South Africa’s Welfare Agency Scraps Minister’s Advisory Teams

Johannesburg (Capital Markets in Africa) – The South African Social Services Agency has scrapped the advisory groups that were set up to plan for the future of the country’s more than $11 billion of annual welfare payments.

Letters were sent to the so-called “work streams” last week informing them of their termination, Sassa Chief Executive Officer Thokozani Magwaza said in an interview at Bloomberg’s Johannesburg office on Monday. Magwaza said he had informed Social Development Minister Bathabile Dlamini of the decision and hasn’t yet received a response. The advisory groups reported directly to the minister, effectively creating parallel structures to the agency’s management.

The government is pushing to find a new system to pay welfare grants to more than 17 million recipients after the Constitutional Court in March allowed for a 12-month extension to the contract with Net1 UEPS Technologies Inc., after earlier finding the deal was invalid. Any interruption to the program could spark protests in poor communities where many households have no other income, and may hurt the ruling African National Congress ahead of 2019 elections.

The groups, appointed by the Dlamini two years ago, failed to find solutions and the agency was unable to take over welfare distribution by April this year, according to Magwaza. The National Treasury had found that the setting up of the “work streams” was irregular.

“By the CEO taking this position it could be a response to the fact that so far those work streams have not produced the results desired,” Bonita Meyersfeld, who heads the University of the Witwatersrand’s Centre for Applied Legal Studies, said by phone. “From a constitutional point of view it is incredibly important that Sassa is able to advance its mandate and that requires a certain degree of independence.”

Rising Tension
The decision may add to tension between Magwaza and the minister who contradicted each other in affidavits submitted to the Constitutional Court. Dlamini was asked by the court to explain why she shouldn’t pay the costs of the legal case after the department, under her supervision, failed to find a replacement for Net1 after a 2014 ruling. A decision on her liability is yet to be made.

The welfare agency plans to start phasing in a new contractor in November to comply with the court order, Dlamini told lawmakers in May. The minister’s spokeswoman asked for emailed questions.

The Treasury last week authorized Sassa to engage with the state-owned South African Post Office as the operator of the welfare-payment system, Magwaza said. While the Post office has said it’s willing, and has the capacity, to take over the payments, Sassa will still have to make sure the company can comply with the requirements, he said.

“National Treasury has agreed that Sassa engages the post office as the sole bidder,” Sassa spokesman Paseka Letsatsi said by phone. “For government to appoint anybody there must be a formal tender process followed, but this time Treasury is saying we are giving you a deviation to engage with the Post Office. If that doesn’t work out we can engage other bidders.”

The SAPO’s Postbank obtained a provisional banking license in 2016 and has applied for a formal permit. If the Post Office fails to meet the full requirements, Magwaza said “any company except Net1” will be considered, complying with the order by the Constitutional Court. Mark Barnes, the Post Office’s CEO, said by phone that he hasn’t received official confirmation from Treasury.

Source: Bloomberg Business News