Social grant distribution must be a social service not a source of profits

1 November 2017

The South African Federation of Trade Unions demands that the SA Post Office, and its autonomous division Postbank, must without further delay, be given the responsibility for the payment of social grants from 1 April 2018. 

This vital social service to 16 million of the poorest South Africans must never again be exploited by private companies to market their profit-making schemes, as previously happened with Cash Paymaster Services (CPS) and its parent company Net1.

CPS’s contract to distribute grants comes to an end on 31 March 2018. This followed a Constitutional Court ruling in 2014 that the R10 billion contract awarded to CPS was constitutionally invalid, and that the South African Social Security Agency (SASSA) must rerun the tender.

The Court suspended its declaration of invalidity until after the new tender process was in place, but the Department of Social Development (DSD) delayed the process, causing the Concourt to grant a further 12-month extension of CPS’s contract to pay grants until 1 April 2018. 

SAPO was identified as a body which could perform the role and SASSA’s former CEO, Thokozani Magwaza, in July 2017, sent SAPO’s CEO Mark Barnes a formal letter agreeing to appoint the Post Office as a “service aggregator to pay social grants on a Build Operate and Transfer model over a period not exceeding five years”. This was regarded by SAPO as “a legally binding letter”.

Magwaza then resigned from SASSA, and Social Development Minister, Bathabile Dlamini is now claiming SAPO’s capability to carry out the disbursement of social grants was too limited and that it would therefore be opening a tender process on 3 November for three services SAPO was unable to offer. 

SASSA’s new acting chief executive Pearl Bhengu told a joint parliamentary committees that SAPO would not provide banking services, card production and cash payments at pay points. It was also disqualified because it does not have the capacity to issue bank cards and has no banking licence.

Barnes assured the parliamentary committee that SAPO and Postbank were more than well placed to fulfil ’97%’ of Sassa’s requirements at an affordable price. This, said Barnes, also meant that government did not have to rely on the private sector to fulfil its mandate, and Postbank would also pay interest to grant recipients instead of returning this to SASSA as has been done in the past.

Postbank, he said, performed inter-bank transaction clearing, providing all grant recipients full inter-operable access to all ATMs, retailers and point-of-sale purchases. It already had the necessary regulatory approvals and capabilities to effect grant disbursements, unlike CPS which did not have a banking licence.

SAFTU is concerned that Bathabile Dlamini, is again delaying the process of complying with the Concourt ruling, just four months before the CPS contract expires again, by inventing spurious reasons for not granting the contract to SAPO and Postbank. 

The procurement process, she announced, “will be concluded in the last week of February 2018 and an award will be announced.”  This would leave just two months for the successful bidder to organize this massive operation, surely an impossible task, which could then be a pretext for a further extension of the CPS contract.

The federation demands that Parliament insists that any genuine obstacles between SASA and SAPO be resolved immediately and that the distribution of grants be given to this public, rather than to a private organization.

Mark Barnes assured MPs that “When you outsource such a capability you create a dependency on the private sector. We would argue for creating an asset in the state. The entire value chain between organs of state can be properly monitored and managed jointly with SAPO and SASSA during the build, operate and transfer period while it will be easy to transfer skills and functionality back to Sassa”.

While welcoming this assurance however, SAFTU insists that given the shocking level of corruption in other state-owned enterprises, there must be watertight procedures in place to ensure that there is maximum accountability over SAPO and Postbank and that there is no way in which the distribution of grants can ever again be used as an opportunity for anyone to exploit the system for private profit.

Issued by Patrick Craven, SAFTU Acting Spokesperson, 1 November 2017