SASSA: hearing on Cash Paymaster Services (CPS) contract

Public Accounts (SCOPA)

28 February 2017
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Department of Social Development (DSD) and South African Social Security Agency (SASSA) appeared before the Standing Committee on Public Accounts (SCOPA) for a hearing into SASSA's irregular, fruitless and wasteful expenditure and about the Cash Paymaster Services (CPS) contract.

The Minister was absent and Mr Magwaza, SASSA CEO, had been booked off on sick leave and an Acting CEO had been appointed just that morning. Members were sceptical about the timing and reasoning behind his absence and expressed even greater disappointment that the Minister was not present at such a critical hearing. SCOPA raised its concerns about the representatives present and whether they sufficient information to answer the detailed prepared questions. SCOPA decided to ask questions only on the CPS contract as the SASSA Project Manager was present.

SCOPA asked why SASSA did not have contingency plans in place when the Cash Paymaster Services (CPS) contract was deemed invalid. It asked about the Ministerial Advisory Committee who assisted the Minister on establishing an in house grant payment system by 1 April, procurement, the options SASSA had in the midst of the crisis and their negotiations with CPS. SASSA acknowledged its failure to meet the deadline and insisted that extending the irregular CPS contract was ‘the safest option’ to ensure grants would be paid on 1 April 2017.

Members asked why CPS was charging a 30% to 50% increase on its R16.44 fee per grantee payment per month; if the 2017/18 budget is R2.6 billion, the 30% option takes you to R3 billion and the 50% option takes you to R3.4 billion, which is way over budget so where would DSD get the money from, seeing that National Treasury had not supported an extended contract with CPS unless the Constitutional Court permitted this.

The DSD Director General said that National Treasury would be asked to make a special exception for SASSA, given the urgency of the situation. He said that the Minister said clearly, based on a letter written by the Minister of Finance, that whatever happens should be done within the confines of the existing budget. That is one of the guidelines for the negotiations: staying within the confines of the budget. The second guideline is that whatever agreement the negotiation team makes with CPS, it must provide very specific safeguards around deductions.

Questions and comments from Members included: The Ministerial Advisory Committee spent R4 million yet they are on the eve of a crisis; CPS has not been an honest partner for our people; the Minister needs to be here to clarify and to be held to account; what did the Advisory Committee say about 31 March 2017; the contract was found to be irregular in 2013 and they had reputable recommendations from Treasury to utilise the services of banks, and the biometric standards could have been sorted out with the banks in those four years; seeing that they are going for emergency procurement, it was painfully obvious as early as August 2016 that SASSA could not do the grant payments so why did they not open the competitive bidding process then which is what Treasury had recommended? Why had they clung so hard to CPS?

Meeting report

Mr Zane Dangor, DSD Director General, explained that the CEO of the South African Social Security Agency (SASSA), Mr Thokozani Magwaza, had been booked off for seven days due to hypertension but the CEO of National Development Agency, Ms Thamo Mzobe, had been appointed that day as Acting CEO for SASSA. The rest of the delegation was: Tsakeriwa Chauke, SASSA CFO; Zodwa Mvulane, Programme Manager: SASSA; Clifford Apel, DSD CFO; Osborne Masilela, DSD Chief Director; Dianne Dunkerley, Grants Administration: SASSA; Nelisiwe Vilakazi, DSD Chief Operations Officer; Brenton Van Vrede, DSD Acting Deputy Director General: Comprehensive Social Security; Dumisile Ndlovu, Corporate Services: SASSA; Thandi Sibanyoni, Head of Internal Audit: SASSA; Abraham Mahlanga, CIO: SASSA ; Solly Tshitangano, Chief Director: National Treasury; Raphahle Ramokgopa, Executive Strategist: SASSA; Abram Phahlamohlaka, DSD Content Development Manager.

The Chairperson noted that the last time they had met on 23 November 2016 SASSA, with Minister: hearing on irregular, fruitless and wasteful expenditure, they had left a number of issues hanging. He had hoped that they could have met in January but the Department of Social Development could only meet at the end of February. Since they had had an extended period, he hoped DSD could give a comprehensive report.

The Chairperson stated that with the economic exclusion of the majority in South Africa, SASSA is the one that mitigates against the revolution of the poor. If SASSA messes up, then everything will go up in flames. This case is more than just an administrative issue. At this stage of the inquiry, he does not just want administrative answers. By the time the meeting ends, the South African people who are anxiously waiting for answers, should feel assured that DSD and SASSA are taking responsibility.

The Chairperson said the last time they met, the CEO of SASSA was present to hear their concerns. He asked how long the Acting CEO had been “acting” for and when Mr Magwaza was booked off on leave.

Mr Dangor replied that the Acting CEO had effectively started that morning. The Minister had finalised her papers the day before. Mr Magwaza had applied for leave on Friday evening.

Ms Thamo Mzobe, Acting CEO for SASSA, said that Ms Zodwa Mvulane, SASSA Programme Manager, would address the grants and Mr Tsakeriwa Chauke, SASSA CFO, would address financial questions.

Mr T Brauteseth (DA) said that the role of SCOPA is to talk to accounting officers and he found it extremely insulting that they had scheduled a meeting with SASSA yet the CEO of SASSA was not present. There was a story running in the Star Newspaper that day which claimed that the CEO of SASSA was suspended not sick. If a person is sick, they take a day off and do not appoint an Acting CEO. He believes that the DSD Director General was being economical with the truth. Officials who have very little to do with the matter at hand were sent as representatives to the meeting. He was doubtful that the Acting CEO would be able to answer questions about the Cash Paymaster Services (CPS) contract. He was very insulted and disgusted by the actions of the DSD.

Mr M Booi (ANC) said they are used to DSD’s duck and diving. At the last meeting, the DSD Director General (DG) said he would take legal responsibility. Would he resign if he does not perform?

Mr M Hlengwa (IFP) said that in a time of crisis such as this, whether the CEO was sick or not, surely in fairness to the Committee, the Minister should have been present. He was concerned that if the Acting CEO had been sworn in only this morning, why was she brought to attend the meeting. As SCOPA, they are used to being undermined in this manner, but he was concerned about the people who rely on social grants because they need certainty from SASSA and the DSD. Members do not take kindly to being undermined in this manner by SASSA.

The Chairperson said despite these concerns mentioned by Members, they could not postpone anything at this point. Seeing that Ms Zodwa Mvulane who reports to the CEO was present, she may answer any questions they may have. They need to allow SASSA and the DSD to demonstrate to the public that they are in good hands; if not, they should allow them to demonstrate how incompetent they are. Either way, they must still be given a platform to speak.

He invited Ms Mente and Mr Kekana to start off the inquiry by asking about irregular expenditure, fruitless and wasteful expenditure and damage. Then Mr Brauteseth would inquire about the Cash Paymaster Services (CPS) matter which should include the R316 million payment.

Mr E Kekana (ANC) noted these were follow up questions to those he asked on 23 November 2016. He was disappointed about the representation present at the meeting. In the SASSA written report there is an attempt to explain the irregular expenditure and fruitless and wasteful expenditure but it still not clear. In the requested report, SASSA is claiming that R16 million was due to the contract which expired. When you sign a contract both parties know when the contract ends and thus make preparations before the expiry date comes. Why would they allow the contract to even expire without contingency plans?

The Chairperson suggested that the question should be responded to in the following way: we have investigated and so and so were the responsible managers who were supposed to do something but did not do it and this is what we (SASSA) are going to do about it.

Mr Tsakeriwa Chauke, SASSA CFO, said that there were two scenarios they found when they looked into the matter. The one scenario was in KwaZulu Natal (KZN) where they had a shared services arrangement, whereby SASSA and DSD would share offices but the DSD did not renew the lease agreement which was under their name. When DSD moved out, SASSA was left in the building which is how the other portion transpired. SASSA could not have pre-empted that the lease agreement would not be renewed.

When SASSA had entered the lease agreement, the Minister had made a determination that the SASSA lease would be handled by the Department of Public Works. By the time DPW found a building in Mpumalanga, the building was not ready and SASSA was caught in a limbo as they needed to get the office going. They came to the decision to extend the lease and stay in that building.

Mr Kekana said he was not happy with the response, saying he was not referring to the Mpumalanga case. At the last meeting SCOPA asked the same question. SCOPA had specifically said that it wants detailed answers such as who was involved, which is what they were supposed to present today.

The Chairperson asked when this irregular expenditure was going to be condoned because based on the response, no one is taking responsibility.

Mr Chauke replied that all the backlog cases would be done before the 31 March. Some of them had not been finalised because the R16 million was not only one case, it was a number of separate cases.

Mr Kekana said that was not happy about the R2 million and the R174 000. In SASSA’s previous response and in their report, the R174 000 expenses were due to the irregularities in hiring and payment of beneficiaries. He asked that they unpack the ‘irregularities’ of those expenses.

The Chairperson said that the document was reader unfriendly. He asked when it was prepared.

Mr Chauke replied that the document contained the list of cases, and it was supposed to be sent to the Committee on Friday 24 February through the DSD office.

Mr Booi said that he was misleading them because the report was supposed to be submitted to SCOPA before the end of 2016. The DSD was undermining Parliament.

The Chairperson said that the document was sent to him at 8:05am that same morning.

Mr Chauke replied that on 30 November 2016, they had forwarded spreadsheets which addressed three categories which included irregular expenditure, fruitless expenditure and damages along with an attachment of the list of cases. Subsequent to that, he thought that he would give Members an updated list of the same cases, obviously things had changed from 30 November 2016 to date.

Mr Booi said that they asked for the report to be submitted in November 2016. He is not interested in how he runs his department, he is interested in the fiscal explanation. The DSD had the audacity to submit a report at 8:05 am that morning after they had given them so much time to prepare. This is not a holiday resort, they are here to do work.

Mr Kekana said that seeing that now there i a document presented to them that morning which holds new information, there would be difficulty in that what he may ask might seem irrelevant. He proceeded with his prepared questions. He wanted reasons for the condonement by National Treasury.

The Chairperson interjected and said that the irregular expenditure had not been processed. The person who is supposed to answer those questions is the CEO as he is meant to process these irregularities. The situation was even worse because the CEO started his duties in November 2016 even though he was appointed in June 2016. He was puzzled why the Minister did not allow the CEO to begin his duties when he was appointed in June.

Mr Kekana agreed and added that whenever the CEO is appointed, as the successor, he/she needs to take responsibility for the matters they inherit.

Mr Booi said that if documents are being sent at 8:05am, it implies that Parliament is not being taken seriously. If Parliament is not been taken seriously, it makes their work look a bit clumsy. The DSD is not organised, let alone its individuals. An Acting CEO was appointed that very same morning, she knows nothing and cannot answer any questions raised. They need to make a decision on whether they proceed or not because the information SCOPA is requesting, which are not new questions, is not being provided.

Ms M Mente (EFF) said on the matter of irregular and fruitless and wasteful expenditure, the Minister is directly linked to these and with her not being present, it affects the whole process. It seems as though the department is unable to answer direct questions. She said it will be difficult for them to proceed.

Mr Brauteseth said the point of SCOPA is to ask questions and hold people who are responsible to account, but in that meeting the responsible parties were not present. The CEO is apparently sick. The Acting CEO is present but he was concerned that if he asked questions about the CPS contract to the Acting CEO, that the next day the Minister or even Mr Magwaza could turn around and claim that the Acting CEO was not properly briefed on the matter. The issue is that they might not receive the right information because the responsible parties are not present.

The Chairperson said seeing that there are two legs to the meeting, they can address the CPS aspect as Ms Zodwa Mvulane is the Project Manager, so she should be able to respond to those questions.

Mr Hlengwa asked seeing that the CEO was on leave from Friday night, how long is the CEO’s leave?

Mr Dangor replied that the CEO was booked off for seven days. He spoke to the CEO himself. He suffers from hypertension.

In response, Ms T Chiloane (ANC) pointed out that they could still have a teleconference with the CEO.

Mr Brauteseth said that he would direct most questions to Ms Mvulane. He apologised that she had to be in the firing line. He wanted to move on from where they were from last year's meeting. His first question was what has the process been since their last engagement. And he particularly wanted her to start off by discussing the Advisory Committee. What is happening with the Advisory Committee which was established and when was it established?

Ms Zodwa Mvulane, SASSA Project Manager, replied that the Advisory Committee was established on 2 September 2013.They provided a preliminary report in October 2014 and submitted a final report in December 2014.

Mr Brauteseth asked when the Minister started at DSD.

Mr Chauke responded and said in 2010.

Mr Brauteseth said that it was interesting because in correspondence with the Minister, she said that she inherited the Advisory Committee yet it also seems as though she was the one who had set it up. He asked Ms Mvulane to comment on that.

Ms Mvulane replied that there were a number of committees before the Advisory Committee. There was a specific Committee which looked at norms and standards at pay points before the Advisory Committee was established. She did not have the exact details of that committee.

Mr Brauteseth asked her to please list the persons who were on the Advisory Committee.

Ms Mvulane she said that would not be able to answer that because she only joined in 2015 as the project manager. She did not intimately know all the people who had been on the Advisory Committee.

Mr Brauteseth said that seeing that she did not know all the names, he would throw out some names and she should confirm whether she knew them: Andile Nyhonyha? Tim Sukazi? Tangkiso Parkies? Sizwe Shezi? Patrick Monyeki?

Ms Mvulane confirmed she knew all of the names with the exception of Sizwe Shezi.

Mr Brauteseth asked how much the Advisory Committee were paid for their work.

Mr Chauke replied that they were paid a total of R4 million to 11 people, over a period of one year.

Mr Brauteseth asked what processes were taken to approve that expenditure.

Mr Chauke replied that there were appointment letters done through the Minister and the Minister appointed the Advisory Committee, seeing that they were advising the Minister.

Mr Brauteseth asked Ms Mvulane to list the work streams and who ran them?

Ms Mvulane replied that there were five works streams, but only three were up and running: Legal and Regulation led by Tim Sukazi; Economic Development led by Tangkiso Parkies and Business Information which included banking services led by Patrick Monyeki.

Mr Brauteseth asked what the nature of the work streams were. Did they give outside advisory services for SASSA?

Ms Mvulane replied that they procured the services of the work stream lead. For example they procured the Legal and Regulatory services of work stream lead Tim Sukazi, who brought in his legal team which is Tim Sukazi Inc.

Mr Brauteseth said that effectively what she was saying is that people who served in the Advisory Committee who advised SASSA to set up work streams were creating work for themselves. Because the people who served in the Advisory Committee ended up being team leaders and their companies ended up doing work for SASSA. Do you not see that inappropriateness that an Advisory Committee which is advising the Minister on the grants payment system appoint themselves to do the work stream work to try get the system online?

Ms Mvulane replied that they were implementing the recommendations made by the Advisory Committee.

Mr Brauteseth said that seeing that the services were procured, was there a competitive bidding process in terms of the Public Finance Management Act (PFMA)? What was the procedure of procurement?

Ms Mvulane replied no, they did not go through a bidding process in terms of PFMA.

Mr Brauteseth asked what the purpose of the work streams were.

Ms Mvulane replied that it was mainly to implement the payment process. For example in banking services, they did a due diligence with regards to the IT system and made recommendations to SASSA to get the proper system.

Mr Brauteseth asked how long has this been going on.

Ms Mvulane replied from August 2016.

Mr Brauteseth asked how far they are now. Do they have a system? Are we going live on 1 April?

Ms Mvulane replied no, they did not have a system.

Mr Brauteseth said that the Minister told SCOPA that SASSA was involved in a process under Thokozani Magwaza to work out a system which would operate on 1 April. SASSA faces a fork in the road: they have a court option and they have a new contract option. Please take us through these and where SASSA is going to go.

Ms Mvulane stated that to put things into perspective, before answering the crossroad question, the document flowing from the work streams indicated that SASSA is nowhere near ready to be paying grants as of 1 April 2017. Therefore they proposed the current service provider continues while SASSA gets itself ready for bringing in a transitional arrangement; SASSA would take over the grant payments itself in the 2019/20 financial year.

When it became clear that SASSA would not be able to make the grant payments as envisioned, SASSA consulted major stakeholders such as National Treasury, the Reserve Bank and other stakeholders. There was a task team under the leadership of the Directors General of National Treasury. The task team looked into six options that were available just as an interim measure.

The first option was utilising the current service provider. Second option, utilise the services of commercial banks for cash and electronic payments. Third option is utilise the services of commercial banks for only electronic payments and for those who received money as a cash disbursement, they would do a short procurement for cash disbursement. Fifth option, utilise the services of the Post Office for both electronic and cash payments. Sixth option, invite beneficiaries to give them their bank accounts details for those that had bank accounts and for those who wished for cash disbursement, they would conduct a shortened procurement process. They looked at the pros and cons of all six options.

The challenge of the first option, is that the very contract which is running has been declared invalid. The plus about the current service provider is that the cards which they are using, will only expire in December 2017.They can utilise the current card.

The challenge of option two is that banks have not rolled out infrastructure which supports biometric standards. The second challenge was transaction fees because when the money is due to the beneficiaries, they would incur transaction fees which come with that bank account.

On the short procurement process for a cash dispensation, the challenge would be that it separates the clients in such a way that if a client is registered in Rustenburg, they would only get money at a pay point in Rustenburg. The safest option of all six options is utilising the current service provider.

Mr Brauteseth asked which road is being taken?

Ms Mvulane replied that they are going to negotiate with the current service provider starting 1 March 2017.

Mr Brauteseth asked if SASSA is not going the Constitutional Court route. Yes or no?

Ms Mvulane replied no, they were not going down the court route.

The Chairperson asked if that is that fact. Is that her own opinion, or will the Minister dispute that?

Ms Mvulane replied they will be going to court to file a supplementary report. They are not going to court to file for an extension of the contract.

Mr Dangor explained they initially wanted to do the extension route through the Constitutional Court. Yet the option has changed because the legal advice they received was that they did not need to go to the Constitutional Court. They have now asked to do a dual process. Before they negotiate with CPS, you will submit a document to the Constitutional Court stating their intentions and what they are going to negotiate and to secondly submit to the Constitutional Court the outcomes and terms of agreement of the negotiations. It was always the intention to do both.

Mr Brauteseth said that he was happy they were doing a full disclosure. He read a letter written by National Treasury in response to Mr Magwaza’s correspondence which set out SASSA’s proposals. The response given by National Treasury was that the reason to extend the contract was not justifiable. SASSA should have requested a deviation to advertise a new tender for a short period in December 2016 or early January 2017 to avoid a self-created emergency. National Treasury does not support the extension of the invalid contract. They would only support the extension if the Constitutional Court would further extend the suspension of its invalidity of the CPS contract beyond 31 March 2017.

SASSA is in between a rock and a hard place, because Treasury would have to approve their process and it does not seem that Treasury wants to do that, so what is SASSA going to do?

Ms Mvulane replied the PFMA does give them leeway to use emergency procurement. They will have to give reasons why it is an emergency. While the term self-created emergency was used, to be frank half of it should be blamed on SASSA and the other half not.

Mr Brauteseth asked who is to be blamed for the other half.

Ms Mvulane replied that the procurement process started quite late.

Mr Brauteseth asked whose fault was that.

Ms Mvulane said that it was SASSA’s fault.

Mr Brauteseth asked if they were only going to start negotiating with CPS tomorrow.

Ms Mvulane replied yes.

Mr Brauteseth said that she was being economical with the truth, because in a letter written by Mr Magwaza on 7 February, it points out that the current CPS fee rate is R16.44 and that the new rate CPS is asking for will be somewhere between R22 and R25. He approached Treasury with those figures on 7 February. So have you never spoken to CPS?

Ms Mvulane replied that they have not spoken to CPS. The only thing they have spoken about is get a principal agreement to be amenable to negotiations.

Mr Brauteseth said do you know that CPS is a public company listed on the NASDAQ and the JSE?

Ms Mvulane replied she did.

Mr Brauteseth said that the minutes and recordings of meetings of listed companies are public record. Have you heard the recording of the last meeting? Mr Serge Belamant (CPS CEO) said that they been having many interactions with SASSA in the last few months. What do you say to that?

Ms Mvulane replied that the interactions she could account for as a programme manager is when they engaged CPS for due diligence and when they were establishing a principal agreement.

Mr Brauteseth said she has said in the beginning that tomorrow (1 March) would be the first engagement between CPS and SASSA. Yet he has a recording, which is accessible to the public that took place on the 10 February which makes it clear that there have been numerous engagements between CPS and SASSA. Mr Belamant said in the recordings that these engagements have not been shared with the public or Treasury because they do not understand the complexity of these issues. What is your opinion of this?

Ms Mvulane reiterated that they engaged CPS for due diligence and when they were establishing a principal agreement. Yet they have not discussed negotiations.

Mr Brauteseth asked Ms Mvulane to tell them about those figures of R22 or R25 mentioned by CPS?

Ms Mvulane replied that for the current contract they have a capped fee for R16.44 for a five year duration. SASSA did not do a business case for the future contract so they were indicating to Treasury a CPI related figure. So they were asking if they had been paying a CPI related figure to CPS, where would they be by now. So that is a tentative amount; it is not a figure that they are being charged by CPS. It could be less or it could be more. That figure is just the CPI figure should it be growing on an annual basis.

Mr Brauteseth asked growing from when?

Ms Mvulane replied the contract started in 2012, so had it been growing annually, that is how they got to that figure.

Mr Brauteseth said that while CPI is at about 6%, R16.44 to R22 jump is a 30% jump, and to R25 it is a 50% jump. Do you expect us to believe that despite you and your Minister initially saying there had been no engagement, that there has been nothing spoken between you and CPS? Yet there is reference to engagement in this letter and at the CPS shareholder meeting. Are these figures just sucked out of the air? If it is R16.44 why not take the figure to R17.50 or R18 or R19 if it is CPI related? Why jump 30% and 50%?

Ms Mvulane replied that they had put CPI for 3 years, if they were paying their service provider CPI related figure annual. The letter to National Treasury was indicating that they needed a budget for that handling fee. They were not suggesting anything to the service provider that should be the fee that they go with.

Mr Brauteseth asked if she knew the budget that was lined up for 2017/18.

Ms Mvulane replied R2.6 billion.

Mr Brauteseth said that the R22 option takes you to R3 billion and the R25 option takes you to R3.4 billion, so why are you going way over budget?

The Chairperson interjected and said that there is no reason to be futuristic.

Mr Brauteseth said that he would explain where he was coming from. An emergency was created and completely, 100% SASSA was to blame. They will reach Treasury and put a gun to their head and say this country will burn on the 2 April if we do not pay these grants, we have to use CPS and the price is going to go up by R1.3 billion. What are you going to do? That is the scenario SASSA has created. He asked for a response.

Ms Mvulane replied that she does agree that it is a self-created emergency, partly, yes it is. On the handling fee figure, she is not certain about that. What she can assure the Committee is that they had sought the services of an actuary to come to that correct figure, which is scientifically correct.

Mr Brauteseth referred to the Post Office / Postbank option. Treasury and Mr Gordhan were in favour of that option. Why are we not going that route since the Minister and Mr Magwaza were so obsessed about talking to Mark Barnes, SAPO CEO?

Mr Booi said that these questions are not dealing with the irregularities, they have gone far, especially if he is bring in the Post Office.

The Chairperson said it is fine to ask the those questions because the Minister had sat there in Parliament and told SCOPA that she would bring substantive answers in January already. The negotiations would start the following day. SCOPA cannot go into that now because it is in the future. But the processes that have brought them into this position is where we are at now in the proceedings. He invited Mr Brauteseth to continue.

Mr Brauteseth asked why South African Post Office (SAPO) was not a feasible option.

Ms Mvulane replied that they did have interactions with Post Office. SASSA invited them twice and they received a bid document from them. Yes, they are considering to use SAPO in the transition period. What she wanted to indicate is that SAPO has a footprint of about 2 000, while CPS has about 10 000 pay points. They will look to utilise the SAPO footprint but when you look at their footprint, it is mainly in urban and semi-urban areas. Far flung rural areas do not have a SAPO footprint, so they are using their own pay points in those areas. In SAPO's bid document, they are not ready for April

The Chairperson interjected and said that she should not judge the Post Office. There seems to be a lingering and strong bond with CPS that SASSA cannot break. Everybody else is rubbish.

Mr Booi said they should ask these questions directly to the Minister. They were asking the project manager to go way beyond her own mandate.

Mr Brauteseth noted that at the start he said the project manager could answer questions she had information on and she also had the liberty to say she did not know the answer. To summarise where we are, SASSA will have to work with National Treasury to renew this contract and they are hoping to use emergency PFMA regulations to do this. Am I correct?

Ms Mvulane replied, yes, we will be assisted by National Treasury.

Mr Brauteseth said that in rejecting the South African Post Office, SASSA chose to go with CPS which is a white American company with a white Australian-French origin and a CFO who is a white Afrikaner. How does that fit in with radical economic transformation and trying to move away from white monopoly capital? How does that engage with trying to move away from white monopoly if you are using this CPS company? Why are we not benefitting our own people?

Mr Dangor said, with all due respect, that is a political question that he would rather not answer.

Mr Hlengwa pointed out that there was a Ministerial Advisory Committee of 11 to 16 people spending an amount of R4 million yet they are on the eve of a crisis. CPS will be negotiated with because there is a crisis. But let us be honest, CPS has not been an honest partner for our people. He pleaded with the Chairperson as a matter of urgency that he gets the Minister to come before the Committee because the irregularities of this entire transaction are escalating. We cannot allow us to negotiate with a bunch of crooks. The Minister needs to be here to clarify the commitments she made at the last meeting. It is not fair on Members and the public because they are receiving half-baked and half cooked information.

Mr L Ross (DA) said that if the contract was found to be irregular in 2013 and they had reputable recommendations from the likes of Treasury to utilise the services of banks, yet the biometric standards could have been sorted with the banks in the four years. It is a grave concern, we have 17 million people dependent on these grants. With regards to political consequences, he fully agrees that the Minister should be present to be held to account.

Ms L Wilson (DA), Member of Portfolio Committee of Social Development, said that seeing that they are going for emergency procurement, it was painfully obvious as early August 2016 that SASSA could not do the grant payments. Why did they not open the competitive bidding process then which is what Treasury had recommended? Why had they clung so hard to CPS? Secondly, on page 22 of the national budget is a list of line items and her concern was that they budgeted R2 billion for the grant payments system and that was a baseline expected to be maintained in the medium term. In other words they have not budgeted for an increase, they were quite satisfied with the current rate. If that is the case, had they not been negotiating with CPS? How do you budget for something you do not know about or has somebody messed up the budget completely?

Ms N Khunou (ANC) said that they need Solly Tshitangano from Treasury to answer some of the questions asked. Irrespective of what Ms Mvulane had said, when one looks at the PFMA what she has said does not make sense because they should have been in contact with Treasury. How long has CPS to be contracted for? She asked the Director General if they were saying that they did not plan what is going to happen after this contact ended. They should not take Parliament for granted. She noted that they had an official (Ms Mzobe) whose flight ticket was paid for by government to come to Parliament to merely state she was appointed that same morning to be SASSA Acting CEO. Our people out there really need this morning's hearing. You cannot say that the Post Office cannot be used because it is not available in rural areas. Home Affairs is also available in rural areas. Where there is a need they have mobile offices. Why cannot we have mobile offices? Who owns CPS because CPS is costing us serious money?

Ms Mente said that she would be very disappointed if they receive an audit report and the R4 million spent on the Advisory Committee does not reflect as fruitless and wasteful expenditure. What was the initial image that the Advisory Committee painted for the project manager and the Minister? In terms of time frames, where are we going to be at certain stage and by how much? What did the Advisory Committee say to you about 31 March 2017?

There is a huge outcry about CPS, people are receiving unauthorised debit orders. But this same CPS system which allows unauthorised deductions is proclaimed to be very accurate and to be the best. Why are we not considering other means to give people their money? SASSA claimed that everything was under control, but nothing is under control. Treasury is saying today that they will give you money and will not assist you to break the law and assist you to undermine the Constitutional Court. So where are you going to get the money? The PFMA states that consequences will be applied to those who fail to follow it; now you have failed the PFMA.

Mr Kekana said that he does not think any amount of questions will assist the situation. It was established that the officials before them could not answer the questions. The Minister should come to answer these questions. It is an urgent matter.

The Chairperson gave the SASSA project manager and DSD delegates an opportunity to respond. He invited Treasury to also respond seeing that Treasury is caught up in the matter too.

Mr Brauteseth asked what SASSA will do if they do not come to an agreement with CPS the following day.

Ms Zodwa Mvulane, SASSA Project Manager, responded that they are working on a plan B should the negotiations not go as planned. With the assistance of National Treasury, they are speaking with Bankserv to pay the accounts of the beneficiaries. It may have its own challenges because there are older people who may not have pin numbers, so the biometric standard becomes an issue so they would still need to get a way to allow those people to gain access to their money.

On why they are acting only now after the Constitutional Court gave its judgement in 2013, she said that SASSA was instructed to get into a procurement process to replace the CPS contract. They got into that procurement process which was only finalised in 2015. There were just five bid companies, two of them withdrew and the remaining three companies could not pass the first stage of administrative compliance. So they only had one year to prepare, from September 2015 to now, for SASSA to become the paymaster.

Ms Khunou asked what SASSA is negotiating with CPS about.

Mr Dangor replied that the Minister said clearly, based on a letter written by the Minister of Finance, that whatever happens should be done within the confines of the existing budget. That is one of the guidelines for the negotiations: staying within the confines of the budget. The second guideline is that whatever agreement the negotiation team makes with CPS, it must provide very specific safeguards around deductions.

Mr Hlengwa said that we should not speak to this issue as if it is an emergency. The contract had a large lifespan. Whether SASSA knew the contract was invalid or not, at some point SASSA knew it would end. It is pure incompetence and a sheer failure to understand a contract and its lifespan. There is no sustainable thinking and no sustainable plan. It is not a crisis, it is pure incompetence of the highest order.

Ms Mente reiterated what was the image painted to you by the Advisory Committee that led you to believe that by 1 April, everything would be sorted. It means someone told you that things would be in place and that someone should pay for lying to us and misleading us. And whoever failed to do their job must leave the Department.

Ms Wilson said that SASSA has a legal team, a Human Resource (HR) department, an Information Communication Technology (ICT) department. So why did they spend R4 million for an Advisory Committee when you already have the capacity? Secondly, why did they pay R12 million to an ICT provider who were only appointed in August 2016 but by November had spent R12 million when there is already an ICT department at SASSA?. Are we saying that SASSA itself is so incompetent that they had to procure the services unprocedurally from other people?

Mr Ross said his party fully supports a full parliamentary inquiry into SASSA. It is totally unacceptable and is a risk to the 17 million people who depend on grants. It is the responsibility of this Committee to ensure consequence management.

Mr Booi said while the officials have said that the public should not be worried as they will get their money on 1 April. Yet as a Parliament Committee, specifically SCOPA, they need to make a recommendation to take the matter seriously, especially looking at how the matter has been handled. Even after the Constitutional Court judgement three years ago, instead of dealing with the matter at hand, it responded by appointing and replacing officials. We cannot allow ourselves to get to a position where South Africans are feeling endangered.

The Chairperson said that he would not allow the DSD and SASSA officials to respond principally because the questions SCOPA had raised were an indication of failure. Failures cannot be explained away. SASSA has made South Africa apprehensive. He invited Mr Tshitangano to respond as a representative of National Treasury.

Mr Solly Tshitangano Chief Director: Governance, Monitoring and Compliance, National Treasury, said that he cannot comment on the merits of the case. The concerns raised by Members also reflect the concerns they have as Treasury. What is key is Section 38 of the PFMA. The procurement decision rests with the accounting officer or the accounting authority, they can only advise but if they break the law they should face the consequences.

The Chairperson thanked the officials present. In the midst of negations on a matter which is critical, the CEO is on sick leave. Is he sick because of the magnitude of these problems? It is very worrying, we are in Parliament, so any clownish responses are being communicated to the public. Why does the CEO have hypertension about SASSA?

He said to the Director General that the CPS thing is a ruse which we are being given here. They are creating an emergency to put a gun to South Africa’s head. The critical questions are why? What interest and whose interest? Whatever is going to be negotiated with CPS. We cannot stomach anything beyond 12 months. He said they will make time to have the Minister present.

For all the things people do there are consequences, administrative and political consequences. If people are on a suicide mission, we will let them go ahead and let us see what happens. SASSA and the Department have not been fair on Parliament and the public. He received a letter from the Minister the day before around four in the afternoon making certain requests about today’s proceedings. What was he supposed to do at that time, he was not even in Cape Town when he received it. Which is the epitome of how things are handled, they do rushed things. It is okay when you do that with your personal life but not with matters that affect the public.

The Minister did not indicate to him in the letter that she would not attend. A political leader needs to assure the public that everything is fine. He wanted to have the same political process as they had with Correctional Services. His is generally not happy with the Department and the engagement they had.

He is going to write a letter to Treasury because last year there was fruitless and wasteful expenditure, specifically the SABT irregular expenditure, which amounted to one million rand which the CEO could not answer to. If there is expenditure which is fruitless and wasteful, there must be someone who takes account.

The meeting was adjourned.

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