South African Treasury Won't Break Law on Welfare Deal, ANC Says

  • S. Africa scrambles to sign new contract before April 1
  • Dispute is over the legality of April payments: Zizi Kodwa

Why South Africans Are Losing Faith in the ANC

South Africa’s Treasury will not act illegally and approve a new welfare distribution deal with Net1 UEPS Technologies Inc. unless it has been sanctioned by the country’s Constitutional Court, the spokesman for the country’s ruling party said.

While the Constitutional Court in 2014 ruled an existing contract with Net1 invalid because of they way it was awarded and ordered the South African Social Security Agency to hold a tender and find a new service provider, it has failed to do so and the contract runs out on March 31. Social Development Minister Bathabile Dlamini said this week that a new contract will be negotiated with Net1 and rather than seeking permission from the court, she would merely inform it.

President Jacob Zuma on March 4 met with Dlamini and Finance Minister Pravin Gordhan and ordered them to ensure that there was no interruption to the payment of welfare to more than 17 million people in April. The Finance Ministry has said it will not authorize a deal unless it has the Constitutional Court’s blessing.

“Treasury will not do that,” ANC spokesman Zizi Kodwa said in interview on Wednesday at the Luthuli House party headquarters in Johannesburg. “It’s even exaggerated to think that people won’t be paid by the 1st of April. They will be paid but the manner in which it will be done may not be legal.”

Reducing Inequality

The payments of more than 140 billion rand ($10.7 billion) a year are a signature policy of the ANC, which says the grants are an important measure to reduce inequality in the nation 23 years after the end of white-minority rule. A disruption could dent its support just months after its worst ever showing in an election.

Opposition parties and the Congress of South African Trade Unions, the country’s biggest labor group and an ally of the ANC, have called for Dlamini’s resignation. Last week she accepted responsibility for the crisis in court papers filed with the Constitutional Court.

Next week Gordhan will appear in parliament to explain Treasury’s position on the welfare contract to lawmakers. On March 15 the Constitutional Court will hear a case brought by the Black Sash Trust, a human rights group, demanding court oversight of any agreement with Net1 and regular reports to the court from Dlamini over her progress in finding a new provider.

On Wednesday the court ordered the welfare agency and government to divulge who at the agency decided it was incapable of making the payments itself from April, when the decision was taken and why the court wasn’t told. It also asked whether the state agency has concluded a new disbursement contract with Net1’s Cash Paymaster Services unit and, if so, demanded that it be provided with all details.

The government and welfare agency have argued that Net1 is the only entity with the capacity to ensure that payment of the grants continues uninterrupted.