INTHECONSTITUTIONALCOURTOFSOUTHAF~CA

CCT: 48/2017

THE BLACK SASH TRUST Applicant

and
THE MINISTER OF SOCIAL DEVELOPMENT First Respondent

CHIEF EXECUTIVE OFFICER OF THE SOUTH

Second Respondent
AFRICAN SOCIAL SECURITY AGENCY

SOUTH AFRICAN SOCIAL SECURITY AGENCY Third Respondent

THE MINISTER OF FINANCE Fourth Respondent

NATIONAL TREASURY Fifth Respondent

CASH PAYMASTER SERVICES (PTY) LTD Sixth Respondent

THE INFORMATION REGULATOR Seventh Respondent

and

DEMOCRATIC ALLIANCE First Intervening Party

FREEDOM UNDER LAW NPC Second Intervening Party

FILING SHEET

DOCUMENT TO BE FILED:

1. Sixth Respondent's Answering Affidavit

SIGNED and DATED at JOHANNESBURG on this the 7th day of MARCH 2017.
 2

eys for the Sixth Respondent

12 A vonwold Road
Saxonwold
Johannesburg
Tel: 011 646 0006
Fax: 011 646 0016
Attention: Tiaan Jonker
E-mail: Tiaan@smitsew.co.za
Attention: Sacha Capazorio
E-mail: Sacha@smitsew.co.za
Ref: MAT28041 /OCJ/SC

TO:
THE REGISTRAR OF THE
CONSTITUTIONAL COURT, CONSTITUTIONAL HILL
BRAAMFONTEIN

AND TO:
CENTRE FOR APPLIED LEGAL STUDIES SERVICE BY E-MAIL
Attorneys for the Applicant
1st Floor, DJ du Plessis Building
West Campus, University of Witwatersrand
1 Jan Smuts Avenue
Johannesburg
Tel: 011 717 8606
Fax: 011 717 1702
Attention: Nomonde Nyembe
E-mail: Nomonde.Nyembe@wits.ac.za
Ref: BHR/0062/NN
 3

AND TO:
TIM SUKAZI INC SERVICE BY E-MAIL
Attorneys for the First to Third Respondents
Sandton Close 2, Block A 2nd Floor
Cnr 5th Norwich Close, Sandton
Tel: 011 911 4100
Fax: 011 783 3537/6
Attention: Tim Sukazi
E-mail: TSukazi@timsukaziinc.co.za

AND TO:
STATE ATTORNEY, JOHANNESBURG SERVICE BY E-MAIL
Attorneys for Fourth and Fifth Respondents
12th Floor, North State Building
95 Market Street, Cnr Kruis Street
Johannesburg
Attention: Vijay Dhulam
E-mail: vdhulam@justice.gov.za
Attention: Rebecca Tee
E-mail: minreg@treasurv.gov.za; Rebecca.Tee@treasurv.gov.za
Mobile: 083 564 8539

AND TO:
THE INFORMATION REGULATOR (SOUTH AFRICA) SERVICE BY E-MAIL
Seventh Respondents
21st Floor, SALU Building
316 Thabo Sehume Street
Pretoria
Tel: 012 406 4818
Fax: 086 500 3351
Attention: Mmamoroke Mphelo
E-mail: MMphelo@justice.gov.za
 4

AND TO:
MINDE SHAPIRO & SMITH INC SERVICE BY E-MAIL
Attorneys for the First Intervening Party: Democratic Alliance
Tyger Valley Office Park
Building number 2
Cnr Willie van Schoor & Old Oak Roads
Bellville
Cape Town
Tel: 021 918 9000
Attention: Elzanne Jonker
E-mail: Elzanne@mindes.co .za
Ref: DEM16/0430/E JONKER/sw
Care of CHRISTODOULOU & MAVRIKIS INC
Suite 3A, 5 Fricker Road
lllovo Boulevard
Johannesburg
Tel: 011 325 4201
Fax: 086 713 3180
E-mail: Antonia@cm-attorneys.com

AND TO:
NORTONS INC SERVICE BY E-MAIL
Attorneys for the Second Intervening Party: Freedom Under Law NPC
135 Daisy Street
Sandton
Tel: 011 666 7560
Fax: 086 600 5529
Attention: Anthony Norton
E-mail: Anthony@nortonsinc.com
Attention: Anton Roets
E-mail: Anton@nortonsinc.com
Attention: Michelle Rawlinson
E-mail: Michelle@nortonsinc.com
 IN THE CONSTITUTIONAL COURT OF SOUTH AFRICA

CCT: 48/2017
In the matter between:

THE BLACK SASH TRUST Applicant

and

THE MINISTER OF SOCIAL DEVELOPMENT First Respondent

CHIEF EXECUTIVE OFFICER OF THE SOUTH

Second Respondent
AFRICAN SOCIAL SECURITY AGENCY

SOUTH AFRICAN SOCIAL SECURITY AGENCY Third Respondent

THE MINISTER OF FINANCE Fourth Respondent

NATIONAL TREASURY Fifth Respondent

CASH PAYMASTER SERVICES (PTY) LTD Sixth Respondent

THE INFORMATION REGULATOR Seventh Respondent

and

DEMOCRATIC ALLIANCE First Intervening Party

FREEDOM UNDER LAW NPC Second Intervening Party

SIXTH RESPONDENT'S ANSWERING AFFIDAVIT

I, the undersigned,

SERGE CHRISTIAN PIERRE BELAMANT

do hereby make oath and state that:

 2

1. I am a major male and director of the sixth respondent ("CPS"). I am duly

authorised to depose to this affidavit on behalf of the sixth respondent.

2. The facts contained herein are, unless the contrary is stated or indicated, within

my own personal knowledge, and such facts are to the best of my knowledge and

belief both true and correct. Where I make submissions of a legal nature I do so

on the basis of the advice obtained from the sixth respondent's legal advisors,

which advice the sixth respondent accepts and adopts.

3. I have read the founding affidavit deposed to by Ms Maart in the abovementioned

matter. Save in the limited respect outlined in paragraph 3.5 below, CPS does

not oppose the relief sought by the applicant ("Black Sash").

3.1 CPS supports the re-instatement of the oversight role of this Court. CPS

welcomes transparency and accountability in all matters concerned.

3.2 CPS has no difficulty with the reporting mechanisms that the Black Sash has

proposed .

3.3 CPS wishes to avoid litigation in respect of the envisaged contract to be

concluded with SASSA. It is anxious to avoid becoming embroiled in further

protracted and costly legal battles as a result of irregularities that are entirely

of SASSA's making. Regardless of its innocence, CPS's reputation is

inevitably compromised when it is required to conduct business under

contracts that have been declared invalid- or, indeed , which are concluded in

circumstances that require deviations from prescribed proJt e;

 3

procedures. CPS would, therefore, welcome an order that the terms of the

envisaged agreement be sanctioned by this Court before the agreement is

finally concluded between the parties.

3.4 CPS readily accepts that it is under a duty to act reasonably and with due

regard to its constitutional obligations in negotiating and contracting with

SASSA. This Court has already made clear that CPS bears constitutional

obligations in the administration of social grant payments. The declaratory

order in prayer 4 therefore seems unnecessary, but is not otherwise opposed

by CPS.

3.5 The prayers that CPS are concerned about are those in paragraphs 5(b) and

11 (b), which require that the contract to be concluded by SASSA "must provide

that personal information of beneficiaries is the property of SASSA ". CPS does

not consider these prayers to be lawful and competent. In particular, it appears

that these orders would contravene the Protection of Personal Information Act

4of2013.

4. Given CPS's approach to this application, it is necessary for me to address only

the following in this affidavit:

4.1 I explain the history of SASSA's engagement with CPS in respect of the

payment of grants upon the termination of its contract on 31 March 2017, as

well as the current state of affairs in the negotiation of the envisaged contract.
 4

4.2 I respond to the groundless aspersions on CPS that the Black Sash has

regrettably made in its affidavit, and its mischaracterisation of pending litigation

involving CPS. These allegations are not only unfounded, but are irrelevant.

For this reason, and to avoid burdening this Court unduly in these urgent

proceedings, I respond to the aspersions only briefly. They are, however,

categorically denied.

4.3 I address the concerns over prayers 5(b) and 11(b).

SASSA's engagement with CPS

5. In the AI/Pay litigation, CPS undertook to assist SASSA with any transition to a

new payment system and service provider. As the date for SASSA's take-over of

the payment of grants approached, CPS sought to engage SASSA on the

assistance that it may require from CPS, be it technical assistance, staffing or

infrastructure. CPS also requested SASSA to furnish it with details of the

transitional measures that SASSA would require CPS to implement before 1 April

2017, to ensure the uninterrupted payment of social grants.

6. For the sake of transparency and completeness, I attach marked "A" all the

correspondence that CPS and SASSA exchanged in respect of the expiry of

CPS's contract. In summary:

6.1 On 24 May 2016, CPS addressed correspondence to SASSA expressing its

concern over the short time period remaining for a phase-in/phase out

strategy, and proposing alternative solutions to SASSA to this end. ~ ~

 5

6.2 On 9 December 2016, becoming increasingly concerned with the lack of

communication from SASSA, CPS again wrote to enquire about the assistance

that SASSA required in the transition process. CPS also informed SASSA that

it would commence dismantling its payment infrastructure on 1 January 2017.

6.3 SASSA responded to CPS on 22 December 2016. SASSA expressed an intent

"to engage on probabilities for assistance in the transition of SASSA operations

towards a new service model", and proposed a first meeting on

5 January 2017. SASSA also sought responses to a range of queries on

technical matters pertaining to the transition to the new model.

6.4 CPS responded on 28 December 2016. It furnished SASSA with the requested

technical information. CPS advised SASSA that, should it be required to

continue providing services beyond 31 March 2017, a new contract had to be

concluded as a matter of urgency and before 1 January 2017, when it would

begin implementing its plans to close-down its operations.

6.5 On 9 February 2017, SASSA wrote to CPS and called for a meeting "to explore

the possibilities to avail the company's services as an interim arrangement

regarding the payment of social grants for the period extending from

31 March 2017".

6.6 CPS responded to SASSA's request for a meeting on the same day, and

requested proposed meeting dates. It proposed that the meeting should be

convened before 17 February 2017.

 6

6.7 On 10 February 2017, CPS responded to SASSA's Request for Information

(issued on 9 December 2016).

6.8 On 16 February 2017, CPS again wrote to SASSA noting that SASSA had not

advised it of dates for the exploratory meeting. CPS indicated that travel

arrangements had to be made, and that it was only available to meet from

1 March 2017.

6.9 SASSA replied on 21 February 2017 and confirmed the meeting for

1 March 2017.

7. CPS and SASSA accordingly met for the first time to discuss the possibility of

an interim agreement on 1 March 2017. These discussions are ongoing. An

agreement has been reached which will ensure that beneficiaries are paid

beyond 1 April 2017. The agreement is presently being reduced to writing.

8. The suggestion by the Black Sash that CPS has "built itself into an impregnable

position" and somehow positioned itself to hold SASSA or the state "to ransom "

is unsubstantiated, utterly unfounded and unfair. CPS has no control over the

process, cannot be blamed for the fact that there were no responsive bidders to

SASSA's last tender and has offered to assist SASSA in its endeavour to take

over the payment of social grants. CPS has now engaged with SASSA out of

necessity, cognisant of this Court's directions in the AI/Pay litigation and the need

to ensure uninterrupted payment of grants to beneficiaries.

 7

9. It bears mention that CPS elected not to bid for the new tender issued by SASSA

in 2015 and had planned to terminate its services as soon as the new service

provider was ready to take over. It highlighted the operational and regulatory

complexity of the grant payment system during the AI/Pay litigation and

specifically advised SASSA of the need to engage with it, as well as with the

South African Reserve Bank ("SARB") and the Payment Association of South

Africa ("PASA"), to facilitate the transfer to a new payment system .

The aspersions made by the Black Sash

10. The Black Sash has made a number of aspersions on CPS, which are uncalled

for and irrelevant. The Black Sash has also mischaracterised pending litigation

involving CPS . While I do not wish to burden this Court, it is incumbent on me to

respond . I do so briefly.

11. First, I have stated repeatedly under oath, and affirm again, that CPS does not

share the beneficiary data that it captures during beneficiary enrolment or

receives from SASSA with any third parties- including Net1 subsidiaries. The

Black Sash's suggestion that certain of Net1 's subsidiaries have "de facto

unrestricted access" to the SASSA-branded bank accounts held by beneficiaries

is untrue and is firmly denied.

12. I point out that both the National Consumer Tribunal and the Competition

Commission have been called on to investigate such claims, and properly

rejected them as unfounded. Beneficiaries' SASSA-branded Grindrod bank

accounts operate like any other transactional bank account and are subjtt to the

Ar ~
 8

same levels of protection (but with the added protection of biometric verification

to the extent permitted by the SARB and/or PASA).

13. Second, the allegation that CPS and other Net1 subsidiaries engage in unlawful

marketing practices is unfounded. As regards CPS, it does not market or sell any

goods or products to beneficiaries. CPS's sole function is the administration of

grant payments. Certain other Net1 subsidiary companies do market and provide

financial products to beneficiaries. They do not, however, engage in unlawful

marketing practices or conduct "ambush marketing" as the Black Sash suggests.

The services are provided within a strictly regulated environment, under the

scrutiny of the National Credit Regulator, the Financial Services Board and the

SARB, and operate entirely independently from CPS.

14. Third, as regards the terms and conditions of beneficiaries' SASSA-branded

Grindrod bank accounts, these are displayed when beneficiaries are enrolled.

Grant recipients are specifically required to agree to these terms and conditions

- they do so biometrically by "signing" electronically with their fingerprints. The

terms and conditions of the bank accounts, as well as Grindrod Bank's operating

procedures and the protection of the confidential data of its account-holders are

subject to the oversight and regulation of the SARB and PASA - like any

transactional account operated by a PASA-member bank.

15. All of the allegations addressed above were previously made by the Black Sash

and were thoroughly disputed by Net1 and other industry participants in the

litigation relating to the interpretation of Regulations 21 and 26A of the Social

Assistance Regulations ("the Regulations litigation"). The principal issuffi th~

 9

case is whether the processing of debit-orders and EFT instructions from

beneficiaries' SASSA-branded bank accounts constitutes an "unlawful deduction"

under the Social Assistance Act and its Regulations, and whether SASSA's

instruction to CPS and Grindrod Bank, immediately to terminate all debit-orders

and EFTs from beneficiaries' bank accounts, is lawful. Judgment in the matter is

pending in the High Court, and may ultimately reach this Court on appeal. I

respectfully submit that it is not appropriate for this Court to express any view on

the issues raised in that litigation at this stage.

16. I point out, however, that Net1 and its subsidiaries did not oppose Black Sash's

intervention or the conditional relief that the Black Sash sought in the Regulations

litigation. In particular, Net1 did not oppose the granting of orders declaring that

"the State is under a constitutional and legal obligation to protect the beneficiaries

of social grants from exploitation in a manner that prevents grant beneficiaries

receiving full benefit from them" and directing the Minister to make Regulations

that achieve this purpose. Net1 and its subsidiaries, including CPS, endorse this

relief. They fully accept that unauthorised deductions- that is, deductions made

without the informed consent of the account-holder - are unlawful and

unacceptable, and that all lawful and reasonable measures must be taken to

prevent unauthorised deductions from beneficiaries' accounts. They also readily

accepts that the provision of financial products and services must comply with

relevant legislation.

17. As regards the pending litigation that Corruption Watch instituted against SASSA

and CPS in March 2015, this litigation is also pending (the matter is yet to be

heard in the High Court). The Black Sash has mischaracterised the litig1ti n in

~-
 10

contending (at paragraph 110) that it concerns a decision of the SASSA CEO to

approve reimbursement to CPS of costs incurred by it, in the amount of R317m,

"for the re-registration of beneficiaries, despite this being a requirement of the

SASSA-CPS contract". At the heart of this case is a dispute over whether the

registration of child dependants constituted the registration of "beneficiaries" as

defined in the tender and contemplated between the parties, and whether this

was indeed a "requirement of the SASSA-CPS contract". Save to say that both

SASSA and CPS dispute the interpretation of the tender and the contract that

Corruption Watch proposes, I do not consider it appropriate to address the matter

in this Court at this stage. It bears mention that the system introduced by CPS, in

particular the re-registration of all beneficiaries and their dependants, is estimated

to save the fiscus approximately R2 billion per annum through the elimination of

fraudulent claims. That is R1 0 billion over the duration of the 2012 contract, which

is more than the entire fee paid to CPS over the 5 year period for execution of

the contract. I also point out that CPS publicly disclosed the payment and has

been fully transparent in respect this claim.

Prayers 5(b) and 11(b)

18. In prayers 5(b) and 11 (b), Black Sash seeks an order directing that the contracts

SASSA concludes "must provide that personal information of beneficiaries is the

property of SASSA". CPS accepts that SASSA alone must retain possession

and control over the personal information of beneficiaries upon the termination

of the contracts, and must protect its confidentiality. However, this does not

mean that the information becomes "the property of SASSA". The person to

whom the information relates is the owner of that information. This ap~ars to

~,( ~
 11

be the meaning and import of the Protection of Personal Information Act 4 of

2013.

19. In AI/Pay 2, this Court sought to protect the privacy of personal data under

SASSA's contract with CPS. The Court ordered (in paragraph 3.1 (c)) that-

"personal data obtained in the payment process remains private and

may not be used in any manner for any purpose other than payment

of the grants or any other purpose sanctioned by the Minister in terms

of section 20(3) and (4) of the Social Assistance Act 13 of 2004."

20. CPS supports the granting of the same order in respect of the interim

agreement.

21. Since CPS supports Black Sash's application (save for its concern over the

wording of prayers 5(b) and 11 (b)), no order of costs s uld be made against it.

SERGE CHR STIAN PIERRE BELAMANT

I hereby certify that the deponent knows and understands the contents of this affidavit
and that it is to the best of his knowledge both true and correct. This affidavit was
signed and sworn to before me at RoS-:BfZ'Q'h-- :<.epS on this the 7th day
of March 2017, and that the Regulations contained in Government Notice R.1258 of
21 July 1972, as amended, have been complied with.

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SUID-AFRIKAANSE POLtSIEDtENS
 CASH PAYMASTER SERVICES (PTY) LTD.
3rd Floor, President Place
Cnr. Jan Smuts Ave &
Botton Rd, Rosebank
P.O. Box 2424
"A"
Partdands 2121
Republic of South Africa
Telephone: +'IT (11) 343 2000
Facsimile: +'IT (11) 343 2094

24 May 2016

The Executive Manager: Special Projects

South African Social Security Agency
SASSA House, Prodinsa Building
Corner Beatrix and Pretorius Street
Pretoria

Dear Ms Mvulane

RE: SASSA CARD PROGRAMME

As you are aware , the Constitutional Court mandated SASSA to issue a fresh tender for the
payment of grants or to perform this function in-house. SASSA chose to issue such a tender.
but unfortunately none of the bidders qualified and as a result the tender was cancelled .
SASSA then informed the Constitutional Court that it intended to take the service in-house
and provided the Court with a high-level project plan .

As an aside , the Constitutional Court did not anticipate or take into consideration the
possibility that neither CPS nor AIIPay would not tender or that the tender process would not
result in a tender award .

As you will recall , we attended a meeting at your request a few months ago to discuss the
implications for SASSA to achieve this objective. We discussed both a closed loop system
that could permit interoperability with the NPS , as well as an open loop system as is
currently provided .

The reason for the two approaches . which are both technologically equivalent in terms of
interoperability, is that a closed loop system would allow SASSA to provide a payment
solution which would be under its control in totality as SASSA would operate only under the
Social Assistance Act of 2004 . An open system would require SASSA to obtain or make use
of a banking licence, amongst others , or to outsource this function to one or more banks
resulting in a solution similar to the current system . The open loop payment solution would
be governed by the banking rules , the SARB. PASA Visa and MasterCard, the FSB , etc.
and , as such , SASSA would not have actually taken the payment function in house in any
way but simply outsourced it to a different bank or/and service provider which wou ld
probably require a fresh tender to be issued. Taking over the registration element may be
possible , although KYC would still have to be conducted by the issuing bank(s) as a FAIS
licence (training , supervision , etc.) would be required in some form or another.

This being said , it is also important to take cognisance that the current SASSA card , which is
managed by Net1 's card programme, terminates on March 31 st 2017 . This is due to two
major events :

I.

ffhlo lnsruutr
of South Afrla. _
CASH PAYMASTER SERVICES (PTY) LTD. Reg No. 19711007195107

Directors : S.C .P. Belamant", H.G. Kotze, N. Plllay

'Ff'rmch
Company Secretary: C.W. van Straaten
 First, the duration of the programme was set for 5 years which coincided with the
maximum duration of MasterCard programmes in general:
Second , the UEPS portion of the card software also terminates after 5 years. This
portion was . and remains . critical to provide both biometric verification as well as
offline payments (rural areas).

Experience has demonstrated that it would take more than a year to replace all of the cards
in issue, specifically those that are in the hands of beneficiaries who reside in urban areas.
as SASSA will have to contact them all and conduct a re-issuing process (including KYC) ,
together with their new banking partner(s). We estimate this registration to address 7 million
beneficiaries who reside in urban areas as well as approximately 3 million beneficiaries who
reside in semi urban or rural areas. As you will recall, the initial registration process required
many thousands of temporary staff. venues which had to accommodate thousands of
people . toilets. water, medical care and , of course . security.

Our auditors confirmed that this work cost CPS in excess of R1 billion in 2012/3.

SASSA should therefore consider both the timing issues as well as the cost it will incur to
ensure a smooth take over that would not result in massive disruptions in the payment
process - another critical element of the Constitutional Court's ruling .

Net1 has been analysing the possibility to extend the life of the cards currently in the field
beyond March 31 , 2017. Please note that the expiry date is laser printed on the plastic card
as well as encoded on the magnetic stripe. The actual EMV chip also contains the expiry
date as well as the MasterCard and Net1 Cryptographic key sets. Without updating these
cryptographic keys , the cards would simply not be accepted by any acquiring bank (ATM or
POS) , or funds created for payment at mobile pay points.

Net1 is quite confident that the laser engraving will not become an issue as this is not
checked electronically but rather visually by shop keepers . Shop keepers normally are more
interested in sales and if a transaction is approved by the issuing bank, they would disregard
the date printed on the card . The same applies to the content encoded on the magnetic
stripe - because the card is an EMV compliant debit card , all transactions are and must be
effected on-line and the magnetic stripe data is therefore simply ignored. Net1 has
proactively tested these two scenarios and will request Gnndrod Bank to approach PASA for
the appropriate waivers , if required .

The problem thus remains the legality and the technical ability to change the cryptographic
key set(s) . We believe that it could achieved because our cards have multiple entry points .
allowing us to change the UEPS key set. The EMV standard would prove more difficult and
would require a set process to be followed whenever a card ts entered in an ATM or POS
device . ATM would be preferable as the card cannot be removed whilst the update process
is taking place . If the card were to be removed prematurely , the card would become non-
functional and a new card would have to be issued .

The quest1on remains as to which infrastructure would be able to perform the key update.
Net1 suggests that all of its ATMs , pay points . POS devices and Kiosks could be used to
perform both functions . The reg istration process and equipment present at SASSA's offices
could also be utilised with some software modifications. In theory, bank ATMs could also be
used but all banks would have to develop software to update their A TMs. It is our view th
 there is not enough time left between now on March 31 , 2017 for the banks to assist in this
massive task . This is due to the many different ATMs banks use, the quality control required ,
the creation of a process template and the state diagram associated with the key change
including , of course. the potential risk of a security breach .

As time is running out quite rapidly, it is critical for SASSA to decide on the way forward . In
order to prevent disruption in the payment process and to protect beneficiaries, it may be
better for SASSA to extend the current CPS contract for at least 12 months, during which
SASSA could refine their strategy and implement a phase-out and phase-in plan .

I am extremely concerned that if this issue is not resolved within the next few weeks , we will
run out of time and it may simply become impossible to extend the life of many cards which
will result in major disruptions throughout the country.

We remain available to assist in any way we can , but some matters may simply not be under
our control or ability to resolve . The cost associated with this upgrade may still be quite
substantial and may thus require some form of internal/external PFMA or emergency
process to be followed .

~e.rge Bela
. I _,.
t
{Chief Exe ive Officer
/
 CASH PAYMASTER SERVICES (PTY) LTO.
3rd Floor, President Place
Cnr. Jan Smuts Ave &
Bolton Rd, Rosebank
P.O. Box 2424
Parldands 2121
Republic of South Africa
Telephone: +27 (11) 343 2000
Facsimile: +27 (11) 343 2094

9 December 2016

The Honourable Minister of Social Development

Department of Social Development
HSRC Building
134 Pretorius street
Pretoria

Dear Madam

As you are aware , on November 30 , 2016 , SASSA reported to Parliament that it would
be ready to perform the payment of all social grants by April 1, 2017 .

The Contract and Service Level Agreement ("the contracts") between SASSA and
Cash Paymaster Services (Pty) Ltd ("CPS ") were declared invalid by the Constitutional
Court of South Africa . The Constitutional Court, however , suspended the declaration
of invalidity until a) SASSA issued and awarded a fresh tender or b) until March 31 ,
2017 which ever event occurred first

The Constitutional Court also found that CPS would carry certain obligations and
responsibilities as if it were an "organ of state" for the duration of the contracts . The
organ of state status was introduced by the Constitutional Court to ensure that CPS
could not "walk away" from performing the grant payment function until March 31 ,
2017 , if required to do so .

Therefore CPS 's organ of state status and its obligations under the contracts will
terminate on March 31 , 2017 as per the Constitutional Court 's ruling .

CPS has provided a grant distribution service to SASSA for many years and to most
of South Africa 's provinces for many years before that and therefore understands the
difficult and complex task associated with the distribution of grants to more than 10
million beneficiaries on a national basis.

Over the last six months , SASSA's advisory committee has performed a due diligence
and analysis of all functions currently performed under "the contract" for SASSA to be
in a better position to formulate its future direction and implementation plans thereof .

CASH PAYMASTER SERVICES (PTY) LTD. Reg No. 1971I00719slo7

fthks InStitute Directors : S.C.P. Belamant , H.G Kotze, N. P ill ay
ofSou rh Africa French
Comf)<lny Secretary: C.W. van Straaten
We supplied the advisory committee with all the material they requested including
technology, operations, financial control, security, regulatory issues and the like . I
hope the information we wilfully and openly provided will prove useful for SASSA to
formulate a new system that will take social assistance to the next level of excellence
for the benefit of all South Africans .

Over the same period, the SARB , PASA, Grindrod bank and MasterCard have
engaged with us to debate the technological issues related to the longevity of the
existing SASSA branded cards and if a solution could be found to prolong their lifespan
beyond April 1, 2017 .

These organizations were of the view that finding a solution was primordial as SASSA
had not finalised or disclosed their transition plan. but that such plan would
undoubtedly require the SASSA branded cards to continue to operate beyond April 1,
2017 to ensure that there would be no disruption to the payment of grants' service
going forward.

As a result, we have developed and tested a plan that will ensure continuity but such
plan requires your urgent endorsement and commitment.

The following enumerates the issues that were identified , the steps that need to be
taken and the decisions that are required to be made for this contingency plans to
succeed .

Summary of technical issues identified :

a) Expiry date printed on the SASSA branded card that reflects 12/17
b) The same date (i .e. 12/17) is encoded on the magnetic stripe and on the chip
of all the SASSA branded cards .
c) The MasterCard cryptographic key set expires on 12/17
d) The Net1 /UEPS cryptographic key set expires 3/17 (set for the termination of
the CPS/SASSA contracts)

We have conducted a number of tests to establish how the lifespan of the SASSA
branded cards could be prolonged for at least 18 to 24 months . This time frame should
prove adequate for SASSA to take over the grant payment system including the
issuance of new cards to existing beneficiaries . This issuing process , in our view, will
prove difficult to achieve in less than 24 months .

As a countermeasure , we have developed software that will allow for the update of the
cryptographic key sets as required by MasterCard and UEPS. This step requires the
roll out of specialised terminals in all SASSA branches and the employment of a
minimum of 400 staff members . 400 SASSA branches need to be upgraded with the
necessary hardware , terminal software and provided with staff training .
We understand that this plan will not resolve the problem in its entirety by April 1, 2017
as not all beneficiaries' cards can possibly be updated by this date. The problem,
however, will be alleviated to some extent as we believe that 50% of all cards could
be updated by April 1, 2017 .

In addition therefore, we have tested a number of supplementary options that could

be used for a limited period of time as these options would weaken the security
associated with EMV based transactions and could therefore result in increased
financial risk , systemic risk, reduced card acceptance at merchant stores and possible
fraud.

These additional options are only be possible if:

1) NPS ATMs do not check the printing on the card
2) NPS ATMs do not check the expiry date encoded on the card's magnetic stripe
3) NPS ATMs will however check the expiry date stored in the card microcontroller
as used in the MChip4/UEPS/EMV/biometric masked debit payment application
4) Merchants do not check the expiry date printed (laser printed) on the card
5) EMV POS merchant devices do not check the magnetic stripe data when a chip
is present on the card

We are of the opinion that the above is true nationally and we could thus force all
expired card transactions to be routed to the issuing bank for approval (Grindrod
Bank/Net 1) instead of being declined as per NPS standard procedures . As these
methods could create financial risk, security risks and thus some degree of systemic
risk , they could not remain active for an extended period to prevent perpetrators from
identifying the weaknesses created and take advantage of these - hence the need for
the cryptographic key sets update to commence immediately.

SASSA and CPS/Net1 could enter into an agreement that would define how the
liabilities created would be shared . SASSA, together with CPS/NET1/Grindrod , would
engage with PASA to obtain a waiver for any PASA or NPS rules that would prevent
operations during this period . We believe that PASA is amenable to such deviations
to ensure that the grant payment function continues without any disruption .

The above contingency plans will ensure that SASSA branded cards can continue to
operate on and beyond April 1, 2017 from a technological point of view.

It is also imperative that SASSA communicates with us of their intentions to prolong

the use of our CPS infrastructure which currently services more than 10000 pay-points
as well as 1OOOs of merchants .

Our current plan is to commence with the dismantling of our CPS infrastructure on
January 1, 2017 This timing is necessary because we are obliged to a) give a
months ' notice period to more than 3000 of our staff members, b) issue notices of
termination to our landlords with regard to depot and branch leases, c) terminate our
security and guarding contracts, d) terminate our agreements with our international
suppliers (cards, ATMs , POS, voice biometrics) and e) plan for the systematic closing
down of our pay-point infrastructure. The current cost of our CPS operations alone
amounts to between R80 and R90 million per month . This amount excludes all support
services provided by Net1 such as IT development and maintenance , IT operations ,
general management, financial reconciliation , call centre , cash management, human
resources, procurement and numerous other staff functions . Grindrod bank fees are
also excluded .

It is also necessary for the Net1 banking system to be provided in order for the SASSA
branded cards to be authorised .

In light of the foregoing , it is highly likely that our assistance might be required in any
form of transition arrangements devised by SASSA. It is imperative therefore that you
inform us of SASSA's immediate plans and of your intentions so that we have the time
to align ourselves accordingly . Should our assistance be required, our new agreement
would probably require departure from the current terms to cater for issues such as
CPI , additional risks , new work to be performed and du ration .

Should you be of the view that the emergency and cont ingency plans described above
are in line with SASSA's transition plan and your vision for the future , please inform us
before December 19, 2016 to ensure that a) these plans can be implemented
timeously to avoid disruption to the payment of grants and b) for us to reschedule the
liquidation of our CPS subsidiary . We cannot overemphasise the significance of
avoiding further delays on this matter.

Please be assured that you can count on our comm itment to assist SASSA with its
plans going forward if it is your wish for us do so .

Yours sincere ly

Serge Belamant
Chief Executive Officer
 HEAD OFFICE
SASSA House, Prodinsa Building,
Cnr Pretorius and Steve Biko Streets,
Pretoria
Private Bag X55662

sass a
Arcadia , Pretoria, 0083
Tel : (012) 400 2686
\NWW.sassa.gov.za

Mr. Serge Belamant,

Chief Executive Officer,
CASH PAYMASTER SERVICES (PTY) LTD .,
3rd Floor, President Place,
Cnr. Jan Smuts Ave & Bolton Rd,
Rose bank,
Gauteng,
Republic of South Africa

Dear Sir,

After much deliberation and satisfaction of due process SASSA is now in a position to
formally express its intentions to engage CPS on probabilities to assist in the transition
of SASSA operations (while ensuring grant payment continuity) towards a new service
model that must be subject to a regular procurement process.

The Discussions will be centered on the following services as a basis from which to
explore possibilities of delivering services beyond March 2017:

1. Beneficiary Enrolment and Card issuing

2. Grant distribution as per SASSA requirements
3. Continuation of Cash Distribution and Cash Pay Point Management
4. Generation of the Electronic Voucher
5. Distribution of the Electronic Voucher
6. Identification of the grant recipient linked to the proof of grant delivery and of the
amount delivered and of the 'Proof of life' certification
7. Transaction facility including :
a. Cash withdrawal at mobile pay points (Cash dispensers/ATMs)
b. Cash withdrawals at fixed pay points (Cash dispensers/ATMs)
c. Cash withdrawals at retail stores (POS)
d. Cash withdrawals at bank ATMs

)~
 e. Transfer to traditional bank account
f. Transfer to Postbank account
g. Transfer to a third party
h. Third party payments
i. Purchase of goods and services

In addition to the services stated above, SASSA would demand the following reforms:

a. SASSA intends to implement a Data Integration Layer (API) between the CPS
systems and the SASSA grant application platform for the consumption of
Beneficiary and Payments information.
b. SASSA intends to implement integration between the CPS call centre and the
SASSA call centre to enable a direct call transfer to beneficiaries.
c. SASSA intends to put in place a phase out plan that will enable a seamless
migration to a new enhanced SASSA Banking and Payments Model which
subject to a regular procurement process may involve one or more new service
providers.

On the other hand , SASSA requires clarification on technical information pertaining to:

Expiry date printed on the payment card magnetic stripe - 12/17

MasterCard Keys - 12/17
UEPS Keys - 03/17

1. Questions for business to continue 1 April 2017:

a. Are the UEPS keys only used on the closed loop CPS acquiring
platform with the EMV keys being used on the open loop (NPS)
acquiring platforms?
b. Can UEPS Keys be updated at transaction time on UEPS acquiring
devices ie. Pay points and CPS ATMs?
c. Can UEPS Keys be updated on the open loop (NPS)?
d. What chargeback reasons do CPS foresee that will result in liability
shift?
e. What are the Application Identifiers (AIDs) on the application/s

2. for business to continue 1 January 2018:

a. What will the payment application respond to a POS device when the
device indicates an expired application?
 b. Why is there a need to update the EMV Keys (not an EMV supported
script) if the card will force an online transaction according to the Issuer
Action Codes in the payment application and the standard EMV
processing procedures?
c. Will CPS still be able to acquire the SASSA cards beyond the contract
life?
d. What chargeback reasons do CPS foresee that will result in liability
shift?
e. Are there any SASSA cards in the market that has an expiry date
before 31 December 2017?
f. Does the SASSA card support offline open loop transactions?
g. What EMV tag/s are used for open loop offline transactions?

While this letter intends to express the intent of SASSA to engage on probabilities for
assistance in the transition of SASSA operations towards a new service model , this
letter does not constitute in any capacity an official service agreement as such will be
subject to negotiation. Technical discussions that will ensue as tabled in this letter form
a basis from which further negotiation can be conducted .

Cons idering that plans have to be put in place at the beginning of the new year to
enable timeous communication with all affected, the suggested date for the maiden
meeting is the 5th January 2017.

Looking forward to your response .

Yours Sincerely,

Exe utive Manager: Special Projects

Date: 22 December 2016
 NET 1 UEPS TECHNOLOGIES, INC.
3rd Floor
President Place
Cnr. Jan Smuts Ave &
Bolton Rd, Rosebank
P.O. Box 2424
Parklands 2121
Republic of South Africa
Telephone: +27 (11) 343 2000
Facsimile: +27 (11) 880 7080

28 December 2016
Ms Zodwa Mvulane
Executive Manager
Special Projects
SASSA

Dear Ms Zodwa Mvulane

RE: YOUR LETTER DATED DECEMBER 22, 2016

Thank you for your letter dated December 22, 2016.

INTRODUCTION:

The opening paragraph of your letter indicates the following :

I. SASSA wishes for CPS to continue with the distribution and payment of grants
after March 31 , 2017 - 'processing continuance'; and
2. SASSA wishes to investigate how CPS could assist SASSA to migrate towards a
new service model, which must be subject to a regular procurement process
'phase-out plan'.

We infer from your letter that it is your wish to engage CPS for a period of time,
commencing April 1, 2017, during which CPS would continue with a) the distribution
and payment of grants and b) facilitate SASSA's migration to a new service model.

As mentioned in my letter to the Minister, we can accommodate your first request as

long as we finalise a new contractual agreement before January 1, 2017. The reason
for this deadline is that CPS will commence with the process of closing down its
social grant payment operations on January I, 2017. During this closing down period,
which is anticipated to be complete by March 31 , 2017, CPS will continue to provide
the grant distribution and payment service as per the existing (although invalid)
Contract and Service Level Agreement ("SLA") terms and conditions. It must be
noted that our current service levels exceed, in many aspects, the minimum service
levels specified in the SLA - specifically those that regulate the duration of the
payment cycle and the timeframes in which daily payments must be completed.

As we commence the closing down of CPS, our service levels will gradually approach
those stipulated in the SLA due to the re-allocation of CPS staff and the reduction in
the number of vehicles deployed. We hope this 'return' to standard service levels will

NET 1 UEPS TECHNOLOGIES, INC. IRS Employer Identification No. 96-{)171860

Incorporated: State of Florida. USA
Directors: S.C.P. Bel amant' , H.G. Kotze. C.S. Seabrooke. A.J.K. Pein, P. Edwards"
French " British
Company Secretary: H.G. Kotze
 2

not cause any major disturbances or create any unwarranted burdens for beneficiaries.
The further we progress with our closing down processes, the more difficult and
costly it will become to return to our current levels of service.

It is therefore imperative that we conclude a new agreement as soon as possible to

reduce any negative impact on the grant distribution and payment system.

Assuming that any new agreement will be fundamentally similar to the current SLA,
it is important to note that the financial terms, however, will vary depending on:
a) Adjustment due to CPI (5 years at 6% per annum); and
b) Adjustment due to our increases passed on by our direct service providers
(Net I, Grindrod Bank, Fidelity Security Services); and
c) The contemplated duration period; and
d) Variations of current terms and conditions; and
e) Any contemplated phase-out plan; and
f) Our risks associated with the current and any new SLA (lawsuits,
Corruption Watch, etc.)

It must be noted that March 31, 2017 will mark the end of five years of uninterrupted
operations and quality of service delivery, even when the project was initially faced
with performance and capacity problems introduced by Bankserv and a number of
acquiring banks.

To maintain the level of service delivery to which beneficiaries have become

accustomed to, we will need to commence with the upgrade of our payment
infrastructure, specifically our vehicles and payment equipment. The cost of these
unavoidable additional infrastructure investments will have to be recovered over the
new contract period. As a result, we estimate our short-term price offer to increase
from Rl6.44 (incl. VAT) to R25 (incl. VAT) for a 90 days rolling commitment period
(i.e. 90 days termination notice may be given at any time), or R22 (incl. VAT) for a
24-month contract (i.e. a fixed-term two year contract). The above pricing assumes no
changes to the terms and conditions of the existing SLA and does not incorporate any
phase-out/migration plan.

We will only be in a position to respond to your second request when you have
finalised and published your new service model. We understand you will be required
to comply with the PFMA and therefore issue one or a number of RFPs to procure the
services and technologies your new model will require. Regardless of our company's
election to respond to the RFP(s) or not, a gradual migration of beneficiaries' accounts
from CPS to SASSA or its new service(s) provider(s) will be inevitable, which
migration will invariably result in less beneficiaries being paid by CPS as the
 3

migration plan accelerates. In order to ensure that we do not find ourselves in the
untenable and unsustainable position of providing our payment services at a loss, our
phase-out I migration pricing will be based on a fixed monthly fee, as opposed to the
current methodology of being based on actual number of beneficiaries paid per
month. This fixed monthly fee model will be introduced when SASSA or the new
contractor(s) commences migration operations. The phase-out I migration period
fixed monthly fee will be equal to the last monthly invoice paid by SASSA
immediately preceding the commencement of the phase-out period and assuming that
we will be paying less, not more, beneficiaries during such phase out I migration
period.

DISCUSSION ON DELIVERING SERVICES BEYOND 31 MARCH 2017:

CPS is currently providing all of the services enumerated. CPS, together with its
partners Netl, Fidelity Security Services and Grindrod Bank can continue with the
provision of all of these services.

SASSA DEMANDS:
In addition to the services mentioned above, SASSA demands the following (as per
your letter):

a) SASSA intends to implement a Data Integration Layer (API) between the CPS
systems and the SASSA grant application platform for the consumption of
Beneficiaries and Payment information. The implications of this demand are
not clear to us. We assume that the grant application platform is a part of the
SOCPEN system.

We have no objection to this request as long as such request does not

contravene any regulatory (banking) or privacy regulations. The work to be
performed will be defined once SASSA has established and documented the
required specifications. We will then provide SASSA with timeframes and a
quote for the IT work to be performed.

b) SASSA intends to implement integration between the CPS call centre and the
SASSA call centre to enable a direct call transfer to beneficiaries.

We have no objection to this integration. The timing and cost of this project
will have to be determined when the specifications have been defined and
documented (hardware, software, process level, scripts, escalation procedures,
opening and closing of calls, etc.)
 4

c) SASSA intends to establish a phase-out plan that will enable a seamless

migration to a new enhanced SASSA Banking and Payments Model, which
(subject to a regular procurement process) may involve one or more new
service providers.

We have no objection to this request. We have described in our introduction

what fees CPS would charge for a) processing continuance and b) the phase-
out plan. For clarity, CPS will continue to charge a fee to SASSA per
beneficiary paid per month (processing continuance fee). This fee will be
determined once SASSA has decided on the duration of the continuance. Once
phase-out is activated, the fee structure will change to a monthly fixed fee
instead of a 'per beneficiary' fee. The fixed fee will be equal to the last
monthly invoice paid by SASSA under the processing continuation fee
structure. The fixed fee will continue to be charged until the need for any of
CPS services has been eliminated in totality. This fee structure will provide
SASSA or a new contractor(s) with complete flexibility in terms of timing, as
well as where and when they wish to commence the transition process whilst
ensuring no disruption to the payment service.

TECHNICAL INFORMATION:
a) Expiry date printed on the payment card magnetic stripe- 12117
The expiry date printed (laser engraved) on the payment card is 12/17. This
date is meant to be checked by merchants accepting the cards. If a merchant
allows an expired card to transact and such transaction results in a reversal
(refund to the cardholder), a merchant charge-back may be effected by the
acquirer. Merchants should be indemnified against such charge-backs.

The date encoded on the magnetic stripe also reflects 12117. The magnetic
stripe's 'chip on card' bit is set, however, resulting in the encoded date to be
ignored by acquiring banks and ATM applications when these comply with
the EMV processing standards.

b) MasterCard Keys- 12117

Correct.

c) UEPS Keys- 03/17

The UEPS keys are 112-bit key set used with the symmetric triple DES
algorithm. These keys are used for number of purposes:
a) Validation of electronic vouchers;
b) Validation of funds originator; and
 5

c) Random session key establishment with biometric reading devices.

QUESTIONS FOR BUSINESS TO CONTINUE 1 APRIL 2017:

a) Are the UEPS keys only used on the closed loop CPS acquiring platform with
the EMV keys being used on the open loop (NPS) acquiring platform?

No. UEPS keys are used in all transactions to ensure that beneficiaries can, at
their own discretion, transact anywhere. The UEPS keys facilitate the offline
functionality used at pay-points, Netl merchants and Netl AIMs. These keys
are also used in on-line NPS transactions to validate issuer responses and
create electronic funds on the UEPS wallet from which all transactions are
then performed. UEPS keys are also used to generate random session keys
between the card application and biometric reading devices to ensure that
fingerprint templates cannot be stored, recorded, replayed or compromised.

b) Can UEPS keys be updated at transaction time on UEPS acquiring devices i.e.
Pay points and CPS ATMs?

Yes.

c) Can UEPS keys be updated on the open loop (NPS)?

No. This could be achieved using EMV scripting. However, scripting has not
been implemented in totality as part of the PASA regulatory framework.

d) What chargeback reasons does CPS foresee that will result in liability shift?

1) Repudiation of transactions
2) Possible fraud (exploiting the weakness of the security)
3) Cost of query resolution may lead to transaction reversals
4) Penalties (PASA)
5) Penalties (MasterCard- reputational risk)
6) Additional monitoring and query resolution

e) What are the Application Identifiers (AIDs) on the applicationls?

EMV M/Chip 4 debit (MasterCard) - acquiring

 6

QUESTIONS FOR BUSINESS TO CONTINUE 1 APRIL 2018:

a) What will the payment application respond to a POS device when the device
indicates an expired application?

The M/Chip 4 MasterCard payment application does not expire. The expiry
date is stored on the card, however, and is read by the EMV kernel present on
the POS device. The date and other data elements are also read by the POS
device to ensure that the card is genuine; these data elements are signed using
the payment scheme keys issued by the Payment Scheme Certificate
Authority. If these keys are no longer current (key version number), the POS
cannot authenticate the data elements provided by the card. When this occurs,
the POS EMV kernel will act according to the issuer action codes e.g. force
the transaction to be authorised on-line. POS devices and ATMs normally use
a kernel provided by the POS and ATM manufacturers or POS and A TM
software developers. These kernels are therefore normally relatively bug-free.

b) Why is there a need to update the EMV Keys (not an EMV supported script) if
the card will force an online transaction according to the issuer Action Codes
in the payment application and the standard EMV processing procedures?

The EMV key sets exist for a number of security reasons:

In essence, these keys are present to ensure that the card transacting is
genuine. Therefore, when these keys are bypassed (e.g. action code), the
liability passes from the acquirer to the issuer and more importantly, passes
from the card schemes (Master Card/Visa) to the issuer. If any breach in
security occurs because the keys were simply bypassed, the liability will fall
squarely on the issuing bank only. The expiry date is also used to force the
replacement of cards when the application needs to be updated (cryptography,
functionality) or the hardware micro-controller needs to be replaced (higher
security, Reliability, etc.)

c) Will CPS still be able to acquire the SASSA cards beyond the contract life ?

Yes.

d) What chargeback reasons does CPS foresee that will result in liability shift?

The liability shift will be from the card scheme and acquirers to the issuer
only. (Netl takes on these liabilities contractually on behalf of Grindrod
Bank). It is difficult to quantify what the liabilities may be as the risk is
 7

directly proportional to the time during which the rules are being bypassed
(e.g. keys, update of application, hardware update).

e) Are there any SASSA cards in the market that has an expiry date before 31
December 2017?

No.

f) Does the SASSA card support offline open loop transactions?

No. The RFP mandated that off-line transactions should not create
liabilities. (In other words a beneficiary account could not become overdrawn
due to off-line spending). There is no wallet concept in the EMV standard and,
as a result, the available funds are kept on the Host. Any off-line transaction
therefore may result in an overdrawn account. This is one of the reasons why
we used the UEPS system as the backbone to the Master Card M/Chip 4
payment application.

g) What EMV tags are used for open loop offline transactions ?

None! Off-line open loop is not supported.

I am very concerned that a new contract may take a substantial amount of time to
negotiate and execute, specifically when approval will need to be sought from
National Treasury and possibly the SARB and the Constitutional Court.

We remain at your disposal.

Yours faithfully

Serge Belamant
Chairman and Chief Executive Officer
 HEAD OFFICE
SASSA House, Prodinsa Building,
Cnr Pretorius and Steve Biko Streets,
Pretoria
Private Bag X55662

sass a
Arcadia, Pretoria, 0083
Tel: (012) 400 2686
www.sassa .gov. za

Mr. Serge Belamant,

Chief Executive Officer,
CASH PAYMASTER SERVICES (PTY) LTD ..
3rd Floor, President Place,
Cnr. Jan Smuts Ave & Bolton Rd,
Rose bank,
Gauteng,
Republic of South Africa

Dear Sir,

PAYMENT OF SOCIAL GRANTS BEYOND 31 MARCH 2017

We refer to the above matter

After much deliberation and following due process the South African Social Security
Agency (SASSA) is now in a position to formally express its intentions to hold an
exploratory meeting with Cash Paymaster Services (Pty) Ltd (CPS) on probabilities to
assist in the transition of SASSA operations (while ensuring grant payment continuity)
towards a new service model that must be subject to a regular procurement process.

Based on the above stated fact, SASSA requires a principle confirmation from CPS that
it is amenable to agree to the proposed meeting to explore the possibilities to avail the
company's services as an interim arrangement regarding the payment of social grants
for the period extending from 31 March 2017.

Looking forward to your response.

Mr Thokozani Magwaza
Chief Executive Officer
Date: 09 February 2017
 "'""'" r~rMA~ I I::H :>tRVICES (PTY) LTD.
3rc:f Floor, PrHident Pille..
Cnr. Jan Smuts Ave &
Bolton Rd. Rosebank
P.O. Boa 2424
Prlltand5 2121
Republic of South Africa
T~ c +27(11) 343 2000
Fac:aimlfe 27 (111 343 20S4

9 February 2017

Mr Thokozani Magwaza
Chref Executive Officer
South African Social Security Agency
Sassa House Prodinsa Building
Corner Beatnx And Pretonus Street
Pretona

Dear Sir

PAYMENT OF SOCIAL GRANTS BEYOND 31 MARCH 2017

Your letter dated 9 February 2017 refers

CPS conftrms that it IS amenable to the proposed exploratory meetmg to d1scuss the
probabilities to assist SASSA in the transition of CPS operations (while ensuring grant
payment contrnUtty) towards a new service model

We believe that tt ts m the best interest of both parttes . as well as the beneftciaries . that thts
exploratory meeting be concluded by no latef than 17 February 2017 to agree on CPS s
services as an tntenm arrangement regarding the payment of soctal grants for the period
after 31 March 2017

Please provide us w1th a few dates and times that will be su1table to you and your team as
soon as possible

Yours s1ncerely

CASH PAYMASTER SERVICES (PTY) LTD. Ru No 1971J007te51o7

Dii'I>Ctors . S C .P Belamant' , H.G . KotH . N. Pillar

.~ . .,_
Com~n" S<o<:l'8f.lty.- C W. van Stra.tan
 CASH PAYMASTER SERVICES (PTY) LTD.
3rd Floor, President Place
Cnr. Jan Smuts Ave &
Bolton Rd. Rosebank
P.O. Box 2424
Part<Jands 2121
Republic of South Africa
Telephone: +27 (11) 343 2000
Facsimile: +27 (11) 343 2094

16 February 2017

Mr Thokozani Magwaza
Chief Executive Officer
South African Social Security Agency
Sassa House , Prodinsa Building
Corner Beatrix and Pretorius Street
Pretoria

Dear Sir

PAYMENT OF SOCIAL GRANTS BEYOND 31 MARCH 2017

I refer to your letter, dated 9 February 2017 as well as our response of the same date.

We have, however. not received any formal notification from SASSA or yourself regarding
the dates for such exploratory discussions. I am concerned that any further delay will
significantly impact on our ability to conclude an interim arrangement.

It is our view that any negotiations in this respect will require adequate time and consultation
to address the following aspects of a new contract. including but not limited to duration ,
price , phase-in or phase-out strategy, BEE.

It is unlikely that the current contract can be extended due to the Constitutional Court
judgment as well as the legal constraints of the PFMA An extension of the contract would , in
any case . be unacceptable to the Net1 board of directors due to the ongoing controversy
and reputational damage to our company.

I have re-scheduled my diary as well as my travel arrangements to accommodate the

SASSA meetings and will be available to meet with you from 1 March 2017 .

I am somewhat surprised and concerned that we have not. as yet . had any forma l
communication with yourself. despite your "alleged"' comments as reported in the press . We
have always conducted and continue to conduct ourselves in the most professional manner
and have gone the extra mile in delivering a first class service to all 10 million beneficiaries .

It is our view that SASSA can enter into a new agreement with CPS on the basis of
emergency (which this is) . but would find it difficult to enter into an agreement with any other
service provider without going through a formal tender process.
at ~
~

CASH PAYMASTER SERVICES (PTY) LTD. R&g No. 19711007195107

flhics Institute
ot South Africa.
OlrtJCtors: S.C.P. Belamant', H.G. Kotz6, N. Plllay
French
Company Secretilry: C.W. van Straaten _
-&PI
--;.,, h ,,.,,
....._/Pr:IJIM
I must admit that I do not understand the rational or need to put the entire grant payment
service at risk and by doing so potentially affect the lives of so many poor South Africans .

I kindly request that you please do me the courtesy of replying to my letter, dated 9 February
2017 , and advise if it is SASSA's intention to continue to utilise the CPS system and
infrastructure post 31 March 2017 , as reported in the media .

Yours sincerely
 HEAD OFFICE
SASSA House, Prodinsa Building,
Cnr Pretorius and Steve Biko Streets,
Pretoria
Private Bag X55662

sass a
Arcad ia, Pretoria, 0083
Tel : (012) 400 2686
www.sassa .qov.za

Mr. Serge Belamant,

Chief Executive Officer,
CASH PAYMASTER SERVICES (PTY) LTD ..
3rd Floor, President Place,
Cnr. Jan Smuts Ave & Bolton Rd ,
Rosebank,
Gauteng,
Republic of South Africa

Dear Sir,

PAYMENT OF SOCIAL GRANTS BEYOND 31 MARCH 2017

Your letter dated the 16 February 2017 refers.

It is gratifying to learn that Cash Paymaster Services (Pty) Ltd (CPS) is concerned as
much as we are in relation to payment of grants beyond 31 March 2017 and the
urgency that is required to bring the matter to finality.

We have been preoccupied with other equally pressing matters that relate to the
transition of SASSA operations and which were to precede any discussions on the
subject matter. Now that those have been cleared the SASSA team comprising of
nominees from major stakeholders is ready for discussions.

SASSA has noted in your correspondence that the 01 March 2017 is the first date that
you are available for discussions. The proposed date is agreed to and further proposes
that subsequent days thereafter be set aside for subsequent meetings i.e. 02nd & 03rd
March 2017.

r~.~~
Chief Executive 00~
Date: 21 February 2017