Brief Summary

Social Assistance — Regulations — Electronic debit deductions — Applications for leave to appeal regarding amendments to regulations under the Social Assistance Act 13 of 2004 — Applicants contending that regulations do not prohibit electronic debits from social grant beneficiaries' accounts — Minister and SASSA opposing, asserting regulations restrict such deductions — Court held that regulations do not operate to restrict beneficiaries in the operation of their bank accounts — Application for leave to appeal dismissed with costs in one matter, and appeal upheld in another, granting intervention to Black Sash Trust.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings before the Supreme Court of Appeal concerned two related matters referred for oral argument under section 17(2)(d) of the Superior Courts Act 10 of 2013, namely an application for leave to appeal (Case No 825/2017) and an appeal in relation to refusal of intervention (Case No 752/2017). Although framed as applications for leave to appeal, the parties were directed to be prepared to address the merits, and argument was heard on both leave and substantive issues.

In Case No 825/2017 the applicants were the Minister of Social Development, the Chief Executive Officer of the South African Social Security Agency (SASSA), and SASSA itself. They sought leave to appeal against declaratory relief granted by the Gauteng Division of the High Court, Pretoria (Van der Westhuizen AJ), in favour of several respondents/applicants in the High Court, including Net1 Applied Technologies South Africa (Pty) Ltd, Moneyline Financial Services (Pty) Ltd, Manje Mobile Electronic Payment Services (Pty) Ltd, Finbond Mutual Bank, The Smart Life Insurance Company Limited, and Information Technology Consultants (Pty) Ltd, together with the involvement of entities such as Grindrod Bank Limited, the South African Reserve Bank (SARB) and the Payment Association of South Africa (PASA) (in varying capacities across consolidated matters).

The general subject-matter of the dispute was whether amendments to regulations made under the Social Assistance Act 13 of 2004 prohibited electronic debits—including debit orders, stop orders and electronic funds transfers (EFTs)—from the bank accounts of social grant beneficiaries, particularly accounts held at Grindrod Bank within the then-existing social grant payment architecture. The High Court held that the amended regulations did not restrict beneficiaries in operating their bank accounts, and it granted declaratory relief to that effect, with costs against the Minister and SASSA.

In Case No 752/2017, the Black Sash Trust (an NGO) and six individual social grant beneficiaries sought leave to appeal against the High Court’s refusal to permit them to intervene and (for the Black Sash) to be admitted as amicus curiae. Their intervention application was linked to the same consolidated litigation, but by the time of hearing in the Supreme Court of Appeal they no longer persisted in seeking substantive mandatory or declaratory relief beyond intervention.

A significant procedural and contextual development was that during 2018 the social grant payment regime changed materially (including arrangements involving the South African Post Office and Postbank), raising a threshold question whether the main application for leave to appeal had become moot, in the sense that a decision would have no practical effect.

2. Material Facts

SASSA is responsible for administering social assistance under the Social Assistance Act 13 of 2004, including the monthly payment of various categories of social grants funded from monies appropriated by Parliament. The statutory scheme includes section 20(3), providing that a beneficiary must “without limitation or restriction receive the full amount” of the grant before any other person may enforce any claim in respect of that amount, and section 20(4), permitting the Minister to prescribe circumstances under which deductions may be made directly from grants if necessary and in the beneficiary’s interest.

In 2012 SASSA concluded a contract with Cash Paymaster Services (CPS) (a subsidiary of Net1) to implement a new payment system intended to shift grant payments toward electronic disbursement. As part of that system, CPS (through Net1) contracted with Grindrod Bank to operate affordable bank accounts for grant beneficiaries, and SASSA-branded cards were issued enabling beneficiaries to access funds and transact through the National Payment System (NPS). Once grants were transferred into beneficiaries’ Grindrod accounts, beneficiaries could transact like other bank account holders, including authorising debit orders and other electronic deductions in the NPS.

It was uncontested that the amendments to the regulations were motivated by concerns raised by the Minister, SASSA, and civil society organisations regarding alleged predatory marketing and unauthorised deductions from beneficiaries’ accounts (including deductions linked to loans, insurance products, and other services). Complaints included the difficulty beneficiaries allegedly experienced in reversing deductions, and government concern that vulnerable beneficiaries—particularly those who were elderly, illiterate, or struggled with technology—were exposed to exploitation.

Originally, deductions “directly from a social grant” were tightly circumscribed in regulation 26A (introduced in 2009), principally permitting limited deductions for funeral insurance or schemes subject to written consent and a 10% cap, and linked to sections 20(3)–(4) of the Act. Government considered further restrictions, including a draft regulation 26A(7) that would have prohibited deductions from “the bank account opened for a social grant beneficiary to facilitate the payment of a social grant,” but that proposal was abandoned after comments, including an opinion suggesting unconstitutionality.

On 6 May 2016, the Minister promulgated amendments to regulations 21 and 26A, including a new regulation 21(4) stating that the payment method determined by the Agency under regulation 21(1)(b) “shall not allow for any deductions, except for deductions allowed for in terms of this Act.” Following publication, the Minister issued a press release indicating an intention to end unlawful deductions and referred to instructing CPS to remove the debit order facility from the SASSA-branded card. The Minister also wrote to Grindrod demanding it cease EFT debit orders and stop orders.

Multiple applicants (including Net1-related entities, Finbond, Smart Life and Intecon) launched consolidated applications in the High Court seeking declaratory relief that the amended regulations did not prohibit electronic debits from beneficiaries’ Grindrod accounts. Some applicants advanced conditional constitutional challenges to the extent the regulations were interpreted as restricting beneficiaries’ accounts, but the High Court did not reach those constitutional issues.

The High Court accepted the applicants’ interpretation, holding that once the grant was transferred into a beneficiary’s Grindrod account it operated as any bank account at a commercial bank, that SASSA did not control such accounts, and that the Minister and SASSA’s attempt to characterise Grindrod accounts as a special “method of payment” under regulation 21(1)(b) was untenable. It declared that regulations 21 and 26A, read with section 20 of the Act, did not restrict beneficiaries in operating their bank accounts, and it ordered costs against the Minister and SASSA.

Separately, the Black Sash and six beneficiaries sought intervention. Their affidavits described experiences of exploitative practices and unauthorised deductions. The High Court refused intervention and amicus admission, without a costs order on that aspect.

Subsequent to the High Court judgment, the social grant payment system changed substantially. SASSA and the South African Post Office entered into an agreement effective from 1 April 2018, establishing (among other methods) a Special Disbursement Account model linked to a SASSA/SAPO card, described as a restricted account that could accept only social grant deposits and did not allow EFT debits or stop orders (while allowing withdrawals and point-of-sale purchases). It was also common cause that beneficiaries could elect direct payment into bank accounts held with commercial banks of their choice, in which case beneficiaries could authorise debit deductions. The record before the Supreme Court of Appeal indicated that many beneficiaries continued to receive grants into accounts at commercial banks (including Grindrod), while the SAPO special disbursement accounts constituted a different “ring-fenced” mechanism.

Against this backdrop, the Supreme Court of Appeal had to assess whether the dispute about the earlier Grindrod-linked regime remained a live controversy capable of producing practical effect.

3. Legal Issues

The central legal questions were, first, whether the High Court’s declaration on the interpretation of amended regulations 21 and 26A remained capable of having practical effect, given the new payment regime, and thus whether the application for leave to appeal should be dismissed under section 16(2)(a)(i) of the Superior Courts Act 10 of 2013 on mootness grounds. This was primarily a question about the court’s appellate jurisdiction and remedial appropriateness, turning on justiciability and the statutory “practical effect” threshold.

Secondly, if the matter was not moot, the court had to consider whether leave to appeal should nevertheless be refused because there were no reasonable prospects of success under section 17(1)(a)(i), and whether any other compelling reason existed to hear the appeal. This required evaluation of the interpretive dispute about the amended regulations and their effect on electronic deductions, which was essentially a question of law (statutory and regulatory interpretation), albeit situated in a complex operational and policy context (the NPS, banking products, and the grant disbursement system).

Thirdly, in the separate matter involving the Black Sash (Case No 752/2017), the legal question was whether the High Court erred in refusing intervention (and amicus participation). This involved the application of established principles regarding intervention in litigation, including whether an applicant has a direct and substantial interest and, as emphasised by the Constitutional Court, whether intervention is in the interests of justice. This aspect concerned the application of legal standards to undisputed institutional roles and interests, rather than resolving contested primary facts.

4. Court’s Reasoning

On intervention, the Supreme Court of Appeal held that the concessions made by the parties were correctly made and that the High Court’s refusal was unjustified. The court applied the principle that a party seeking to intervene generally must have a direct and substantial interest in the subject-matter, but also stressed the Constitutional Court’s approach that the interests of justice constitute the overriding consideration. Having regard to the Black Sash’s role in protecting vulnerable social grant beneficiaries, its participation in the ministerial task team investigating alleged abuses, and its involvement in prior public interest litigation, the court considered that both the organisation and the beneficiary applicants plainly met the threshold for intervention.

The court further observed that the High Court’s refusal was “peculiar” because, notwithstanding refusing intervention, it had permitted the Black Sash to address the High Court on relevant issues. This supported the conclusion that the refusal did not coherently reflect the interests-of-justice enquiry.

Turning to the main application for leave to appeal, the Supreme Court of Appeal treated the threshold issue as whether the appeal would have any practical effect or result, as contemplated by section 16(2)(a)(i) of the Superior Courts Act. The court endorsed the established principle (drawing from Constitutional Court authority) that courts should not decide moot disputes or give advisory opinions on abstract propositions where there is no longer a live controversy.

Applying those principles to the facts placed before it (including agreed statements on the new payment procedures), the court found that the primary objective pursued by the Minister and SASSA—namely ring-fencing grant payment mechanisms so as to prevent electronic deductions—had effectively been achieved under the new regime through the SAPO special disbursement accounts. The court emphasised that it was common cause that beneficiaries who elected payment into ordinary commercial bank accounts could authorise debit orders and other deductions, and that the new system distinguished between (a) mainstream commercial bank payments and (b) the restricted special disbursement account model treated as a method under regulation 21(1)(b).

The court concluded that there was no longer a live, justiciable issue in relation to the Grindrod accounts as they existed under the CPS-era system. It reasoned that the interpretive dispute about the amended regulations would have no practical effect because the contested “Grindrod SASSA accounts” (as the object of the earlier dispute) no longer existed in that earlier form, and because there was no realistic likelihood of the same situation arising again given the changed payment architecture and lessons learned. On this footing, leave to appeal could be dismissed on mootness alone.

The court nevertheless went further and explained that, even if the matter were not moot, there were in its view no reasonable prospects of success on appeal. It referred to the evidence (including admissions by the Minister and SASSA) that the Grindrod accounts under the prior CPS contract were known to be fully functional accounts within the NPS and that they permitted debit orders and similar deductions. The court characterised the 2016 regulatory amendments as an attempt—motivated by legitimate concerns—to achieve an outcome similar to the abandoned draft regulation 26A(7), but considered that the interpretive position advanced by the Minister and SASSA was unsustainable.

In evaluating the regulatory text and scheme (in brief), the court accepted the force of the applicants’ submissions that regulation 21(1)(a) and 21(1)(b) describe different and mutually exclusive payment methods, connected by a disjunctive “or”, and that the prohibition in regulation 21(4) is directed at the “method of payment” under regulation 21(1)(b) rather than at beneficiaries’ own bank accounts into which a grant has been paid. It also accepted the criticism that the Minister and SASSA’s approach entailed an unwarranted interference with beneficiaries’ operation of mainstream bank accounts.

The court additionally noted the statutory, policy, and practical implications for the National Payment System identified by the SARB, and observed that the new payment regime had implemented the SARB’s suggested approach of ring-fencing through a restricted account model that permitted no deductions. This reinforced the court’s view both that the original dispute no longer required adjudication and that the Minister and SASSA’s interpretive position lacked prospects of success.

Finally, the court addressed submissions by the Black Sash concerning the State’s constitutional and international obligations to protect the right of access to social security and ensure that social assistance is not unlawfully depleted. The court accepted, in principle, that the State bears obligations to take reasonable measures to realise social security rights, but noted that effective protection required policy choices and enforceable legislative measures that fall within the domain of the other branches of government, rather than judicially imposed mandatory regulation-making orders in this litigation. The court recorded that the Minister and SASSA were not averse to the suggestion that government consider legislative steps, and it requested the Minister to have regard to the need for careful and urgent consideration of possible legislative intervention, including recommendations by stakeholders.

5. Outcome and Relief

In Case No 825/2017, the Supreme Court of Appeal dismissed the application for leave to appeal. The dismissal was supported on the basis that the dispute had become moot and that, in any event, there were no reasonable prospects of success and no other compelling reason to entertain the appeal. The court ordered the applicants (the Minister, SASSA, and the CEO of SASSA) to pay costs, including the costs of two counsel.

In Case No 752/2017, the appeal was upheld to a limited extent. The Supreme Court of Appeal set aside part (c) of the High Court order and replaced it with an order granting the application for intervention by the Black Sash Trust and others. The judgment did not substitute a costs order for this limited success and indicated no interference with the High Court’s approach to costs beyond the agreed correction regarding intervention.

Cases Cited

Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others [2013] ZACC 42; 2014 (1) SA 604 (CC).

Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others 2014 (4) SA 179 (CC).

International Trade Administration Commission v SCAW South Africa (Pty) Ltd [2010] ZACC 6; 2012 (4) SA 618 (CC).

National Coalition for Gay and Lesbian Equality and Others v Minister of Home Affairs and Others 2000 (2) SA 1 (CC).

JT Publishing (Pty) Ltd and Another v Minister of Safety and Security and Others [1996] ZACC 23; 1997 (3) SA 514 (CC).

Radio Pretoria v Chairperson, Independent Communications Authority of South Africa [2004] ZACC 24; 2005 (4) SA 319 (CC).

Radio Pretoria v Chairman, Independent Communications Authority of South Africa and Another 2005 (1) SA 47 (SCA).

Corruption Watch NPC and Others v The President of the Republic of South Africa and Others; Nxasana v Corruption Watch NPC and Others [2018] ZACC 23.

Ferreira v Levin NO; Vryenhoek v Powell NO 1996 (1) SA 984 (CC).

Lawyers for Human Rights and Another v Minister of Home Affairs and Another [2004] ZACC 12; 2004 (4) SA 125 (CC).

United Watch and Diamond Company (Pty) Ltd and Others v Disa Hotels Ltd and Another 1972 (4) SA 409 (C).

Legislation Cited

Constitution of the Republic of South Africa, 1996 (including section 10 and section 27).

Social Assistance Act 13 of 2004 (including sections 3, 4, 20(3), 20(4), 32, and references to sections 5–13).

South African Social Security Agency Act 9 of 2004 (including sections 2, 3(a), 4(2)(a), and section 16(1)).

Superior Courts Act 10 of 2013 (including sections 16(2)(a), 17(1), and 17(2)(d)).

National Payment System Act 78 of 1998 (including sections 3(1), 6A(1), 12, and 14).

Consumer Protection Act 68 of 2008.

National Credit Act 34 of 2005.

Long-Term Insurance Act 52 of 1998.

Financial Advisory and Intermediary Services Act 37 of 2002.

Promotion of Access to Information Act 2 of 2000.

International Covenant on Economic, Social and Cultural Rights (Article 9, and ratification/entry into force details as recorded in the judgment).

Rules of Court Cited

No specific rules of court were cited in the judgment.

Held

The Supreme Court of Appeal held that the High Court should have granted the Black Sash Trust and the individual beneficiaries leave to intervene, because they had a direct and substantial interest in the litigation and, in any event, the interests of justice favoured intervention given the public importance of protecting social grant beneficiaries and the Black Sash’s established role in that field.

The court further held that the main application for leave to appeal by the Minister and SASSA should be dismissed because the dispute about whether amended regulations 21 and 26A prohibited electronic deductions from Grindrod-held grant beneficiary accounts had become moot under the fundamentally changed social grant payment regime, meaning that any decision would have no practical effect or result. The court additionally held that, even apart from mootness, there were no reasonable prospects of success on the merits of the proposed appeal.

LEGAL PRINCIPLES

The appellate enquiry under sections 16(2)(a) and 17(1) of the Superior Courts Act 10 of 2013 requires that an appeal (or application for leave to appeal) may be refused or dismissed where the decision sought would have no practical effect or result, reflecting the broader constitutional principle that courts should avoid deciding moot controversies or issuing advisory opinions on abstract legal questions.

The grant of leave to appeal depends on whether there are reasonable prospects of success or another compelling reason to hear the appeal, and this is assessed against both the practical utility of the appeal and the substantive merits as they arise from the judgment appealed against.

In applications for intervention, a key consideration is whether the applicant has a direct and substantial interest in the subject-matter of the litigation. However, consistent with Constitutional Court authority, the interests of justice are the overriding criterion, and a direct and substantial interest, while important, is not the sole determinant.

Where litigation concerns the administration and payment of social grants to vulnerable beneficiaries, the courts recognise the broader public importance of participation by organisations and individuals directly concerned with the protection of beneficiaries, particularly where they bring perspective on the lived experience of alleged exploitation and the systemic context within which rights are realised.

Minister of Social Development of the Republic of South Africa and Others v Net1 Applied Technologies South Africa (Pty) Ltd and Others [2018] ZASCA 129 (27 September 2018)