Multi-billion-rand legal showdown in South Africa

The South African Social Security Agency (SASSA) and Postbank head to court on Thursday in a dispute over the termination of the Master Service Agreement (MSA) which governs how millions of social grants are paid each month.

The case, to be heard in the High Court in Pretoria today, will determine whether SASSA acted lawfully in cancelling its contract, and what the consequences may be for grant beneficiaries.

The respondents in the case include the ministers of Communication and Digital Technologies, Social Development, Planning, Monitoring and Evaluation.

The Master Service Agreement was signed in 2018 after the Constitutional Court declared the contract between SASSA and Cash Paymaster Services unlawful.

To ensure continuity, SASSA entered into an agreement with the South African Post Office (SAPO) for the administration and distribution of social grants.

In 2022, Postbank took over the contract after SAPO’s collapse. The contract originally included over-the-counter and cash paypoint services which allowed beneficiaries to collect their grants in cash at a number of sites.

However, problems with Postbank contributed to many beneficiaries opting to get their grants paid into private banks.

SASSA currently pays roughly 19-million grants (excluding the Social Relief of Distress grant) costing about R22.4-billion every month. About three million beneficiaries are serviced by Postbank.

SASSA first issued a six-month notice of termination of the MSA in December 2023, citing a breakdown in the relationship with Postbank.

The agency said Postbank had failed to comply with its obligations and SASSA faced reputational risks due to Postbank’s shortcomings.

Postbank denied that it had failed to perform its contractual obligations. It disputed the validity of SASSA’s notice and argued that the termination was unlawful.

SASSA then withdrew its first termination notice. In March 2024, it served Postbank with a second notice: this time, an 18-month notice of termination. That notice set 30 September 2025 as the end date of the agreement.

Postbank’s arguments

Postbank has now approached the court on an urgent basis to interdict SASSA from terminating its services.

It argues that the cancellation of the MSA is invalid because the dispute resolution process prescribed in the contract was never followed.

In its papers, Postbank argues that it is not only protecting its own interests but also those of millions of beneficiaries.

The bank warns that without subsidies provided under the MSA, social grant recipients will have to pay commercial banking fees for services that were previously free.

These include free mini-statements, balance enquiries, card replacements and monthly account statements. Postbank argues that these services are vital for poor households.

If the MSA is terminated, Postbank says, beneficiaries will face a R7 monthly service charge, and fees of R14.56 for ATM withdrawals and R80 for card replacement. “The interests of justice cry for urgent court intervention,” Postbank says.

The bank says SASSA has acted in bad faith by refusing to engage in the dispute resolution process. “Any disruption could have severe consequences for vulnerable citizens who depend on their grants for survival”, says Postbank.

SASSA’s response

SASSA rejects Postbank’s claims that beneficiaries currently enjoy free banking services under the MSA. “No such subsidies exist, which makes this contention a futile attempt to mislead this court,” SASSA says in its court papers.

SASSA says Postbank has abused urgent court procedures to delay the inevitable termination of the agreement.

The agency says Postbank has repeatedly failed to meet its obligations, and late submission of invoices has complicated the flow of cash between SASSA and National Treasury.

Beneficiaries will not be done “irreparable harm” if the contract is ended; they will continue to receive their grants, SASSA says.

SASSA will ask the court to strike the matter from the urgent roll with costs.

• By Marecia Damons. Published originally on GroundUp.