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Life after CPS and Net1: Sassa charts new course for social grant payments

Life after CPS and Net1: Sassa charts new course for social grant payments
Marianne Thamm
By Marianne Thamm
4 Jun 2018
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Sassa acting CEO Abraham Mahlangu said on Friday that Sassa and SAPO would, in extreme circumstances, enlist the support of the SA National Defence Force to pay social grants in areas not yet fully covered by the new payment infrastructure. Meanwhile, Grindrod Bank has refused to reduce its current R10 banking fee, carried by impoverished beneficiaries, as the bulk of it, R9.50, is paid over by Grindrod to Net1 “for the services rendered in support of the programme”. Oh, and Bathabile Dlamini says everyone is out to destroy her.

While the “new dawn” regime under Minister of Social Development Susan Shabangu is making promising headway with regard to phasing out CPS/Net1 for the payment of cash social grants, former minister Bathabile Dlamini has defended ally, former Sassa acting CEO Pearl Bhengu’s last-minute irregular sign-off of tenders worth R16-million for three events in KwaZulu-Natal shortly before the ANC’s elective conference in December 2017.

Speaking to the SABC on Friday in her capacity as Minister of Women, Dlamini became characteristically defensive when asked to respond to allegations of irregularity with regard to Bhengu’s sign-off, quipping:

“I regret that everyone has made an effort to discredit Pearl. Pearl is a banker, she has worked for a bank for a number of years, she is experienced on these matters.”



Dlamini said a variety of other events had been planned for December including a celebration of Oliver Tambo and that the splurge should be looked at “in a context” although she did not elaborate as to what connection Sassa would have had to these last-minute celebrations.

Dlamini charged that there were those who “want to destroy me” after she was pressed to respond to Bhengu’s role in the splurge.

In mid-May, at a Scopa meeting to discuss Sassa’s over R1-billion irregular expenditure, it was revealed that Bhengu had pushed through contracts worth R20-million – R4-million each for five events. In the end only three of these took place at the cost of R12-million. The breakdown of the costs for only one of the events showed staggering numbers.

For a Sassa event scheduled to take place at Makhosini in KwaZulu-Natal, the supplier quoted R485,000 for the marquee, R482,000 for flooring, R490,000 for toilets, R487,000 for extras including chairs and décor, R493,000 for catering for VIPS and the public, R493,000 for transport, R492,000 for a sound system and R480,000 for gifts and promotions. The amounts, cunningly, are just below the R500,000 threshold that would require the procurement to go out on tender.


Meanwhile Mahlangu, in a report to the Constitutional Court on Friday, set out the agency’s progress to “ensure continuity” of payment of social grants for the remaining five months of the extended CPS contract.


He also set out a five-month plan to migrate the bulk of beneficiaries currently collecting social assistance from cash pay points to alternative methods of payment as well as measures taken to support beneficiaries who live more than 20 kilometres away from any payment infrastructure and who may require cash payments beyond September 2018.


Mahlangu disclosed that in April 2018, Sassa had paid over 17.5-million social grants to 10,842,658 beneficiaries across all its payment channels.


“The payments were made utilising various channels including cash payments at pay-points through CPS, payments at participating vendors (merchants with biometrically enabled Point of Sale POS devices), payment vendors utilising PIN, and payments at banks.”


In May 2018, there were 3,110,184 beneficiaries who received social grants using Biometric CVM. These included beneficiaries who received payments at cash pay-points, as well as at merchants and ATMs using Biometric CVM.


Mahlangu reported that the number of recipients using biometric CVM decreased by approximately 50,000 from the April 2018 figure of 3,160,832 and that there was a further “marked decrease” of 1,114,198 (from 3,110,184 to 1,995,986) and that will be implemented during the June 2018 payment cycle.

“The decrease shows Sassa’s commitment to phase out the services of CPS over the next three months.”

In the agency’s April report to the ConCourt, Sassa reported that it had received approval from the South African Reserve Bank for bilateral clearing with Grindrod Bank for a period of three months commencing on 1 April 2018.

“The payment file and funds were transferred to Grindrod Bank for payments to 5,342,376 beneficiaries. In the May Payment File the number was reduced by 1,001,615, leaving Grindrod Bank to facilitate payment to 4,221,990 beneficiaries.”

The 1,001,615 beneficiaries had been paid through direct transfer via Sassa’s Pay Master General account.

In line with the three months' authorisation by SARB, Sassa had taken steps to take over the direct transfers of these accounts in June 2018.

“To this extent, Sassa has captured the account numbers for all the remaining beneficiaries into the Sassa direct transfers payment file.”

Sassa will continue to use the old Sassa card issued by Grindrod Bank to facilitate direct transfers to these beneficiaries until card swap process had been completed, said Mahlangu.

He said that Sassa’s engagement with Grindrod Bank to revert to the original monthly fee of R6.91 from the current R10 per cardholder or beneficiaries’ account, a cost currently carried by social grant beneficiaries, was unsuccessful.

In April 2018, Sassa reported to the court that the agency had written to Grindrod to demand that it revert to the fee structure that it provided to Sassa on 15 March 2018 (the initial monthly fixed fee structure).

“Grindrod Bank has not given effect to Sassa’s demand to revert to the initial monthly fixed fee of R6.91 and reimburse all beneficiaries the difference between the revised monthly fee of R10 and the initial fee of R6.91.”

Sassa had been informed, said Mahlangu, that “Grindrod Bank is a price taker as it relies wholly on Net 1 to provide services”.

Grindrod Bank continues to earn R0.50 per account per month to provide the banking services to the programme. The balance of the charged monthly fee is paid to Net 1 for the services rendered in support of the programme, Mahlangu said.

He added that Sassa had handed over the matter to its legal representatives for further action.

During the April payment cycle, Sassa had successfully paid a total of 3,898,733 beneficiaries directly into their commercial bank accounts, using the Sassa PMG account. The number of beneficiaries receiving payments at commercial banks had increased by 1,550,626 in May 2018.

Sassa had also taken a decision to suspend the cash payment tender following the review of facts and issues raised by a prospective bidder.

Because of the “possible litigation that could follow and further delay Sassa to achieve the end of September Court deadline to terminate CPS contract for cash payment services”, Sassa had decided to cancel the tender.

Meanwhile, a decision had been taken to request SAPO to extend the original agreement to include more than 2,500,000 beneficiaries who were previously earmarked for payments by the cash payment service provider.

“The current Service Agreement will be substantially amended to incorporate the additional services that SAPO will be rendering, subsequent to cancellation of the cash payment tender. A draft addendum to the Service Agreement has been drafted and has been circulated to both Sassa and SAPO Business Units for inputs. The costing structure is also being reviewed in consultation with DSD, SAPO and National Treasury.”

Sassa had, in collaboration with SAPO, taken a decision to reduce the number of beneficiaries paid at the cash pay points as South Africa had a fairly extensive and developed National Payment System Infrastructure across the country, particularly in urban areas.

“Furthermore, cash transportation and management has become increasingly risky and expensive.”

The end goal for Sassa, said Mahlangu, was to completely do away with the cash payment component of social assistance services.

Critical to this migration plan was the expedited card production and card swap programme from the old Sassa/Grindrod payment card to the new Sassa/SAPO payment card and which had started in May 2018 across all the provinces.

“The card swap process is undertaken mainly at identified cash pay points, and will be extended to SAPO branches and Sassa offices. Approximately two million Sassa/SAPO payment cards were produced and 63,000 were swapped as at 29 May 2018. The card production will be doubled in June and July to four million per month,” said Mahlangu.

Preliminary analysis by Sassa had indicated that there are 789,954 beneficiaries served at approximately 3,121 pay points and who resided over 20km outside the National Payment System Infrastructure as well as SAPO Infrastructure coverage.

“The alternative strategy still positions SAPO as a dominant player while commercial banks, merchants and retailers are secondary players in the value chain. These beneficiaries will be issued with the new Sassa/SAPO card during the card swap scheduled for completion on 30 July 2018.”

Although social assistance would be deposited into the accounts of these beneficiaries, “the challenge of the lack of payment infrastructure to allow these categories of beneficiaries to withdraw or access their monies remains”.

“The primary intervention in this regard is that SAPO will procure mobile cash dispensing machines to service outlying locations by July 2018. To this extent, SAPO has commenced with the procurement process for the portable cash dispensing machines and it is envisaged that they will be available before the end of September 2018. In addition, SAPO is in the process of extending the scope of its current Cash in Transit contract to accommodate the additional numbers and sites.”

For pay points with smaller numbers, Sassa and SAPO, as a temporary measure, would contract local transport to ferry beneficiaries to their nearest SAPO outlet, merchant or any available NPS Infrastructure on specific days of the month while SAPO was working on developing its payment infrastructure.

Consultation with local transport industries had commenced, said Mahlangu.

“Under extreme circumstances, Sassa and SAPO will enlist the support of the SANDF to go and pay grants in those areas that are still not fully covered by the various payment channels infrastructure.”

Sassa was also considering staggering payments to ensure that beneficiaries did not all receive their grants on the same day. This staggering, said Mahlangu, would be supported by “robust communication with affected beneficiaries”.

Minister Shabangu, in her second report to the court, said she had filed an affidavit with the court in April notifying it that she had decided to suspend a tender for cash payment services to Sassa beneficiaries.

“I had decided to suspend the tender in order to address concerns that had been raised with the procurement process.”

During the suspension of the tender, Shabangu said, she had considered reducing the number of cash beneficiaries by transferring existing cash beneficiaries to the South African Post Office and issuing them with SAPO cards by 31 August 2018. A second consideration for amending the tender was, she said, in order to address issues raised by G4S (one of the bidders).

Shabangu said that on 3 May she had accompanied Mahlangu and SAPO executives to the launch of the SAPO/Sassa Payment Cards in Worcester in the Western Cape.

“The banking and retail industry participating in the national payment system have tested and approved 250,000 SAPO/Sassa Cards and these cards have passed all 295 VISA tests for certification.”

SAPO had confirmed, said Shabangu, that the SAPO/Sassa cards are capable of verifying the identity of the cardholder through biometric information, in addition to using the beneficiaries' Personal Identification Number (PIN).

“The SAPO/Sassa Cards are therefore equipped to enable beneficiaries to transact within the National Payment System.

Sassa and SAPO were also finalising a card swapping strategy to manage the migration of beneficiaries from the Sassa payment card issued by Grindrod bank to the SAPO/Sassa Card.

“Through the Migration Strategy, our primary intention is to swap all the current Grindrod Cards to the SAPO/Sassa Cards. The success of the Migration Strategy is critical in ensuring uninterrupted payments of social grants to beneficiaries.”

The migration strategy included the transfer of over six million beneficiaries for electronic payments; one million beneficiaries to be paid by SAPO merchants of agents, and 890,000 beneficiaries to be paid at over-the-counter services at SAPO branches.

A nationwide communication strategy would be introduced from 1 June to inform beneficiaries and Sassa and SAPO were also engaging with traditional leadership to ensure that beneficiaries in “their jurisdictions” were encouraged to transfer to the proposed methods of payment.

Shabangu, in scrapping the tender, set up a technical committee consisting o:

  • Dipuo Peters, Former Minister of Transport and former Premier of the Northern Cape Provincial Government;

  • Vusi Madonsela, current Director-General of the Department of Justice and Constitutional Development and former Director-General of the Department of Social Development;

  • Totsie Memela: former Managing Director of the Post Bank and Chief Executive Officer of the Women’s Development Bank Trust;

  • Selwyn Jehoma, former Deputy Director-General of the Department of Social Development;

  • Sipho Shezi, former Special Adviser to the former Minister of Social Development and who was fired by Dlamini in 2017;

  • Monoko Nchwe, a labour relations expert and former Lieutenant-General for the South African Police Service responsible for Human Resources, and

  • Zodwa Manase, a Chartered Accountant and former Chairperson of Audit Committees of various state-owned and private entities.


The Technical Committee, said Shabangu, met for the first time on 18 May and she had directed it, in collaboration with SAPO and Sassa, “to inquire and report back to me on short, medium and long-term solutions to ensure the payment of social grants to beneficiaries.

“Mindful of the Court’s 31 August 2018 deadline, the technical committee is currently focused on implementing the Migration Strategy, with the view to issue SAPO/Sassa cards to all cash payment beneficiaries by 31 August 2018.”

In her conclusion Shabangu said it was a priority for her to “oversee the acceleration of the Migration Strategy in the course of June 2018 and to ensure that all current cash recipients of social grants received new SAPO/Sassa Cards by 31 August 2018.

“I remain confident that Sassa and SAPO will meet the timelines prescribed by the court and be able to achieve their objectives in ensuring the payment of social grants to all categories of beneficiaries,” said Shabangu.

It's amazing how traffic seems to flow smoothly when various obstacles are removed from the process. Shabangu and Mahlangu have worked at a pace previously unknown with regard to the Ministry or Sassa. DM

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