Cash Paymaster Services (CPS), the company formerly hired by the South African Social Security Agency (Sassa) to pay social grants nationally, has been ordered by the Constitutional Court to pay the state R81m it gained through profits.
The top court in 2013 declared the award of the tender to Cash Paymaster, a subsidiary of JSE listed Lesaka Technologies, to provide services for payment of social grants to millions of people over a period of five years for all nine provinces was constitutionally invalid.
CPS’s contract with Sassa was awarded in 2012 and ended in 2017. It has been litigated for more than a decade.
CPS has been in liquidation since 2020 and liquidator Puleng Bodibe has been holding the fort in disclosing financial records of the company to courts.
Freedom Under Law (FUL), a non-profit organisation, initiated an application which was heard in 2024 by the top court wanting an order directing CPS to furnish information to the National Treasury to determine whether and in what amount CPS made a profit from the tender previously declared unlawful.
A unanimous judgment on Wednesday penned by justice Steven Majiedt found that while the unlawfulness of the contract was caused by Sassa, the court could not allow CPS to be a beneficiary of unlawful conduct.
“The sixth respondent (Cash Paymaster Services (Pty) Limited) (CPS) is ordered to refund the adjusted certified profit of R81,286,177 to the third respondent (South African Social Security Agency), in respect of which amount Sassa is granted leave to prove a concurrent claim,” the judgment read.
While the contract was found to be invalid in 2013, the court allowed for the company to continue distributing grants to shield grant beneficiaries from consequence. At the time, the court did not decide whether CPS should be ordered to repay profits gained during the operation of its contract.
Majiedt, in his recent judgment, said even if the question of profit was not pleaded in papers, the court has the power to decide on the lingering question in the litigation over the contract that has been before the top court several times over the years.
“None of the parties, not even CPS (via the liquidator), or Lesaka, has raised any objection to this court making an order for repayment of the profit. The wide powers afforded this court under section 172(1)(b) permit it to do so,” he said.
“FUL submits that the court ought to order repayment of the amount accepted by CPS (through its liquidator) as the correct profit amount after adjustment, namely R81,812,595. FUL emphasises that this court must order the repayment of the entire amount of profit so that CPS does not reap any benefit from the tainted profit.”
Majiedt said that though the court issued the order for repayment of profit, equally, there is nothing in law that, in suitable circumstances, precludes an innocent, private contractor from claiming profits where it has rendered services in terms of an invalid public contract.
“That, it must be emphasised, will always be a fact-specific inquiry and no general precedent is sought to be laid down in this judgment. The reason for that is plain ― every case will have to be decided on its own facts and the facts must be adequate to enable a court to decide on a just and equitable order.”
The liquidator flagged in court that CPS owed creditors R778,511,264. The bulk of this comprised a different claim by Sassa of R632,894,722 and a further claim by Sassa of R74,786,892 of “payment of services not rendered”.
The liquidator disclosed the insolvent company also faces a claim from the South African Revenue Service (Sars) of R401,392,066 under review in court. Should Sars win in the review, its claim would take priority when the liquidator pays creditors.
While cash-strapped CPS is owned by Lesaka the court did not make an order against the mother company.
“Naturally, it is so that, if CPS were actually able to recover more money, for example by way of claims against Lesaka (which appears to be a thriving entity with many business interests), the amount available to CPS’s concurrent creditors would be larger.”
“But the question as to what CPS can recover from Lesaka is a matter for the liquidator and the liquidation inquiry, which has now been completed.”
There was an allegation of profit shifting from CPS to Lesaka, but this has not been proven yet.
“It seems that this has not caused CPS’s liquidator to believe that she has claims against Lesaka to recover value illicitly transferred from CPS to Lesaka through accounting or other manipulations. There is no reason to doubt the liquidator’s independence and willingness to pursue such claims if they existed.”
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