Cash Paymaster Services (CPS), which managed the distribution of welfare grants to more than 17-million South Africans, still owes the SA Social Security Agency (Sassa) about R1.5bn.
This is according to Sassa’s application filed in the high court in Pretoria in a bid to put a stop to CPS’s business rescue process and rather have the company liquidated.
Financial services and technology group Net1 UEPS, of which CPS is a subsidiary, say that the company’s liabilities exceed its assets and filed for business rescue earlier this year.
“CPS is financially distressed,” Herman Kotze, Net1’s CEO, said in its business rescue application. “It is unlikely that CPS will be able to pay all its debts.”
However, Sassa is arguing that it did not follow proper processes and should rather be wound-up. The agency also argues that there is no prospect of a successful business rescue.
CPS used to manage the distribution of social grants on behalf of Sassa but in 2018 the contract came to an end after a number of Constitutional Court judgments. In 2014, the Court found that the contract Sassa had signed with CPS two years earlier was illegal and invalid. However, the contract was allowed to continue to allow Sassa to find another way of distributing social grants.
In 2017, then social development minister Bathabile Dlamini, at the 11th hour, again approached the courts to have the contract extended because Sassa was not in a position to distribute grants itself. In August 2018, an extension was granted until the end of September that year.
Sassa has now partnered with the SA Post Office (Sapo) to distribute grants.
Sassa’s GM of legal services Busisiwe Mahlobogoana, in an affidavit lodged with the court this week, said that in March 2018, CPS was ordered by a court to pay Sassa a little over R316.4m with interest from June 2014 to the date of payment. However, CPS has allegedly not paid anything.
“The foregoing failure to discharge a judgment illustrates ... that CPS has committed an act of insolvency,” Mahlobogoana said. She added that CPS’s business rescue practitioners had incorrectly stated that the company has liabilities of about R586m, as it owes Sassa R1.5bn. At the lowest point the liabilities were understated by R252mm and at the highest, by R800m.
“There is clearly no point in undertaking business rescue. Instead, considering that CPS made a profit in the region of R800m or R252m, as CPS alleges, and there is only R15m in assets to show, the set of facts are indicative of either reckless conduct or serious misconduct, which can be properly investigated by way of an inquiry during the liquidation, rather than in business rescue proceedings,” Mahlobogoana said.
Freedom Under Law has claimed that CPS is under-reporting profit by almost R1bn and has approached the Constitutional Court, asking that it force the company to give auditors, appointed by the Sassa, complete access to its financial records.
Mahlobogoana alleged that CPS commenced with business rescue proceedings in an unlawful and illegal manner and if the process continues Sassa will suffer irreparable harm.
“CPS is unable to repay monies belonging to the public purse and ... it may be just and equitable that CPS be urgently liquidated and their financial affairs be subjected to an inquiry.”
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