Antisocial grants?
In a move typical of a central bank, the SA Reserve Bank has expressed concerns about Net1 UEPS’s possible conflict of interest in the distribution of the R130bn/year social grant but stopped well short of demanding Net1 be prohibited from marketing financial services to grant recipients.
The Reserve Bank appears caught between an inclination to protect the more vulnerable of the 16.5m grant recipients and an obligation to protect the integrity of the National Payment System (NPS) of which it is custodian.
Though the monthly deductions (many reckless or fraudulent) of around R500m are deeply concerning to the Reserve Bank, the danger of prohibiting all social grant-related debit orders is the threat that would pose to the NPS’s role. That role is crucial in enabling efficient and secure clearance of payments between all of the banks in the country.
The Reserve Bank’s comments are part of a long drawnout legal battle between the SA Social Security Agency (Sassa) and Net1 subsidiary Cash Paymaster Services (CPS).
Sassa is determined to block deductions from the grants. However, CPS says this would violate the constitutional rights of the grant recipients to enter into contracts and would also threaten the NPS.
In the latest phase of that battle, earlier this month Sassa filed a criminal case against CPS and Grindrod Bank, which provides banking services to the grant recipients.
This action was taken because CPS and Grindrod had failed to comply with regulations, effective since early May, aimed at stopping deductions. Ahead of those regulations becoming effective, CPS had filed for a declaratory order seeking clarity on what they meant.
Last week’s high court outing, which involved the Reserve Bank as one of many respondents, related to that declaratory order.
Ahead of last week’s Pretoria high court action, Net1 CEO Serge Belamant described the complex and lengthy procedures needed to cancel all debit orders against social grants.
“It would take a substantial amount of time and somewhat redefine the entire NPS debit process,” said Belamant, adding: “Beneficiaries would also have to be informed to ensure they would not be prosecuted for nonpayment and placed on a defaulting database, preventing them from being approved for microfinance in the future.”
Given the highly litigious nature of the parties involved, it’s likely that in the absence of a definitive statement all the Reserve Bank has succeeded in doing is muddying the social grant waters.
Last week the Reserve Bank told the Pretoria high court it