Algeria, May 14, 2018


Banks still have a key role in social grants plan

Hurdles include standard low-cost product and the need for a subsidy

Plans to ensure that the banks play a key role in distributing social grants remain on course despite concern recently expressed by the CEO of the South African Social Security Agency, Abraham Mahlangu, in a letter to the Banking Association of SA (Basa).

Securing a sustainable role for the banks would put an end to the involvement of Net1 subsidiary Cash Paymaster Services. It might also lead to a return to the time before CPS’s controversial involvement in the administration of social grants when 85% of beneficiaries received grants from banks.

A source close to discussions between the banks and Sassa told Business Day that the Treasury, Sassa and the banks were determined to find a sustainable long-term solution to challenges involved in distribution of social grants to 10.5-million beneficiaries every month.

A critical issue for the banks revolves around the need for a subsidy to cover their costs. However, the Social Assistance Act does not allow for beneficiaries to be charged for the receipt of their grants. 'National Treasury and the Reserve Bank are looking at ways of providing a subsidy, the decision rests with them and not Sassa,' said the source who added negotiations are still on track with the banks though there have been deliberate attempts to delay progress.

While controversial Bathabile Dlamini has been removed from the post of social development minister and a new CEO appointed at Sassa, the critical position of project manager remains with Zodwa Mvulane.

In a letter sent to Basa CEO Cas Coovadia last week, Mahlangu referred to the subsidy issue and informed Coovadia that 'in the absence of a policy to subsidise banks, and in the absence of a procurement process, Sassa is not in a position to subsidise any bank account'.

Mahlangu said that it had become apparent during engagement with individual banks that the Sassa-envisaged low-cost bank product or account would not be ready by April 1 2019. 'Each bank was advised to market its existing low-cost bank products or accounts to beneficiaries who may want to choose receiving their grant benefits through a bank,' said Mahlangu.

The banks believed to be in discussions are Barclays Africa, Nedbank, Standard Bank and FNB. But they have expressed reluctance to work with an industry-standardised product.

In addition to the critical subsidy issue, Mahlangu’s letter also referred to the need to clarify the process by which beneficiaries authorise Sassa to have their grants paid through their chosen method.

'Sassa is also looking at convenient ways of easing the process required for the provision of written authorisation where beneficiaries choose to receive their grants in their bank accounts,' wrote Mahlangu.

In recent months nongovernmental organisation Black Sash has alleged that CPS has been using its position to encourage beneficiaries to select Grindrod, which is the bank that CPS uses.

Meanwhile, a recent letter to Mahlangu from Chris Newland, head of retail at Grindrod Bank, explains it had no choice in the matter of the R10 monthly fee it has levied on beneficiaries. The fee was levied despite Sassa and Grindrod agreeing to a monthly fee of only R6.91 as recently as March 15. Mahlangu said Grindrod was not entitled to levy the R10 fee and demanded it reimburse all beneficiaries who had been charged R10.

Newland told Mahlangu that the fee was set in conjunction with Net1, 'as they play a significant role in the programme by providing the infrastructure and the technology to support the programme'.

He said that Grindrod continues to receive only 50c per account per month and that the balance of the increased fee was paid to Net1 for its services.


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