• Company says amended regulations curb beneficiaries autonomy
  • State welfare agency says stance supported by legislation

South African welfare-grant distributor Net 1 UEPS Technologies Inc. said a state agency has breached the constitution by amending regulations to prevent deductions from the payments to some of the country’s poorest people.

In May, the South African Social Security Agency, which oversees the payment of welfare grants to more than 16 million people, amended its rules to prevent what it said were illegal deductions for goods and services directly from grants ranging from funeral insurance to mobile-phone airtime.

The amended regulations “unjustifiably infringe beneficiaries’ right to contractual freedom and self-autonomy, which is an incident of the right to human dignity protected” by the constitution, Johannesburg-based Net 1 and companies hat it part-owns said in court documents filed with the North Gauteng High Court last month in preparation for a case due to be heard on Oct. 17 and 18.

The assertion that the welfare agency, known as Sassa, has behaved unconstitutionally is the latest development in a dispute that has pitted Net 1, its associates and insurance firms providing funeral cover, against the government. While the welfare agency says that grant recipients are being taken advantage of because they don’t always understand what they are signing up for Net 1 asserts that they should be allowed to spend their money as they see fit.

Child Grants

The amendments were made as Sassa said it wanted to stop the sale of funeral insurance for children, which were paid for from child-support grants paid to their parents or guardians.

“Beneficiaries have been able to enjoy the security and convenience of electronic banking, as well as access to credit facilities, which were previously inaccessible to them under the cash-based payment system,” said Net 1, which won the contract to distribute the payments in 2012. The amendments are “an unjustifiable and disproportionate intrusion on the individual autonomy of beneficiaries to regulate their own affairs.”

Sassa says it has not broken the constitution. The country’s central bank, which has been cited as a respondent in the case, has said in its own court documents that the activities of Net 1’s associate companies may constitute a conflict of interest.

“The legislation clearly says that a social grant may not be transferred, ceded, pledged or in any other way encumbered or disposed of,” Dianne Dunkerley, executive manager of grants administration at Sassa, said by phone from Pretoria. “We are clearly saying that it is not unconstitutional, otherwise we would have not published it.’’

Net 1 shares have declined 15 percent in Johannesburg since the government said in May that it would amend the regulations. Over the same period the benchmark stock index has gained 1.4 percent.

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