrated Sapo’s capability to pay social grants.

Magwaza’s letter might have salvaged Sapo’s potential deal with Sassa.

MPs pressured Sassa and Sapo to return to the negotiating table to reach an agreement – just five months before the invalid CPS contract has to be phased out. Both parties will provide a report back to the committees in Parliament at 18h00 on Wednesday.

If the impasse continues, MPs proposed the referral of Sassa and Sapo to the Inter-Ministerial Committee, which is chaired by President Jacob Zuma. The National Treasury would also provide an oversight role. Treasury’s Director-General Dondo Mogajane prefers a hybrid model, which would see Sapo and all banks participating in the payment of social grants.

Sapo responds to Dlamini’s claims

Barnes said Sapo was capable of taking over the payment of social grants, contradicting Dlamini’s comments on Monday that Sapo didn’t have the capacity.

Read: The SA Post Office’s fight to pay social grants

Sassa’s bid evaluation committee revealed that Sapo couldn’t fulfill the entire requirements of paying social grants including the issuing of 4.2 million social grant cards needed yearly, as it doesn’t offer card body production and distribution and banking services. The committee relied on the technical due diligence findings by the Centre for Scientific and Industrial Research (CSIR).

Other tender requirements that Sapo didn’t meet included not disclosing to the committee on whether it would sub-contract the services that it couldn’t fulfill.

Dlamini raised concerns about the Post Bank (Sapo’s bank) not having a fully-fledged banking license and its limited reach across the country as Sassa’s standards required that beneficiaries should be within a 5km radius of pay points.

Barnes said Sapo’s bid was disqualified on the basis of Sassa’s inaccurate assertions despite meeting the social grant agency’s norms and standards.

He added that Sapo provided information to Sassa’s committee on its sub-contractors.

“Of the 218 tests for due diligence, there were only eight of the requirements that Sapo did not meet,” said Barnes, who added that this is the equivalent of meeting more than 90% of Sassa’s requirements under the CSIR evaluation.

Sapo can produce two million cards after eight weeks and after a card design system is approved, then two million cards can be produced every three weeks, Barnes said.

He said Sapo has more than 2 500 outlets across the country, which “nobody has” and it would make use of cash-in-transit services to deliver cash to pay points for beneficiaries without bank cards in far-flung areas.

On the financial viability of Sapo, which relies on government guarantees as its turnaround progresses slowly, Barnes said Post Bank, which has 5.7 million active customers, is “insulated from the economics of the Post Office Group”.

“We are the highest capitalised bank in SA and the seventh biggest bank… The Post Bank has got a net asset value in excess of R3 billion, which is represented in cash and near-cash. We are solvent.”

Post Bank’s application for a full-banking license is yet to be approved by the Reserve Bank, but it already clears banking transactions with the help of its partner Standard Bank.

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