Former social development director general Zane Dangor says he warned in October last year that it might be “immoral” to extend the grants payment contract with Cash Paymaster Services (CPS) because of concerns about deductions.

Social Development Minister Bathabile Dlamini did not heed his warning, GroundUp reports.

Dangor resigned on March 3. He filed an affidavit to the Constitutional Court on Monday, backing former South African Social Security Agency (Sassa) head Thokozani Magwaza’s stand against Dlamini.

Asked by the court to explain her role in the Sassa crisis, Dlamini filed an affidavit in which she blamed Sassa officials for the agency’s failure to take over the payment system after the contract with CPS expired on 31 March 2017. Magwaza responded with his own affidavit denying her statements.

Dangor said Dlamini chaired a meeting on October 5 last year, at which the “work-stream” leaders she appointed to prepare for Sassa’s takeover of the payment system presented a progress report.

“The presentation indicated that very little work was done. The most significant element of their proposal was the recommendation that CPS be given a new contract for a period of two years,” he said.

'Self-created delay'

In its own documents to the court, CPS argued for a new two-year contract, in which it would charge Sassa R4.6-billion over two years.

Dangor said he had warned at the October meeting that he had the “distinct impression” that there was an element of self-created delay to ensure CPS continued to pay social grants.

He said he had raised two concerns: that there might be legal challenges to a new contract with CPS and this might delay the payment of grants; and that a new contract might be “a political mine-field and immoral”. This was in the context of “emerging evidence that CPS was involved in immoral and/or illegal deductions from the accounts of grant recipients”.

Dangor was one of two chairs of the ministerial task team Dlamini appointed in 2014 to deal with what he called “the unsavoury practice” of deductions from social grants. These were made by companies in the Net1 group, of which CPS is a part. The other chair of the team is Lynette Maart of the Black Sash, which is running a “Hands off our Grants” campaign to prevent these deductions.

CPS has been accused of sharing confidential information about grant beneficiaries with other companies in the Net1 group, including insurer Smartlife and money lender Moneyline. Net1 CEO Serge Belamant has denied this.

Dangor said at a further meeting on October 22 there was still no firm plan for the takeover of the payment system.

“Again, I was concerned that there was indeed an element of self-created delay to facilitate an on-going relationship with CPS,” he said.

'Moral and political hazards'

He said by then it was very clear that because of the “parallel reporting structure” Dlamini had set up, in which the work-stream leaders reported directly to her, Magwaza knew very little about their work.

Magwaza and the Sassa executive “were excluded from the key decision-making process”, Dangor said.

His concerns about legal challenges and about the “moral and political hazards” of continuing with CPS had prompted him to hold meetings with the Banking Association, Mastercard, the SA Reserve Bank, and Grindrod Bank (through which the CPS system works). He wanted to use all the banks, including the Post Bank, as an alternative to CPS.

“These recommendations found no traction within the work-streams,” he said.

A technical team including Treasury, SARB, and Sassa was set up in January this year to address “the looming crisis”. It concluded that the “least risky emergency option” would be to extend the CPS contract for one year and prepare a long-term plan involving all the banks and the Post Office, he said.

Dangor said he had filed his affidavit to “shed a brighter light” on assertions that Sassa and Magwaza were to blame for the crisis. He had done so “despite potential repercussions to my personal career and notwithstanding veiled physical violence to my own as well as my family’s security,” he said.

Dangor’s Johannesburg home was broken into on March 20, but nothing was stolen. He said at the time he saw it as an attempt at intimidation. He noted that Magwaza’s home had also been targeted.