Legal View

Social grants payments model gets go-ahead

SAPO readies to distribute social security payments.
Read time 5min 30sec
SAPO readies to distribute social security payments.

The South African Social Security Agency (SASSA) and the SA Post Office (SAPO) have reached an agreement regarding the future of social grants payments, following a tumultuous negotiation period.

The deal, described as the "culmination of a very rigorous, in-depth and mindful process", signals SAPO taking over the social grants payments function from Cash Paymaster Services (CPS).

Speaking at a media briefing in Pretoria yesterday, Jeff Radebe, minister in the presidency and chairperson of the Inter-Ministerial Committee (IMC), announced SA's national postal service will be the official distributor of SASSA grants, effective 1 April 2018.

"I am delighted today to announce to members of the media and the South African nation that we have reached a landmark agreement between the South African Post Office and the SASSA to bring to life a new grants payment system.

"This new system, while drawing on the resources and capabilities of the South African democratic state, will also make allowance for the participation of other partners such as enterprises and commercial banks, in the payment of social grants to beneficiaries," Radebe expressed.

CPS gets the boot

CPS, a Net1 UEPS Technologies subsidiary, distributes social grants on behalf of SASSA. The CPS contract, which was declared invalid, would have come to an end on 31 March.

The Constitutional Court (ConCourt) suspended the order of invalidity and ordered a year-long extension of the contract until the end of March 2018 to avoid a social grants catastrophe.

The ConCourt also issued a directive to SASSA and the Department of Social Development to use this time to find an alternative service provider to CPS.

As the distributor of South African social grants to more than 10 million beneficiaries, CPS has faced a slew of allegations that it authorises deductions on beneficiaries' accounts before their social grants are paid out. The payments provider has refuted these claims.

SAPO, through Postbank, has been government's preferred entity to take over the payments function from the Net1 subsidiary. The national postal service even declared itself ready and the ideal candidate to distribute SASSA grants when the CPS contract expires.

However, over the past few months, there have been fears that potentially another social grant scandal was on the cards, and doubts were cast over SAPO's capabilities to take on the social payments function. Even social development minister Bathabile Dlamini said SAPO is "incapacitated" to issue SASSA grants.

Last month, the ConCourt instructed SASSA to deliver a comprehensive plan by 8 December, detailing how it will pay more than 17 million grant recipients.

Going hybrid

Jeff Radebe, minister in the presidency and chairperson of the Inter-Ministerial Committee.
Jeff Radebe, minister in the presidency and chairperson of the Inter-Ministerial Committee.

Government's new grants payment system, a hybrid payment model, was first mooted in a National Treasury report.

Radebe yesterday revealed the IMC confirmed the adoption by government of a state-led hybrid model, which includes a partnership between SASSA and SAPO, increasing the role of the banks and merchants and reducing the role of cash payment for social grants.

He explained: "The public sector-led component of this hybrid model allows government to effectively monitor the payment of social grants and intervene timeously if necessary, with additional resources or capacity during this period. This will be done without benefiting or breaching contractual agreements between the government and private sector parties.

"The hybrid model envisages increasing the role of financial institutions through a migration plan over the five-year period and beyond. The Banking Association of South Africa, Reserve Bank and some banks have met with the IMC's technical committee's subcommittee on a financial model to discuss the establishment of a Special Disbursement Account, which will be more affordable than normal bank accounts with respect to transaction fees. An effective communication plan by government and aggressive marketing plans by the respective banks will be necessary to migrate beneficiaries to new bank accounts away from cash pay points."

"The hybrid model further identifies the role of 'second economy' merchants such as general dealers, corner shops, spaza shops, village banks and cooperatives in township and rural areas outside of the 5km radius, which are legally registered and South African owned and operated. This will provide a wider network of outlets, greater accessibility for beneficiaries within rural villages and townships, and eliminate transport costs to banks and town centres," added Radebe.

Welcomed progress

The Democratic Alliance (DA) said it welcomes the signing of the services agreement between SASSA and the national postal service to see the implementation of a new social grants payments system starting in April.

In a statement, the DA said: "It is very encouraging that the proposed hybrid model will also involve the use of payment platforms incorporating banks, commercial retailers and small businesses. We welcome the phasing out of cash payments and the building of an inclusive financial system.

"The DA now calls on SASSA and the IMC to table the agreement in Parliament in order to give members an opportunity to interrogate the feasibility of the proposed timelines and cost estimates. There can be no more delays and obstruction by SASSA and social development officials.

"Parliament has an obligation to ensure that any agreement reached between SASSA and SAPO is feasible and will not inconvenience millions of South Africans who depend on social grants."

Although the Organisation Undoing Tax Abuse (OUTA) also welcomed the signing of the agreement between SASSA and SAPO, it said it remains cautious about the recent developments.

"We are eagerly waiting to see the details, to ensure that all bases are covered and that the plan is feasible at a reasonable cost. Our main concern is that the recipients must receive their grants without fail," said Dominique Msibi, OUTA portfolio manager for special projects.

"Parliament and the IMC should review the agreement without delay to ensure its feasibility, especially the timelines and the confirmation that it will indeed be implemented come 1 April 2018," said Msibi.

"At this point, we cautiously applaud the signing of the agreement, but we need to see proof and success."

Simnikiwe Mzekandaba
IT in government editor

Simnikiwe Mzekandaba is the IT in government editor at ITWeb. She reports on tech initiatives, policies and digital transformation strategies in government, banking and education. She holds an Honours degree in Journalism from Rhodes University. Behind that smile, she is plotting how best to get government officials to respond to her emails before deadline :)

Have your say
a few seconds ago
Be the first to comment