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FILE PHOTO:Shacks are seen at an informal settlement near Cape Town, South Africa, September 14, 2016. .Nicky Milne/Thomson Reuters Foundation via REUTERS/File Photo


JOHANNESBURG (Reuters) - The government will continue paying millions of South Africa's most vulnerable people social security payments on April 1, despite not signing a new deal with an existing service-provider, the minister of social development said on Sunday.

The South African Social Security Agency (SASSA) is scrambling to ensure that as many as 17 million people continue to receive their money, despite concerns that retaining the existing service provider is both unlawful and costly.

For millions of South Africa's most vulnerable, SASSA money is often the difference between an empty or a full belly.

"We will continue paying social grants beyond March 31 when the contract with the current service provider comes to an end," Minister of Social Development Bathabile Dlamini told the media.

"As has been the case in the past no one will go unpaid."

Dlamini said the South African Post Office's more than 2,600 outlets will be used as one of the payment services for social security in the transition and future phases.

In an attempt to resolve the looming crisis, President Jacob Zuma held talks on Saturday with Minister of Finance Pravin Gordhan and Dlamini to ensure that social security payments are made from April 1.

The existing contract, run by Cash Paymaster Services, part of technology company Net1 1 UEPS Technologies, has been in doubt since South Africa's highest court ruled in 2014 that the tender process to acquire its services was unlawful. It ordered that a new contract to be negotiated.

SASSA has so far failed to find a new service provider to take up the service at the start of April or set up its own payment agency.

SASSA Officials said last week the agency had opted to renew the deal with Cash Paymaster Services despite the court order. A new deal however, has not yet been signed.

The social security payment debacle saw the director-general of the social development ministry, Zane Dangor, announcing his resignation on Saturday over differences with Dlamini.

"Dlamini has utterly failed to ensure that SASSA was ready to take over the distribution of grants at the end of this month ... and has allowed the situation to reach crisis point," said Bridget Masango of the opposition Democratic Alliance.

(This refiled version of the story adds dropped word in headline)

(Reporting by Nqobile Dludla, editing by Louise Heavens)

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