A bit more in grants — plus a scary delay
The social development department doesn’t appear to have made much progress to ensure that people who depend on social subsidies receive them from April. And national treasury has little to say on the matter
For those hoping for some indication of adult oversight of the controversial social grant tender, the budget was a grim disappointment.
Perhaps understandably, given the political sensitivity attached to the issue, finance minister Pravin Gordhan brushed off the one SA Social Security Agency (Sassa)-related question at the press conference ahead of the budget.
“We’ve little to say on that matter; we’ve engaged with Sassa and the social development department . . . ultimately it is the department’s responsibility,” the minister said. “We’re expecting them to go to the constitutional court at some point,” he added.
And then the very scary part: “There’s a process they’re following.”
At least it was scary for anyone who had, minutes earlier, listened to social development minister Bathabile Dlamini update parliament’s portfolio committee on the progress of that process to ensure that social grants continue to be distributed to people who depend on them. Those who sat in for the full session concluded there had been little progress.
It appears Sassa has not started its negotiations to extend Net1-UEPS’s subsidiary Cash Paymaster Services’ (CPS) contract. It now distributes grants to 11m recipients (who receive grants on behalf of 17m beneficiaries).
And though Sassa undertook to apply to the constitutional court by February 15 to extend its contract with CPS, it has not yet done so. Once it has been back to the court, Dlamini told the committee, it will return to national treasury for approval of a plan for the distribution of social grants after April 1. That’s when the current CPS contract, which has been declared invalid by the court, expires.
Dlamini’s short-term plan appears to be the continuation of some sort of relationship with CPS for up to two years. That relationship will require a new contract.
Against this uncertain backdrop it was probably reasonable that national treasury based its figures for the coming year on the assumption that little would change with Sassa’s distribution contract in 2017/2018.
“The agency currently spends R2bn a year on contracting the full payment function to a service provider. This baseline is expected to be maintained over the medium term,” the Estimates of National Expenditure 2017 tome says.
Sassa’s total budget for 2017/2018 is R7.2bn. The largest single item in that budget is R3.2bn for employees; the second-largest is R2.3bn for “payment contractors”. This is where CPS comes in. CPS was the payment contractor that
received R2.1bn in 2016/2017 and may or may not (but probably will) be the contractor that receives a budgeted R2.3bn in 2017/2018.
If, as many suspect, CPS is able to extract better terms for the additional two years referred to by Dlamini, then Sassa will have to find the extra funds from somewhere within its R7.2bn budget. Remarkably, it had an accumulated surplus of R625m at the end of financial 2016/2017. This surplus is expected to be reduced to R123m by the end of 2017/2018.
Treasury will be reluctant to hand over any additional funds to Sassa for on-payment to CPS. It points out that the grants’ administration cost is now over 5% of the total costs of the grants. This compares with the world best of around 3%.
Estimates of National Expenditure also makes reference to expectations that Sassa will implement a biometric authentication system: “The system is expected to reduce fraud by providing secure, positive identification of users, and [the linking of officials] from the agency with the beneficiary whose grant they approved. An estimated R100m over the [medium-term expenditure framework] period is allocated for the project, which is set to be implemented in 2017/2018.”
Meanwhile, the 2017/2018 budget will result in more money being distributed by whoever secures the contract after March 31. The old-age grant creeps up by R90 to R1,600/month for people over 60 and R1,620 for those over 75. The disability and care dependency grants also increase by R90, to R1,600. Foster grants are up R30 to R920 and child support grants by R20 to R380/month. The total social welfare bill for the year will be R142bn, just R15bn more than the new wealth tax is expected to generate.
Bathabile Dlamini: Updated parliament’s portfolio committee