Sassa misses another deadline to sign Post Office deal

The South African Social Security Agency (Sassa) has experienced more delays in contracting the South African Post Office (Sapo) to take over social grant payments from incumbent Cash Paymaster Services (CPS).

It missed another self-imposed deadline in signing a contract with Sapo to distribute more than R130 billion in social grants to about 17 million beneficiaries annually by April 1 2018.

The social grants agency initially told Parliament’s Standing Committee on Public Accounts (Scopa) that a contract with Sapo would be signed on August 31, which it subsequently missed. When Sassa was hauled before Scopa on September 5, it revised the deadline date to September 13. It missed this deadline.

Two more revised deadlines were then set by Sassa – September 16 and 28 – which Scopa chairperson Themba Godi said were missed.  This means that Sassa missed four self-imposed deadlines in two months, which raised fears that the agency might not comply with the Constitutional Court’s order that it must phase out its contact with CPS in the next six months.

“This is becoming a great concern for us. Unless Sassa awards the contract to the Post Office now, they are creating a perfect storm for us to continue with CPS. No other company can take over the social grant payments at short notice. CPS is what we don’t want,” said Godi.

In April, the Constitutional Court extended CPS’ unlawful contract for another year to avert the worst case scenario of delays in the payment of social grants. The ultimate plan is for Sassa to undertake social grants payments itself –  although it has warned that this process will take five years to implement.

Sassa has to submit regular reports to the court on its progress in phasing out the CPS’ contract and its plans to take over social grants. Scopa has been putting pressure on Sassa to make regular appearances in Parliament to give an update regarding its process to find another paymaster.

“The delays do not inspire confidence that Sassa can do its work and as diligently as possible.” Godi said delays could only lead to CPS’ contract being extended beyond 2018.  Scopa would meet on Tuesday and Wednesday to decide its next move on Sassa.

Due diligence on the Post Office

So far, Sapo only has an agreement to collaborate with Sassa in finding a solution after CPS is phased out and has been issued with a request for proposals for the social grant payment tender.

Sassa contracted the Council for Scientific and Industrial Research (CSIR) to start a due diligence inquiry on the capacity of the Sapo to take over social grant payments. The CSIR was meant to present its due diligence findings to Sassa’s bid evaluation committee on September 20 with a final decision to be announced before the end of September.

Sassa spokesman Kgomotso Diseko told Moneyweb that the bid evaluation process “took longer than expected” which resulted in the latest missed deadline to sign a contract with Sapo.  “It [the bid evaluation process] will be resolved soon and an announcement [will be] made,” Diseko said in a text message. He didn’t comment when asked for details about Sassa’s new timelines.

Awarding the contract to the Sapo is widely viewed as a cost-effective measure for the fiscus. Sapo has over 2 000 outlets across the country and operates Post Bank, which has 5.8 million clients with savings accounts.

It’s not clear what type of contract Sapo would be awarded when it passes the due diligence test. The state-owned-entity could be awarded the entire contract or a portion of it. Sassa recently indicated that it preferred a hybrid model over the next five years, which will include outsourced and insourced functions before it becomes fully responsible for social grant payments.

Brought to you by Moneyweb