IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA In the matter between [ALLPAY CONSOLIDATED INVESTMENT HOLDINGS (PTY) LTD ALLPAY FREE STATE (PTY) LTD ALLPAY WESTERN CAPE (PTY) LTD ALLPAY GAUTENG (PTY) LTD ALLPAY EASTERN CAPE (PTY) LTD [ALLPAY KWAZULU NATAL (PTY) LTD ALLPAY MPUMALANSA (PTY) LTD [ALLPAY LIMPOPO (PTY) LTD ALLPAY NORTH WEST (PTY) LTD ALLPAY NORTHERN CAPE (PTY) LTD MICAWBER 851 (PTY) LTD MICAWBER 852 (PTY) LTD MICAWBER 853 (PTY)LTD MICAWBER 854 (PTY) LTD and ‘THE CHIEF CXEGUTIE OFFICER OF THE SOUTH AFRICAN SOCIAL SECURITY AGENCY ‘THE SOUTH AFRICAN SOCIAL SECURITY AGENCY ‘CASH PAYMASTER SERVICES (PTY) LTD EZIDLUBHEDU INVESTMENT HOLDINGS (PTY) LTD CASE NO:48r13, First Applicant ‘Second Applicant Third Applicant Fourth Applicant Frith Applicant Sh Applicant Seventh Applicant Eighth Applicant Ninth Applicant Tent Applicant Eleventh Applicant “Tweith Applicant “hireonth Applicant Fourteenth Applicant First Respondent Second Respondent Third Respondent Fourth RespondentFLASH SAVINGS AND GREDIT COOPERATIVE ENLIGHTENED SECURITY FORCE (PTY) LTD MOBA COMM (PTY) LTD EMPILWENI PAYOUT SERVICES (PTY) LTD PENSION MANAGEMENT (PTY) LTD MASINGITA FINANCIAL SERVICES (PTY) LTD THE SOUTH AFRICAN POST OFFICE ROMAN PROTECTION SOLUTIONS cc UBANK LIMITED AFRICAN RENAISSANCE INVESTMENT MANAGEMENT (PTY) LTD ‘STANDARD BANK GROUP LIMITED NEW SOLUTIONS (PTY)LTD ITHALA LIMITED KTS TECHNOLOGY SOLUTIONS CONSORTIUM THE SOUTH AFRICAN RESERVE BANK THE PAYMENT ASSOCIATION OF SOUTH AFRICA and ‘CORRUPTION WATCH CENTRE FOR CHILD Law THE BLACK SASH TRUST FILING SHEET: Frith Respondent Sth Respondent Seventh Respondent Eight Respondent Ninth Respondent Tenth Respondent Eloventh Respondent ‘Tweith Respondent ‘Thirteenth Respondent Fourteenth Respondent Fifleenth Respondent Sixteenth Respondent Seventeenth Respondent Eighteenth Respondent Nineteenth Respondent Twentieth Respondent First Amicus Curiae ‘Second Amicus Curiae Thi Amicus Curiae FIRST AND SECOND RESPONDENTS’ FOLLOW-UP REPORTPRESENTED HEREWITH for serves and fling 41. Fist and Second Respondents’ follow-up report. DATED at SANDTON on this 2nd day of MARCH 2017. ‘Tm SUKAZI First and Second Respondents’ Attorneys Sandton Close 2, Block A 2nd floor Cr, th & Nomich Close, Sandton P.O. BOX 785210, Sandton, 2146 Tet 011 911 4100 Fax: 011 783 3537 Email tsukazi@timsukaziine.co.za To: ‘THE REGISTRAR OF THE SERVICE BY EMAIL CONSTITUTIONAL COURT ‘AND HAND. BRAAMFONTEIN AND TO: NORTON INC SERVICE BY EMAIL ‘Attorneys forthe First to Fourteenth Applicants 195 Daisy Street SandtonTet 011 666 7560 Fax: 086 600 5529 Email Anthonvi@nortonsine.com / Anton@nortonsine.com Ref: A Norton / A Rosts AND TO: SMIT SEWGOOLAM INC SERVICE BY EMAIL “Third Respondent's Attorney 12 Avonwold Road Saxonwold Tek: 011 646 0006 Fax: 011 301 3200 Email jiaan@smitsew.co.2a AND TO: NORTON ROSE FULBRIGHT ‘SERVICE BY EMAIL [Attorneys forthe nineteenth respondent 18 Alice Lane Sandton Tel: 011 685 8500 Email: Mareise vanderwesthuisen@novtonrosefulbriaht com maithew.clark@nortonrasefulbight.com AND TO: PAYMENTS ASSOCIATION OF SOUTH AFRICA SERVICE BY EMAIL, ‘Twentieth Respondent 2nd Floor, D Building ‘Sunnyside Office Park 32 Princess of Wales Terrace Parktown JOHANNESBURG ‘Tel 011 645.6760 Fax 011 645 6860Email PieneC@pasa org. za / WalleV@pasa.or.za AND TO: VAN HUYLSTEYNS. ‘Attomeys for Fist Amicus Curiae SERVICE BY EMAIL 431d Floor, Sandton City Office Tower 4168 Fifth Steet, Sandhurst SANDTON Tet 011 623 9900 Fax: 011 523 5328, Ref: A Legg/D Rath Emait: Daniel@vlaw.co.za AND TO: LEGAL RESOURCES CENTRE SERVICE BY EMAIL ‘Attomeys forthe Second and Third Amicus Curiae Constitutional Litigation Unit 46th Floor Bram Fischer House 20 Albert Street JOHANNESBURG ‘Tet 011 836 9891 Fax: 011 834.4273 E-mail: naseema@lre.ora,za Ref. 0752121‘CONSTITUTIONAL COURT OF SOUTH AFRICA case COTARS In the matter between: [ALLPAY CONSOLIDATED INVESTMENT HOLDINGS AND OTHERS Applicants and CEO OF SASSA AND OTHERS Respondents ‘SASSA'S FOLLOW-UP REPORT INTRODUCTION 4, This report is madeon behalf ofthe South ican Sooral Securty Agercy by its ‘acting Chief Executive Officer acting under the direction ofthe Minister of Soci Development“This court exerci 1 supervisory luisction over ASSAYS plans for the come forward wih their bank accounts as opposed to & procurement prosess with banks ((e, a benklng soliton as opposed 0 8 procurement solution) However, there was no consensus about the feashbifty of the options that ‘emerged, There ar an! have been diffrences of opinion both within SASSA and amongst SAGSA and stakeholders as o how bast to preceed in a manner \which priorisas the best interests of beneficiaries, “The Minister and SASSA have evaluatod each ofthe options and he associated risks and have concluded that an form arrangement with OPS isthe option swith the leas iskio ensure the uintemuptod payment of ssa grants after 31 March 2017 at least a tis point. The Minster and SASSA recognise that ‘SASSA may need to resort to another option or combnaten of epions which tnay involve banks, SAPO and the appcintment of a service provider for cash istnbution onan expected basis. The Minister and SASSA have considered the views of SARB and Treasury in evaluating the appropriate course and ‘continue todo so. “The differences of opinion hat emerged over recent months extend both to how {o proceed and fe the oorree lagal approach,35. 38, 31 During this process, and in January and early February 2017, SASSA considered and took steps t0 apply to the Consttusonal Court to authorise SASSA to engage PS to provide servions forthe payment of social grants for tne period 1 Apri 2017 to 81 March 2018 and to request the court to resume ts supervisory urisieion by receiving futher report by no lator than Octobor 2017. Con 8 February 2017, the Minister took a decision not to follow tis cours, Rather, the Minster deced to act onthe ace ha the court cannot authorise ‘an extension ofthe CPS contract and any interim arrangement with CPS wil constiute @ new procurement decision that fs subject to section 217 of the Consituon andthe Public Finanee Management Act of 1988. The Minister is advised that the court cannot authorise in advance any new agreement with ‘¢PS on terms yetto be determined and in crcumstances where heres a neod for futher engagement with Treasury “The aiferenoe in opinions and delays in resolving cfferent views have in tum delayed forging and implementing a clear path since October 2016, when SSASSA received the legal advice in October 2016 refered to above. Formal negotiations with CPS — which have now commenced - were delayed in part forth reason, The Minister and SASSA accept that formal negotiations ought to have commenced at an eater stage, Until recently, there have been only informal discussions between SASSA and CPS, and CPS hed advised that Ris wiling to essiat SASSAL38, 40, (On 8 December 2016, SASSA issued a request for infomation (RFI) fo assist ito formulate a request for proposals (RFP) appropriate to the prvaling circumstances and that takes cognisance ofthe current marke in commercial ‘and technical tems. The RFI is altachod as °C". It invited interested service providers wha wishto patejpat inthe provision of banking services, payment management and reconeiaton of social grants to SASSA to provide Information, The RF sought information relating to an integrated grant administration and payment framework, card body production ard dition, social grant payment card service provislon and account management, cash istibuton and pay-point management, blomettic root of Ife and integrated fisk management and cyber assuranee. The RFI requested responses providing indicative costing and/or models wth cost foracating for both @ 3 ‘and 5 year contrad. 'A compulsory briefing Session was held on 13 January 2017. Submissions closed on 10 Febuary 2017, There were 18 responses which are curenty belng evakated. SASSA has planned the ol ou ofthe procurement process ‘onthe bass that Iwill advertise an RFP by 17 Morch 2017 with a closing date ‘of 28 Apri 2017, (On 7 February 2017, the CEO wrote to the Director-General of National “Treasury for apprval for deviation ftom the normal compelive bidding process in accordance wih paragraph 8.5 of the National Treasury Insttuction 3 of 201612017. The lelter requested Treasury's suppott for an extension of the 2“1 a. ‘xiang contact wih CPS ta enable a negotiation to appoint CPS for a potiod of 12 to 18 months ater 1 April 2017, The request posited a combination of an ‘ongoing relatonshp with CPS and Option 6 referred to above. A copy is attached as 0" on 8 February 2017, Mr Tshtangano, the Chiat Detor: SOM Governance, Monitoring and Compliance responded. In short, Treasury did not ace SASSA’s explanation for is postion, and expressed concem about the perpevation of uniawfuiess and constitutionally in the face of the Gansttutonal Court's decisions. The eter advised that National Treasury ‘would not suppot the extension of the unlawful CPS contract unless the Constitutional Cout further extended the suspension ofits lnvality beyond 34 March 2017, Italo advised that SASSA should have requested a deviation aevertse anew ender for a short pri in December 2016 or ealy January 2017 to avoid a sa-crented emergency. A copy is attached as "E* Cover recent weeks, there have been various communications between the Minister and the Vinistor of Finance. ‘The Ministers have diferent views about how to proceed. The communications were uni recenty informed by a legal approach tha he Ministor and SASSA have since reconsidered. Both Ministers are acutely anare thatthe unntaruted payment f social grants fer31 March 2017 fs the proty, ‘The Ministerhas taken ito account the views expressed by the Miniter f Finance, has taken nto account that it may be appropriate fot “reasuy’s vow to be an atematv route should I not be possible to reach an intaim arrangement wih CPS on reasonable terms and fora sufficient inited43, 44, 46, period, The Minister intends to continue to work co-operaivly with the Minster of Finance and Teasuty to ensure that the payment of social grants uninterupled and to legalise the payment of social grants on a satisfactory basis as so0n as possible In tght of recent evenis and the need for intetgovernmental co-operation, the RFP process wl ow be adjusted fo ensure that any ongoing relationship wih COPS takes approriate cogrisance of alternative solutions proposed by infer ala Treasury and SARB. The RFP is now ltended to lead, 23 S000 a3 reasonably practicable, 10 the appointment of a conrater or contractrs to perform he grant administration and payment function that are the subject of tho CPS contrac: via @ competitive bidding process and until such me as SASBA is in fact ready to Implement its ultmate Wsion on 28 Februaty 2017, SASSA instituted an application in the Constitutional ‘cour, but wthdrow ton 4 March 2017. The applleation was fled without the authorisation of he acting CEO orthe Minister, who should have been butwere pot consued beforehand, Ones aware ofthe decision, the Minister instructed SSASSA to withdaw the appliotion. AL the time ofthe fig of this por, he circumstances ef the fling ofthe application are still being investigated by the Minister and SASSA. “The affidavit supporting the application contains ertors, ‘This report reflects ‘SASSA's postion.SASSA'S INTENDED COURSE OF ACTION a 48, 4, ‘SASGA's convuct ta date has been based on ts intenton to assume the function of paying and adninistering eocial grants self, an intention that has been ‘expressed publely since at least 2012 SASSA now accepts that to puroue the intetion in the shot or medium tem va cause undve delay in puting the payment of socal grants on a lewl footing, Instead, it wil run a competitive bidding process Yo have @ new contractor oF contacter in pace. This wil be done through the REP adjusted as required to aezammodate any appropriate solutions ffem f, Treasury and to ensure progress on a co-operative basis “This wil tcely mean that SASSA wil only be able © pursue the objectives contemplated by the Progress Repott over the medium to fonger term, The objectives that SASSA has sought to implement, continue be regarded os the most esrabe poly objectives to serve the interests of baneiiariesin the ona {erm, including in respect of biometric innovation, SASSA wil continue to take stops to implement these pollcy objectives. Inthe meantime the service provider or proves appointed as a result ofthe REP prooass wil deliver the services, The Mister appreciates that it may in fac take longer, possibly fve ‘years, 1o implement SASSA's poli objectives. “The Minister has mandated @ negotiating team fo conduct negotiations with GPS to reach an arrangement whereby CPS will continue to pay social grants after 31 March 2017, The mandate that has been given is to negotiate &50, 5 22, transitional rrangenent wheeeby the scope and duration of he arrangements limited as far as reasonably possible, is within budget parameters and on reaconable ters. This wil tkely entail annem arrangement wih CPS in order reguarise the poson and ensure the unintorupted payment of soca grants s at 31 March 2017. The intention is that new sence providers willbe appointed on a competitive basis. ‘oPS has icicted a witingness to engage with SASSA to assist in ensuring rant payment ecninulty and Yo assist in the transilon of CPS operations towards a new sevice model. Formal negotiations coremenced on 1 March 2017 and are cortnuing, The negotiation team is comprised of oficial from the Department o Social Development, SASSA and some ofits workstteams “The Minister and SASSA wit engage co-operatively wth National Treasury and other stakeholders regading the most appropriate solutions tothe challenges boing faced Ponty attention wil be given to framing the RFP appropriately given the prevaiing circumstances. ”TED, Chorio MS BO DLAMIN, MP MINISTER OF SOCIAL DEVELOPMENT SE Ms THAMO NZOBE ACTING CEO, SASSA DATE: 2 MARCH 2017IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA Inthe matter belweer: ALIPAY CONSOLIDATED INVESTMENT HOLDINGS (PTY) LTD [ALIPAY FREE STATE (PTY) LTD [ALLPAY WESTERN CAPE (PTY) LTD ALLPAY GAUTENG (PTY) LTD [ALLPAY EASTERN CAPE (PTY) LTD ‘ALLPAY KWAZULU NATAL (PTY) LTD ALLPAY MPUMALANGA (PTY) LTD ALLPAY LIMPOPO (PTY) LID ALLPAY NORTH WEST (PTY) {TD [ALLPAY NORTHERN CAPE (PTY) LTD MICAWBER 851 (PTY) LID IMcAwaeR 852 (PTY) LTD MICAWBER 853 (PIY) LTD IMICAWBER 854 (PTY) LTD nd ‘THE CHIEF EXECUTIVE OFFICER OF THE SOUTH AFRICAN SOCIAL SECURITY AGENCY THE SOUTH AFRICAN SOCIAL SECURITY AGENCY CASH PAYMASTER SERVICES (PTY) LID ETIDLUBHEDU INVESTMENT HOLDINGS (PTY) LTD FLASH SAVINGS AND CREDIT COOPERATIVE CASE CCT 48/13 Fist Applicant Second Applicant Third Applicant Fourth Applicant Fith Applicant sith Applicant Seventh Applicant Eighth Applicant Ninth Applicant Tenth Applicant Eleventh Applicant Twelth Applicant Thirleenth Applicant Fourteenth Applicant Fist Respondent Second Respondent Thee Respondent Fourth Respondent Fifth RespondentPage 2 ENLIGHTENED SECURTTY FORCE (PTY) LID sixth Respondent OBA COMM (PTY) LTD Seventh Respondent EMPILWENI PAYOUT SERVICES (PTY) 1D fight Respondent PENSION MANAGEMENT (PTY) LID Ninth Respondent IMASINGITA FINANCIAL SERVICES (PTY) 1D Tenth Respondent THE SOUTH AFRICAN POST OFFICE Beventh Respondent ROMAN PROTECTION SOLUTIONS CC ‘welth Respondent UBANK LIMITED ‘iteenth Respondent [AFRICAN RENAISSANCE INVESTMENT MANAGEMENT (PTY) LID Fourteenth Respondent STANDARD BANK GROUP LIMITED Fifeenth Respondent NEW SOLUTIONS (PTY) LTD siteenth Respondent ITHALA UMITED seventeenth Respondent KIS TECHNOLOGY SOLUTIONS CONSORTIUM —_Eighteenih Respondent “HE SOUTH AFRICAN RESERVE BANK Nineteenth Respondent THE PAYMENT ASSOCIATION OF SOUTH AFRICA Twentioth Responcient PROGRESS REPORT IN TERMS OF PARAGRAPH 4.1 OF THE ORDER "MADE BY THE CONSTITUTIONAL COURT ON 17 APRIL 2014 1. The decision taken by the Chief Execulive Officer of SASSA no! to ‘qword the tender for the payments of social grants was filed with Registrar of this Court on 15 October 2015.Pages In toms of paragraph 4. 1 of this Cout's order dated 17 Apal 2014, SASSA must within 14 days of is decision not to award the tender, siodge a report with the Registrar of this Cour setting out al the relevant inforaton on whether and when it wil be ready fo assume the duty fo pay grants its In her 2012 budget speech the Miniter of Social Development indicated that the contract for the payment of social grants, subsequent cwarded tothe thrdrespondent and thereafter set aside by this Honourable Cour, would be the final time that a third pty was contracted to effect the payment of social grants on SASSA's behalf cand that thereatterSASSA would perfor in fl is mandate in terms of the South Affican Social Secutly Agency Act, Act 9 of 2004. the impugned poyment contract was designed fo serve as a springboard for the future payment system for social assistance, The plan was for SASSA take over the contfol, administration and management of payment of the sociol grants by 2017 when the contract wih C25 expires. SASSA was fuher going fo pitts payment system during 2216. However, the finding of invality of the award of the lender to CPS and the new tender process ordered by this Court had the effect of re-drecting SASSA’s immediate focus and resources tothe running end. completion of the new tender process. SubsequentPage 4 {0 the decision not to award, SASSA is now in a position to again direct iis focus on taking over the payment of social grants. ‘To ensure the continued payment of social grants it should be noted that the social grants value chain includes the following 5,1. Application management: screening and attesting of each ‘opplicant, the enrolment of the applicant on the system, the actual capturing and vetfieation of the application on the system; 5.2. Payment Management: the processing of payments, actual payments fo beneficiaries and the reconciliation of payments; ‘ancl 53. Benoficiery Maintenance Management: the ife ceriication as \wellos the maintenance of the beneficiary data including grant reviows. Alline above functions, except the actual payment of social grants to beneficiaries andrelated functions, are akeady curently perforrned by SASSA. The payment functions ental the cctual processing and transfer ‘of cash fo the different beneficiary accounts, the aclual cash disbution to those beneficiaries who prefer fo receive their benefit in ‘cash; as well the reconctiation ater payment,Page 5 SASSA's initial plan to take responsibilty for payment of social grants was as follows: 7A. Phase 1 (2012-2014): Centralisation and improvement of integiily of the data which included collection of biometric data trom CPS. 7.2. Phase 2 (2014-2015): Taking over on-going enrolment process 73. Phase 3 (2013 - 2016): Developing SASSA in-house copabilly to manage payments and reconciliation. 7.4. Phase 4 (2016): Pilot of the new system in 2016. 7.5. Phase § (2017): Implementation tullrollout in 2017, ‘The takeover o' these functions requires SASSA to build its intemal copacily including the development of systems and processes: as well asthe recruitment of appropriate personnel. In order fo assit SASSA in the selection and implementation of the ‘appropiiate, most efficient and cost effective method of insitusienalsation of the payment of social granls, and the reaured personnel skils, the Minister of Social Development appointed an “Advisory Comnitice duting September 2014, to investigate and advise her on the appropriate system for payment of social grants. SASSA also10. Pages enisted the assistance of the Council for Scientific & Indushial Research {CSIg} and the National stitute for Smart Government (NSC), New Delhi, India, to advise on payment systems related and other issues regarding the insftulionalsation of the payment of social grants. In regord fo prase 1 refered fo in paragraph 7 above, the centralisation andimprovernent ofintegniy of he date which included collection of biometic data, has been achieved. SASSA was through the re-registration process, able to eslabish a centralised biomettic- based payment database of all beneficiaries (chien included! recipients end procuratoss; and has begun fo verity adult biometric dota against the National Population Register al the Depariment of Home affais. Phase 2. whichisthe toking over of on-going enrolment process, require of SASSA lo procure is own hardware and software for biomettic enrolment and verfcation. n arder to reduce fraudin the grant system by SASSA official (system Users) and beneficiaries, biomelic vettication anc authentication in the form of biomettic identity and access management for system users; and automated fingerptint identification and verification system for beneficiaries crical. SASSA has advertied a tender for biometric idenfly end access management fortssystem users. However in order to curb costs SASSA is seeking advice on whether the same hard and software could notPage 7 bbe ullised for beth biomeltic identity and access management for official; and automated fingerpiint identification ond verification system for beneficiaries. Phase 3, developing SASSA's inhouse capabilly (systems, processes «and skis) lo manage payments and reconcifation, has not yet begun ais SASSA ssl the process of reconciing tne recommendations by the Ministerial Advisory Commillee: NISG and CSIR to determine the appropriate approach to instilutionalising payment of grants, with respect to requied systems, skils and so forth, SASSA will aso continue consulting with slakeholders including the South Affican Reserve Bank (SARB); Payment Association of South Attica (PASA) and National Treasury. SASSA will therefore assume the duty fo itself lake over the payment of social grants, The table below depicts the system deliverablesreqvired for SASSA to take control of iis mandate, and the time frames applicable thereto: Integation of | MarchtoJune |Web based systems through | 2016 (pilot application intoarated web-based | phase} with mainframe jicatior application and other application | august 2016 ful | ict applications at the implementation | back-end