Minister of Social Development briefing on CPS contract

Public Accounts (SCOPA)

07 March 2017
Chairperson: Mr T Godi
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Meeting Summary

This was a joint meeting with the Standing Committee on Appropriations and the Portfolio Committee on Social Development in a packed room. The Chairperson noted that it had been hoped to wrap up the matter of the Cash Paymaster Services (CPS) contract the previous Tuesday, following the initial engagement in November 2016, but that had not been possible as the Minister had been unable to attend the meeting. As Members of Parliament and as South Africans the Committee is concerned that come 1 April, people must be paid their grants; but the fundamental thrust of SCOPA was to determine how the South Africa Social Security Agency (SASSA) had got to this point of crisis.

The Minister arrived twenty minutes late and was refused leave to excuse herself to go to a Cabinet meeting  before the end of the meeting as the Committee wanted her to account personally and not her officials.

The Minister stated that the issue of grants was very important and she did not want South Africans to think that she was arrogant. She objected to talk of a national crisis as grants would be paid on 1 April. She explained that the previous contract with CPA had been found to be invalid by the Constitutional Court in 2014. They were instructed to redo the tender process which took two years, but then the two main bidders for the tender withdrew. An Ministerial Advisory Committee had given advice and some of these people were appointed to work streams. There were procedural irregularities in these appointments that Treasury had not yet condoned. In October 2016, it was established that the intention that the Department of Social Development and SASSA take responsibility for payments was too large a project and they were not going to meet the timeframe of 1 April. They had underestimated the magnitude of the task and the time required. The banks had been invited to join SASSA in the disbursement process but a letter was received in December 2016 stating that the banks were not ready for the process. The Minster also alleged that two banks owed SASSA large sums of money. The South Africa Post Office had been considered but had been unable to cope with the enormity of the task. The Minister explained that even as they were trying to manage contractual issues, other important development work was taking place in SASSA.

Members were particularly concerned that CPS was white-owned and American-owned and the benefits of managing grants were not going to South Africans and the communities where beneficiaries lived. This was in direct contradiction to the President’s State of the Nation Address in which he promised that state funds would be used to ensure radical social economic transformation. The Minister was accused of being unable to manage SASSA and there were calls for her to resign. She was accused of misleading Parliament because Treasury had not approved deviations made by SASSA and was unlikely to give approval. There were unresolved issues between SASSA and Treasury.

The Minister sought to assure everyone that the debit cards used by beneficiaries would only expire in December 2017 and not at the end of March 2017. She repeated her declaration that all grant payments would be made on 1 April 2017.

Meeting report

Opening remarks
The Chairperson welcomed the Minister and her team; the Standing Committee on Appropriations led by its Chairperson, the Portfolio Committee on Social Development, National Treasury and the Auditor-General representatives.

The Chairperson noted that it had been hoped to wrap up the matter of the Cash Paymaster Services (CPS) contract the previous Tuesday, following the initial engagement in November 2016, but that had not been possible. In November, two elements were addressed, that is, irregular expenditure and fruitless and wasteful expenditure. The Committee discussed the issues but were unable to properly tie them down so the Committee requested that the matter of the SASSA disbursement of social grants be dealt with later and be kept in abeyance. The Committee had hoped they could get to it the previous week, which they did, but the Committee felt that their engagement with the officials in the Minister's absence did not give a full sense of closure. The issues were quite pointed. As Members of Parliament and as South Africans, the Committee members were concerned that come 1 April people must be paid; but that was not the fundamental thrust of their work as a Committee. The gist and crux of the Committee’s concern was how the South Africa Social Security Agency (SASSA) had got to the point of emergency because from the beginning, the 2012 CPS five-year contract had an endpoint by which time it was to lapse. The Chairperson believed that the 2014 Constitutional Court ruling should have sped them on. Some explanations were given the previous week but they are not conclusive as far as the Committee was concerned. So how had they come to where they are? This was the major area of interest, but there were also specific issues that members had raised the previous week. At some point the Minister might want to tell the Committee where SASSA was at, and he did not think any South African would be unhappy to receive the information, but SCOPA was specifically concerned with how processes were managed. How did they get to the situation they are in? That was the fundamental area of focus.

Minister of Social Development briefing on Cash Paymaster Services (CPS) contract
The Minister thanked the Chairperson and Members of Parliament. She explained, firstly, that the previous week she could not attend the committee meeting as she had had other responsibilities. She pointed out that the Co-Chairperson of the Committee could not attend when she had confirmed she was coming, but that was not an issue. Secondly, it was the SASSA and DSD accounting officers who should give a report to SCOPA. However, in November, she had come with the accounting officers. Thirdly, the Minister had accounted to the Portfolio Committee and a report had been received by the Portfolio Committee.

The issue of grants was very important and she did not want South Africans to think that she was arrogant because people had been counting the meetings that she had not attended, but they never asked why she had not attended even though the relevant structures knew where she was. Regarding how they had got to this point: they all knew that around October 2015, SASSA went to court to give an progress report of the work they had done. The Court discharged its supervisory role after SASSA had accounted for what they were going to do. When the court rules the CPS contract invalid in April 2014, SASSA was asked to reissue the tender. Five companies tendered for the business of SASSA and it took two years to finalise that process but when they were about to finalise it, two bidders decided to withdraw and the three bidders left could not meet the requirements of the tender.

The Minister said that she found that at the Department of Social Development there was a committee that had been formed by her predecessor, Minister Molewa, and that committee had looked into the challenges faced in South Africa when it came to grant payments. They had also spoken to beneficiaries. That committee consolidated its report, after which the Minister had formed an advisory committee that had to benchmark their work internationally and they condensed the whole process from three to two years. After completing their work, they came up, firstly, with a preliminary report and later tabled a consolidated report to the management of SASSA. The report was accepted and, amongst the recommendations, was the proposal to form work streams. Due to the urgency of matter, the Minister spoke to all members of the Advisory Committee and asked those who could, to avail themselves to serve on the work streams. Most of the them, even the Reserve Bank representative in the Advisory Committee, said that their work was being compromised as they had full-time jobs so only three were available and those three have been working with SASSA. Immediately after the terms of reference were established for each of the work streams, a memorandum was received from Treasury which asked about the procurement process. A report was sent but they were still waiting for Treasury to concur with the processes that SASSA had gone through. The Minister did not blame them for that because at some stage when SASSA saw that they were running behind time, they had to move as fast as possible and just went on. Secondly, concerning the work streams, more particularly the legal work stream team, it advised the Minister on a number of issues in October 2016. They stated that the intention to ensure that the Department of Social Development and SASSA take responsibility for payments was too huge a project and that they were not going to meet the timeframes.

The work streams started working on the phases of the programme and looked at areas that SASSA was supposed to have implemented but could not implement, for instance the taking over of the registration of beneficiaries and strengthening the work with Home Affairs, as well as the biometrics for children, as the Department of Home Affairs does not have biometrics and the government is doing what the experts call "one too many" systems with the children. The details of some people registered during the re-registration period were not handed over to SASSA, even though the information belonged to SASSA which had paid for the information. So, the Minister again had a meeting around 12 December with the legal work stream. They said SASSA could not implement by 31 March. Before the 15 December, a letter should be written to the Constitutional Court explaining what had happened as they knew that it would be wrong to continue with an invalid tender.

The CEO had just been appointed but, unfortunately, he was not part of the briefing by the lawyers. The Minister had a discussion with the CEO and he had requested time. The request was agreed to and it was agreed that SASSA would communicate with the Constitutional Court. While they were waiting for the CEO, processes continued with meetings with Treasury and the Reserve Bank and there was communication between the two Ministers (of Social Development and of Finance). The Finance Minister wrote a memo raising his concerns about SASSA deciding to use one option out of the six options given by officials. The Minister was taken aback by this as the report from officials said there was agreement because the CPS was the only company that would give seamless processes. SASSA was aware that the tender was declared invalid so they decided to have negotiations with CPS on the basis of tabling SASSA's requirements and talk about the phasing out and phasing in of the processes. It was always part of their agenda that the South African Post Office (SAPO) should be part of what was going on.

Whilst they were meeting with stakeholders, they also made sure that they had someone at SASSA to deal with the establishment of an internal ICT system because they did not have such a system. Together with CSIR they came up with a biometrics system and that was ready, and had been done in South Africa. Amongst those who had submitted Requests For Information about the tender was SAPO and they thought that was not strategic as the previous time when they had tried to bring them into the process, the service provider said that they could not bring them in through the backdoor, even if they were a government service, because CPS had tendered. But the Minister was keen on SAPO and thought that they had a bigger role to play and that they would start with registration of beneficiaries. The Minister noted that at face value these processes look accurate and innocent but on the side line there was communication taking place between a Mr Dave de Beer and the service providers and he told them he had been approached by someone high up who would tender for payment of grants. He said to CPS that they were ready to do the work and, as SAPO had said they don’t have all requirements needed by SASSA, CPS should join them in a tender. The message said there was a meeting on 10 February 2017 to finalise and they must say whether they were working together or not. Also on the side lines was a letter dated 10 February sent by the CEO to ask SAPO to join SASSA, but there had already been a problem with SAPO and the CEO should understand the SASSA Act.

When they sat with lawyers and presented to the Portfolio Committee, there was a suggestion that they should volunteer information to the Constitutional Court and that the report must be divided into two so that the court understood what had happened after the negotiations.

The first affidavit was about to be deposited with the court but it had a number of challenges as the affidavit showed who should do what but did not show where SASSA was at that point in time. This had been discussed a lot and people were raising their feelings about a fact that was untrue, that is on 1 April SASSA would not be able to pay grants. So, they had to apologise to the Constitutional court for everything that had been a commotion and because people were unstable because of the reports that they were getting. The people were unstable despite the fact that they had said that they would be paying on the first and never mind that the technical team had made its recommendation. Consequently, the Minister had asked that the affidavit not be submitted to court. But an affidavit that she had never seen was posted and, as she had a right to see it, she told them to withdraw it. They sat with the CEO and brought together the legal teams as people who were not involved in the work streams not aware that were doing scientific work. SASSA posted a report to the Constitutional Court and they have started negotiations. People have also raised issues, but the due diligence had been done.

When they were visiting offices, the Black Sash was always with them, and they were privy to information that others do not have as there is a Ministerial custom that brings together Black Sash, Social Development and SASSA. They have dealt with all of the Black Sash’s issues.

Treasury was requested by SASSA to provide two people for the negotiations but, unfortunately, they could not come. The Finance Minister raised the issue of the Minister choosing one option but it was the technical team that had chosen that option.

The Minister had had to fight with officials in Social Development because she had wanted to bring in SAPO to see what they could provide. SASSA has 9000+ offices for pension pay-outs. SAPO has 2600 offices, including agencies of SAPO. Most SAPO offices are based in the old apartheid towns and some areas do not have SAPO offices. The Department sat down to see if SAPO could strengthen their pension pay-out. It must be noted that SAPO views things differently from Social Development. Social Development is about human rights and about improving the lives of people. The Minister indicated that Ms Zodwa Mvulane, SASSA Programme Manager, and others would highlight the issue of options. Amongst the options was one that SASSA would change the service provider and take Green Rod to be the major service provider and CPS would be the minor service provider, but that was just going to be a facelift, not transformation.

SASSA was going to use biometrics as it had been praised when biometrics was used in the re-registration process and saved the country R2 billion. Those biometrics came from the Taylor Commission but it would be better to use local expertise.

The banks have a different approach. Those who deal with money think about clients and “banking the unbanked” and the partnership is between the bank and the people. SASSA worked with Standard Bank which still owes SASSA R500 million because they had dormant accounts and no one had come to SASSA to ask how they were going to deal with those accounts. Ithala Bank, with interest, owes SASSA R1.1. million. SASSA cannot go to banks because of the previous experiences with them. The work of SASSA must be people-centred and must not be seen as a burden to the people. The budget of R140 billion must go to strengthening the economy around the communities. Currently, big retailers are getting the money, which is not a problem, but SASSA must make it possible for people to develop through the payment of benefits. SASSA cares about people and has been given the responsibility to contribute to the radical economic transformation, so all processes must be inclusive of their people.

It was okay that people asked about the termination of the tender as it would fall off automatically on 31 March anyway. Everyone had been fighting about the date but what was really going on, was that there are those who had used pensions to campaign (in the elections) and the same people wanted to remove the government in the eyes of the people. The Minister suggested that everyone should wait until 1 April to see if SASSA would be unable to pay grants.

As to the last part, the Minister pointed out that issues that SASSA had raised during negotiations with CPS would be discussed by the technical teams that were going to meet and a full report would be provided to the Minister by officials on Thursday that week. The Minister was mindful that Treasury had said that SASSA should use its own budget and that there would be no extra money.

SASSA had prioritised issues of business continuity and had noted that that would take two years. The first year would be used for the out-phasing and the second year would be about rolling out all the processes. Secondly, the issue of monies deducted had been discussed because Regulation 26(a) of the SASSA Act says only 10% of a beneficiary’s pay-out may be deducted for funeral benefits, etc. If anyone wanted to deduct more, they would have to get permission from the Minister. Deductions also include telephonic purchases of electricity and water.

SASSA has spoken about opening a special account that will disperse monies to various beneficiaries. At the moment, the service provider received a lot of interest when they bank the benefit payment for one day before they disburse benefits, so SASSA would access accounts.

The Minister explained that in the presentation made during negotiations, they had made space for SAPO. It was important to take note of the extension of card life as the lifespan of the Master card used by beneficiaries is up until end of March, but cards can be used to the end of year. SASSA payment experts in IT advise that the life of the card can be extended beyond the end of the year, which would save a lot of money.

SASSA has two different call centres but they will be integrated and work 24 hours a day because beneficiaries have free airtime from 8pm to midnight. As far as reconciliation of accounts is concerned, the Minister felt that she was not qualified to speak on the topic. The Minister referred to the SASSA transition enablement, the taking of all biometric data as well as beneficiary data and costing, servicing footprint and CPS branch classification as examples of work that had been done.

The Minister told the meeting that officials would give account of all the things that have been done parallel to the contract, but she admitted that SASSA had underestimated the work involved in taking over payment. One needs one’s own systems. It is such a complex task that even banks do not have the facilities and even they have other people to do it. The information had been provided by the experts. It is important to talk about facts and to let those who understand the work scientifically, to take the lead. SASSA had to look for people who are very experienced in payments and Consumer Pricing Index (CPI) so that SASSA did not make the mistake of over-paying for everything that they were doing. The two-year plan was just part of the five-year plan for changing SASSA. The Minister then informed the Chairperson that Cabinet started at 9:30 and she would like to attend as she had to give a report to Cabinet. She had given her report to SCOPA.

Mr M Booi (ANC) interjected, saying that it was wrong. Mr C Ross (DA) added in a milder manner that it was unacceptable that the Minister should leave at that point when they wanted to interrogate her on a very important issue. Mr Booi added that the meeting was not a church and that the Minister should sit still and give account. The Minister said she didn’t want to be insulted. Mr Kekana noted that it was a SCOPA meeting and members should respect SCOPA and be quiet.

 Ms T Chiloane (ANC) added that Members of the Committee are Members of Parliament and they had waited for the Minister so it was wrong for her to leave at that point, while Mrs Khunou asked whether pointing hands to the Minister was wrong.

The Chairperson called the meeting to order, explaining that the Minister was wrapping up and saying she wanted to leave but he had not yet responded. He asked Members to wait, adding that he had allowed Minister to go into a lot of detail as that was what they had wanted and as she had to account to the people of South Africa.

A private discussion was held between the Minister and the Chairperson.

The Chairperson then thanked the Minister for her input and commented that Members would agree that the input of the Minister went way beyond what officials had been able to present at the previous meeting. He pointed out that the issues to be addressed by the Portfolio Committee was different from the issues that SCOPA was concerned with. The Chairperson asked the Minister, in view of issues to be clarified, for the liberty of time. He did not know the level of questions that Committee members had but was pleased that the Minister had responded to the question he had posed.

As SCOPA had called the meeting, the Chairperson first called on SCOPA members to pose questions and asked that they ask only questions and not make statements.

Mr E. Kekana (ANC) suggested that questions be limited to the SASSA CPS issue. Mr M. Hlengwa (IFP) asked how much time was available as he wanted to know if there was time for a substantive discussion. The Chairperson indicated that the Minister had to be at Cabinet at 11am but flexibility was needed and he had asked her make arrangements to stay longer if needed.

Mr T Brauteseth (DA) objected to the limited time but agreed not to engage in the normal to and fro of questioning as long as the Minister answered all questions posed to her. He alleged that it was a moot point that the Minister had set up the Advisory Committee and appointed certain people to the committee. The burning question, relating to SCOPA, was that when the Advisory Committee submitted its final report in December 2014, the Minister had instructed the then CEO, Virginia Petersen, that certain people were to be retained to run work streams. The question was how she had tied in an imperative of retaining certain people to be in the work streams while their companies were involved in the tender, with the notion of a competitive bidding process. That instruction led to various memos going back and forth about a deviation from the protocol of the procurement processes. What was the Minister’s involvement in that and what was her comment on that? Thirdly, Mr Brauteseth wanted to know if the Minister did not think it improper that people from the Advisory Committee were then given work to the tune of R47 million. These people had all received work without a bidding process for that kind of money. Did the Minister think it appropriate? He wanted to tie it up to her comment in her presentation that there was no time to worry about those things. Questions had been asked about why SASSA did not go the bank route or the SAPO route. In her presentation, the Minister had spoken of monies owed by the banks. If Standard Bank actually owed R500 million and Ithala owed R1.1 billion, what the Minister was doing to get the money back or did they not really owe any money? It was an enormous sum of money to be owed to a state department. He also wanted the details of the CPS contract, including the rate per beneficiary and the total cost of the new CPS to the South Africa taxpayer. Mr Brauteseth noted that when SAPO was engaged, the service provider, CPS, had told the Minister that SAPO could not come in the back door, but the service provider was holding an illegal contract and was in no position to make such demands. Who was leading whom? Was CPS leading the Minister?

Mr Hlengwa wanted to know how CPS fitted into radical economisation and whether it made any sense when everyone knew that CPS was white-owned? Was CPS BEE compliant? Secondly, the Minister had referred to interventions instituted by her predecessor but Mr Hlengwa wanted to know how she did not know about the interventions when she had deputised the previous Minister. It seemed that it was all new to the Minister and there was no sense of continuity. The issue of the Constitutional Court (ConCourt), was secondary in the sense that the contract was due to expire anyway. The ConCourt decision about the contract being invalid and illegal was a secondary matter as primarily there had to be contract management. What preparation had been done to look into a new contract that would look to the national interest and the economic radicalisation of the contract? Mr Hlengwa assured the meeting that he was not negating the importance of the Concord decision but the root cause was the lack of contract management in the first place.

In response, the Minister objected to talk of a national crisis. The Minister and her officials had said that grants would be paid on 1 April, and they would, so it all depended on how an individual saw the whole issue. She noted that there had been instances where government had deviated because of challenges experienced. The Advisory Committee had dissected the work and analysed the work and then informed SASSA that the timeframes that they had set for themselves could not be met. The Advisory Committee benchmarked the work of SASSA internationally and they had experiences from other countries.

The Minister noted that the information that the Honourable Member had about how people from the Advisory Committee got to the work stream was inadequate as there had been a meeting with all members of the Advisory Committee and she was prepared to send the Minutes of the meeting if this was required. The Reserve Bank representative on the Advisory Committee, for example, had said that he did not have time as he had to go and do his work, so the Minister did not choose who would work in the work streams. There had been no tender process. The officials would account for that but they had followed due processes.

Mr Brauteseth interjected saying that they had asked the Minister to account, not the officials.

The Minister said that they were all Members of Parliament and she did not want to be diverted by interruptions as she was not an expert on some things and she might say something and then be told she was a liar. She agreed that they had not had time and that banks were going to have a role to play. However, after the pronouncement by the DG at the press conference in December, the banks sent a letter to Ms Mvulane saying that they would only be ready at a particular time and they had evidence of this.

As far as SAPO was concerned regarding the issue of the invalid tender and the service provider who had raised his concerns, it had to be noted that that was a legal matter and when people raised legal matters, they had to be handled that way. The Minister explained that she took recommendations from advisors. As to the issue of not being serious and talking rubbish, she would not respond.

The Chairperson asked the Minister to respond to the question of banks owing money. The Minister stated that she would provide appropriate correspondence. The Chairperson also asked for clarity regarding the lack of bidding for positions in the work streams in accordance with the PFMA. The Minister indicated that Treasury had raised concerns even after SASSA had gone through proper processes. SASSA had explained what they had done, but Treasury had not yet come back to them.

SASSA was currently paying CPS R16.44 per grant recipient. They had not come up with a new amount but would give details at a press conference after the meeting with the (Finance) Minister which would follow the technical team meeting. SASSA has 11,000,000 beneficiaries. It was to be noted that one account might be for more than one beneficiary, for example, a grandmother and her grandchildren.

The question of BEE compliance was previously responded to in court. Mr Hlengwa interjected that he was asking the question in the Committee room, not in court. The Chairperson told the Minister that he too was unclear about matters raised in court. The Minister replied it was raised under matters of BEE compliance. The issue of radical economic transformation is on the agenda moving forward.

Social Development had tried to use the SRD through establishing cooperatives, and they had close to 360, and when they had to deal with social relief of distress, it was those cooperatives that did children’s uniforms and also for the SRD vegetables were bought from the communities. The Minister was prepared to take people to see those cooperatives. Radical economic transformation was not in their minds when dealing with the CPS tender. The question being asked related to the future, not to issues of the past.

There were interventions by the Minister’s predecessor but they had had to formalise their work and make it look professional so that they had confidence in what they were going to do.

The Chairperson asked for clarity on the question of contract management. The Minister informed the Committees that for two years they had run a tender and two bidders withdrew just at the close of the tender. Secondly, they had appointed the work streams and in October the work stream members came to SASSA to say they needed more time to do the work and that they should go to court to explain. So it was not a question of the Minister and SASSA not doing ­­­­their work, but that they needed more time. Starting a bank is not easy and paying out money for pensions means that there is a long process. SASSA also did work on the side lines, for example working with CSIR to develop biometrics was not nothing but there are perceptions that nothing had been done.

Mr M Ndlozi (EFF), who was standing in for Ms N Mente (EFF), stated that although the Minister had implied that Members spoke of 1 April as if it were a fact that it was not going to happen, and that that was the bigger substance of the issue. Since the constitutional court decision, the Minister had had an avalanche of failures to stick to the deadlines to appoint and conclude contracts, and thus there could not possibly be confidence that she would be ready by 1 April. It was not the problem of the Committee or of political parties that campaign on social grants. If social grants are not delivered on first of April, and she or the ANC were removed, it would not be the doing of anyone else, but the Minister’s incompetence. Mr Ndlozi requested a comment from the Minister on his statement.

The negotiations with CPS were happening at the current time, not in the past. The details were not known and every time the Minister was asked about cost, she said that she was not an expert. Why was the Minister in negotiations with CPS which was not BEE compliant, even after the State of the Nation Address and Mr Zuma’s statement on radical economisation? She herself had said she supported radical economisation. Is that not perpetuation of white dominance and white monopoly power and a relegation of black ownership to small gardens and small deals? President Zuma had explicitly stated that economic radicalisation would be taken into account in relation to tenders and contracts that government entered into. Thirdly, when the Minister went to ConCourt she had said that she would be ready. What had she had in mind? At the SCOPA meeting in November, she had spoken of a contingency plan. What was it that the Minister had in mind but could not divulge to the Committee and why or how had it failed? This information was required so they could not accuse the Minister of lying.

Mr Kekana stated that the matter was of national interest. The Minister had said at SCOPA in November that she had been assured that there would be payment on 1 April 2017 but the question was whether it was within budget and within the parameters of law. He needed such assurance from the Minister.

Mr Ross asked the Minister why she had said that only in October the previous year, had she realised that she could not meet the commitments. What had happened since the court’s decision in 2014 up to 2016. As to her disregard for Treasury and the extremely dangerous situation of irregular expenditure of billions of Rand, he wanted to know what she was doing in respect of Treasury and in seeing that the expenditure was legalised, at least to a certain extent. What were her endeavours in this regard?

The Minister stated that everyone knew that they had run a tender process for two years and had thought that they would have an extension of two years as that service provider would have been appointed for five years. Regarding the avalanche of failures, the Minister pointed out that Ministers worked with accounting officers in departments and the same honourable members blamed the executive authorities for taking over the work of officials so she had given the officials time. The previous year she had called the accounting officer and work streams to report in October. She had thought that they would report but they had not and she had to call them and ask them to account. If anyone wanted to call it incompetence and an avalanche of failure, she could not stop people from saying that. The Minister added that Committee Members wanted to talk about the past and mix it with what the President had said, which was a mixing of issues. They must decide if it was deliberate or not.

Procurement for the work streams started on 1 November 2015 and went on to July 2016. It kept on moving up and down and people were asking questions. When the work streams started doing their work, they took only a month to say they were sitting on a time bomb. The Minister admitted that SASSA had applied for a deviation. This was supposed to have been done by the accounting officer and thereafter Treasury would concur if the ConCourt agreed with the extension of the contract, but she pointed out that they had not extended and were negotiating a new contract. Because of pressure, they had not looked into the economic transformation issue but they were still negotiating and could therefore raise those issues. It must also be kept in mind that they were negotiating with the same people but were negotiating for different terms that would favour SASSA.

The Chairperson reminded the Minister that Mr Kekana and Mr Ross wanted to know about the role of national Treasury in the current process. Were they involved in the processes underway? Had SASSA reached an agreement with Treasury? The Minister said that she thought so because they had been part of the coming up with six options but they had not attended the negotiating process. She could not speak for them as to why they had not attended negotiations. The Chairperson asked if Treasury had given reasons for not attending. Was the Minister on the same page as Treasury in terms of processes so that when they came to the end, Treasury would be satisfied? The Minister replied that at the previous meeting, it was agreed that the Working Committee would make a presentation to the President.

 Mr Brauteseth interjected stating that the Minister was misleading Parliament as Treasury had not agreed to the deviations on the work stream and had said quite clearly that they were not going to approve the appointment of CPS on the non-bidding process.

The Minister said that it was a huge indictment and she could not speak on behalf of Treasury. The Committee should call Treasury and interrogate them. She complained that it was unfortunate that Treasury would be allowed to speak but not her officials. The Chairperson noted that the Minister of Finance would respond if he were there. He also stated that they agreed that benefits would be paid on 1 April 2017, but SCOPA’s concern was the legality.

Mr Booi was unhappy that, given the time that the Minister had had to prepare, she was blaming officials. He asked whether they were to blame as they had not done their work. He needed the names of people who had been involved in the process so they could engage in the depths of the problem and find out how much it was going to cost the taxpayer because some people had not done their work. The Committee needed to see who had not done the work and what it had cost the country. The people who had put the country into the situation would have to take full responsibility and would have to pay back the monies wasted.

Secondly, he conceded that the Minister was in negotiations but noted it was with CPS. Who was involved and how much were they contributing to the South Africa economy? Was there a BEE in the whole arrangement? Who was SASSA talking to? Who were those old players who were still involved? The fiscus was putting money in but their processes were not being respected. Was CPS relevant to radical economisation? The President spoke in SONA about radical economisation and if it were not, SCOPA had to apply its mind to the matter.

Ms Chiloane noted that Treasury had said that they could not add to the amount, which meant there would be deviations within the Department. How would these deviations affect work in the Department? Secondly, as far as the irregular payments of R3.4 million in 2015/6 were concerned, had Treasury condoned it? Thirdly, were there any preparations in-house for SASSA to be able to pay grants on their own? Did SASSA have any data on the 11 million beneficiaries apart from that information held by SASSA?

Ms N Khunou (ANC) wanted to know from Treasury how long it took to deal with a tender in terms of Treasury regulations. The Treasury representative responded that it was difficult to be specific but it could be ten days or longer. Depending on requirements, the advertisement would take 21 days and the bid process could take up to 60 to 90 days. A tender can be extended to four months, but two years is not normal.

Ms Khunou needed clarity on the timeframe. She wanted to reiterate what colleagues had said, which was that she was disappointed that the DG had not attended. The previous week he had started answering some of their questions. As accounting officer, the DG was one who was liable to ensure he was compliant. The last time the CFO had been on seven days’ sick leave. The problem was a South African problem and so officials should be here. Ms Khunou wanted to know if the PFMA and Treasury regulations were clear, i.e. that proposed expenditure of more than R500,000 had to go out to tender. From the beginning, CPS was more than R500,000. It was clear that the Minister was ill advised. Furthermore, the Advisory Body people were not at the Committee meeting to respond to questions about their actions. The Committee wanted to see the Advisory Body reports and the Treasury reports as well as the reports on the Court decision. She asked the Minister to talk about the Turnaround Strategy and show how they could be sure that timeframes would be met. She agreed with her colleagues that they could not run away from transformations. She had asked the DG, the previous week, who owned CPS and whether CPS had transferred any skills during the five years. Departments must be able to do their jobs without employing outside resources. There were South Africans who were not working and some of them have the skills needed. What did people like AllPay do? The Minister had spoken about SAPO and had said that they employ other sources. How did CPS do it for R16 per beneficiary? How much would SAPO charge? Ms Mvulane had said the previous week that SAPO was not available, but they could have mobile services. What would SAPO charge if they were available? What about banks that owe money? If CPS aside were put aside, then who could take over?

Mr Ndlozi asked about beneficiary cards as it appeared that over 50% would not be updated by 1 April. Was that discussed during negotiations? If so, what were they going to do? It appeared that the Minister was suggesting that they had reached the crisis because of SASSA officials. According to the Act, she had appointed the officials and was responsible for ensuring that they fulfilled their mandate but today she was blaming them, which meant she had not assessed and intervened on time to see that South Africa had a contract for 1 April. He alleged that the failings were the Minister’s failings. It was not right to blame the officials whom she had appointed and had to oversee. If she could not get it together, the failures were hers. Why should she still be the Minister if she could not handle SASSA? Why should she remain the Minister in good conscience after these failures?

The Minister pointed out that she had wanted officials to respond as Treasury officials had spoken. She was not blaming officials as she had taken responsibility. She had to change the submission to Court as it was not realistic. She had accepted responsibility but she could not accept people saying they would not be able to pay beneficiaries on 1 April because that caused pain and tension and uncertainty in the minds of the people. The Minister was not going to respond to hearsay. Ministers are appointed by the President. When one joins an organisation, one does not join to become a Minister. One was appointed as a Minister. There was some confusion as to whether Mr Ndlozi had spoken of “consciousness” or “conscience”.

The Minister began listing the names of people in the work streams but the Chairperson interrupted suggesting that it would be better if she sent a list of the names. The Minister agreed but indicated that she was going to name the people as the Committee needed to hear who they were. Senior Counsel Wim Trengove, ICT and banking Patrick Mokyeki [inaudible] Manie van Wyk, Mr Singh, [inaudible] – they report to us, not Parliament  – Economic Transformation – Tangkiso Parkies, They were experts in the work they were doing and SASSA would continue listening to them as they did research and did not thumb suck. Regarding the R316 million, SASSA was awaiting a response from Treasury. As Treasury was present, they could give their responses. As far as budgetary matters are concerned, they would be talking to Treasury. The Minister could not talk about the negotiations as they were still in process. When one negotiates, one negotiates in good faith. The Minister did not want to end up lying just to impress the Committee. She could only report what she knew.

As part of in-phase out-phase, data was already coming to SASSA. They already had half of it. The previous Minister, Minister Molewa, had begun talking to SAPO. They had been given ample time to put their house in order and yet they did not even have the licence. They had picked out a niche for SAPO, which is a state entity and has to be strengthened. SASSA could strengthen the Post Office and the Post Bank. When the matter was raised, it should not be raised as if they were running away from SAPO. People who know that SAPO was not ready should not blame SASSA. The Committee should call the SAPO and SASSA together to find out about their readiness.

SASSA had not signed any agreement with CPS. There had been negotiations and the technical team was looking into the outcome and thereafter they would take the process forward. Ms Mvulane could respond to the BEE questions. The Minister of Finance had written a letter raising three things. Firstly, they are unhappy about SASSA taking one option, but SAPO had always been taken along in their work so it was not one option. Re-registration was supposed to take six months but it had taken a long time – six months more. That was the reason for the unauthorised expenditure. Their work takes a long time. Treasury raised the issue of the budget stating that their budget would not be increased and that they should work within their budget. There was a budget and they would not request additional money. Should they need additional money, they would re-prioritise within their own budget as agreed by parliament and they would then go to the relevant committee because deviation is allowed. The Committee members should not suggest that SASSA was going to do something that was not legal.

Mr Ndlozi (EFF) referred to the plea bargain she had entered into in 2006 and her being in court in respect of Travelgate as a reason for doubting the word of the Minister. The Chairperson pleaded for an end to that line of engagement as it had been clarified. He told Minister that she had responded to the questions so there was no need for the officials to respond and he wanted to set more questions. The Minister said she objected. Ms Dumisile Ndlovu, Acting Executive Manager: Corporate Service at SASSA spoke to issues regarding the supply chain. She explained that when the services of the work streams were procured, Treasury Practice Note 6 and 7 of 2007/8 had applied and Practice Note 8 gave the accounting officer authority to approve deviations while Note 6 required one to report to national treasury and the Attorney General following the approval of such a deviation but Treasury had not responded to SASSA nor requested further information. She addressed the question of why it had taken two years to procure. She was able to pronounce with pleasure that the very same expert from Treasury had been involved in the Tender Committee. The Chairperson requested that personalities not be discussed - she could speak of officials. When ConCourt pronounced in 2014 they had started tender processes but it had been legally challenged before it was closed and went back to the ConCourt which ordered them to withdraw the tender. The tender was re-worked and introduced to the market place. The Constitutional Court had directed that they should conclude the process by 2015 and they met that date. They could not have foreseen that they would have non-responsive bids or they would have issued a five-year tender and would not have been sitting there. When they were unable to award a tender, they went back to Court in November and presented a report indicating when they would be ready to take over. Based on that report, the Court discharged its supervision over them. SASSA acknowledged the mistake that they had made in underestimating the magnitude of the work involved. They had 2016 to account and they had accounted in the previous meeting. Ms Mvulane explained that the debit card was endorsed by MasterCard and would expire in December 2017 but because it was currently being used to pay beneficiaries, it was linked to the current service provider and there were encryptions made by the service provider. These encryptions could be decoded remotely and SASSA did not need to get the cards into the system to unlock them. The card would expire only in December 2017.

Mr Chauke (CFO) spoke to the current process. They were currently engaging with CPS in a procurement process and that process needed to be finalised before they could talk about it because there were structures that needed to approve such a process. The fact that they had started negotiations with CPS did not mean anything as there were checks and balances in place, including the Bid Committee which must discuss the contract. It was unfair to be discussing the matter. The Chairperson interjected asking whether he saw SASSA going through all those processes in the time that was available. Mr Chauke pointed out that meetings would have taken place at that precise time if they had not been called to SCOPA. The Committee must afford SASSA the opportunity to complete the process without forcing the officials to make pronouncements on a process that was not yet complete. SASSA would address some of the issues raised when the renegotiated Service Level Agreement (SLA) was drawn up. Only once it was concluded, the SLA could be shared with the Committee and the public and it would inform them of the processes.

Mr Ross stated that time was of the essence as everyone in South Africa was waiting for grant payments to be effectively implemented on 1 April. He asked Minister whether she agreed that they were entering a period of uncertainty as the Minister has indicated that she had not signed a contract, especially as the magnitude of work had been underestimated and the procurement had not been concluded. Mr Ross had thought that South Africa was facing unaccountability but he had discovered that the country was facing a period of uncertainty. He asked the Minister whether she could intervene and have discussions with Treasury and the Minister of Finance so that there could be some sort of a joint statement from the Minister, and perhaps the Minister of Finance, to see that processes and the legality of the processes were adhered to and also to see that irregular expenditure was avoided. Would the Minister agree that the matter necessitated a full parliamentary enquiry into SASSA?

Mr Brauteseth said that he appreciated Ms Ndlovu’s explanation. When the Minister determined who would be in the work streams that took out the competitive bidding process as it was predetermined. It determined who would head them and which companies would get the work so there was no way that Treasury could ever approve the process. Treasury was clearly not happy with the process because there had not been a competitive bidding process for an, at least, R2.6 billion contract. The CFO had already blamed SCOPA for slowing down the process by calling SASSA to account. Was the plan to blame Treasury when people did not get their money in April and when their self-created crisis went pear shaped?

Mr Ndlozi pointed out that the previous week the Minister had said she was not going to court but she had gone to court that afternoon. He wanted an explanation as to why the Committee had been deliberately misled. The Minister should be charged with misleading parliament. CPS seems to be a Siamese twin attached to the hip of SASSA, although these were the very people responsible for illegal deductions, subjecting the people to criminals at the very least. They were a bunch of crooks. Why was SASSA so hell-bent on ignoring everything to ensure the tender was given to CPS, even to the point of using the threat of a crisis? It spoke to the integrity of the contract manager of the Department. In the entire debacle there had been a failure to lead.

Ms Khunou needed to re-emphasise that as the Public Accounts Committee, they were standing there to guard the public purse and to ensure that each and every cent was accounted for. The Strategic Plans of a Department were signed by the accounting officer and everyone responsible for signing the plans. The Committee wanted to ensure that everyone adhered to the plans. There had been fruitless expenditure of R5.5 and then there was the current crisis so Ms Khunou wanted to know where they were going to get the money to deal with everything, including the VIP protection used when doing pension payments, which cost R3.5 million and was not necessary. Deviation after deviation suggested that the problem was now a problem of South Africa. It did not help to know how procurement works, the Committee needed a report that showed who had been employed to solve the problems. If they had underestimated the timeframe, who had they appointed to solve the problem? The situation could lead to CPS having a monopoly. What was CPS doing that no other company could do?

In response to the Minister’s remarks, Ms Chiloane wanted clarity on the extent to which the deviations to fund the SASSA programme would affect other programs.

Mr Kekana had requested assurance that there would be payment on 1 April but he had not been assured. He rephrased his question asking the Minister to provide timelines for negotiations because he had assumed that negotiations would be completed in time. However, listening to information from the officials he was concerned that there was insufficient time to complete the whole thing. Maybe they could provide the timelines and indicate when the announcement would be made so that everyone could be assured that come 1 April, the pensioners would be paid.

Mr Booi said that it was quite clear that they needed to continue with the process and not leave it to SASSA alone if they wanted to get to the bottom of the issue. If SCOPA did not mentor SASSA, CPS would be in the system permanently. It was in the interest of SCOPA to re-engage with their resolution on how they engaged with the particular matter of SASSA. SCOPA was dealing very closely with other entities such as the SABC and Correctional Services. SASSA must become a focus area until SASSA is able to turn around. SASSA must remain their baby as the answer regarding BEE had not been answered and the State President had been very clear on radical economic social transformation in the SONA speech. Mr Chauke should not suggest that it was not the first CPS agreement. There had been an agreement with CPS and it had gone to the Constitutional Court, with a lot of problems. The Committee wanted to see if the Service Levels Agreement with CPS did help South Africans and create employment. CPS was getting richer than South Africans were. He accepted that it was a private sector company but he wanted assurances as to who would benefit besides the pensioners. He warned SASSA that they would be coming back quite regularly because SCOPA wanted to get to the bottom of the matter.

The Chairperson thanked the Minister for having sat through the meeting, despite her commitments. In addition to the other questions, he wanted to know about SoftPac as they had received correspondence from people who claimed that they were to have been awarded the IT tender. The matter went back to 2006 and they alleged that the Minister would not allow the matter to go to Court for resolution. Why had it not gone to court?

When she was Deputy Minister, the Minister had been given responsibility to look into the issue of the IT tender and the State Law Advisor had been very clear that there was not enough evidence. She had been asking for the relevant letter from Thabo Mbeki but she had never seen it, although she understood that the Chairperson had the letter. Secondly, the same people who had been to the Chairperson had taken them to court. Others also claimed that they were part of the tender. It was thought that a thorough response was necessary as the Speaker of Parliament had sent the letter to the Minister. The State Law Advisor had turned them down a number of times. SocPen (the legacy information management system) had to be strengthened and strategies had to be developed to integrate information because names were lost when payments were done and they had to be paid the next month. SocPen sometimes created teething problems for SASSA. When SASSA agreed to work with them, they had thought SocPen would be in charge of the system since they are a government institution but they themselves had to look for others to do the work. The Committee should call them as they are a public company and let them account.

The Portfolio Committee for Social Development was in attendance and the Minister felt that they were better placed to mentor SASSA. At that point the Chairperson had to request the meeting to quieten down. The Chairperson explained that Mr Booi had wanted SCOPA to engage fully. The Minister agreed with that. She told Mr Hlengwa that CPS was like Cornerstone (the brokerage that provides funeral cover to pensioners) and was doing exactly the same things as Ithala. SASSA had grown step by step and had deepened its understanding of what they could do with pay grants.

The Minister indicated that they had timeframes for the implementation of the whole programme but she was asked to provide timeframes for the process of concluding the negotiations and making an announcement. The Minister stated that she had said, even in the meeting, that payment would be made on 1 April and that after receiving the report on the terms of the agreement and everything from the technical team on Friday, she would make announcement. The Minister had already made a joint statement with the Minister of Finance, and even the President had made a statement committing to the payment of grants. It was up to Committee to make a request to the President regarding a Commission of Inquiry. The officials were invited by the Minister to make additions but they did not want to comment further.

The Chairperson highlighted the fact that on 1 April all of government was committed to the payment of grants but SCOPA required the contract agreed upon between SASSA and CPS and the approval of Treasury. He did not know about the court processes but SCOPA needed to know about the processes, especially in respect of government processes, and that these processors had been adhered to. Where was the timeframe? He agreed that one should never play with the emotions, especially the emotions of the poorest who, because of the high levels of inequality in the country and the lack of transformation, could only celebrate freedom by receiving social grants and if that were threatened, the entire purpose of freedom becomes meaningless. The Chairperson called on the Chairperson of Appropriations and the Chairperson of the Portfolio Committee to make comments.

The Chairperson of the Social Development Portfolio Committee, Ms R Capa (ANC), expressed the appreciation of her Committee that they had been permitted to join SCOPA for the discussion as they are beginning to understand issues. They appreciated the cooperation from other committees sand they would continue engaging with the Department so that they could continue their mandate. They were not there because there was a business interest. They were concerned about poverty and the issues of inequality that all of South Africa should be continually engaged with.

Ms Y Khoza (ANC), Chairperson of the Committee on Appropriations appreciated the presentation by the Minister as they had gained deeper insight into the challenge that confronted SASSA and the Department of Social Development. Her Committee had already decided to engage with SASSA in terms of the mandate of her committee which was to follow money and to assess the impact that money made as this was taxpayers money being spent through SASSA. They had gained such insight and background. The Committee had decided to engage with SASSA and have their own session, to which SCOPA was invited. She thanked the Minister for being able to respond to the questions.

Meeting was adjourned.

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