SASSA and Post Office on social grant payments contract

Public Accounts

05 September 2017
Chairperson: Mr T Godi (APC)
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Meeting Summary

The South African Social Security Agency (SASSA) and South African Post Office (SAPO) were to brief the Standing Committee on Public Accounts on the agreement for SAPO to provide assistance with the payment of social grants. Unfortunately, SAPO could not present its plan because SASSA said that it was still testing the markets and its procurement process was not yet completed. SASSA informed the Committee it has been instructed by the Inter-Ministerial Committee to conduct due diligence on the SAPO proposal before SASSA could finalise the agreement with SAPO. SASSA was unsure which Ministers sat on the Inter-Ministerial Committee when asked but thought it was the Ministers of Agriculture, Labour, Small Business, Social Development, Minister Mahlobo and Minister Jeff Radebe.

The Committee was told that the Council for Scientific and Industrial Research (CSIR) has been appointed to undertake due diligence at an agreed fee of R410 000. It needs to finish the due diligence before SASSA could confirm the SAPO agreement. The due diligence would indicate or identify areas SAPO could assist with and would be completed by the end of September.

SAPO told the Committee it has the records of all its meetings with SASSA and had indicated the roles it would assist on. For those items it could not deliver, SAPO had indicated it has agreements with entities that could assist with this. SAPO stated it has not yet been contacted by the CSIR.

Members were unhappy with the answers it received from SASSA. They felt SASSA was not enthusiastic about working with SAPO and that SASSA was manufacturing an environment that would allow Cash Paymaster Services (CPS) to come in through the "back window". Members said the interaction with SASSA was not comforting and was not giving them confidence that there would be constitutional compliance.

National Treasury stated the reason SASSA could not finalise the SAPO agreement is because it had not followed the advice and regulations of Treasury on how to go about doing due diligence.

The Committee agreed that SASSA should furnish it with all its documents on the SAPO agreement and indicated it would conduct an oversight visit at SASSA offices on 14 September 2017.

Meeting report

Ms T Chiloane (ANC) stated that in its previous meeting with SASSA, SASSA had promised to send the required documents before the next meeting to enable the Standing Committee on Public Accounts (SCOPA) to go through them before the meeting, but those documents have not reached the Committee.

Ms Pearl Bhengu, SASSA Acting CEO, replied that at that meeting they had given the Committee the final date of 31 August 2017 to provide the names of those who were going to do due diligence of SAPO. SASSA then decided to ask for a deviation. They wrote a letter to National Treasury while they were waiting for the evaluation committee. Treasury refused to grant them a deviation, saying it could not consider only one service provider. SASSA then went back to ask for quotations from the people that submitted later. She said this matter would be finalised by the end of September when the adjudication committee has done its work.

Mr T Brauteseth (DA) remarked that the SASSA letter to Treasury raises concerns. He asked why SASSA needs an outside service provider to do due diligence and why this could not be done internally.

Ms Bhengu indicated that although SASSA does not have capacity internally, the due diligence is going to be done as an evaluation process inside SASSA. Doing due diligence on SAPO's proposal was a resolution taken by the Inter-Ministerial Committee and it had to be done before finalising the SAPO agreement.

Mr Brauteseth asked what skills are required for due diligence and if they have a list of diligence to be checked.

Ms Bhengu replied they need qualified people to assess the capacity and capability of the organisation in delivering the service. These two areas needed to be checked to see if there would be efficiency within the organisation to carry out the work.

Mr Brauteseth asked what the technical issues are they are looking at from SAPO, the qualifications of the people who are going to do due diligence that SASSA could not do, and the cost for this work.

Ms Bhengu replied she does not have all the information to share with the Committee and the cost of the work would be less that R500 000.

Mr Brauteseth remarked SASSA was refused a deviation by Treasury and it appointed a service provider to do the work yet it does not know the qualifications of the people who are to do the work. He asked how many quotations SASSA got for the work and who the winning bidders are.

Ms Bhengu indicated they got quotations from Thulo Consulting, Capital C, and CSIR. The CSIR was appointed to do the work of due diligence at a cost of R410 000.

Mr Brauteseth asked when CSIR is expected to finish the work.

Ms Bhengu replied work would be concluded during the month of September 2017.

Mr Brauteseth asked when the evaluation committee is going to complete its work.

Ms Bhengu replied it has completed its work.

Mr Brauteseth asked how could an evaluation committee complete its work when the technical due diligence has not been completed. He asked for the names of people serving on the technical evaluation committee.

Mr Tsakeriwa Chauke, SASSA CFO, replied that they could not give out names of the people until their assignment is done.

Mr Brauteseth asked what their concerns are for not giving the Committee their names.

Mr Chauke replied they needed to ensure they complete their work.

Mr Brauteseth asked if there are people involved in the evaluation committee who also work for the ministerial work streams that are financed by the Department, and if there are people on the SASSA payroll who are on the evaluation committee.

Mr Chauke replied no to both questions.

Mr Brauteseth asked who were the people who went to MinMec to report the completion of the work and when was the handover done at MinMec.

Mr Chauke replied the handover was done around June 2017 and it is the project manager that went to report on the technical aspects and she was invited by MinMec.

Mr Brauteseth asked when the work streams ended and the handover was done to EXCO. There are service providers that want to take over from SASSA, but the situation could not be left hanging. He asked when the last payment was made to the ministerial work streams.

Ms Zodwa Mvulane, SASSA Project Manager, replied that 10 July 2017 was the last day of the work streams. Its work was adopted towards the end of August 2017. Invoices were received, but she could not state when they were paid.

Mr Brauteseth said they needed a full list of the people who work on the committees and state the entities. He asked SASSA to tell the Committee where does SAPO start and end because they want to know what SAPO can and cannot do and what SASSA is going to do to complete the bidding process.

The Chairperson reminded Mr Brauteseth it would be unfair for SASSA to respond to the questions because due diligence and evaluation have not been completed. SAPO could not say it could do everything based on what it submitted. As a Committee, they felt SASSA was not enthusiastic about the service SAPO would provide.

Mr Brauteseth stated SASSA would have an idea of what SAPO could not do, hence they are procuring from other service providers.

The Chairperson said the Committee needs the other dates for the bidding from the other service providers.

Mr E Kekana (ANC) said the bidding process has not yet been completed and it would be unfair to ask SAPO to state what it could do or not do in public. This matter is involving a legal process.

Ms Bhengu informed the Committee they revised the dates for they could not get a technical service provider. The closure for bids would be at the end of October 2017 and evaluations would commence during the first week of November 2017. If they require more days, they would work over the weekend. New cards would be rolled-out around January 2018.

The Chairperson commented if SASSA is talking about a new card rollout, it is telling the Committee about something Members do not know. And that means SASSA knows who it is going to use.

Ms Mvulane replied that the procurement process for SAPO is looking for card rollout. SASSA is planning for other scenarios.

Mr Brauteseth asked what they are planning for other scenarios.

Ms Mvulane replied that they are working on timelines.

Mr Brauteseth commented that the Minister indicated the whole process would be phased out after five years, and he asked why SASSA is planning to do the whole thing within months.

Ms Bhengu replied that the Minister was referring to the process of phasing out CPS.

Mr Brauteseth wanted to find out who owns the biometric data since CPS has lots of data. He asked if SASSA is going to import the data from CPS into its own system or if SASSA is going to do a new registration seeing that 31 March 2018 is the last date for CPS.

Ms Bhengu reported the data belongs to CPS, except for the data they are waiting for a legal opinion on, and that is the payment data. The data for beneficiaries is with SASSA while the biometrics data is with CPS and would be given to SASSA monthly.

Mr Brauteseth said the CPS indicated it owns the whole data and it costs R1,6m. He wanted to establish how SASSA is going to ensure the data from CPS is secured.

Ms Bhengu replied the data belongs to SASSA and they have made an addendum with CPS in terms of security of the data.

Mr Brauteseth asked SASSA if it has heard of EasyPay and if it is going to go through a new registration and will make use of EasyPay. If SASSA is going to use EasyPay, he asked about the level of protection that it would provide to beneficiaries against EasyPay.

Ms Bhengu replied they have heard of EasyPay, but the new SASSA cards are not going to be linked to debit orders.

Mr Brauteseth asked if SASSA is going to rollout a programme warning beneficiaries against illegal practices.

Ms Bhengu replied that they are on radio stations trying to tell people of the protection of their money and cards. Currently, SASSA is working with the GCIS in communicating with the beneficiaries in all languages.

Mr Brauteseth asked if SASSA is aiming for a ballpark figure for the transaction rate seeing that the CPS transaction rate is R16.64. He asked what the budget would be for this.

Ms Bhengu replied that there is a procurement process happening and this could not go public. She said the budget is around R2.3 billion and they are striving for a saving.

Mr Brauteseth asked if Q Link is providing services to SASSA beneficiaries, and if SASSA has not approached National Treasury for the verification of the scope of work.

Mr Chauke replied that Q Link is not providing any service to SASSA beneficiaries. He agreed in the affirmative that they have approached Treasury for work scope verification.

Mr Brauteseth stated it is confusing that SASSA made enquiries about Q Link while it is also thinking of working with SAPO. He asked why SASSA needs an outside company to handle deductions if Q Link was already providing the very same service to SASSA.

Mr Chauke replied it is not only SASSA responsible for payments. Q Link was the third party. SASSA was on PERSAL. Third party deductions like funerals would be done by SASSA. The law requires that SASSA deducts only 10%. Any service provider that would come knows that this would be done internally by SASSA.

Mr Brauteseth asked how much is Q Link paid for collecting funeral monies.

Mr Chauke replied that SASSA is not paying Q Link any money at this stage.

Ms Chiloane stated that in terms of the letter SASSA wrote to the Chairperson about the change of dates and the deviation not granted, the Committee was of the view that SASSA would bring its terms of reference with SAPO. Now the Committee finds itself dealing with legal matters. She asked if 18 January 2018 is the day SASSA is finalising the project with SAPO. She asked who commissioned KPMG to assist SASSA with data.

Ms Mvulane replied that whoever is going to be the service provider is going to order 10 million cards and put everything in place. She reported that it was CPS who commissioned KPMG when there were data problems. With regard to the card rollout and the March 2018 deadline, SASSA has made arrangements to continue with the current cards seeing that it would not meet the March 2018 deadline.

Ms Chiloane commented that the country is in a crisis. SASSA ended up giving the business to CPS without following any tender process. At its previous meeting with SCOPA, SASSA gave the Committee all sorts of dates that were not followed. The Committee did not address why SAPO was in the meeting in the first place. And it is easy to tell the two entities are not communicating. She pointed out there is no reason to empower CPS and Q Link when state entities like SAPO are in existence. She stated that deductions from the beneficiaries should be stopped by 31 March 2018. The Committee needs assurance that everything is going to happen by 31 March 2018 because no one knows what is going to happen to all the monies paid by the beneficiaries.

Ms Bhengu replied that their plans still allow them to appoint service providers to ensure SASSA meets the March 2018 deadline. SASSA has a mandate from the SASSA Act to deliver the payments itself and not fold its arms and watch the service provider failing to do its work.

Ms V Mente (EFF) remarked she finds discomfort for getting SAPO to be in the meeting if the Committee could not verify what SASSA is saying about SAPO. SAPO should be allowed to take the Committee through the timeframes it is proposing and see if it would be able to deliver in time. She agreed the Committee might not be able to go into the details of the bidding process. However, the simple things SASSA has provided in the correspondence dated 15 August 2017 on the items SAPO would not be able to do are giving the Committee no comfort. She asked why there is a need to roll out new cards when SAPO has the technical capacity to transfer data to the current cards.

Ms Mvulane replied that  the new cards would be linked to a commercial bank that is going to allow SASSA not to experience the problems it is currently experiencing with the existing cards. The new system would be linked to Grindrod.

Ms Mente asked why she is getting the feeling that SASSA does not want to work with SAPO.

Ms Mvulane replied they are still busy with the procurement process. If the bid documents of SAPO have got satisfactory answers, then they would engage with SAPO.

Ms Mente commented that the whole process is there to frustrate SAPO so that it does not deliver on its mandate, and by March 2018 everyone would be back with the CPS.

Mr Chauke replied that there must be a competitive bidding process that is taking place.

Mr C Ross (DA) asked why SASSA has applied for a deviation if it is committed to a competitive bidding process. You apply for a deviation if there is only a single supplier or an emergency.

A Treasury official stated that the first deviation was to do with the appointment of the CSIR. SASSA indicated that if the initial submission was R500 000, then it was going to have to be a competitive bid. But if the amount is less than R500 000, SASSA assesses the service provider and awards the business. The second deviation has to do with Q Link. SASSA requested an expansion, but that has not been finalised. When SASSA asked Treasury about approaching a government entity, Treasury suggested SASSA should engage with the entity and establish what the entity can do and ask for a financial proposal.

Mr Ross stated that there are exceptions to the rule, if people are serious about competitive bidding. SASSA is driving a difficult process. He asked if SASSA should not engage a private company to drive the process and take the grant delivery process from CPS to SASSA and SAPO. SASSA should source an investment banking company to help them.

Mr M Hlengwa (IFP) commented there are alternatives that are being done to avoid working with SAPO and to allow CPS to come back through the "back window". There is no political or administrative will to work with SAPO. He requested the Committee be furnished with minutes of meetings between SASSA and SAPO to look at the progress made since the two entities had a workshop. He asked that the transition process be detailed so as to see who is involved in the process. The Committee runs the risk of being lost and seeing many players on the field and many cooks in the kitchen. He enquired about the cost of data migration, and asked how long the General Manager has been with SASSA and what his job description is.

Mr Chauke replied the data is received on a monthly basis from CPS at a rate of R16.44.

The Chairperson asked if the R16.44 is inclusive.

Mr Hlengwa interjected and said the R16.44 could not be a package. It is not good for Members to attend the meeting only to get wishy-washy responses.

Mr Chauke indicated the data they do not have is the transactional data that they are seeking a legal opinion on this. The biometric data is with SASSA.

Ms Bhengu remarked that the General Manager has been with SASSA since 2012 and is doing project coordination within SASSA.

Mr Hlengwa remarked that SASSA CEOs come and go but the General Manager has been there quietly.

Mr Ross said that they want government departments and entities to do the work themselves and not make use of consultants. But there comes a point when Members have to make a proposal for the use of consultants when they see things are reaching a level of incompetence and deadlines are not going to be met.

Mr M Booi (ANC) remarked that the concerns and attacks from Members are not personal, but SASSA is attracting their attention. SASSA is now forcing the Committee to consider other legal or constitutionally acceptable avenues of sorting out the problems. He asked if the agreement between SASSA and CPS on the transference of data is still available.

Ms Bhengu replied they still have the letter from CPS that indicates cooperation on the take-over, but the biometric data is still with CPS and is being transferred monthly.

Mr Booi asked about the SASSA staff component and if CPS is working with SASSA at no cost after it abused R40m.

Ms Bhengu replied her organisation has got no new people except the General Manager who started in 2012. She stated that SASSA pays R16.44 and has not asked for any deviations.

The Chairperson asked about the Ministers who are on the Inter-Ministerial Committee. He asked National Treasury that if SASSA is going to use SAPO, would SASSA identify the things that SAPO could do and not do.

The National Treasury official replied that the legislation states that if the service cannot be provided by a government entity, it has to be advertised. But if it is entity to entity, both entities have to approach Treasury. SASSA raised concerns about engaging SAPO. Treasury then advised SASSA on how to go about the matter as stipulated in the Demand Management Guidelines.

The Chairperson asked what the legal weight of the guidelines is.

The Treasury officer replied that the guidelines have legal weight.

The Chairperson wanted to establish if it was the decision of the Inter-Ministerial Committee that due diligence should be done on SAPO.

Ms Bhengu agreed in the affirmative. She stated that though she is unsure, she thinks the Inter-Ministerial Committee comprises the Ministers of Agriculture, Labour, Small Business, Social Development, Minister Mahlobo and Minister Jeff Radebe.

The Chairperson stated the reason the Committee is in the process it is, is because the Inter-Ministerial Committee gave out instructions that were contrary to National Treasury.

The Treasury officer stated that when you do due diligence on a government entity, things are different from when you do due diligence on a private company. SASSA has to verify what SAPO has claimed to have done or delivered on. However, it appears SASSA never followed the advice and regulations of Treasury.

The Chairperson asked what the outcome of the workshop was that was supposed to verify SAPO's capabilities.

Mr Chauke replied the outcome was to get the Request For Proposal (RFP) from SAPO. SAPO's proposal did not identify the needs of SASSA though it indicated they could do everything. It seemed feasible that entity-to-entity was going to work.

The Chairperson remarked the impression from SASSA's side was that there were things that SASSA thought SAPO would not be able to do when it approached SAPO's proposal. The Committee needs to get confirmation from SAPO that states it would be able to do everything for SASSA.

Mr Mark Barnes, SAPO Group CEO, reported that they sent responses to SASSA. SAPO specified the details of the services they would provide, and those things it could not deliver on, SAPO had indicated it has agreements with entities that could assist.

Mr Kekana pointed out it is not clear if SASSA is keen to work with SAPO. SASSA is still testing the market. It is not clear from the interactions with the Inter-Ministerial Committee the route that is to be taken.

Mr Booi commented that the processes SASSA is talking about are not making the Committee confident that there will be constitutional compliance. By March 2018 the Committee needs to be confident that processes have been followed. The Committee does not feel comfortable that SASSA is unsure about the Ministers that make up the Inter-Ministerial Committee though it was made known to the public. Everything is back to square one and is undermining the laws of the country.

Mr Brauteseth remarked that Q Link provided services to SASSA in the form of deductions. Then there was the expansion of scope. Treasury never agreed to this expansion because Treasury asked SASSA if this expansion could not be done through SAPO.

Mr Chauke replied that Treasury never refused the expansion of scope, but asked for additional information. Q Link is not doing any work for SASSA at the moment.

Mr Brauteseth suggested the Committee should schedule a meeting with SASSA on progress made on processes. He expressed frustration and puzzlement over the absence of the Minister from two meetings.

Mr Ross pointed out that when two parties engage, there are negotiations and agreements. But by the look of things, it does not appear there will be an indication of when SASSA will have an agreement with SAPO.

Mr Hlengwa commented it is good that SAPO was in the meeting so that it could see the kind of people it is dealing with. An environment is being manufactured to bring back CPS, by hook or crook. The Committee needs to create a framework that is going to ensure that CPS is not involved in any way in this process. He requested that the Inter-Ministerial Committee brief the Committee so that it has full confidence in the process and can probe the matter fully. He said the Committee is a necessary irritation and it is going to be on the back of SASSA until it gets things right.

Ms Khunou remarked that the Committee is dealing with passionate liars who change the information all the time. She had asked the then SASSA CEO if due diligence would be done by this time, and the response had been that it would. But this is September 2017 and nothing is done. This is the time when the Committee has to show departments that Parliament has power and that is why they had told Treasury not to come and talk of deviations. The terms of reference for the evaluation process are not known.

Ms Mente stated that the SASSA General Manager should give the Committee clear guidance on the engagement between SASSA and SAPO. The then SASSA CEO, Mr Magwaza, had meetings with SAPO. But today the Committee is told of the bidding process. She agreed with Mr Hlengwa that processes are going to be delayed so that SAPO would not be able to test and put its systems in place. What is going to happen is the Committee would see a service provider that is going to use a CPS licence and that means CPS would never leave this process.

Mr Kekana asked if SASSA is going to take the government-to-government route or if this is going to be an open tender/bid process. Both processes have legal implications.

The Chairperson assured Mr Kekana that SASSA has taken the government-to-government process.

Mr Chauke replied if SASSA had wanted an open tender process, SAPO would not have been in the picture.

Mr Barnes replied that SAPO has accurate records of all its meetings with SASSA. Technical due diligence commenced on 31 July and would be completed around 25 September 2017. SAPO has submitted to SASSA all that it could do.

Ms Mvulane replied that SASSA is still studying the SAPO documents.

The Chairperson asked who is monitoring the deadlines.

Ms Bhengu replied that deadlines are being monitored on a weekly basis. SASSA still wants to work with SAPO and on top of that there is a three-year contract that would be given to SAPO. She indicated that they are mindful of the beneficiaries and how they have been taken for a ride. Hence with the new cards there would be no debit orders. Those that want debit orders would have to open their own bank account and money would be deposited in their bank account.

The Chairperson told SASSA that everything it does has to be in the public interest. If Members are hard on them, it is because the Members are doing their work. There is nothing personal. He said it was important for SAPO to attend the meeting to prove they could work with SASSA and that there is no turning back. He asked SASSA to forward the Committee all its documents regarding its SAPO agreement. The Committee resolved to pay SASSA an oversight visit on 14 September 2017 at its offices.

The meeting was adjourned.
 

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