* One in three South Africans receive welfare benefits
* Court issues scathing ruling against welfare minister
* ANC calls for heads to roll over scandal
* Allan Gray signals Net1 shareholder revolt over debacle (Adds Desmond Tutu comment)
By Tanisha Heiberg
JOHANNESBURG, March 17 (Reuters) - South Africa’s Constitutional Court ordered the government on Friday to pay social grants on April 1 via its current service provider, seeking to end a fiasco that had threatened the payment of benefits to 17 million people.
The court also sharply censured Social Development Minister Bathabile Dlamini, calling her inaction to resolve the crisis incomprehensible.
The saga is the latest example of allies of President Jacob Zuma being called to account for incompetence or poor performance since he took office in 2009. It has prompted scathing criticism of the government, including from Nobel Peace Prize winner Desmond Tutu.
“The fact that it has come to this underlines the moral bankruptcy of the Zuma regime,” Tutu said in an opinion piece published on Business Live.
Pauline Masiq, a 74-year old mother of six who walks with a crutch and lives in Johannesburg welcomed the court ruling. She receives 1,600 rand ($125) a month in social grants.
“I‘m very much pleased,” she said. “It means a lot to me because I have to pay for burials, pay food, pay rent and buy water and electricity... it helps me a lot.”
The chaos over the grants stems from the social welfare department failing to take responsibility for social service payments or find a new provider after the Constitutional Court ruled in 2014 that the tender won by Cash Paymaster Services (CPS), a unit of technology company Net1, was illegal.
Net1 and CPS on Thursday expressed concern at government comments that they had acted arrogantly.
“The sole reason for this litigation is ... the minister’s failure to keep its promise to the people of South Africa,” Justice Johan Froneman said on behalf of the court.
The court gave Dlamini until March 31 to show why she should not pay the costs of the case from her own pocket.
The minister, who this week denied the welfare system was in crisis, said she was sorry for the fiasco.
“I apologise to the grant beneficiaries,” Dlamini was quoted as saying by ANN7 News channel.
She told the South African government’s news agency: “This judgment will ensure that there’s no interruption in the provision of social grants.”
The court said it would take oversight over the welfare payments and ordered the grant-paying company to continue distributing the grants under the terms of its current contract for 12 months before a new arrangement could be adopted.
Zuma has said he does not intend to sack Dlamini, who heads the Women’s League in the ruling African National Congress party.
But his stance jarred with the tone of the ANC, which in a statement called for an investigation and action “against those responsible for this embarrassing and undesirable situation”.
Tutu called Zuma’s defence of Dlamini “incomprehensible”.
He said Dlamini had “shown by her inaction that she has no regard for the poor,” Tutu said.
The grants are a lifeline for the country’s most vulnerable and includes more than 11 million child support grants, many of whom would go hungry without the monthly payment.
The welfare scandal threatened to instigate a shareholder revolt with investment firm Allan Gray saying could call a meeting for the removal of the board over the service provider’s handling of the crisis. ($1 = 12.7622 rand) (Additional reporting by Ed Stoddard and TJ Strydom; Writing by James Macharia; Editing by Alison Williams and Richard Lough)