Basa: we can solve grant problems
• Banks not shying away from issue but mindful of competition concerns
The Banking Association SA (Basa) told the expert panel appointed by the Constitutional Court that it was committed to addressing the “challenge” of the distribution of the social grants, but said it was mindful of potential competition issues.
“We would therefore want the discussions on the specific details and design to be overseen by the South African Reserve Bank.”
Bank analysts said on Wednesday that the Reserve Bank’s involvement would be a minimum requirement to protect the banks from the potentially crippling reputational risk associated with the distribution of social grants.
One analyst, who did not want to be named, said Capitec would be an obvious player, but it probably would not be comfortable with the risk.
Capitec spokesman Charl Nel said the bank was not actively pursuing the South African Social Security Agency (Sassa) contract.
“We are satisfied with our continuous growth of more than 100,000 clients per month and we will rather continue to focus on servicing our over 9-million active clients.”
In a statement released on Tuesday, Basa said that all of the major banks had low-cost products that could be used immediately, meaning there was no need to develop a new product, although there might be a need to harmonise features.
“The ‘R5 accounts’ could with some adaptation and alignment with Sassa requirements allow for a limited number of cash withdrawals and are cheaper when withdrawal is done at point of sale as opposed to a teller or an ATM.
“Debit orders can be loaded onto this,” said Basa.
In response to issues raised in its recent meeting with the panel, Basa said that traditional over-the-counter withdrawals in banking halls would be available but costly and inefficient at the scale envisaged. Other payment solutions included ATMs, cash at point of sale as well as mobile money transfers.
Basa said the current system of payment at the beginning of the month needed to be relooked as it led to congestion.
On the issue of waiving or substantially reducing the cost of withdrawals and balance inquiries, Basa would only say there was a commitment to tackling costs “in order to provide a sustainable and economical solution”. It also said it was possible to give Sassa greater control on the deductions.
Providing access in remote areas would be a challenge, but not an insurmountable one and maintaining ATMs in those areas would depend on electricity supply, telecommunications and security, which could not be controlled by the banks.
While the expert panel seems keen to involve the banks in creating a solution to the Sassa challenge of the banks, the Department of Social Development and Sassa have been rather more hesitant.
At a meeting in late August, the association told Social Development Minister Bathabile Dlamini that if the department was going to use Postbank as the key vehicle for delivery of social grants, it would like to understand in what ways it could assist Postbank.
“A solution needs to be found as quickly as possible, given the urgency of the situation and the time lines set down by the Constitutional Court,” Basa MD Cas Coovadia told the minister.
Basa said the critical issues that had to be dealt with related to meeting the needs of rural areas that were outside the radius of the banks’ infrastructure, meeting the need for biometric compliance, reducing and controlling costs, and the question of returning unused funds. But, it said, “there’s no technical problem to which we cannot find a solution as an industry”.