Social grants cost post office R60m per month

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 16 Feb 2020

The SA Post Office (SAPO) is losing at least R60 million a month from distributing social grants to millions of citizens, who rely on government’s welfare for survival.

This is according to a report in the City Press, which says the situation is so dire that the post office is considering shutting down many cash pay points around the country.

It says the high cost drivers for this loss are cash in transit and security fees which the post office has paid to ensure that hard cash is delivered effectively to its cash pay points.

Post office has estimated that for every R100 the entity gained from the deal to distribute grants on behalf of SA Social Security Agency (SASSA), it was spending R500, the report says.

City Press has obtained the post office income statement for 2019, ending in December.

The income statement shows that security costs have more than doubled since the post office took over social grants payments from Cash Paymaster Services (CPS) in 2018, says the paper.

ITWeb reported in August 2018 that at the height of the social grants crisis, SAPO was gazetted as the preferred payment channel for all SASSA grants in a government-led initiative.

This meant CPS, the entity that distributed payments on behalf of SASSA, ceased to be the social grants paymaster. SASSA had relied on the services of the Net1 UEPS Technologies subsidiary to pay 10.8 million beneficiaries through cash payments, direct deposits and electronic payments.

As SASSA and SAPO prepared to commence the payment of social grants to 7.7 million of the 10.8 million beneficiaries, both entities had no solution for the rest of the beneficiaries that received payments via cash pay points.

City Press notes that while the cash-strapped post office is struggling to find new revenue streams to stay afloat, its nine-member board, which began its work on 1 November last year – after being appointed by the Cabinet in October – repaid more than R1 million in fees in December.

According to the publication, the post office board said the payments were justified because the board members had been involved in a number of necessary committee meetings and oversight visits.

The income statement reveals that “security costs increased by R355 million to R600 million, from R265 million, due to the increased costs for SASSA payments”.

It says an international memorandum, dated December 30, 2019, was submitted to the board, briefing members on the post office’s status, says City Press.

In it, it adds, group chief information officer, Refilwe Kekana, warned: “The post office finds itself in a financial and operational situation that requires an urgent and focused turnaround strategy that must be implemented by 1 April 2020. To date, the previous board and management have not focused on revenue-generating initiatives that would take the post office into its new vision and beyond the separation with Post Bank.”

According to City Press, Kekana added: “The SASSA project won by the post office has proved to be loss-making initiative that the post office continues to subsidise at its own risk of financial viability, going concern and reckless trading.

“The (communications) ministry has engaged and iterated that there are no further budget allocations to enable the post office to carry its capital and operational expenditures.”

A source privy to the situation at the post office told City Press that the financial situation had not changed since the presentation was made in December last year, saying: “The board is expected to meet with all stakeholders…to request the National Treasury to transfer money in advance to the post office – money which it will use to pay grant beneficiaries.”

According to Kekana’s memorandum, the new board established a committee, which was looking into forming several public-private partnerships aimed at assisting the post office in bringing in much-needed revenue, says the publication.

It says some of the partnerships that the board was considering included the post office to start selling life insurance products to its clients and social grant recipients; having the entity partner with information and communications technology company Yekani (now facing liquidation) to sell set-top boxes; and seeing it enter into an agreement with national operator Ithuba to distribute cash using its network.

Also among the options cited were revenue-share partnerships, in which the post office was to provide zero investments, City Press says.