{"id":167053,"date":"2020-09-29T17:47:06","date_gmt":"2020-09-29T15:47:06","guid":{"rendered":"https:\/\/www.groundup.org.za\/article\/cash-paymaster-services-go-liquidation\/"},"modified":"2020-09-29T17:47:06","modified_gmt":"2020-09-29T15:47:06","slug":"cash-paymaster-services-to-go-into-liquidation","status":"publish","type":"post","link":"https:\/\/www.myza.co.za\/press\/cash-paymaster-services-to-go-into-liquidation\/","title":{"rendered":"Cash Paymaster Services to go into liquidation"},"content":{"rendered":"<div id=\"article_body\">\n<p><a class=\"bigger-image\" href=\"https:\/\/www.groundup.org.za\/media\/uploads\/images\/photographers\/Barbara%20Maregele\/sassa%20car.jpg\" target=\"_blank\" rel=\"noopener noreferrer\"><img decoding=\"async\" alt data-pagespeed-url-hash=\"1922748842\" src=\"http:\/\/www.myza.co.za\/press\/wp-content\/uploads\/2020\/09\/cash-paymaster-services-to-go-into-liquidation.jpg\"><\/a><\/p>\n<p class=\"caption\">SASSA says Cash Paymaster Services should go into liquidation rather than business rescue. Archive photo: Barbara Maregele<\/p>\n<ul>\n<li>Cash Paymaster Services, which used to pay out social grants on behalf of the South African Social Security Agency, is to go into liquidation.<\/li>\n<li>The company wanted to be placed under business rescue, but SASSA says CPS has no hope of a viable business plan.<\/li>\n<li>SASSA says the profits made by CPS from the social grants contract are a liability on the company\u2019s balance sheet, because the Consitutional Court has ordered that these must be repaid.<\/li>\n<li>The exact amount of the profits is still under dispute.<\/li>\n<\/ul>\n<hr>\n<p>Cash Paymaster Services (CPS) &#8211; the company formerly hired by the SA Social Security Agency (SASSA) to pay social grants &#8211; has agreed to go into liquidation after SASSA refused to back down over debt the company owes SASSA. This debt includes profits made by CPS during the contracts, which the Constitutional Court has ruled must be paid back.<\/p>\n<p>SASSA did agree to prioritise some of CPS\u2019s debts over others and low priority debts, up to R10 million, may be negotiated at a discounted rate.<\/p>\n<p>CPS \u2014 a subsidiary of Net1 which is listed on the JSE and on the Nasdaq in the United States \u2014 was contracted to pay social grants by SASSA in 2012 and the contract was extended twice, ending in September 2018 when the Post Office took over grant payments. This left CPS \u201cfinancially distressed\u201d, said Net1 CEO Herman Kotze in a <a href=\"https:\/\/www.groundup.org.za\/article\/parent-company-moves-put-cash-paymaster-services-business-rescue\/\">business rescue application<\/a> to the South Gauteng High Court dated 26 March. CPS was subsequently placed in business rescue in May, according to Net1\u2019s most recent <a href=\"https:\/\/ir.net1.com\/static-files\/da5af05d-72e3-4ec4-a1d2-07a4c44178e4\">quarterly<\/a> report.<\/p>\n<p>Kotze said in court papers then that CPS\u2019s current assets amounted to about R15 million but the company owed SASSA \u2014 CPS\u2019s main creditor \u2014 about R316 million plus interest. He argued that a business rescue plan, as opposed to liquidation, was the best outcome for creditors because CPS had a pending claim for about R338 million (plus interest) against SASSA. This relied on \u201cdiligent and efficient\u201d litigation, said Kotze, and this could \u201csignificantly reduce, or set off entirely\u201d CPS\u2019s liability to SASSA.<\/p>\n<p>But in its court application filed in the North Gauteng High Court on 10 September, SASSA argued that there was no reasonable prospect of CPS\u2019s claim against SASSA being successful. And even if it was successful, the claim would not make a dent in CPS\u2019s actual liabilities, said SASSA.<\/p>\n<p>SASSA said there was a <a href=\"https:\/\/www.groundup.org.za\/article\/cash-paymaster-services-might-have-pay-sassa-r1-billion\/\">factual dispute<\/a> between the two parties about the extent of CPS\u2019s liabilities.<\/p>\n<p>\u201c[SASSA] contends that the liabilities of [CPS] have been understated by an amount of R252 million (at a minimum) and\/or by an amount of R850 million (at a maximum),\u201d read SASSA\u2019s court papers. This finding was made by SASSA\u2019s auditors who verified CPS\u2019s audit report to determine how much <a href=\"https:\/\/www.groundup.org.za\/article\/insolvent-cash-paymaster-services-must-still-pay-back-profits-to-sassa-court-told\/\">profit<\/a> it made from the social grants contract. The Constitutional Court has ruled that CPS may not retain profits, and <a href=\"https:\/\/www.groundup.org.za\/article\/will-net1-have-pay-back-money\/\">ordered the company<\/a> to file audited statements of expenses, income and net profit earned under the contract, and SASSA to obtain \u201can independent audited verification\u201d of the CPS statements and file this with the court.<\/p>\n<p>\u201cAccepting then, as we must, that CPS will not retain the profit earned from the unlawful contract with SASSA, it follows to say the profit earned is in fact a liability in the books of CPS,\u201d said SASSA in court papers.<\/p>\n<p>Until accurate findings are made, SASSA said, CPS could not come up with a viable business rescue plan.<\/p>\n<p>SASSA requested that the decision to enter CPS into business rescue be set aside. SASSA committed to subordinate its debts by up to R10 million if CPS is liquidated.<\/p>\n<p>In response to SASSA, CPS said in its court papers filed on 25 September that the aim of the business rescue plan was not to rescue the company, but to secure the best outcome for creditors.<\/p>\n<p>CPS said SASSA had failed to show how business rescue did not yield better results for creditors than liquidation.<\/p>\n<p>But without the support of CPS\u2019s largest creditor, SASSA, CPS said \u201cone is reluctantly forced to concede\u201d that a successful business rescue plan is not possible.<\/p>\n<p>\u201cSASSA\u2019s application to set aside the business rescue resolution should be dismissed. However, relying specifically on the undertaking and commitment of SASSA to subordinate its claims in liquidation to the extent of R10 million, CPS concedes to an order terminating the business rescue proceedings and that it be wound up \u2026,\u201d said CPS.<\/p>\n<p>The dispute over the amount of profit CPS made is currently before the Constitutional Court. Freedom Under Law has asked the court to order CPS\u2019s auditors to hand over all financial records so that SASSA\u2019s auditors can accurately determine the profits made by CPS.<\/p>\n<\/div>\n<div id=\"article-copyright\">\n<p>\u00a9 2020 GroundUp. This article is licensed under a <a href=\"http:\/\/creativecommons.org\/licenses\/by-nd\/4.0\/\" rel=\"license\">Creative Commons Attribution-NoDerivatives 4.0 International License<\/a>.<\/p>\n<p>You may republish this article, so long as you credit the authors and GroundUp, and do not change the text. Please include a link back to the original article.<\/p>\n<\/div>\n<p><img decoding=\"async\" src=\"http:\/\/www.myza.co.za\/press\/wp-content\/uploads\/2020\/09\/cash-paymaster-services-to-go-into-liquidation.jpg\"><a href=\"https:\/\/www.groundup.org.za\/\">Source: GroundUp<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SASSA says Cash Paymaster Services should go into liquidation rather than business rescue. Archive photo: Barbara Maregele Cash Paymaster Services, which used to pay out social grants on behalf of the South African Social Security Agency, is to go into liquidation. The company wanted to be placed under business rescue, but SASSA says CPS has [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":167054,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[9928],"tags":[28001],"class_list":{"0":"post-167053","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-groundup","8":"tag-groundup","9":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.myza.co.za\/press\/wp-content\/uploads\/2020\/09\/cash-paymaster-services-to-go-into-liquidation.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/167053","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=167053"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/167053\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media\/167054"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=167053"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=167053"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=167053"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}