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[2019] ZASCA 131
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Cash Paymaster Services (Pty) Ltd v Chief Executive Officer of the South African Social Security Agency and Others (1029/2018) [2019] ZASCA 131; [2019] 4 All SA 327 (SCA) (30 September 2019)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1029/2018
In
the matter between:
CASH
PAYMASTER SERVICES (PTY)
LTD APPELLANT
and
CHIEF
EXECUTIVE OFFICER OF THE SOUTH AFRICAN
SOCIAL
SECURITY
AGENCY FIRST
RESPONDENT
SOUTH
AFRICAN SOCIAL SECURITY AGENCY SECOND
RESPONDENT
CORRUPTION
WATCH (NPC)
(RF) THIRD
RESPONDENT
Neutral
citation
:
Cash
Paymaster Services (Pty) Ltd v Chief Executive Officer of the SASSA
and others
(1029/2018)
[2019] ZASCA 131
(30 September 2019)
Coram
:
Navsa, Saldulker, Swain, Molemela and Plasket JJA
Heard
:
10 September 2019
Delivered:
30
September 2019
Summary:
Tender
for the payment of social grants – whether contract included
registration of recipients of social grants plus other
beneficiaries
in return for payment of a set fee – no lawful basis for
variation of contract to provide for payment of additional
fee of
R316 447 361.41.
Order
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Tsoka J sitting as court of
first instance):
1
The appeal is dismissed.
2
The appellant is directed to pay the third respondent’s costs,
including the costs of two counsel.
JUDGMENT
Plasket
JA (Navsa, Saldulker, Swain and Molemela JJA concurring):
[1]
The South African Social Security Agency (SASSA) is an organ of state
created by s 2(1) of the South African Social Security
Agency Act 9
of 2004 (the SASSA Act). One of its functions is to ‘administer
social assistance in terms of Chapter 3 of the
Social Assistance Act,
2004
’.
[1]
It may, with the
concurrence of the Minister, enter into contracts with service
providers ‘to ensure effective payments to
beneficiaries’.
[2]
[2]
SASSA published a request for proposals (RFP) for the registration of
beneficiaries of social grants and the payment of social
grants. It
awarded a tender to Cash Paymaster Services (Pty) Ltd (CPS), the
appellant, in January 2012. In the following month
SASSA and CPS
entered into a contract and a service level agreement (SLA) in terms
of which CPS undertook, inter alia, to register
beneficiaries of
social grants on a data base, and to pay them their social grants
when due.
[3]
[3]
This appeal concerns the validity of what was described by CPS and,
at one stage, by SASSA as a variation of the contract, evidenced
by
the minutes of a meeting held on 15 June 2012. As a result of that
purported variation, an amount of R316 447 361.41
was paid
by SASSA to CPS. Corruption Watch, the third respondent, launched an
application in the Gauteng Division of the High Court,
Pretoria for
the setting aside of the decision to approve payment to CPS and an
order directing CPS to repay SASSA the amount it
had received,
together with interest.
[4]
Tsoka J granted an order in the terms sought by Corruption Watch and
refused CPS leave to appeal. The matter is, however, before
this
court pursuant to leave to appeal having been granted on petition.
Background
[5]
Corruption Watch was described in the founding affidavit deposed to
by its executive director, Mr David Lewis, as a ‘non-profit
civil society organisation’ that has as its objectives
‘fighting the rising tide of corruption and the abuse of public
funds in South Africa’ as well as the promotion of
‘transparency and accountability to protect the beneficiaries
of
public goods and services’. It brought the application in
the court below in the public interest, and its standing to do so
is
not in issue.
[6]
CPS is a subsidiary of Net1 UEP Technologies Incorporated (Net1)
which is incorporated in the United States of America and is
listed
on both the Nasdaq and the Johannesburg Stock Exchange (the JSE). On
6 June 2014, the JSE released a stock exchange announcement
which
stated (in part):
‘
Net1
UEPS Technologies, Inc. . . . today announced that it has received
approximately ZAR 275 million (or $25.7 million at prevailing
exchange rates) from the South African Social Security Agency
(“SASSA”), related to the recovery of additional
implementation
costs incurred during the beneficiary re-registration
process in fiscal 2012 and 2013. At the time, SASSA requested Net1 to
biometrically
register all social grant beneficiaries (including all
child beneficiaries), in addition to the grant recipients who were
issued
with the SASSA-branded UEPS/EMV smart cards. As a result, Net1
performed approximately 11 million additional registrations that
did
not form part of its monthly service fee. After an independent
verification process, SASSA agreed to pay the ZAR 275 million
as full
settlement of the additional costs incurred.’
[7]
After Corruption Watch had become aware of the announcement –
and of the fact that SASSA had disbursed a large sum of
money to CPS
– it wrote to SASSA to ascertain the details of the payment and
the basis for it. SASSA invited representatives
of Corruption Watch
to a meeting in order to brief them and to allow them to inspect (but
not copy) relevant documentation.
[8]
Corruption Watch’s representatives were able to ascertain that
the payment was made ostensibly in respect of the registration,
onto
a database, of beneficiaries of social grants. It was claimed that
the payment was for registrations additional to the approximately
9.7
million beneficiaries in respect of whom CPS was paid on a monthly
basis.
[9]
No evidence of SASSA ever requesting this additional service was
placed before Corruption Watch’s representatives nor
was any
evidence tendered of any written agreement having been concluded. All
that Corruption Watch’s representatives were
told was that
senior SASSA officials, including its chief executive officer (CEO),
Ms Virginia Petersen, and CPS’s managers,
including its CEO, Dr
Serge Belamant, had met to discuss the arrangement that led to the
payment. No minutes of this meeting were
made available.
[10]
Corruption Watch was able to ascertain that CPS had commissioned a
report from its auditors, KPMG, in order to justify its
claim for
payment. After receiving the claim for payment and KPMG’s
report (to the effect that all was in order) –
and on the basis
of Ms Petersen’s instructions – SASSA convened a Bid
Adjudication Committee (BAC) meeting to consider
CPS’s claim.
The BAC approved the payment of all but 20 percent of the claim
which, it said, should be held back pending
the finalisation of an
internal audit by SASSA.
[11]
The BAC’s recommendation was accepted by Ms Petersen. Payment
of the reduced amount was tendered by SASSA but CPS refused
to accept
it and returned the money to SASSA. CPS demanded payment of the full
amount. The BAC convened again and recommended that
the full amount
be paid to CPS in the light of what it referred to as the ‘external
KPMG audit report’. On 25 April
2014, Ms Petersen accepted the
BAC’s recommendation and CPS’s claim was paid in full.
[12]
On the strength of this information, Corruption Watch concluded that
the decision to pay CPS mighty well have been tainted
by
irregularity. It then launched its application in the court below,
using the procedure provided for in rule 53 of the Uniform
Rules, to
review SASSA’s decision to pay CPS. It alleged that the
decision taken by SASSA’s CEO to pay R316 447 361.41
of public funds was the exercise of a public power that was
reviewable either in terms of the
Promotion of Administrative Justice
Act 3 of 2000
or the principle of legality; and that it was invalid
because it had no lawful basis, was irrational and was contrary to
both s
217 of the Constitution and ss 50 and 51 of the Public Finance
Management Act 1 of 1999 (the PFMA).
[13]
Eventually, when most of the record had been produced by SASSA in
terms of rules 53(1)(
b
)
and 53(3), Corruption Watch filed an amended notice of motion
[4]
and a supplementary affidavit, in terms of rule 53(4).
[14]
In the answering affidavits deposed to by Ms Petersen, on behalf of
herself (as the first respondent) and SASSA, and by Mr
Nunthakumarin
Pillay, on behalf of CPS, the respondents made common cause. I shall
now set out their version briefly.
[15]
The RFP was published to invite tenders for the payment of social
grants. This included the registration of beneficiaries.
Ms Petersen
stated in this regard:
‘
4
At the time of the tender SASSA was responsible for the payment of
more than 14.5 million social grants per month to over 8.5
million
beneficiaries. These figures were approximate figures given the fact
that some recipients/beneficiaries of grants were
receiving them on
behalf of children or on behalf of those beneficiaries who have
appointed procurators. As I will address further
below in this
affidavit, the re-registration of every social grant beneficiary,
care giver, procurator and children benefitting
from a social grant,
under the new tender effectively saw the number of beneficiaries and
recipients re-registered or re-enrolled
under the new system
increasing to almost 22 million.
5
SASSA issued out the tender in question to address these challenges.
The main purpose of the tender was to shift from the largely
cash
based method of paying social grants to a more electronic
environment, which would afford beneficiaries increased convenience,
while at the same time reducing opportunities for duplicate payments,
losses and fraud. In order to achieve this, the tender called
for the
biometric enrolment of every grant recipient to ensure secure
payments through the biometrically enabled SASSA payment
card. This
biometric electronic mode of payment would address many of the
challenges that SASSA was experiencing in relation to
the payment of
social grants. The tender was awarded to Cash Paymaster Services
(Pty) Ltd (“CPS”) pursuant to my approval
on 17 January
2012 and the parties entered into a Contract and Service Level
Agreement (“SLA”) on 3 February 2012.
’
[16]
CPS’s bid, it was alleged, was based on the number of the
people who had to be paid every month, whether for themselves
or on
behalf of others, rather than on the total number of recipients plus
beneficiaries, such as the children supported by child
support grants
or foster parent grants. Ms Petersen explained:
‘
It
must be understood that for every grant recipient, there may be
multiple grants paid. Each of these grants represents an individual
who needed to be accounted for, if the spirit and intention of this
RFP was to be met.’
[17]
The contract involved three phases in order for it to be executed. In
the first two phases, provision was made for beneficiaries
who had
been paid by service providers other than CPS to continue to be paid
under the new system. According to Ms Petersen, the
third phase,
which had commenced on 1 June 2012 in the form of a pilot project,
‘entailed the re-registration of all beneficiaries
including
children and procurators and cardholders onto the CPS solution and
the issue of the biometric cards’.
[18]
It was, Ms Petersen said, only at this stage that it became clear
that there was a problem. She explained it thus:
‘
The
scope of work as set out in the RFP was wide and it included in it
the re-registration of all beneficiaries inclusive of children,
procurators and recipients. The projected numbers provided in
annexure 2 of the RFP of about 9.7 million recipients did not take
into account all the children and procurators. It thus became very
clear during the [registration] pilot project that whereas the
RFP
was broad, the SLA dealt only with the re-registration or enrolment
of recipients as opposed to all beneficiaries including
children and
procurators.’
[19]
At a meeting of SASSA and CPS officials on 15 June 2012 an agreement
was reached by Ms Petersen and Dr Belamant to vary the
contract. Ms
Petersen said that the minutes of that meeting, which are signed by
her and Dr Belamant, record the terms of the variation
agreement in
writing.
[5]
The minute records
the following:
‘
The
SASSA CEO confirmed that the enrolment of dependants should proceed,
as specified at the outset and agreed upon during the SLA
negotiations.
At
the request of the SASSA CEO, the CEO of CPS agreed that the payment
of costs associated with the enrolment of dependants would
only be
effected at the conclusion of the bulk enrolment process.
The
SASSA CEO requested an independent report in respect of the costs
associated with the enrolment of dependants to be tabled at
the
conclusion of the bulk enrolment process.’
[20]
In other words, it was, according to Ms Petersen, agreed that CPS
would register the additional beneficiaries at cost, and
that the fee
for doing so would be determined after the event. In a nutshell,
then, the case for SASSA (at that stage) and of CPS
was that the
payment was made lawfully in terms of the alleged variation
agreement, which had become necessary because the SLA
and the
contract only made provision for the registration of recipients, and
not of beneficiaries.
[21]
In Corruption Watch’s replying affidavit, an attack was
launched on the lawfulness of the variation agreement on the
basis,
inter alia, that it ‘does not exist in the form of a formal
written agreement’, that it was not approved by
the BAC and was
contrary to SASSA’s supply chain management policy. It also
filed an amended notice of motion that, in addition
to the relief it
had earlier sought, also sought to set aside Ms Petersen’s
decision to agree to the variation.
[22]
Some months later, Corruption Watch filed a supplementary affidavit
containing evidence that had not been available to it when
its
replying affidavit was deposed to. That evidence was a report filed
by Net1 in the United States of America in terms of that
country’s
Securities Exchange Act of 1934. The report was signed by Dr Belamant
and Mr Herman Kotze, Net1’s chief financial
officer, both of
whom certified its correctness. The relevant passage of the report
concerned ‘recent developments in South
Africa’ and it
reads:
‘
We
commenced the second phase of the enrolment process in early July
2012 and plan to be substantially complete by March 2013, in
accordance with the enrolment plan agreed with SASSA. Under our
agreement with SASSA, we have to enrol both the grant recipients
(those individuals who receive the actual payment and are issued with
our UEPS/EMV smart card), as well as the grant beneficiaries
(those
individuals who have qualified for the social grant, but are not
necessarily the recipient of the grant). By way of example,
a parent
who has three children and receives a grant for all three children is
the grant recipient, while the three children are
each classified
individually as grant beneficiaries. In this case, we capture the
personal and biometric information of the parent
and three children,
but only the parent is issued with an UEPS/EMW smart card. While the
number of grant recipients on a national
basis has consistently been
quantified by SASSA at 9.4 million individuals, the number of
beneficiaries is continually being revised
by SASSA on an ongoing
basis from an initial estimate of approximately 15.5 million, to the
current estimate of approximately 21.6
million.’
[23]
The report continued to say:
‘
We
do not receive additional compensation for the enrolment of grant
beneficiaries who are not otherwise grant recipients because
the
pricing under our SASSA contract is based on the number of grant
recipients we pay, rather than the number of grant beneficiaries.’
[24]
On 18 April 2017, a few months after the filing of the supplementary
affidavit, a notice was filed by the State Attorney withdrawing
the
opposition of both SASSA and its CEO, abiding the decision of the
court below and tendering wasted costs.
[25]
In his judgment in the court below, Tsoka J found that the variation
had not been agreed to by SASSA and CPS. Instead, Ms Petersen
had
unilaterally varied the SLA. The result was that the payment to CPS
was without any basis and unlawful.
[6]
Secondly, he found, in addition, that on the assumption that
agreement had been reached, it had been vague (and, on that account
invalid) because no agreement had been reached as to the cost of the
service CPS was to provide.
[7]
Thirdly, the variation was concluded contrary to SASSA’s supply
chain management policy in that no prior approval from the
BAC had
been sought or given.
[8]
Fourthly, he found that the payment to CPS had been effected for an
ulterior purpose or motive; had not been ‘rationally
connected
with the purpose for which it was made’; and was unreasonable
in that ‘no reasonable person in the position
of SASSA could
have effected such payment without any valid reasons’.
[9]
Finally, he concluded that, in any event, the registration of
beneficiaries was contemplated by the SLA.
[10]
[26]
Approximately two months before the appeal was to be argued, a letter
was sent by the Registrar of this court to SASSA’s
attorneys
requesting an explanation for its withdrawal of its opposition to
Corruption Watch’s application. An affidavit,
deposed to by Ms
Busisiwe Mahlobogoana, SASSA’s General Manager: Legal Services,
was filed in which an explanation was given
for deciding not to
oppose the application. (At the hearing of the appeal, counsel
appeared for SASSA, as directed by the court,
in order to be of
assistance to the court.)
[27]
Ms Mahlobogoana explained that when Corruption Watch’s
application was launched, Ms Petersen took the decision to oppose
it
on behalf of SASSA. She deposed to an answering affidavit in which
she sought to justify the payment to CPS even though ‘SASSA
had
difficulties to explain the reasons for the payment’. Despite
that, SASSA’s papers were finally drafted to reflect
what Ms
Petersen and Mr Frank Earl, the Manager: Grants Administration and
Customer Services, ‘understood to have been the
basis for the
payment and its justification’. Interestingly, Ms Mahlobogoana
stated that Ms Petersen and Mr Earl had been
briefed by Ms Raphaahle
Ramokgopa, the project manager in respect of the tender, who
explained to them, before the answering papers
were drafted, that the
RFP and the SLA envisaged ‘the registration of beneficiaries,
recipients and procurators’ and
would include the taking of
biometric data of children who benefitted from social grants. Despite
this, ‘they persisted with
their view as expressed in the
answering affidavit’.
[28]
After Corruption Watch filed its supplementary affidavit, SASSA’s
counsel, in order to draft a response, posed a number
of questions to
SASSA officials in relation to the disclosure made by CPS in the
United States of America. Ms Mahlobogoana proceeded
to explain:
‘
The
most concerning of the issues was that for the first time it appeared
that CPS was aware that the beneficiaries included children,
therefore there could not have been a variation agreement to include
children when they had been included all along. There were
thus
glaring inconsistencies between the versions given by SASSA and its
then CEO (Ms Petersen) and CPS in their respective papers
and what
CPS declared in annexure DL30 of the supplementary affidavit.’
[29]
When SASSA was not able to provide answers to the questions counsel
had posed, Mr Thokozani Magwaza, who had replaced Ms Petersen
as CEO,
took the decision, on counsel’s advice, to withdraw SASSA’s
opposition.
[30]
Parliament’s Standing Committee on Public Accounts (SCOPA)
requested information from SASSA concerning its reasons for
withdrawing its opposition. Mr Magwaza furnished SCOPA with a
detailed report dated 23 June 2017. Having set out the problems
identified by counsel and having interpreted the RFP and the SLA in
order to show that they envisaged the registration of children,
he
concluded:
‘
Based
on the above factors, it would appear that children and procurators
were included to be re-registered as per the RFP, Contract
and SLA.
Therefore, SASSA cannot say with certainty that there were additional
beneficiaries that had to be registered on the CPS
system. If indeed
there were additional people to be registered, then it is not clear
why the fee was not agreed prior to that
registration process or why
the fixed fee of R16.44 was not used. However, this does not mean
that there can be no reasons advanced,
but currently commonly
understood and accepted reasons from SASSA’s side cannot be
advanced.’
[31]
SASSA’s view of the answering affidavit deposed to by Ms
Petersen is that while it cannot simply be disregarded, it must
be
seen for what it is – the ‘explanation given by those who
were involved in the decision-making process’. That
said, it is
clear that SASSA does not support the version put up by Ms Petersen.
Indeed, Ms Mahlobogoana said that SASSA considered
the court below’s
judgment to have been correct and welcomed it. She set out SASSA’s
position on the merits as follows:
‘
In
particular SASSA does not stand by the interpretation of the former
CEO Ms Petersen and Mr Earl that children and procurators
were not
included in the SLA for the following reasons:
53.1
The bid documents show that the enrolment of children was also
included;
53.2
It was always known that although children are not regarded as
recipients, they were included under the recipients whom they
fell
under;
53.3
SASSA did not follow the procedure set out in the SLA which requires
that an addendum be concluded if additional work is procured;
53.4
The Bid Adjudication Committee (BAC) recommended, on conditions, for
Ms Petersen’s approval for payment of the additional
work after
the fact.’
[32]
The problem of two mutually destructive versions being put up by
SASSA is more apparent than real. Ultimately, the outcome
of this
appeal turns on an interpretation of the RFP, the SLA and the
contract. It is to that issue that I now turn.
The
interpretation of the contractual documents
[33]
The process of interpreting documents, including contracts, is an
exercise aimed at ascertaining what the parties involved
meant by the
words they chose. It is necessary to do so contextually and to
construe the document
‘
in
accordance with sound commercial principles and good business sense
so that it receives a fair and sensible application’.
[11]
[34]
These broad principles were explained as follows by Wallis JA in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
:
[12]
‘
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than one
meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose
of the document. Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible
or businesslike for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between
interpretation and
legislation; in a contractual context it is to make a contract for
the parties other than the one they in fact
made. The “inevitable
point of departure is the language of the provision itself”,
read in context and having regard
to the purpose of the provision and
the background to the preparation and production of the document.’
[35]
I shall commence by considering the legislative context within which
SASSA functions, as well as its obligations. Thereafter,
I shall
consider, in turn, the RFP, the SLA and the contract.
The
legislative context
[36]
In terms of s 2(2) of the SASSA Act, SASSA is, in its functioning,
subject to the PFMA. It is a public entity for purposes
of the
PFMA.
[13]
Section 2 of the
PFMA provides that its objects are to ‘secure transparency,
accountability, and sound management of the
revenue, expenditure,
assets and liabilities of the institutions to which this Act
applies’. Obligations consistent with
these objects are placed
on the CEO of SASSA as its accounting authority.
[14]
[37]
SASSA’s objects are set out in s 3 of the SASSA Act. They are
to ‘act, eventually, as the sole agent that will
ensure the
efficient and effective management, administration and payment of
social assistance’;
[15]
to ‘serve as an agent for the prospective administration and
payment of social security’;
[16]
and to ‘render services relating to such payments’.
[17]
When SASSA outsources its functions, as it did in this case, s 4(3)
requires that any contract it enters into includes provisions
that
ensure, inter alia, ‘the effective, efficient and economical
use of funds designated for payment to beneficiaries of
social
security’.
[18]
[38]
The principal empowering mechanism for the payment of beneficiaries
is the
Social Assistance Act. Its
preamble states:
‘
SINCE
the Constitution of the Republic of South Africa, 1996 (Act 108 of
1996), provides that everyone has the right to have access
to social
security, including, if they are unable to support themselves and
their dependants, appropriate social assistance, and
obliges the
state to take reasonable legislative and other measures, within its
available resources, to achieve the progressive
realisation of each
of these rights;
AND
SINCE the effective provision of social assistance requires uniform
norms and standards, standardised delivery mechanisms and
a national
policy for the efficient, economic and effective use of the limited
resources available for social assistance and for
the promotion of
equal access to government services;
THEREFORE
in order to prevent the proliferation of laws, policies and
approaches to the execution thereof from materially prejudicing
the
beneficiaries or recipients of social assistance as well as the
economic interests of provinces or the Republic as a whole
or from
impeding the implementation of a national social assistance economic
policy;
AND
in order to assist in securing the well-being of the people of the
Republic and to provide effective, transparent, accountable
and
coherent government in respect of social assistance for the Republic
as a whole,
BE
IT THEREFORE ENACTED by the Parliament of the Republic of South
Africa, as follows: – ’
[39]
The objects of the
Social Assistance Act are
set out in
s 3.
This
section reads:
‘
The
objects of this Act are to –
(a)
provide for the administration of social assistance and payment of
social grants;
(b)
make provision for social assistance and to determine the
qualification requirements in respect thereof;
(c)
ensure that minimum norms and standards are prescribed for the
delivery of social assistance; and
(d)
provide for the establishment of an inspectorate for social
assistance.’
[40]
The
Social Assistance Act gives
effect to the fundamental right,
provided for by
s 27(1)(
c
)
of the Constitution, for everyone to have access to ‘social
security, including, if they are unable to support themselves
and
their dependants, appropriate social assistance’. In order to
meet this obligation, s 4 of the Act requires the responsible
Minister, with the concurrence of the Minister of Finance, to make
funds available for the payment to persons who qualify of six
different types of grants. They are child support grants, care
dependency grants, foster child grants, disability grants, older
person’s grants, war veteran’s grants and grants-in-aid.
[41]
From the legislative provisions that I have referred to, it is
apparent that two complementary sets of obligations rest on
SASSA and
would, of necessity, have had a bearing on, and informed, the content
of the RFP, the SLA and the contract. The first
set concerned the
obligation to deliver a social grant payment system that could fulfil
SASSA’s constitutional mandate, as
given effect to by the SASSA
Act and the
Social Assistance Act. This
included not only putting in
place a system that was able to deliver social grants on time but
also one that respected the dignity
of recipients and beneficiaries,
and was user-friendly.
[42]
The second set of obligations involved SASSA performing its core
function in a fiscally responsible manner – as cost-effectively
and efficiently as possible with systems in place to avoid fraud,
duplication of payments and corrupt payments to ‘ghost’
beneficiaries. That, it seems to me, entails, inter alia, ensuring
that accurate information is captured on the system concerning
those
to whom social grants are paid as well as those who are the ultimate
beneficiaries of social grants. These obligations stem
from the SASSA
Act, the
Social Assistance Act and
the PFMA.
The
RFP, the SLA and the contract
[43]
After the RFP had, in a section entitled ‘Background and
Intent’, recorded that SASSA was responsible for the
management, administration and payment of social grants, the
statement was made that more than 14.8 million people benefitted from
social grants each month.
[19]
The purpose of the RFP was to invite bidders to submit proposals ‘for
the provision of a Payment Service for Social Grants’.
[20]
Its general intent was for SASSA to have in place a system for the
payment of social grants that improved services to beneficiaries,
was
flexible, reduced ‘fraud, corruption and leakage at the point
of payment’ and reduced costs.
[21]
[44]
Section C of the RFP dealt with the scope of work that the successful
bidder was required to perform. Clause 1 of this section
stated:
‘
1.1
As indicated in the introduction Section A of the RFP, SASSA is
currently responsible for the disbursement of Social Grants
to more
than 8.5 million Grant Recipients per month resulting in over 14.8
million grants being paid.
1.2
This number is likely to increase in the near future, given that the
age limit for child support grant has been extended up
to the age of
18 years.’
[45]
It will be noticed that this clause draws a distinction between 8.5
million recipients and 14.8 million grants being paid to
them. In the
definitions section of the RFP a distinction is drawn between
‘beneficiaries’, on the one hand, and ‘recipients’,
on the other. ‘Beneficiaries’ are defined as ‘those
persons who receive Social Grants in terms of the [Social
Assistance]
Act’, while a ‘Grant Recipient’ is defined as ‘a
Beneficiary, a primary care giver or a Procurator
who receives one or
more Social Grants’. A ‘procurator’ is defined in s
1 of the Social Assistance Act to mean
‘a person appointed by a
beneficiary’ or SASSA to ‘receive social assistance on
the beneficiary’s behalf’.
[46]
Clause 3 defined the scope of the work to include ‘enrolment of
eligible Beneficiaries, Grant Recipients and Procurators’,
the
issuing of beneficiary payment cards and the payment of grants.
[47]
The enrolment process was required to capture and register the
identification data of ‘Beneficiaries, Grant Recipients
and
Procurators’.
[22]
Two
phases of enrolment were envisaged – a ‘bulk enrolment of
the Beneficiaries into the Successful Bidder’s
system’
and an on-going enrolment of new beneficiaries when they entered the
system.
[23]
[48]
Clause 3 provided further detail of the work that was required.
According to clause 3.1.2.1.2, SASSA’s intention was
to have
‘all Beneficiaries . . . to be Biometrically identified’
during the bulk enrolment process. Clause 3.1.6 provided
that for
‘child support, foster child and care dependency grants, the
Successful Bidder/s must ensure that the Biometrics
and Data relating
to the children is also captured’; and, in terms of clause
3.1.7, when a procurator is involved, the successful
bidder was
required to ensure that ‘the Data relating to the Procurator is
also captured including Biometrics’.
[49]
Clause 3.1.15 provided that when SASSA approved a grant to a parent
or caregiver, ‘the details of the Beneficiary (i.e.
the child)
for whom the grant is intended’ will be specified ‘in
order for the Successful Bidder/s to authenticate
the details of the
actual Beneficiary (child)’. Clause 3.2.2 stated that only ‘one
Beneficiary Payment Card will be
issued to the Grant Recipient
irrespective of the number of grants types that the Beneficiary or
Recipient qualifies for’.
[50]
Section E concerns financial details of the bid. Clause 2.1 provided
that in the costing of the bid, a number of ‘key
cost drivers’
had to be taken into account. They were listed in clause 2.2. It
provided that the transaction fees that would
be due to the
successful bidder covered enrolment, beneficiary payment cards,
labour, payment infrastructure, phase-in costs and
set-up costs. The
‘transaction fees/cost’ were, in terms of clause 2.3,
capped at a maximum of R16.50, inclusive of
VAT, for the duration of
the contract. In the definitions clause, the ‘firm price’
is defined to mean ‘the all-inclusive
transaction fee charges
per Grant Recipient charged by the Bidder to SASSA for provision of
services for the duration of the contract,
which Firm Price shall not
be in excess of R16.50 (VAT inclusive) (Sixteen rand and fifty cents)
per transaction per month’.
[51]
The RFP unambiguously and clearly contemplated a contract in terms of
which the successful bidder would enrol on its system
both recipients
and beneficiaries. It would do so at the outset and when new
recipients and beneficiaries qualified for social
grants. It would be
paid the ‘fixed price’ as an all-inclusive fee for doing
this and for paying social grants every
month for the duration of the
contract.
[52]
Clause 1 of the SLA contains definitions. The term ‘beneficiaries’
was defined to ‘bear the meaning assigned
to it in the Act and
includes Children’.
[24]
A child was defined as ‘any person under the age of 18
(eighteen) years who is entitled to benefit directly from a Grant
and
in respect of whom an application was made for the Grant’. A
procurator was defined with reference to the definition
in
s 1
of the
Social Assistance Act, and
a recipient was defined as ‘a
Beneficiary, Primary Care Giver, a claimant of Unclaimed Benefits or
Procurator who is entitled
to receive one or more Grants’.
[53]
Clause 4 of the SLA listed the services that CPS had agreed to
provide. These included the ‘[e]nrolment of all eligible
Recipients as per the Enrolment plan . . .’
[25]
In other words, CPS undertook, inter alia, to enrol beneficiaries,
including children. Clause 5 dealt with the enrolment process.
It
provided that this entailed two phases, namely, a bulk enrolment
phase – the ‘initial Enrolment of every Recipient
at the
commencement of the Contract – and ‘on-going Enrolment of
new Recipients’.
[54]
Clause 5.3 set out the information that was required to be captured
by CPS when enrolling recipients. This included: the ‘[n]ame,
surname, Digital Photograph (not applicable to Children) and
identification number of the Recipient’;
[26]
and ‘[a]ll 10 fingerprints where possible, or two palm prints,
or two foot prints (new born to 6 years) and voice’.
[27]
Clause 5.3.8 placed an obligation on CPS to ‘verify the
identity of all Recipients and Children before Enrolment’.
[55]
The contract contained a definition of the terms ‘agreement’
and ‘contract’ in clause 2. They mean
‘the
agreement as set out in this document together with the Service Level
Agreement, Bid Documents and RFP, which documents
shall be regarded
as annexure hereto by reference’. The definitions of the terms
‘beneficiary’, ‘child’,
‘procurator’
and ‘recipient’ in clause 2 of the contract are identical
to the corresponding definitions
in clause 1 of the SLA. The ‘firm
price’ is defined in the contract to mean ‘an
all-inclusive fee of R16.44 (VAT
inclusive at 14%) per Recipient Paid
by the Contractor’.
[56]
Clause 5.2 dealt with the SLA. It stated:
‘
The
Service Level Agreement shall include provisions contemplated in
section 4(3) of the South African Social Security Agency Act,
2004
(Act No. 9 of 2004); as well as detailed Services to be provided
which include: performance, quality and functionality standards;
procedures, norms and standards prescribed by SASSA requiring
compliance by the Contractor; practical steps for the implementation
of the Services; pre-funding; enrolment of Beneficiaries; issuing and
replacement of Cards to Beneficiaries; payment compliance;
transfer
of beneficiary data to SASSA; the respective roles of the Contractor
and of SASSA and reporting, liaison; communication
requirements;
infrastructure, equipment and facilities to be provided and
maintained; security; communications; implementation
of penalties
system; and related issues.’
[57]
Clause 6.1 stated that in consideration for the services that were to
be provided by CPS, SASSA would pay it the firm price.
In the event,
however, of CPS being required to render ‘social grant payment
related services’ that are additional
to the services
contemplated by the contract (including the SLA), the terms of the
rendering of the additional services will have
to be negotiated and,
if agreed, to, reduced to writing.
[28]
[58]
It is clear from the provisions of the SLA and the contract that when
CPS was required to register social grant beneficiaries,
it was
required to register not only recipients in the strict sense –
the persons to whom payment was made – but also
those who
benefitted from social grants. So, if a parent received payment of
child care grants in respect of three children, CPS
was required to
register not only the parent but the three children as well. That is
consistent with the definitions in the SLA
and the contract, and with
the duties imposed on CPS in respect of the service it was to
provide. It is also consistent with the
legislative context in terms
of which SASSA sought to outsource the provision of an efficient and
effective, corruption free payment
system for social grants. The
result is that this registration process was part of the service that
CPS agreed to provide in return
for payment of the fixed price for
the duration of the contract.
Conclusion
[59]
On the basis of my interpretation of the SLA and the contract, it is
evident that Ms Petersen and CPS were incorrect in their
assertions
that it had been necessary to vary the contract because it only
required CPS to register recipients of social grants
and not
recipients and beneficiaries. They were also incorrect in their view
that CPS was entitled to payment over and above the
fixed price.
[29]
[60]
There was no lawful basis for the variation agreement for this
reason. In my view, CPS’s claim for payment was contrived
and
opportunistic. There was consequently no lawful basis for the
decision to pay CPS the amount of R316 447 361.41,
and it
must be repaid by CPS to SASSA. As a result, the appeal must fail.
The
order
[61]
I make the following order:
1 The appeal is
dismissed.
2 The appellant is
directed to pay the third respondent’s costs, including the
costs of two counsel.
________________________
C
Plasket
Judge
of Appeal
Appearances:
For
Appellants: A Cockrell SC (with J Bleazard)
Instructed
by:
Smit
Sewgoolam, Johannesburg
Peyper
Attorneys, Bloemfontein
For
First and Second Respondents: N Cassim SC (with H Rajah)
Instructed
by:
State
Attorney, Johannesburg
State
Attorney, Bloemfontein
For
Third Respondent: S Budlender SC (with L Kelly)
Instructed
by:
Dockrat
Attorneys, Johannesburg
Honey
Attorneys, Bloemfontein
[1]
SASSA Act, s 4(1)(
a
).
Section 1
of the
Social Assistance Act 13 of 2004
defines social
assistance to mean ‘a social grant’ and that term is, in
turn, defined to mean ‘a child support
grant, a care
dependency grant, a foster child grant, a disability grant, an older
person’s grant, a war veteran’s
grant and a
grant-in-aid’.
[2]
SASSA Act, s 4(2)(
a
).
Section 4(3) provides that such a contract ‘must include
provisions to ensure’ inter alia ‘the effective,
efficient, and economical use of funds designated for payment
to beneficiaries of social security’.
[3]
The regularity of the award of the
tender to CPS was taken on review by an unsuccessful bidder. In
Allpay Consolidated
Investment Holdings (Pty) Ltd & others v Chief Executive Officer
of the South African Social Security
Agency & others
2014 (1) SA 604
(CC), the Constitutional Court declared that the
award of the tender was unlawful but suspended the operation of the
order of
invalidity ‘pending the determination of a just and
equitable remedy’. (Para 98.) In
Allpay
Consolidated Investment Holdings (Pty) Ltd & others v Chief
Executive Officer of the South African Social Security
Agency &
others
2014 (4) SA 179
(CC), the Constitutional Court declared that the contract between
SASSA and CPS, entered into pursuant to the irregular award
of the
tender, was unlawful, but it suspended the operation of the
declaration of invalidity pending the award of a new tender
after a
new tender process. (Para 78.)
[4]
The amended notice of motion referred
to the exact amount paid by SASSA to CPS – R316 447 361.41
– rather
than the approximation of R317 million that appeared
in the original notice of motion. In addition, Corruption Watch also
sought
an order directing CPS to repay the money to SASSA.
[5]
Clause 18.1 of the contract requires
any variation to be in writing and to be signed by the duly
authorised representatives of
the parties.
[6]
Paras 16-17.
[7]
Paras 18-19.
[8]
Paras 20-22.
[9]
Para 24.
[10]
Para 27.
[11]
Picardi Hotels Ltd v Thekwini
Properties (Pty) Ltd
[2008] ZASCA 128
;
2009
(1) SA 493
(SCA) para 5. See too
KPMG
Chartered Accountants (SA) v Securefin Ltd & another
2009 (4) SA 399
(SCA) para 39;
Coopers
& Lybrand & others v Bryant
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at 767E-768E.
[12]
Natal Joint Municipal Pension Fund
v Endumeni Municipality
2012 (4) SA 593
(SCA) para 18.
[13]
PFMA, Schedule 3, Part A.
[14]
PFMA, ss 50 and 51.
[15]
SASSA Act, s 3(
a
).
[16]
SASSA Act, s 3(
b
).
[17]
SASSA Act, s 3(
c
).
[18]
SASSA Act, s 4(3)(
a
).
[19]
Section A, clause 1.3.
[20]
Section A, clause 2.1.
[21]
Section A, clause3.
[22]
Section C, clause 3.1.
[23]
Section C, clause 3.1.2.
[24]
In terms of
s 1
of the
Social
Assistance Act, a
beneficiary is ‘a person who receives social
assistance in terms of
sections 6
,
7
,
8
,
9
,
10
,
11
,
12
or
13
’.
[25]
Clause 4.1.1.
[26]
Clause 5.3.1.1.
[27]
Clause 5.3.1.4.
[28]
Clause 6.3.
[29]
The principal focus of Corruption
Watch’s case was on irregularities in the procurement process.
It was conceded on behalf
of CPS, however, that there was no
obstacle to this court deciding the matter on the basis of an
interpretation of the SLA and
the contract. There was, at best,
muted criticism of Corruption Watch’s submissions on the
interpretation issues. Furthermore,
in order to deal with the
defence raised by CPS, it was imperative that the SLA and the
contract be interpreted.