* 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 (Recasts with court ruling, quotes, details)
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.
It is latest example of allies of President Jacob Zuma being called to account for incompetence and underperformance since he took office in 2009.
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 said on Thursday it was concerned by comments by government officials that it had taken an arrogant stance over the crisis, saying it was trying to resolve the crisis.
"In the deepest and most shaming of ironies, government relies on a private company ... to get it out of this predicament," Justice Johan Froneman said on behalf of the court.
"The sole reason for this litigation is ... the minister's failure to keep its promise to the people of South Africa," he said. "There must be public accounting for how this was allowed to happen."
Dlamini has until March 31 to show why she should not pay the costs of the case from her own pocket, he said.
The minister was not immediately available to comment.
The minister and the welfare agency in her department, the South African Social Security Agency (SASSA), had previously said privately the that SASSA has opted to negotiate a new deal with CPS but there has been no public confirmation.
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 said in parliament on Thursday there was no "crisis", and said he would not fire Dlamini, who is also the head of the Women's League in the ruling African National Congress party.
During the court hearing earlier this week the country's chief justice placed the blame for the debacle squarely on Dlamini. The case was brought by applicants urging the court to take oversight of a new contract.
The creation of a welfare safety net which supports one in three South Africans has been one of the key achievements of the ANC, in power since the end of white apartheid rule in 1994.
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 ANC's tone over the saga was a striking contrast to Zuma, who had defended the welfare minister. In a statement, the party called for an investigation and action "against those responsible for this embarrassing and undesirable situation".
In another example of how public bodies are scrutinising Zuma's government, the High Court ruled that the appointment of Berning Ntlemeza as head of an elite police investigation unit is unlawful and must be revoked.
Since late last year, parliament has shone a spotlight on Communications Minister Faith Muthambi over the running of the state broadcaster SABC, which has been mired in editorial and executive controversy.
The welfare scandal threatened to instigate a shareholder revolt with investment firm Allan Gray saying its 16 percent stake in Net1 allowed it to 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; Writing by James Macharia; Editing by Alison Williams)