Three of South Africa’s biggest banks are considering bidding to distribute government welfare payments to more than 17 million people.
This as a contract with a subsidiary of welfare grant distributor Net 1 UEPS Technologies comes to an end, after years of legal battles.
The existing contract earned Net 1 about R2 billion a year, its annual reports show.
Barclays Africa, Nedbank and a unit of FirstRand are contemplating bids, according to emailed responses to questions from the lenders.
The state-owned Post Office has already said it will bid.
While it is yet to issue a formal bid, the SA Social Security Agency (Sassa) – which administers the approval and payment of social grants – has asked potential bidders to submit requests for information as it mulls over how to distribute R139.5 billion in welfare payments a year.
The contract with Net 1’s subsidiary, Cash Paymaster Services, expires at the end of March, but may be extended until the security agency’s own systems are in place or an alternative provider is found, according to the department of social development.
While Cash Paymaster’s contract was ruled invalid by the Constitutional Court in 2013, it continued because Sassa did not issue a new request for proposals and there were unresolved legal disputes.
“Government deals come with a lot of costs,” said David Shapiro, deputy chair of bank-controlling firm Sasfin Securities.
“I imagine there will be a number of bidders. It is too big a contract to disregard.”
African Bank and Capitec Bank are not bidding. Standard Bank said it had not engaged in the Sassa process to date.
“If I was a bank and tendering, I would ensure that the awarding of the contract was transparent, with reasons why the winning bid won.
“The problem with Net 1 lies in allegations that it did not win the tender fairly,” said Kokkie Kooyman, fund manager at Denker Capital.
AllPay, a subsidiary of Barclays Africa, used to distribute some of the social welfare grants. It legally challenged the awarding of the contract to Cash Paymaster.[Source: Bloomberg]