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Sassa: Gordhan cautions politicians to steer clear of procurement

Johannesburg – Politicians should not interfere with the procurement of social grant payment services, said Finance Minister Pravin Gordhan.

Gordhan told Parliament on Tuesday that Treasury’s role in the social grants payment crisis is one of support. That entails managing the transparency of procurement and other financial duties related to the social development department and its entity, the South African Social Services Agency (Sassa). Both have the primary responsibility to ensure the payment of the grants.

“The minister of finance and National Treasury have the mandate to ensure transparency, accountability and sound financial controls in the management of public finances, which is not always the case,” said Gordhan.

Treasury said its role is four-fold, firstly in terms of assigning a budget to the social development department and its entities. It is also responsible for the procurement framework involved, oversight and on request advisory support regarding policy and the national interest of ensuring the payment of grants.

About 17 million beneficiaries receive grants. “We have a constitutional responsibility to obey the law. Sassa and ourselves have a higher duty to ensure people receive grants on April 1,” said Gordhan.

The budget allocated to the social development department, headed by Minister Bathabile Dlamini, is determined by Cabinet, he added. Projected expenditure for Sassa is R7.7bn, and R7.2bn is to be sourced from the social development department. Payment of contractors is projected to be R2.1bn for 2016/17 and R2.3bn in 2017/18.

“There is no shortage of money in system to do what is required to be done,” said Gordhan.

Procurement

In terms of the Constitution, all tenders are to be advertised to ensure competitive processes are followed, explained Gordhan. “Anybody who wants to bid and do government work must be allowed to do so, and be allowed indicate what the costs will be for government to get the best value,” he said. This would avoid cases of collusion as was seen in the construction industry, said Gordhan.

Treasury’s role in procurement is to monitor and assess the implementation of new contracts. Deviation from competitive processes can occur in the case of emergencies, such as natural disasters or where there is a sole supplier in exceptional cases.

Among the specifications of procurement is that there should be “equal and equitable” opportunities for historically disadvantaged groups to bid. This is crucial, as the design pf procurement should ensure “maximum inclusivity and opportunity” and not “narrow down” options to a “favourite person and entity”.

Gordhan also said that the decisions of courts are binding, but there are instances in which a CEO or accounting officer may consider deviation from a normal competitive bidding process. The accounting authority can only deviate from inviting competitive bids in the case of sole supplier status or an emergency.

An emergency constitutes a serious or unexpected situation such as a risk to life, health and property or acts of God, he explained.

There should be evidence that the sole supplier possesses the available capacity. The authority can also invite as many suppliers as possible and select a preferred supplier, using a competitive bid committee system. This is essentially a closed tender process where only a few compete. There also needs to be written approval from Treasury.

Treasury met with the director general of social development, the Reserve Bank and Sassa late last year and in early January regarding future options for the payment of social grants after the expiry of the contract with existing service provider Cash Paymaster Services (CPS) on March 31.

Options include the continuation of CPS as service provider, by extending the existing tender. The other option is to set up a new tender.

Sassa approached Treasury on February 7 to request the extension of CPS's services. However, Gordhan said this would be unlawful, and would have to be challenged at the Constitutional Court in order to continue.

Gordhan emphasised that Treasury does not support the extension of an invalid contract and would only support this if it were granted by the Constitutional Court. Two legal opinions showed that the CPS tender is unlawful.

Any extension provided by the Constitutional Court should be for the shortest possible time, to ensure the tendering process becomes competitive and is acceptable within the law. “The unlawfulness can be suspended until a new process is put in place to ensure continuation of payment of grants in future,” he said. 

The company involved essentially becomes an organ of state, acting in national interest with the legal obligation to ensure there is no disruption in the distribution of grants, he added.

"Our role is to ensure Parliament appropriates money for the administration and payment of grants, and ensure procurmenet law is adhered to and followed," he said. 


Among the other options discussed in the meeting with the Reserve Bank, the Department of Social Development and Sassa is the likelihood of banks stepping in to distribute grant payments through their networks - provided that they comply with Sassa.

About 60% of recipients would use this option as they have access to banking services, explained Gordhan. Another option is to use the facilities of the Post Office and a cash paypoint option to complement the above options.

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