Constitutional Court cuts CPS down to size

© Vitaliy Vodolazskyy – 123RF.com

Currently, CPS’s sole duty is distributing cash grants on behalf of Sassa to about 1.8 million beneficiaries.

Earlier in May, CPS dropped its rate and said it was prepared to invoice Sassa R45 to pay social grants in cash, instead of its original request of R66.70 per beneficiary. This was in line with recommendations made by National Treasury to the court on 30 April.

But on Wednesday, the court ruled that CPS should invoice Sassa at R14.42 (excluding VAT) per beneficiary as an interim fee.

CPS is to negotiate with Treasury on a final charge per beneficiary for the remainder of its new contract with Sassa. This contract is expected to end in September.

“This rate is not sustainable and doesn’t cover even the cost of security … We are hopeful that we will arrive at a satisfactory solution with National Treasury’s inputs and finalise this matter as quickly as possible,” said Herman Kotzé, Net1 CEO. CPS is a subsidiary of Net1.

But, Kotzé said, despite the court’s ruling, social grant payments would not be interrupted in June.

Though it accepted Treasury’s recommended fee of R45, CPS had warned that at this rate the company would not be able to recover fixed operational costs. These costs include paying staff and security working at the more than 10,000 cash pay points the company still services across the country.

CPS has previously been able to cross-subsidise costs of cash payments from fees charged for electronic payments and other administrative services offered to SASSA. The R16.44 per beneficiary was part of CPS’s initial five-year contract with SASSA which started in 2012. This, however, was for payments the company made to over ten million beneficiary accounts.

This article was originally published on GroundUp.