IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA

CASE CCT 48/13

In the matter between:

THE CHIEF EXECUTIVE OFFICER OF THE

SOUTH AFRICAN SOCIAL SECURITY AGENCY First Applicant
THE SOUTH AFRICAN SOCIAL SECURITY AGENCY Second Applicant
and

CASH PAYMASTER SERVICES (PTY) LTD First Respondent

THE MINISTER OF FINANCE Second Respondent

NATIONAL TREASURY Third Respondent

In Re:

ALLPAY CONSOLIDATED
INVESTMENT HOLDINGS (PTY) LTD First Applicant
ALLPAY FREE STATE (PTY) LTD Second Applicant
ALLPAY WESTERN CAPE (PTY) LTD Third Applicant
ALLPAY GAUTENG (PTY) LTD Fourth Applicant
ALLPAY EASTERN CAPE (PTY) LTD Fifth Applicant
ALLPAY KWAZULU NATAL (PTY) LTD Sixth Applicant
ALLPAY MPUMALANGA (PTY) LTD Seventh Applicant
ALLPAY LIMPOPO (PTY) LTD Eighth Applicant
ALLPAY NORTH WEST (PTY) LTD Ninth Applicant
ALLPAY NORTHERN CAPE (PTY) LTD Tenth Applicant
MICAWBER 851 (PTY) LTD Eleventh Applicant
MICAWBER 852 (PTY) LTD Twelfth Applicant
MICAWBER 853 (PTY) LTD Thirteenth Applicant
MICAWBER 854 (PTY) LTD Fourteenth Applicant

and

THE CHIEF EXECUTIVE OFFICER OF THE

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SOUTH AFRICAN SOCIAL SECURITY AGENCY First Respondent

THE SOUTH AFRICAN SOCIAL SECURITY AGENCY Second
Respondent
CASH PAYMASTER SERVICES (PTY) LTD Third Respondent
EZIDLUBHEDU INVESTMENT HOLDINGS (PTY) LTD Fourth
Respondent
FLASH SAVINGS AND CREDIT COOPERATIVE Fifth Respondent
ENLIGHTENED SECURITY FORCE (PTY) LTD Sixth Respondent
MOBA COMM (PTY) LTD Seventh Respondent
EMPILWENI PAYOUT SERVICES (PTY) LTD Eight Respondent
PENSION MANAGEMENT (PTY) LTD Ninth Respondent
MASINGITA FINANCIAL SERVICES (PTY) LTD Tenth Respondent
THE SOUTH AFRICAN POST OFFICE Eleventh Respondent
ROMAN PROTECTION SOLUTIONS CC Twelfth Respondent
UBANK LIMITED
AFRICAN RENAISSANCE INVESTMENT Thirteenth Respondent
MANAGEMENT (PTY) LTD Fourteenth Respondent
STANDARD BANK GROUP LIMITED Fifteenth Respondent
NEW SOLUTIONS (PTY) LTD Sixteenth Respondent
ITHALA LIMITED Seventeenth Respondent
KTS TECHNOLOGY SOLUTIONS CONSORTIUM Eighteenth
Respondent
THE SOUTH AFRICAN RESERVE BANK Nineteenth Respondent
THE PAYMENT ASSOCIATION OF SOUTH AFRICA Twentieth
Respondent
________________________________________________________________________

FOUNDING AFFIDAVIT
________________________________________________________________________

I, the undersigned,

THOKOZANI MAGWAZA
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do hereby make oath and state that:

1. I am the second applicant herein, and the person responsible for

the overall administration of social assistance and the payment

of social grants in terms of section 3 of the Social Assistance Act,

13 of 2004 (the Act) and am authorised to depose to this

affidavit. I was appointed Chief Executive Officer of SASSA on 1

November 2016.

2. The facts contained herein fall within my personal knowledge

and belief, and are true and correct, unless where otherwise

stated, or where the contrary appears from the context.

Synopsis of this application

3. On 3 February 2012 SASSA granted to Cash Paymaster Services

(CPS) a five year contract for the payment of social grants on

behalf of the State to about 15 million people for all nine

provinces in South Africa. The contract period was 1 April 2012

to 31 March 2017. This contract was declared constitutionally

invalid, but the declaration of invalidity was suspended pending

the decision of SASSA to award a new tender (Allpay

Consolidated Investment v CEO, SA Social Security Agency 2014

(1) SA 604 (CC)) (Allpay1).

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4. In Allpay2 (2014 (4) SA 179 (CC)), this Court made remedial

orders effectively compelling CPS to continue to render the

services of effecting payment of social grants until such time

that SASSA initiates and completes a new tender for a period of

five years.

5. As will be demonstrated below, SASSAs endeavours to procure a

new tender had been unsuccessful and its own ability to

administer the grants is presently limited; it is accordingly

necessary to invoke the assistance of this Court to ensure that

for a further period of one year 11,487,417 beneficiaries (the

total number of grants being 17,143,635) are not deprived of

their only hope of ever living in the material conditions that our

Constitutions values of dignity, freedom of equality promise.

6. In short, come 1 April 2017 if an agreement is not procured with

CPS to continue rendering the services for a further year, the

majority of our poor people will have hardship in receiving

payment of social grants.

7. CPS has intimated in a letter dated 9 February 2017 that it is

amenable to assisting SASSA in the transitional period on the

premise that this is in the best interests of the parties,

particularly the beneficiaries. I attach CPSs letter as annexure

A to this affidavit. I have no doubt that CPS, cognisant of the

enormity of the hardship that the beneficiaries will suffer if they

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are not paid social grants timeously, will in good faith engage

SASSA to reach an interim arrangement.

8. SASSAs records show that 1,616,870 beneficiaries have bank

accounts with 23 banks in South Africa. Thus, the majority of

beneficiaries do not have their social grants paid into a personal

bank account. No system including using the National Payment

System would allow us to make payments to all who require it

without a business continuity arrangement. Therefore it is not

feasible to use, at this stage, the banking system to make direct

payments to beneficiaries.

9. Similarly, the fact that banking facilities are not countrywide,

SASSA will also have to use the services of an institution that can

pay through cash modalities. The latter function will have to go

on tender.

10. By way of letter dated 7 February 2017, a copy whereof is

attached hereto as annexure B, I engaged the Director-

General of National Treasury, for approval for deviation from the

normal competitive bidding process in accordance with

paragraph 8.5 of the National Treasury Instruction 3 of

2016/2017. In their response, it was intimated that National

Treasury does not support the deviation. A copy of this letter is

attached hereto marked C.

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11. SASSA therefore requires the approval of this Court to

enable it to make and implement transitional arrangements to

ensure the uninterrupted payment of grants to beneficiaries

after 1 April 2017.

The interim arrangement

12. SASSA seeks to engage CPS for a year to continue paying

social grants. At the termination of this period, SASSA will be in

a position to have phased in the services of the institutions

participating in the National Payment System to serve as the

rallying point where beneficiaries will be paid. This, however, is

not the complete picture because there are areas where these

institutions do not have infrastructure to make payment.

13. SASSA has already commenced the process to issue a

tender for the services of a cash service provider in areas where

banks and the SAPO do not have the facility to make payment.

14. Accordingly, SASSA requires a period of one year to be in a

position where it will make payments of social grants utilising the

National Payment System and in isolated selected areas the

services of a cash service provider.

The parties
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15. For convenience and fairness, a copy of this application will

be served on all the parties that featured in Allpay1 and Allpay2.

Additionally, I have joined the Minister of Finance as well as the

Director-General of Treasury as parties to this application. Both

the Minister of Finance and the Department of Treasury have

been involved in this matter arising from their constitutional

obligations dealing with funding and budgetary requirements as

well as the provisions of the Public Finance Management Act.

16. I will ensure that this application is timeously served on the

Minister of Finance and the Director-General of the Department

of Treasury.

Compliance with prayer 3 of Allpay2

17. In terms of prayer 3 of the remedy judgment, SASSA was

required to initiate a new tender process for the payment of

social grants within 30 days of the order.

18. This tender process was completed during October 2015.

There were no complying bids and consequently no tender was

awarded. This, in turn, resulted in the continuation of the

contract between SASSA and CPS in terms of order 4 of Allpay2.

SASSAs efforts to take over the payment of social grants

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19. In its reports already filed before this Court, SASSA

expressed its intention and undertaking to effect payment of

social grants on its own (without involving service providers) by

the end of its contract with CPS, being 1 April 2017, in

accordance with time frames captured in the fourth report filed

with the Honourable Court on 5 November 2015.

20. The fourth report caused this Court to discharge its

supervisory role.

A summary of SASSAs efforts to implement payment of social

grants

21. The intended take over or implementation of effecting

payment of social grants on its own, required SASSA to explore

interim options for the payment of grants by, inter alia,

engaging:

21.1. The Government Printing Works (GPW) for the

production and distribution of the SASSA payment card;

and

21.2. The SAPO for elements of payment of grants as well as

the utilization of the National Payment System where

different banks are to be considered.

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22. In addition to the above, SASSA management has engaged

critical stakeholders, namely National Treasury, the South African

Reserve Bank, and the Payment Association of South Africa to

gather support and advice on the intended taking over of the

payment of social grants function. All these engagements led to

further suggestions being brought forward for SASSA to consider.

23. SASSA has been in the process of in sourcing the grant

payment system. As far back as September 2013, the Minister of

Social Development appointed the Ministerial Advisory

Committee on the future payment system of social grants in the

Republic of South Africa with a mandate to investigate and

advise the Minister on the best payment option for disbursing

social grants to beneficiaries.

24. This committee completed their tasks (investigation and

provision of advice to the Minister on the best payment option

for disbursing social grants to beneficiaries) during October 2014

and in addition, recommended that work-streams be established

to facilitate the insourcing process. Three of the work-streams

were appointed during the latter part of 2016. The work-streams

comprised the below stated components to develop mechanisms

to implement the report from the Ministerial Advisory

Committee:

24.1. Legislative and Policy Requirement Management;

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24.2. Information and Business System Management;

24.3. Human Resources and Capacity Building (not yet

appointed);

24.4. Demographics and Local Economic Development;

24.5. Change and Stakeholder Management (not yet

appointed); and

24.6. Banking Services.

25. The work-streams have developed a project plan and

preliminary costing for the project. This still requires adoption

and approval.

26. During March 2014, SASSA concluded a Memorandum of

Understanding (MOU) with the Council for Scientific and

Industrial Research (CSIR), the objective being for CSIR to assist

SASSA in determining the appropriateness of its current

Information Communication Technology (ICT) systems and

applications that would provide SASSA with technical expertise

in the development of its ICT systems, internal capacity and ICT

procurement and governance.

27. CSIR has developed the initial specifications for a national

biometric standard, which project was subsequently taken over

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by the Payment Association of South Africa (PASA). During July

2016, PASA announced the adoption of the national biometric

standard for use as a means of authentication.

28. In executing its deliverables in terms of the fourth report

that was filed with the Court on 5 November 2015, SASSA has

already advertised a tender for identity and access

management. This deliverable was to create a system that would

enable biometric enrolment of both beneficiaries and system

users. This tender was also due to non-responsive bids, not

awarded.

29. SASSA has, pursuant to the non-awarding of the tender for

identity and access management, re-advertised the tender on

9 December 2016. This second tender closed on 7 February

2017 and is currently going through the supply chain process. If

awarded, this tender will enable SASSA to attain its second

deliverable in terms of the fourth report.

30. SASSA issued a Request For Information ( RFI) on 9

December 2016 seeking information from potential service

providers to get information on the proposed solution that will

not only address SASSAs responsibility, but to also take

advantage of banking and payment innovations and capabilities

in the industry that will enable SASSA to achieve its strategic

intent. The closing date for the RFI was on 10 February 2017.
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Based on the information received, SASSA will compile a Request

for Proposal, which it intends to issue on 17 March 2017.

31. The above significant factors and/or assignments, including

various processes, namely:

31.1. engaging various stakeholders for assistance and

advice on the objective to take over the social grant

payment function;

31.2. additional and/or further suggestions tabled by the

stakeholders for SASSA`s consideration of its deliverables;

31.3. appointment of consultants to lead various work-

streams that would enable SASSA to attain its objective of

taking over the social grant payment function;

31.4. the preparation and completion of a new tender

process in compliance with paragraph 3 Allpay 2, which

was eventually not awarded;

have, notwithstanding SASSA`s undertaking that it will with

effect from March 2017 be in a position to itself take over the

payment of all social grants, resulted in or caused SASSA not to

be in a position to take over the social grant payment function

with effect from the 1 April 2017.

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32. SASSA has, in addition, to the above factors, also

experienced challenges relating to its specific deliverables as

contained in the fourth report and in summary:

32.1. Deliverable 1 (Integration of systems through web-

based application)

32.1.1. This deliverable has to be delayed to

ensure a full migration of data from SOCPEN

together with Risk Management and Cyber

assurance services are in place.

32.1.2. The full implementation of this deliverable

was previously scheduled for August 2016,

however due to the above challenge, it is now

scheduled to take place by December 2017.

32.2. Deliverable 2 (Verification and authentication

[Biometric enrolment of beneficiaries & system users])

32.2.1. The previous timeframe assigned for the

achievement of this deliverable could not be met

due to SASSA`s need to ensure that change for

the requirements for transitional approach are

factored in.
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32.2.2. The revised timelines for this deliverable is

October 2017.

32.3. Deliverable 3 (Payment processing control account)

32.3.1. This was delayed to ensure that the right

specifications are issued out to the market.

32.3.2. The revised timelines for this deliverable is

November 2017.

32.4. Deliverable 4 (Payment reconciliation real time

reconciliation)

32.4.1. Due to the development of new models by

industry experts and work-streams that

unpacked the detail of how SASSA will transition

into its new role, delays on this deliverable have

been unavoidable.

32.4.2. The revised timelines for this deliverable is

November 2017.

32.5. Deliverable 5 (Payment Infrastructure)

32.5.1. To ensure that strategic advantages are

gained for SASSA and the Social Assistance

mandate in a practical and transitioned manner,

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delays have been introduced to ensure that both

SASSA readiness and industry alignment are

achievable.

32.5.2. The revised timelines for this deliverable is

October 2017.

32.6. Deliverable 6 (Cash distribution and security thereof)

32.6.1. Changes in respect to deliverables 1 to 5

and the decision to ensure that outsourced cash

distribution and security services are closely

governed by SASSA led to the delay of this

deliverable.

32.6.2. The revised timelines for this deliverable is

December 2018.

32.7. Deliverable 7 (Card issuance and special bank

accounts)

32.7.1. Due to new strategic requirements

stemming from the need to achieve concurrence

with stakeholders, delays in respect of this

deliverable is unavoidable.
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32.7.2. The revised timelines for this deliverable is

August 2019. SASSA will, however, as an interim

measure be able to within 12 months present a

solution that will enable SASSA itself to render

the service.

33. The delays go beyond the 31 March 2017, being the date on

which the contract between SASSA and CPS expires, and also the

date on which the declaration of invalidity becomes effective.

The interim arrangement envisaged with CPS has no bearing on

the revised timelines for the deliverables.

34. Faced with the dilemma that SASSA is not in a position to

provide payment of social grants, it considered the following

interim options. These options were developed by a task team

comprising officials from SASSA, the Department of Social

Development, National Treasury, and the South African Reserve

Bank. The options were:

34.1. Procuring of the service from CPS (i.e. the proposed

interim arrangement);

34.2. Procuring the service from the Bank that services the

majority of the beneficiaries (namely Grindrod Bank);

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34.3. Procuring the services of all banks wishing to comply

with SASSA requirements;

34.4. Procuring the services of all banks wishing to comply

with SASSA requirements for those beneficiaries who have

access to banking infrastructure, and procuring the

services of a service provider for grant recipients who are

currently using cash pay points;

34.5. Procuring the services of the SAPO; and

34.6. Appointing a service provider for cash distribution to

grant recipients who are currently using cash pay points

and utilise existing bank accounts to disburse grants

through the banking sector to those beneficiaries with

bank accounts. This is similar to the fourth option, but

involves a communication campaign for beneficiaries to

come forward with their bank accounts as opposed to a

procurement process with banks (i.e. a banking solution

as opposed to procurement solution).

35. The evaluation and analysis of the above options, led SASSA

to conclude that the first option is the most feasible, reasonable

and practical one. The option could:

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35.1 guarantee continued disbursement of social grants with

minimal challenges in the interim;

35.2 assist SASSA pending the completion of the take over of

the payment of social grants function by SASSA itself; and

35.3 accommodate the anticipated duration for phase in phase

out process.

36. Based on the duration of the contract between SASSA and

CPS (5 years), in terms whereof other role players were not

operational in the payment of social grants transaction, it is fair

to say that CPS has the ability to guarantee payments without

any disruption.

37. The need to implement the first option is, however,

dependent on compliance with procurement prescripts.

Concluding submissions

38. I respectfully submit that this matter requires this

Honourable Courts urgent attention. The matter is urgent

because SASSAs tender as contemplated in prayer 3 of Allpay2

did not materialise. In this regard, SASSA intended to comply

with fair procurement processes as contemplated in section 217

of our Constitution. Regrettably, there were no compliant

tenderers.
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39. SASSAs efforts to take over the payment of social grants as

from 1 April 2017 were delayed because the structural

processes that were commenced and developed have not fully

materialised. SASSAs first tender for identity and access

management, utilising biometrics, did not progress to fruition

because of non-responsive bids.

40. SASSAs application for a deviation to National Treasury has

been unsuccessful. The National Treasury states in paragraph 6

of annexure C, that National Treasury does not support the

extension of the invalid contract. National Treasury will only

support the (extension same terms and conditions being

applicable) if the Constitutional Court will further the suspension

of its invalidity beyond 31 March 2017. SASSA believes that it

would be in a position within a year to implement interim

arrangements to ensure the continued payment of social grants,

but the reality is that at present it finds itself in a position where

it relies upon CPS to render the services for at least a year.

41. SASSA is not in a position to go on tender for this interim

period and its inability to utilise a tender process contemplated

in section 217 of our Constitution has the real potential of

prejudicing the beneficiaries.

42. I accordingly submit that SASSA requires the input of this

Honourable Court to serve as a safeguard for the interim period

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contemplated in the notice of motion, and has no other

alternative remedy.

Relief in terms of Rule 11(4)

43. In the event of there being no opposition to the relief sought

in the notice of motion, I submit that this is an appropriate case

for the Chief Justice to direct that the matter be dealt with on the

basis of the information contained in this affidavit.

44. In this context I submit that no reasonable person or

institution will oppose this application because it is an earnest

plea to the Court to permit the facilitation of the payment of

social grants to the poorest of the poor for a limited period of

one year.

45. I accept that there may be criticism as to the tardiness of

SASSAs conduct, but this should not prevent the right decision

in the circumstances.

WHEREFORE I pray that the Court grants the relief applied for in the

notice of motion or such other relief as the Court considers just and

equitable.
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__________________________
DEPONENT

I certify that the deponent has acknowledged that the deponent knows
and understands the contents of this affidavit, that the deponent does
not have any objection to taking the oath, and that the deponent
considers it to be binding on his/her conscience, and which was sworn
to and signed before me at on this the day of
2017 and that the administering of the oath complied
with the regulations contained in Government Gazette No R1258 of 21 st
July 1972, as amended.

__________________________
COMMISSIONER OF OATHS