SASSA and SAPO: progress in overcoming deadlock on social grant contract

Meeting report

Mr Godi welcomed SASSA and SAPO and remarking that he was looking forward to good news from the two entities in overcoming the deadlock. The purpose of the meeting was to alleviate the challenge faced by the entities in light of the looming deadline imposed by the Constitutional Court judgement in the Black Sash Trust v Minister of Social Development and Others case.

The Director General of National Treasury, Mr Dondo Mogajane, told the Committees that National Treasury had met twice with SASSA and SAPO officials since the SCOPA meeting of 31 October. In the first meeting yesterday evening, they discussed the basics of the challenge at hand and in the second meeting this morning, it was resolved that all three entities should assist in reporting back to the Committee.

Mr Mogajane proceeded to provide the Committees with feedback on these meetings. He reported that at no point in the meetings did SAPO come to a fuller understanding as to why they were disqualified for the remaining three services besides biometric data handling. There were four categories of services discussed by the three entities. SAPO had been awarded one of the services: development of a payment platform with features for biometric enrolment as well as biometric proof of life. SAPO genuinely believes that it is capacitated to provide the remaining three services which are card production, banking services and grants distribution.

It was decided in the meeting that SAPO is entitled to reasons for its disqualification and so SASSA is obliged to put forth these reasons. The meeting was thus postponed for two hours to grant SASSA an opportunity to deliver the reasons to SAPO and also for SAPO to motivate why it should be awarded the remaining services.

Once the once reasons were advanced and letters exchanged between the entities, they met again to deliberate on the reasons and the need for an amicable solution to be realised. It was agreed that it was important to think about these issues overnight.

In the second meeting, SASSA presented SAPO with a letter which stated that after careful consideration of the motivations that SAPO had advanced about being ready and willing to provide all services, SASSA would want to satisfy itself that all processes as per section 217 of the Constitution which talks about fairness in the procurement process and section 51 of the Public Finance Management Amendment Act (PFMA) had been met. In so doing it would want National Treasury to pronounce its position on the process. This is so that the process from this point onwards is not seen as untoward. National Treasury had only received this at 13h00 and is therefore currently still considering the letter.

Treasury’s interpretation of the letter is that SASSA wants National Treasury to facilitate and provide a dispute resolution mechanism. It requests that National Treasury conducts itself as an independent body to facilitate discussion between the two entities on the procurement of a grant payment system. National Treasury indicated that it notes the letter and its contents, however, the conversation should rather be what the other possible areas of engagement between SASSA and SAPO need to be.

After the two meetings, it is still unfortunate that he has to announce that the SASSA and SAPO have not come to agreement on the role that SAPO should play in the grants payment administration.

Mr Mogajane said he wants both SASSA and SAPO to indicate clearly what each understands as the key issues hindering the process of coming to an agreement. There should be willingness between the two parties and it needs to be borne in mind that they are two governmental bodies which should anyway collaborate. The SASSA and SAPO CEOs undertook to work together. He added that the technical teams of SASSA and SAPO have never even met. There have been no technical discussions which dearly concerns National Treasury. National Treasury will therefore endeavour to facilitate the discussions between the technical teams and bring in other parties such as to the Reserve Bank to form a task team to facilitate collaboration and ensure that the deadlines are eventually adhered to.

Mr Mogajane said National Treasury believes the process up until now lacks a firm discussion and requires guidance from the Inter Ministerial Committee (IMC). There was a basic exchange between the two entities in the previous meetings but the two entities “are not understanding one another’. SAPO believes that all four services are integrally linked but SASSA sees the services as independent from one another. This shows that the dispute is one of technicalities and it is therefore necessary for expert technical guidance as well as political guidance in the form of the IMC. This is the opinion of National Treasury.

Discussion
Mr Godi thanked National Treasury for the report and the work they had done so far. He would give both SASSA and SAPO an opportunity to respond but the response should be limited to the dispute resolution and moving this process forward rather than on technicalities raised in the two meetings held previously.

Mr Godi said that from the report he has identified four issues at play which he is inviting further discussion before the Committee. These are:
1. The agreement to involve National Treasury in facilitating the process of review;
2. The creation of technical teams by both SASSA and SAPO together with the Reserve Bank and National Treasury;
3. The need to expedite the process so as to meet the Constitutional Court set deadlines; and
4. The IMC as a political guiding hand.

Ms Z Capa (ANC) added to the list the issue of alternatives, should this impasse continue to exist between the two entities. There must be a fallback plan.
 
Ms Pearl Bengu, Acting CEO of SASSA, said SASSA had given a Request for Proposal (RFP) to SAPO and then assessed it to ascertain what SAPO had capacity to handle and what it did not have. National Treasury as well as the policy known as the Inter Governmental Framework was involved in the assessment process. Proper processes were thus followed. However, to clear any assumptions and suspicions to the contrary, SASSA is amenable to a review. In the previous two meetings, SASSA had asked Treasury to provide it with timeframes for the review as it is aware that time is not on their side.

Mr Zibuse Ngidi, Acting SAPO Board Chairperson, said the report of the National Treasury Director General is an accurate reflection of what was discussed and the position in which the two entities, which are in fact sibling entities, now find themselves. He said that National Treasury, as the parent body, should enforce strict timelines so as to expedite the process of dispute resolution between the two entities.

Ms E Wilson (DA) said it concerns her that the technical teams have never met. This was raised in the CSIR Report which was quite clear that sufficient time was not given to do a proper technical evaluation.

Mr T Brauteseth (DA) said it needs to be clear that the Committee does not favour either SASSA or SAPO more. It is ultimately concerned about procurement and financial prudence in coming to a resolution.

He went through the timeline of engagements and found that there had been 14 meetings between SASSA and SAPO but now the Committee is being told that there were no meetings between the respective technical teams even though the technicalities were the crux of the reason for SAPO’s disqualification. He asked Treasury if the fact that of all those 14 engagements, none involved the technical teams, could translate into fruitless and wasteful expenditure. These engagements began in May 2016 yet nothing useful has come of them. He asked if Treasury could prepare all the costs, including flight and accommodation costs, incurred as a result of those engagements and hold the relevant accounting officers to account.

He asked that the Committee be allowed to play a very strict oversight role if this process does not to come to resolution and the procurement of a grants payment system goes to market. Extra due diligence must be applied, especially where CPS is involved, to ensure that the fairest intentions are manifest in contracting.

Mr V Smith (ANC) said that it should be made very clear that the Committee is opposed to outsourcing as far as possible. If the contract is intra-state, it begs the question why fairness of process needs consideration in the first place. In its letter, SASSA spoke about fairness but if the service is kept intergovernmental, fairness will only need to be considered once it is ascertained that the services cannot be provided by a sister entity.

Mr Smith believes that what is primary is that we must invest in capacitating the state so that assets live in the state. Delivery of social grants should, as far as possible, be an in-house service because it is a service that will remain the responsibility of the state long after all of the current Members have left the employ of the state. The requirement of fairness is thus redundant and the purpose of this procurement exercise is transforming the industry which, should it be outsourced, would skew the whole purpose.

His ultimate concern is that if fairness and the requirements of the PFMA are considered to such an extent as it is now, the deadline of 31 March 2018 will not be met. He does not see how an advert can be put out, responded to, adjudicated and implemented by 1 April 2018. There are thus practical reasons for his view against outsourcing and the procurement process necessitated by it.

Mr C Ross (DA) said this is a national crisis and that he believes the Reserve Bank should be involved in guiding the banking services aspect of the system. There is a political element and he asked that the Minister of Social Development, Bathabile Dlamini, gives her opinion and expresses whether she accepts or rejects the review by National Treasury.

Ms N Mente (EFF) said that on the understanding that National Treasury had approved deviation on the basis that procurement of the grant payment system should be kept intergovernmental and that that SAPO as a government body would render the services, she does not understand why SAPO was given reasons for disqualification only yesterday.

All that needs to be considered now is how much time SAPO will need to meet these requirements because there is no way this service can or should be outsourced. She asked why there is not more emphasis on empowering SAPO to be able to render the service rather than looking outside of the governmental family.

Ms Mente said National Treasury should do an assessment to see exactly how long it will take for SAPO to capacitate itself and report back to the Committee as soon as next week. Guidance is needed urgently.

Mr E Kekana (ANC) asked what the outcomes were of the May 2017 workshop held between SASSA and SAPO. He asked if there is now deviation from the deviation as approved initially. He still wanted an explanation why National Treasury had approved the deviation in the first place.

Mr Mogajane replied that National Treasury has standard legislative provisions for approval of deviations which find expression in Treasury Regulations 16.4 and 16.8 as well as in Practice Note 6 and 7 of 2007/8, Instruction Note 32 of 2011 and 2 of 2016. This particular deviation was done for the sole purpose of ensuring that the end goal is realised within the given time frame and an approval made for the purpose of expediting a process is accordingly lawful.

Mr Kekana asked how much the new technical report will cost the state.

Mr Kekana said that there has been a lot of discussion surrounding the IMC and that as far as he knows, the IMC is chaired by the President. The Committee has not received any joy from the relevant ministers on the issues at hand. He put it to the Chairpersons to apply their minds and get the IMC to appear before the Committee so that it can get answers. It speaks to incompetence that the biggest problem for social security will happen at the hands of the Inter-Ministerial Committee on Comprehensive Social Security chaired by the President. It is time that Members take their own duty of oversight responsibility seriously and take the bull by the horns. He called on the Chairpersons to find a date by next week to have all the stakeholders present.

Mr Kekana said the Committee will not accept consultants and willy-nilly outsourcing. Building up the competency of SAPO will cost around R7 billion whereas the outsourcing route, which is fundamentally profit based and not developmental in nature, will cost R6 billion initially. He asked if the state is that wealthy as a country to be able to splurge.

Ms B Masango (DA) asked for clarity on what the two entities have not come to an understanding. She asked why the task teams had not yet met when even the report of the panel of experts had called for such meeting. It means that all the reports that have been received were therefore outside the advice of the task team. This calls into question the credibility of everything that has been put to the Committee.

Mr M Booi (ANC) said the IMC should report to the Committee and give political guidance on the processes.

Ms L van der Merwe (IFP) said that there needs to be a clear indication how long the review and mediation process will take. Unless National Treasury gives an indication of how long it will take, there has been no movement and will continue to be no movement in this process. She has counted the days until 1 April 2018 and there is a total of 100 work days left. There needs to be political accountability for this protracted crisis which to her seems manufactured. She sees one party open to negotiation and another that is not willing to play along.

Ms C Dudley (ACDP) said that time is tight and that the review should be restricted to four days.

Ms Bengu said that SASSA has an obligation that any contract for goods and services is in accordance with a system which is fair, equitable, transparent and cost effective. This obligation is imposed in terms of the Constitutional Court judgement and therefore it is necessary to consider fairness.

Ms Bengu said that the technical teams have been meeting and were chaired by the Treasury DG. She does not know what is meant by “there has been no workshopping” when in fact she herself attended a workshop for Social Development, SASSA and SAPO. There is evidence that National Treasury has been invited to meetings yet Treasury speaks as if they were never informed of such meetings.

Ms Bengu said National Treasury should be given time to review so that SAPO can provide SASSA with a programme of action on how they will manage cards, and if they are unable to manage cards, what their contingency plan is and provide a time frame for the card numbers for a trial period for their services. SASSA cannot be blamed for blocking SAPO.

Mr Mogajane asked that National Treasury be given until Wednesday, 8 November 2017 latest, to provide the Committee with their review.

Mr Smith proposed that the tender set to be published on Friday, 3 November 2017 should be put on hold. He believes that it is unnecessary to delve into the realm of public procurement for this.

Ms Wilson asked when and by whom the decision to publish the tender was made. If it was made in the few days preceding this meeting then it is indicative that there is no good will on the part of SASSA to get SAPO involved in the revised grant payment system. It is indicative of another agenda which is possibly sinister.

Ms Mente said we need not to be apologetic in capacitating the state, there are 17 million people on the grants system and going with a tender bid is saying that we have no hope that we can serve our own people. National Treasury needs to find a way of identifying SAPO’s shortcomings and how they can overcome these so that they are enlisted by SASSA. They are state entities that should be working in collaboration.

Ms van der Merwe proposed that National Treasury present their review report on Tuesday, 7 November 2017 and that the two entities should respond on Wednesday, 8 November 2017 so that a final decision on the way forward may be finalised by Friday, 10 November 2017 for the latest.

Ms Capa said that there are still many days to sit on this matter.

Mr Godi said that National Treasury should not submit their review later than Monday 6 November. The IMC is sitting on Tuesday 7 November and SAPO and SASSA should brief the IMC. Therefore the Committee should meet and be briefed by IMC members on Wednesday 8 November on its responses to the review. He noted that the Committee would write its own report to be submitted to the House.

The meeting was adjourned.

Media statement by SCOPA Chairperson, Mr Themba Godi, and Chairperson of Portfolio Committee on Social Development, Ms Zoleka Capa 

Parliament, Wednesday, 01 November 2017 – A joint meeting of the Standing Committee on Public Accounts (Scopa) and the Portfolio Committee on Social Development today resolved to give National Treasury until Monday, 06 November 2017 to finalise the review of the South African Post Office’s (Sapo) capabilities to implement and manage the national payment system of social grants

The Committee has also resolved that the review should be shared between Sapo and the South African Social Security Agency (Sassa) on Tuesday and that the two entities should brief the Inter-Ministerial Committee (IMC) when it meets on Tuesday, 07 November 2017.

The Committee has also decided to request the leadership of the IMC to brief the joint Committee on Wednesday, 08 November 2017 on the decisions it has taken on the review and the issue at hand.

The Committee has instructed Sassa to halt the advertising of the tender to the public that was scheduled for Friday, 03 November 2017. This is to give an opportunity for National Treasury to conduct the review and come up with measures that would iron out the issues that are problematic.

The Committee will adopt a report next week Wednesday, 08 November 2017 that will be tabled before the National Assembly on the outcomes and the resolutions taken by the Committee in an effort to assist in reaching a solution that will be to the benefit of the country.