No more payments of social grants in cash at post offices

Postbank will no longer pay social grants in cash to recipients at pay points.

The announcement comes after the Post Office business rescue plan detailed how payouts increase the risk of robberies, financial misappropriation and financial inconsistencies.

Postbank and the Post Office are legally separate but they had an agreement that allowed the bank to use branches to pay recipients cash.

But incompatible IT systems make it hard to keep track of the money, according to the business rescue plan. Branches also became targets for cash-intransit heists.

The move to stop cash payouts is part of the plan to make the ailing Post Office cashless, which will be safer and reduce its security costs.

Postbank said on Monday that only 2% of grant recipients receive their payouts in cash at pay points and post offices, meaning most of the 26-million recipients will not be affected by its move. However, this leaves about half-a-million people who will have to change how they receive their grants.

The SA Social Security Agency (Sassa) grant card works like a bank card and can be used to draw money at retailers or ATMs, which from April 2024 will be the only way to receive grants.

Postbank said in a statement the move is also necessary because the footprint of the Post Office will be reduced as part of its business rescue process.

“Factors such as escalating cash-in-transit heists, unfavourable conditions at some of the cash payment sites, and the closure and capacity challenges at many post offices drove this strategic move. By migrating beneficiaries to the other payment channels, we are solving for these challenges proactively.”

The move by Postbank and Sassa has been on the cards since 2018, it said.

The Post Office — which is in business rescue, a move to save it from bankruptcy — was paying the grants from about 900 branches. These will be reduced to 600 from 2024. It had 1,023 branches in July, with 129 not open and only 113 profitable.

ENDLESS PROBLEMS

The business rescue plan detailed how paying grants in cash caused the postal service endless problems and added to its financial losses. It said increased foot traffic at branches on Sassa payment days had a negative effect on other revenue streams, such as people renewing motor vehicle licences.

The plan explained how the business rescue practitioners identified bank accounts titled suspense accounts that hold money that had not been correctly allocated and it still is not clear where it belongs. These had “significant unreconciled balances” and were linked to the relationship between Postbank and the Post Office.

The plan also detailed how a lack of systems between Postbank, which technically receives the cash from Sassa, and the Post Office, which must pay it out, led to money that could not be accounted for

“The absence of effective oversight and review by senior management during the ordering process due to inadequate financial systems and controls has led to inconsistencies in reconciling cash received and returned by branches to Postbank. This problem exists at both SA Post Office and Postbank.”

The business rescue plan explained that there is an incompatibility between the IT systems of Postbank and SA Post Office which hindered “seamless cash management”.

There were also repeated technical issues with Postbank that led to a failure to pay grants.

The absence of transaction report sharing between the Post Office and Postbank further complicated the cash reconciliation processes. “This increases risk of discrepancies and misappropriation [of funds],” the report said. The Post Office was also not meeting the Financial Advisory and Intermediary Services Act and Financial Intelligence Centre Act requirements, due to lack of depth in the compliance team, it said.

In a bid to save the Post Office, it is cutting costs, removing all cash from branches, reducing its headcount from 11,000 to 5,000 and reducing its footprint.

MOVE TO STOP CASH PAYOUTS IS PART OF THE PLAN TO MAKE THE AILING POST OFFICE CASHLESS, WHICH WILL REDUCE ITS SECURITY COSTS