South African Court Extends Welfare Contract, Slams Government

By Matthew Hill

 Bathabile Dlamini (Photo by Elizabeth Sejake/City Press/Gallo Images/Getty Images)

Bathabile Dlamini
(Photo by Elizabeth Sejake/City Press/Gallo Images/Getty Images)

South Africa’s Constitutional Court ordered the nation’s welfare agency to extend Net1 UEPS Technologies Inc.’s contract to distribute grants to more than 17 million beneficiaries for a year to avoid a “potential catastrophe” and slammed the government’s handling of the matter.

The ruling on Friday effectively ends the threat of an interruption to a signature program of the ruling African National Congress but leaves President Jacob Zuma’s administration with a stinging condemnation by the nation’s top court of its performance. Social Development Minister Bathabile Dlamini should explain before the end of the month why she shouldn’t pay the costs of the case in her personal capacity. The court said it would supervise the new agreement.

“This court and the whole country are now confronted with a situation where the executive arm of government admits that it is not able to fulfill its constitutional and statutory obligations to provide for the social assistance of its people,” Justice Johan Froneman said in the ruling. “And in the deepest and the most shaming of ironies, it now seeks to rely on a private corporate entity with no discernible commitment to transformative empowerment to get it out of this predicament.”

African National Congress Women League (ANCWL) members demonstrate support of Bathabile Dlamini outside the Constitutional Court on March 15. Photographer: Ginaluigi Guercia/AFP/Getty Images
African National Congress Women League (ANCWL) members demonstrate support of Bathabile Dlamini outside the Constitutional Court on March 15.
Photographer: Ginaluigi Guercia/AFP/Getty Images

In the ruling, the court said the contract extension with Net1’s Cash Paymaster Services unit must continue on the same terms as the previous agreement that expires on March 31, although the company can ask the Treasury to review the pricing. CPS has a constitutional obligation to continue dispersing the monthly stipends, Froneman said.

Illegal Contract

The welfare payments system was on the brink of collapse after the South African Social Security Agency failed to find a new company to administer the program after the court declared the original contract with Net1 invalid more than two years ago.

“The court has basically said the minister and Sassa cannot be trusted to do what they are supposed to do and it is going to supervise the process to make sure they do their job in a very hand-on manner,” said Pierre de Vos, a law professor at the University of Cape Town. “It is an excellent judgment because in a way it saves the day and it tries to protect the country from the incompetence of the minister.”

 

Zuma’s Missteps

The fiasco is the latest in a series of missteps by Zuma’s administration that have curbed growth, dented investor confidence and stoked conflict between government officials and departments. Zuma on Thursday rejected criticism of Dlamini, saying there is no crisis and that the payments will be made on April 1.

Dlamini will follow the Constitutional Court’s ruling, her spokeswoman Lumka Oliphant said by phone.

“We’d like to apologize for the anxiety and the fear that the people of South Africa, who are beneficiaries of the social grants, had to endure in the past few weeks,” she said.

Human rights groups and opposition parties have accused Net1 of using information gathered on grant beneficiaries to sell services ranging from mobile-phone airtime to loans to some of South Africa’s poorest people without them always understanding what they were agreeing to. It has denied the allegations.

The court ruled that personal grants data must remain private and not be shared for the purpose of marketing goods and services.

“We dropped the ball, we apologize to the nation,” Sassa Chief Executive Officer Thokozani Magwaza told reporters outside the court.

Source: www.bloomberg.com

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