COSATU condemns grant distribution scams
The Congress of South African Trade Unions shares the anger expressed by Social Development Minister, Comrade Bathabile Dlamini, at the serious allegations against Cash Paymaster Services (CPS), the company that won the tender to administer pensions and social grants on behalf of South African Social Security Agency (Sassa) (see Business Times).
It is alleged that CPS - a subsidiary of Net1 UEPS Technologies (Net1) - has been using Sassa's social grants database in a scheme called Umoya Manje, to market airtime to social grant beneficiaries. The SABC has reported they are "illegally deducting" money from grant beneficiaries, which means that in some cases, the beneficiaries receive only a few rands at the end of the month.
It is alleged that the airtime is sold to social grant beneficiaries in R5 bundles on a credit basis, and R5.50 gets deducted from the beneficiary's social grant the following month. Supposedly only the SASSA card number is needed to purchase the airtime, leaving the system open to fraudsters to buy large amounts of airtime and then resell it with an increased profit margin. The minister has reportedly described it as a "scam".
Comrade Bathabile Dlamini has condemned this practice and accused CPS of being "reactionary" and not having the interest of the poor at heart. The Social Development Department says it is talking to the Reserve Bank to stop the debit orders going through and is considering legal action against CPS and even terminating its multi-billion rand contract with it.
These allegations follow even more serious charges, now being investigated by the Public Protector, that CPS has been operating an illegal loan scheme targeting social grant beneficiaries. It is alleged that CPS officials offer and provide certain beneficiaries "interest-free" microloans with repayments automatically deducted from their social grants - some with interest rates as high as 50%. If true, this mashonisa scheme is not only exploiting then poorest of the poor but contravenes the Social Assistance Act.
Even the award of the tender to CPS was controversial. It was challenged in court by the defeated bidder, AllPay, a division of ABSA Bank, which accused Net1 of bribing officials to lower AllPay's scores at the last minute, to justify the award of the tender to CPS - a decision which the high court said appeared to be "unfair and irrational" and done for an "ulterior purpose".
But as the deal was already done, the court declined to cancel it. Absa took the case to the Supreme Court of Appeal, which rejected their appeal, for the curious reason that Absa were evoking "suspicion of corruption and dishonesty by innuendo and suggestion". So then Absa sought leave to appeal to the Constitutional Court. The US Federal Bureau of Investigation is still probing the bribery claims.
In yet another scandal, reported by the Mail & Guardian earlier this year, the Financial Services Board (FSB) suspended the licence of Smart Life, Net1's funeral policy subsidiary, which was set up to sell funeral policies at social grant pay points, which again pointed to an abuse of Net1's monopoly right to distribute grants.
These accusations confirm COSATU's strong opposition to outsourcing or privatising our basic social services, which provide fertile ground for abuse, exploitation and corruption. The federation pledges its full support to the minister in any action she takes to put a stop to CPS's abuse of its exclusive right to distribute benefits
COSATU further calls for the Department of Social Development to cut out middle-men altogether, and itself administer the distribution of grants and pensions directly to the beneficiaries, so that every cent goes to the poor and none to capitalist profiteers like Net1.
Statement issued by Patrick Craven, COSATU national spokesperson, October 21 2013
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