By Nicola Mawson, ITWeb deputy news editor

March 16, 2012

AllPay, a subsidiary of big four bank Absa, is set to square off with the South African Social Security Agency (SASSA) and a competitor next month, over a R10 billion contract it alleges was awarded unlawfully.

AllPay argues SASSA’s five-year deal with Net1 UEPS Technologies unit Cash Paymaster Services (CPS), awarded in January to cover SA‘s nine provinces, does not comply with the necessary regulations and laws.

AllPay claims, in an affidavit filed with the court this month, that the “process followed by SASSA in awarding the tender to CPS is very deeply flawed”. AllPay’s application to have the award set aside is set to be heard on 11 April.

Net1 previously had a contract to distribute grants in five of SA’s nine provinces. AllPay had been handling payments in the Free State, Western Cape, Gauteng and Eastern Cape, for a decade.

Payment disruptions

AllPay argues the award to CPS does not comply with the Constitution, National Treasury regulations or the Public Finance Management Act and is “unlawful”. It says the 10 million beneficiaries will be prejudiced if SASSA goes ahead with the CPS deal, while the matter is pending before the court.

Earlier this month, Democratic Alliance shadow deputy minister of social development Emmah More claimed the change in service providers disrupted grant payments, despite government assurances to the contrary. She said hundreds of recipients did not receive payouts.

AllPay alleges that CPS’s bid did not comply with SASSA’s requirements and that AllPay’s score was inexplicably lowered. “SASSA has acted in a manner which is designed to secure a particular outcome which favours CPS.”

Millions lost

The document, penned by Charmaine Webb, AllPay Consolidated’s GM of sales and service delivery, supplements a February affidavit.

Webb alleges in the February filing that AllPay will “suffer severe prejudice and irreparable harm if interim relief is not granted on an urgent basis”. She says AllPay “will need to dismantle a massive infrastructure if interim relief is not granted”.

However, if the company is successful in its bid, AllPay will need to go through the process of setting up infrastructure again, says Webb. She adds that the company’s technology, logistics and security partners stand to lose about R7 million in income a month.

If AllPay does not get the relief it seeks, 553 temporary and permanent staff will need to be retrenched, which will cost Absa R26 million, writes Webb. In addition, Absa stands to lose anywhere between 1 million and 1.75 million accounts.

No disruption

Net1 VP of investor relations Dhruv Chopra says “there have been several further affidavits that have been filed since to respond to AllPay’s allegations in a comprehensive manner”.

Chopra says, while the matter is pending, CPS continues to implement the tender based on the contract terms it has with SASSA. “We strongly believe we won the contract purely on merit and that a proper procurement process was followed.”

At the time of the award, chairman and CEO Serge Belamant said: “We are overjoyed by the SASSA tender award and very proud of the confidence that SASSA has placed in our company and technology.”

Department of Social Development spokesperson Lumka Oliphant says it is “not in a position to comment on allegations that have not been tested in court”.

Oliphant says “in the meantime, we want to assure our grant recipients that the service will not be disrupted. They will get what is due to them every month.”