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LETTER: Sassa oranges and lemons

It is so that the current social grants distributor, Cash Paymaster Services (CPS), is paid R1.8bn a year, while the South African Post Office’s projected costs are R2.8bn in the first year, increasing to R3.7bn in the fifth year. However, it is important to guard against comparing the lemons we have with the oranges possibly on offer from the Post Office.

On the lemon side, it is reported that the panel of experts appointed by the Constitutional Court to keep a beady eye on the citrus grove stated: “The panel believes these proposed price increases are opportunistic and were made possible only by the lack of competing bids. These prices, if agreed to, would result in an additional R2bn of annual operating costs to the South African Social Security Agency (Sassa) by year five. If other potential service providers making greater use of the National Payment System were able to submit proposals, then the Post Office’s proposal would be deemed uncompetitive.”

On the more palatable orange side: the CPS quote was submitted in 2012. CPS has been locked into it by the invalidity rulings made by the court in the litigation over the procurements by Sassa. The CPS rates have remained fixed despite a valiant but failed attempt to parlay an increase at the last court hearing.

Furthermore, the Post Office, unlike CPS, will not make a fortune on the side through associated companies doing dubious deals with grant recipients. Perhaps most important of all, it has emerged that Net1 and Grindrod Bank share equally in the admitted “small margin” of interest made on public funds standing to the credit of the CPS accounts with that bank. A “small margin” on over R1bn a month can amount to a tidy sum — one the Post Office should not and will not be able to access at all.

Until it emerges in the accounting and audit processes ordered by the court exactly how much interest is made by Net1 (the holding company of CPS) and Grindrod Bank (the CPS banking sub-contractor on the procurement) and whether they have been legally allowed to appropriate the interest earned on public money at all, the comparison of gross rates is odious. Indeed, CPS will be obliged to disgorge all profits it has made due to the invalidity of the procurement of its services. CPS is meant to break even, no more, no less, on any proper reading of the judgments.

When all the relevant facts are known, it may well be that the Post Office offer is not a lemon.

Paul Hoffman SC Director, Accountability Now

Letter published in Bdlive on 29 November 2017

 

 

 

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