The company that the department of social development has appointed to help digitise its coronavirus social relief grant application process has links to disgraced Cash Paymaster Services, the firm that was kicked off the tender to pay social grants two years ago.
However, its CEO says there is nothing untoward about GovChat’s new partnership with the South African Social Security Agency because it won’t be earning anything from facilitating the grant application.
SASSA, which distributes more than 17 million social grants to needy South Africans every month, cancelled its R10 billion social grant payment contract with CPS. This emerged in court papers in May of 2018. The cancellation came four years after the Constitutional Court declared it invalid in 2014.
The agency then found a way to extend the contract, despite the court order that it must re-run the social grants tender.
Now, two years after the CPS saga was put to rest, another company with links to CPS is again working with SASSA.
Minister of Social Development, Lindiwe Zulu, announced on Monday that GovChat will support the agency by digitising the application process for unemployed South Africans to receive a R350 grant for the next six months.
GovChat describes itself as a social media platform that facilitates citizens’ engagement with government, and also provides a complaints management system to local governments. In Monday’s speech, Zulu described GovChat as a “private sector and civil society partner”.
SASSA spokesperson Kgomoco Diseko said the Covid-19 social relief distress grant was introduced in the middle of March and SASSA had the obligation to start paying the grant in May.
“It was not possible to conclude a procurement process of a service provider for the automation of the application and payment process in such a short time. In the interest of speedily bringing relief to the millions of people who were affected negatively by the Covid-19 epidemic and the lockdown SASSA thought it prudent to save the finite resources at its disposal,” Diseko said.
Diseko said GovChat offered SASSA the use of a solution at no cost in writing and SASSA accepted the offer. All services were offered at no cost to SASSA because GovChat viewed it as its contribution to Covid-19 disaster, Diseko said.
The CPS and Net1 connection
In May 2019, GovChat received a R20 million investment from Capital Appreciation, a company that had two directors who were former Net1 founders, the parent company of CPS.
The two directors, Capital Appreciation chairman, Motty Sacks and Dr Hanoch Neishlos, who resigned from the Capital Appreciation board in mid-2019, were both at Net1 when the payment technologies provider acquired CPS.
After Capital Appreciation’s investment, Motty Sacks was appointed chair of the GovChat board. Hanoch, a former computer science professor at the University of Witwatersrand and founder of one of Capital Appreciation’s subsidaries, African Resonance had no involvement in GovChat, the company said.
“While it is true that Motty Sacks was a founder was the chairman of Net 1 at the time it initially acquired CPS in 1999, he resigned from the company soon thereafter. That was in the year 2000, 20 years ago. He has had no association with Net 1 or CPS since that time.
“Dr Neishlos also resigned from Net 1 in the early 2000s. To the best of our knowledge, Dr Neishlos had no association with Net1 or CPS either since then,” said Capital Appreciation CEO, Brad Sacks, in a written statement.
SASSA’s Diseko also said Sacks’ and Hanock’s history with Net 1 and CPS had no relevance to GovChat’s appointment.
“Sacks is a chairman of GovChat and a co-founder of Aplitec, which later became known as Net 1 UEPS Technologies, the parent company of CPS, which was previously contracted to SASSA. The incorrect inference which comes with the story is that CPS is brought back through the back door, but nothing is further from the truth. Dr Neishlos also resigned from CAPPREC which owns Govchat,” said Diseko.
Member of Parliament for the Inkatha Freedom Party and chair of the Standing Committee on Public Accounts, Mkhuleko Hlengwa, said on Tuesday that it was not immediately clear whether a director of a company that fell foul of the law could serve on the board of a different company also servicing government.
Commentator, columnist and activist Khaya Sithole, who flagged GovChat’s connections to Net 1, said the fact that Sacks and Neishlos are no longer at Net 1, or that the latter left Capital Appreciation last year, does not erase the links.
“For me, that semantic that Neishlos has left the board, I don’t buy it. The key issue here is that for a company that has [people linked to] CPS and Net1, for them to enter into another transaction, with the same type of entity, it’s just ridiculously clumsy,” said Sithole.
We are not benefiting
However, GovChat CEO, Eldris Jordaan, said the company took up the Covid-19 grants processing deal pro bono and without Sacks or Neishlos’ involvement.
“GovChat, since 2016 until today, has not charged the South African government a single cent, and this too comes at no cost to the South African government. Data ownership also rests with the South African government,” he said.
He said GovChat is kept afloat by Capital Appreciation’s enterprise development fund and another venture capital fund that is wants to “hold government accountable”. The platform is dependent on grant funding, he said.
Jordaan said GovChat, which is one of several providers appointed to facilitate the unemployment grant applications, will only help connect applicants with the department. It will not be involved in processing the grant payments, and neither will any of Capital Appreciation’s payment service businesses, like African Resonance that Neishlos founded.
During a briefing to Parliament’s Portfolio Committee on Social Development on Wednesday afternoon, acting director general Nelisiwe Vilakazi said seven of the 13 findings in SASSA’s audit report for the 2017-18 financial year were left unresolved, related to fruitless and wasteful expenditure, as well as irregular expenditure.
Executive director of business development and strategy at SASSA, Raphaahle Ramokgopa, said 282 cases have been finalised out of a total of 761 cases at the end of March 2019, leaving 479 cases which are still to be resolved.
He said the North Gauteng High Court and the Supreme Court of Appeal ruled that Cashpaymaster Services must pay SASSA R316 million plus interest.
“Another matter relates to the R74 million that CPS’s attorneys inadvertently omitted from their settlement proposal. CPS is defending the claim. A date for the hearing of the matter is still awaited.
“Net 1 has, during April 2020, filed an application to have CPS put under business rescue on the basis that its liabilities exceeds its assets. Awaiting court date,” said Ramokgopa.