Social Development Minister Bathabile Dlamini has rejected Finance Minister Pravin Gordhan's proposal for banks and the post office to distribute social grants to 17-million beneficiaries.

She said Treasury's proposal to distribute R10-billion in monthly grants was impractical and "not thought through carefully".

Dlamini said beneficiaries would be at risk of not receiving their grants when the Cash Paymaster Services (CPS) contract ends on March 31, under Gordhan's plan.

"Any attempt to implement it may result in the state's failure to pay social grants on 1 April 2017, which will be disastrous. It is a risk that my ministry is not prepared to assume," Dlamini said.

Dlamini was responding to a letter written by Gordhan in which he proposes that CPS should not be part of the service providers to be considered for the distribution of grants, and that the tender be given to banks and the post office instead.

On Wednesday, The Star reported that Gordhan wrote to Dlamini on February 1 and said continuing with CPS would expose government to legal challenges.

Dlamini responded in writing on February 8, saying her department was in charge of the payments of grants and that interactions with Treasury as part of a joint technical team were not to map out the future of social grants, but to merely analyse available options.

The Department of Social Development's grants agency, Sassa, Treasury and the Reserve Bank have been meeting to find a solution as the April 1 Constitutional Court deadline looms for Sassa to take over the payment system.

Dlamini said banks do not have the biometric system which has eliminated fraud from the grants system. She said they are only driven by profits, which are gained through opening new bank accounts and transaction fees.

Beneficiaries should not lose part of their grants to exorbitant banking fees, she said.

"In fact, it would be regressive and an impediment if banks were to be used for controlling and managing the distribution of grants as it would immediately confine the entire functionality towards the banking sector, which at the moment is not cognisant of other functionalities such as biometric verification," Dlamini said.

Dlamini wants the biometric system to be an essential part of the distribution system, arguing that it has saved the state R2-billion, with more work underway to remove duplicate entries which could amount to a further R2-billion saving.

Sassa’s biometric system includes fingerprinting for proof of life and to ensure that grants are paid to the right people.

She also argues that using a traditional bank card and pin code puts beneficiaries at risk of abuse by micro-lenders who would keep the cards and deduct money owed on payday.

She said not only does the Post Office not have a banking licence, or the necessary technology and expertise, but it also does not have enough offices, especially in rural areas, to distribute the money.

Dlamini is insisting that continuing with the CPS contract until Sassa is able to take over the payment function itself is the only viable solution.

"The first option [keeping CPS] will ensure that there are no disruptions to the payment of the social grants beyond 31 March 2017, until CPS is phased out and a new service provider is appointed to take over the payment of social grants, up to the point where Sassa is able to take over the payment function itself," Dlamini told Gordhan.

On December 9, Sassa advertised a request for information for payment and banking services and 74 companies attended the briefing session on January 13.

The closing date for bids was February 10, and so far 18 bids have been received from bidders including three banks and CPS.

Dlamini is expected to report back to the Constitutional Court on Thursday and plead for an extension of the CPS contract.

In 2014, the highest court of the land declared the contract with CPS invalid but suspended the invalidity order. Sassa had until March 31 to find a new distributor or take over the grant system.