Age of impunity is over and justices have sent a memo to the powerful

by | Apr 4, 2017 | General | 0 comments

In Sassa case, top court’s willingness to stretch ‘just and equitable’ remedy to limits of the law, commendable.

There is much to celebrate in the judgment of the Constitutional Court in the urgent application brought by the Black Sash to ensure the continuation of regular and reliable monthly payment of about 17-million grants around the country. The court graphically demonstrates its fealty to constitutional values and its commitment to upholding the rule of law without fear or favour. Its willingness to stretch the “just and equitable” remedy it has to the limits of the law is commendable in the circumstances.

The rule nisi calling on the unspeakably inept Social Development Minister Bathabile Dlamini to show cause why she should not pay the costs of the matter because of the role her apparent incompetence and lack of oversight have played in bringing the matter to a crisis is particularly salutary.

This development ought to inform the police minister in his announced intention to appeal against the high court’s decision to invalidate his appointment of the mendacious Berning Ntlemeza as head of the Hawks.

Both the Helen Suzman Foundation and Freedom Under Law, which jointly won the case, should give immediate consideration to giving the minister notice that they will ask that he personally pay the costs of any appeal proceedings he is so ill-advised as to embark on. The minister should read the Constitutional Court judgment that ended Menzi Simelane’s career as national director of public prosecutions and ask himself whether there is any reasonable basis for distinguishing it from the lot of Ntlemeza.

The age of impunity of the executive has ended and the need to hold to account those who spend public money litigating without regard to the costs involved has been reasserted by the court. The fact that the majority of the Constitutional Court has further suspended the invalidity of the contract between the South African Social Services Agency (Sassa) and Cash Paymaster Services (CPS) for a year has serious implications for the latter. It means, in effect, that both before and after April 1 2017 CPS and its subcontractors cannot make any profit out of the deal to administer the payment of grants for Sassa.

The court has been consistently clear on this aspect of the matter. In the previous judgment concerning the contract, it said: “It is true that any invalidation of the existing contract as a result of the invalid tender should not result in any loss to Cash Paymaster. The converse, however, is also true. It has no right to benefit from an unlawful contract.”

Subcontractors are in the same boat; they have rights only through CPS and cannot magically have more rights than CPS does. It is for this reason that counsel for CPS argued, without success, for a “lawful contract” rather than the extension of the existing regime imposed by the court order in the previous case. In essence, this means both CPS and all its subcontractors, particularly Grindrod Bank, have to work out the balance of the contract on the same basis as if they were allowed to continue with the irregular tender award to CPS — a basis upon which they break even at the end of the day.

It is for this reason that stringent accounting requirements have been built into the order and the services of technical and legal experts have been called in to aid the Constitutional Court.

The CEO of CPS, Serge Belamant, does not seem to appreciate that this is the position CPS finds itself in as a consequence of the invalidity of the contract as extended by court order on March 17. He stoutly contends that shareholders expect him to turn a profit and that the Sassa contract is one in which he should aim to make such profit as handsome as possible. The expectation, if it exists at all, is founded in business, not in law. The legal position trumps the business expectations of CPS shareholders.

If Belamant has been properly advised as to the illegality of turning a profit on the Sassa deal, then he undermines his own credibility by making public utterances that he seeks a profit for CPS and by instructing counsel to argue, unsuccessfully, for the creation of a “lawful contract” for the future. No lawful contract is possible precisely because the illegality of the situation has placed CPS in the position of being the only entity in the world that can administer the payment of grants in the discharge of the constitutional obligation to do so.

It is in the darker recesses of the machinations of Grindrod Bank that the accounting required by the court is going to be most interesting. When he appeared before the standing committee on public accounts on March 14, Finance Minister Pravin Gordhan raised a “red flag” over the payment of interest in respect of the transfers from the Treasury to CPS under the contract.

The minister asserted that on average the money spent five days a month — that’s 300 days so far — in the hands of CPS or its subcontractor, the bank, before it was paid to the grant recipients. A considerable amount of interest can be earned if the money is invested judiciously rather than left idle. It is clear from the passage quoted above from the judgment that neither CPS nor its subcontractors can benefit from the interest so earned.

Interesting questions may arise as to whether it is the state (actually the taxpayer) or the grant beneficiaries who are entitled to the interest, but the illegality of the contract, both before and after the end of March 2017, means it is not the bank or CPS that should benefit; they are both, under the supervision of the court, working on a breakeven basis to perform the constitutional obligation to pay out grants, an obligation that was shouldered by CPS when it won the irregular tender put out by Sassa.

While the Black Sash has drawn attention to questionable microloans made to beneficiaries and to the sale of financial products ranging from airtime to funeral policies, it is the interest component of the deal with Sassa that may cause other misfeasance or malfeasance in the business practices of CPS and its associates to pale into insignificance.

It is heartening that investment company Allan Gray, which owns 15.58% of CPS’s US holding company, Net1, publicly announced prior to the delivery of judgment in the matter that it was reconciled to allowing CPS to work in a manner that lawyers like to call “non lucri causa” — simply put, not for profit. The willingness of Allan Gray to engage with the media and civil society in relation to the goings-on in the contractual relationship between Sassa and CPS is also a welcome development. As a shareholder in Net1, Allan Gray is well placed to exact accountability in respect of the various dubious or questionable aspects of the manner in which the contract has been administered and the confidential personal information of grant recipients has been dealt with by CPS and its associates.

It would seem that a major reassessment of the manner in which CPS does business with Sassa and with the grant recipients is indicated. The accounting ordered by the court comes later; the holding to account by the shareholders for whose benefit CPS does business starts now. Indeed, it has been in place since the formation of CPS.

• Hoffman SC is a director of Accountability Now and author of Confronting the Corrupt.

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