Source: The Times/Getty Images

Zuma Denies Welfare Is in Crisis as Top Court Readies Ruling

  • Constitutional Court to rule on proposal to extend Net1 deal
  • Ministerial team to probe welfare agency, seek legal advice

South African President Jacob Zuma refused to take action against his welfare minister, saying there is no crisis in the nation’s social-grants system even as the cabinet apologized for the “anxiety” caused by uncertainty around whether 17 million people will be paid next month.

South Africa is scrambling to ensure that the payment of more than 150 billion rand ($11 billion) of grants a year will be made from April 1 when a contract with Net1 UEPS Technologies Inc. ends and the Constitutional Court is considering arguments from human-rights groups to supervise any new agreement. While the court ruled in 2014 that the deal with Net1 was invalid, the department of social development says it’s the only company with the capability to pay. The Constitutional Court will make its ruling at 10 a.m. in Johannesburg on Friday.

“How do you evaluate a person on something that has not happened?” Zuma asked lawmakers in Cape Town on Thursday in response to opposition party demands that Social Development Minister Bathabile Dlamini be fired. “April 1 has not happened and the minister and her colleagues are working on ensuring people get paid.”

Any interruption to the signature program of the African National Congress could spark protests in poor communities where many households have no other income. The debacle 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.

Regrets Anxiety

The South African Social Security Agency on Wednesday asked the Constitutional Court to either extend Net1’s contract or award it a new one. Black Sash Trust, Freedom Under Law and Corruption Watch argued that the deal must be supervised by the court until a new operator can be found, and that the company shouldn’t be allowed to profit from the contract. The Post Office said it could take over the payments.

During proceedings, Chief Justice Mogoeng Mogoeng and other Constitutional Court judges criticized the minister and Sassa for letting the matter reach a crisis.

Net1 proposed in court papers on Thursday a fixed monthly fee of 194 million rand to continue to run the system for two years. It’s also prepared to accept an order to keep the same terms as its previous deal for a shorter period, provided the Auditor General consider an increase in the fee to compensate for inflation. The fee proposed took into account estimated inflation, according to the submission to the Constitutional Court.

Offensive Comments

In a later statement, Net1’s board pledged to work with Sassa to bring in a new payment system and apologized for comments made by its officials that were “perceived as offensive.”

A group of ministers, including Dlamini and Finance Minister Pravin Gordhan, are working to ensure the payments will be made, Minister in the Presidency Jeff Radebe told reporters in Pretoria after a cabinet meeting. It would also investigate the actions of the welfare agency and seek advice on further legal action, he said.

Cabinet “regrets the anxiety caused by uncertainty over the social grant payments,” Radebe said.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE