10 December 2017

South Africa: Sassa, Sapo Announce Grants Breakthrough

The South African Social Security Agency (SASSA) and the South African Post Office (SAPO) have signed a landmark deal which government hopes will bring to life a new grants payment system.

The inter-ministerial committee on social security, headed by the Minister in the Presidency Jeff Radebe, announced on Sunday that the new deal was signed and sealed two days earlier.

The Constitutional Court had given SASSA to deliver a comprehensive plan to the court by 8 December 2017, detailing how it will pay more than 17 million grant recipients.

In March this year, the Constitutional Court extended SASSA's contract with Cash Paymaster Services (CPS) for a year in order to fulfil the constitutional obligation of paying social grants to beneficiaries.

Its contract, which was declared invalid by the Constitutional Court in 2014, would have come to an end on 31 March 2017. The court, however, suspended the contract's invalidity so grants could continue to be paid while SASSA made another plan for 1 April 2018.

Hybrid model

The agreement gives an emphasis to the "hybrid" nature of the new model, with the SAPO providing services such as electronic banking services, including the provision of a central holding account and special disbursement accounts, on-boarding of new beneficiaries and the biometric authentication of beneficiaries.

SAPO will also be responsible for the development of the required software solution to replace the incumbent systems as well as provide cash pay points at its outlets.

"SAPO will also provide cash disbursement through its branch network, particularly in locations close enough to replace existing cash pay-points. SAPO may develop a competitive alternative to the current cash in transit pay-point service, subject to the approval of SASSA," Minister Radebe said.

However, SAPO does not have exclusive rights over the new system.

Minister Radebe said the hybrid nature of the system will see an increased role for commercial banks and retailers to give beneficiaries more choice.

It identifies the role of "second economy" merchants such as general dealers, corner shops, spaza shops, village banks and cooperatives in the township and rural areas outside of the 5km radius, which is legally registered and locally owned

The new system will also lead to wider network of outlets, greater accessibility for beneficiaries within rural villages and townships and eliminate transport costs to banks and town centres.

SASSA's role in the in the deal will be the managing and oversee SAPO'S performance; monitoring the quality of the services; convening meetings with SAPO as agreed; and assisting SAPO, where reasonable and necessary.

To this end, SASSA has adopted a 5-year phased in plan as follows:

Phase 1: Payment of Social Grants as from April 2018 and CPS Exit. (Year 1);

Phase 2: Implementation of Hybrid Model that addresses the Constitutional Court directives (Year 2 & 3);

Phase 3: Development of SASSA Insourcing Infrastructure (Year 4 & 5)

So what does the new seal mean?

No interruption in the paysements of grants

The new deal will ensure that 17 million beneficiaries continue receiving grants beyond April 2018, which is the Constitutional Court's deadline for SASSA to take over social grant payments from Cash Paymaster Services.

For about over 2 million beneficiaries who receive their grants through bank accounts, SASSA has received the details of all these bank accounts and has confirmed them, and from 1 January 2018 grant will be paid directly into a bank account by SASSA.

A special, low-cost bank account is also being developed for those who want to move over to the banking sector, rather than rely on the Post Office or cash payments.

More than 5 million South Africans who receive their grants at the moment through electronic means - that is using a PIN number at an ATM, a retailer or other pay point - will be eligible for this special, low-cost account."

The current SASSA card, provided by Grindrod Bank, has been extended by one year, and will not expire in December 2017.

"Let me emphasizes this - to ensure that there are no problems as beneficiaries move from their current payment point to the new commercial bank, the current SASSA card held by Grinrod Bank will be valid until the end of December 2018, " Minister Radebe said.

Cash payments delivered in rural areas for 2.9 million people (29%) will continue to use the current cash payment method which they access at the more than 10 000 cash points across the country.

Incumbent service provider Cash Paymaster Services will not have direct control over this process come April 1, 2018.

SASSA will go out on a tender to find a new service provider to handle the cash payments portion of the grant system.

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