Sassa handed keys to the king­dom to CPS

The South African So­cial Se­cu­rity Agency, re­spon­si­ble for the pay­ment and ad­min­is­tra­tion of so­cial grants, ef­fec­tively tied grant re­cip­i­ents up in a web of de­pen­dency on a pri­vate ser­vice provider.

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thedis­pute hov­er­ing over South Africa’s so­cial grant sys­tem and threat­en­ing mil­lions of vul­ner­a­ble ben­e­fi­cia­ries with non-pay­ment, cre­ate risks far beyond in­ter­rupt­ing poor peo­ple’s ac­cess to des­per­ately needed grants. The fail­ure of the South African So­cial Se­cu­rity Agency (Sassa) – re­spon­si­ble for the pay­ment and ad­min­is­tra­tion of so­cial grants – to act timeously has cre­ated a cri­sis that threat­ens to de­liver grant re­cip­i­ents on a sil­ver plat­ter into the hands of un­scrupu­lous fi­nan­cial ser­vices com­pa­nies.

Sassa of­fi­cials an­nounced in Fe­bru­ary that they would file pa­pers with the Con­sti­tu­tional Court propos­ing that their in­valid con­tract with Cash Pay­mas­ter Ser­vices (CPS), which holds the con­tract for grant dis­tri­bu­tion, should be ex­tended for an­other year.

This con­tract was awarded to CPS in a con­tro­ver­sial ten­der in 2012. It was de­clared in­valid two years ago by the Con­sti­tu­tional Court, which in­structed Sassa to reis­sue the ten­der. Dead­line af­ter dead­line passed. By the end of 2016 it was clear that Sassa had failed to act on the court’s in­struc­tions. On 17 Fe­bru­ary Sassa missed an­other dead­line, fail­ing to make its planned 11th-hour sub­mis­sion for an ex­ten­sion.

There is no cred­i­ble ar­range­ment in place to en­sure that so­cial grants will be paid af­ter 31 March. The so­cial grant sys­tem sup­ports about 17m in­di­vid­u­als. Dis­rupt­ing the pay­ments will cause huge suf­fer­ing to the coun­try’s poor­est and most vul­ner­a­ble peo­ple and is likely to lead to so­cial un­rest.

It seems that Sassa of­fi­cials in­tended to present the court and Na­tional Trea­sury with an im­pos­si­ble sit­u­a­tion: con­done an il­le­gal con­tract, or face the pos­si­bil­ity of so­cial and po­lit­i­cal chaos.

There’s even more at stake. If the court al­lows an­other ex­ten­sion (or ap­proves a new con­tract with CPS), Sassa will have per­pet­u­ated a sit­u­a­tion in which the ac­counts of grant re­cip­i­ents have in ef­fect be­come mere con­duits be­tween the SA fis­cus and the pri­vate fi­nan­cial em­pire that has taken shape around grant dis­burse­ment.

At the cen­tre of the storm is CPS, a sub­sidiary of Net1 UEPS Tech­nolo­gies. Net1 owns the fin­ger­print-based bio­met­ric iden­ti­fi­ca­tion and pay­ment sys­tem cen­tral to CPS’s op­er­a­tions. Its pro­pri­etary Uni­ver­sal Elec­tronic Pay­ments Sys­tem tech­nol­ogy forms the “back end” of the Sassa smart­card CPS uses in the elec­tronic pay­ment of grants.

Scholar Keith Breck­en­ridge says this cre­ates an un­prece­dented sit­u­a­tion – grant ben­e­fi­cia­ries are cap­tured within a pri­vate tech­no­log­i­cal and fi­nan­cial net­work owned and con­trolled not by Sassa, but by its ser­vice provider.

CPS is only part of a big­ger cor­po­rate strat­egy. Also part of Net1’s global em­pire are fi­nan­cial ser­vices com­pa­nies like MoneyLine and EasyPay, which act in con­cert to make use of the op­por­tu­ni­ties af­forded by CPS’s con­trol of the pay­ment net­work.

Mil­lions of grants ben­e­fi­cia­ries, for ex­am­ple, have not only been pro­vided with a Sassa ac­count, their ac­counts have also been linked to EasyPay Ev­ery­where, a bank ac­count op­er­ated by Batha­bile Dlamini’s depart­ment, through Sassa, has a con­sti­tu­tional man­date to ad­min­is­ter and pay so­cial grants. MoneyLine and CPS’s bank­ing part­ner, Grindrod Bank. All of this is part of an ex­plicit two-stage strat­egy by Net1: first it rolls out its tech­no­log­i­cal in­fra­struc­ture, and then it uses this in­fra­struc­ture to mar­ket a wide ar­ray of prod­ucts and ser­vices to an es­sen­tially cap­tive cus­tomer base.

The net ef­fect? So­cial grant re­cip­i­ents are tied up in a web of de­pen­dency on fi­nan­cial ser­vices com­pa­nies con­trolled by Net1.

What this means for fi­nan­cial in­clu­sion

Two prob­lems arise. First, this ar­range­ment may be in vi­o­la­tion of com­pe­ti­tion law. It looks as if Net1 is us­ing CPS’s priv­i­leged po­si­tion as so­cial grant pay­mas­ter to give its sis­ter com­pa­nies first bite and priv­i­leged ac­cess to a vast po­ten­tial client base.

Sec­ond, it raises an of­ten for­got­ten is­sue in sweep­ing gen­er­al­i­sa­tions about the need to cover the “un­banked” with fi­nan­cial ser­vices. Yes, poor peo­ple need ac­cess to bank­ing ser­vices, but these ser­vices should be de­signed with their in­ter­ests in mind.

Deborah James and Di­nah Ra­jak have shown how in SA the his­tory of “credit apartheid” and pa­ter­nal­is­tic con­trol over poor peo­ple’s fi­nance has cre­ated a sit­u­a­tion where cred­i­tors wield dis­pro­por­tion­ate power. Un­bri­dled fi­nan­cial in­clu­sion of the poor may amount to ad­verse in­cor­po­ra­tion into a fi­nan­cial sec­tor geared to­wards prey­ing on them. Al­ready, Black Sash has col­lected ev­i­dence of in­stances of unau­tho­rised and un­law­ful de­duc­tions from ac­counts set up for grant re­cip­i­ents, of­ten with lit­tle re­course. Sassa has missed a ma­jor op­por­tu­nity to en­sure that fi­nan­cial in­clu­sion hap­pens in a ben­e­fi­cial, “pro-poor” way. It failed to fol­low the Con­sti­tu­tional Court’s or­der that the pay­ment of so­cial grants should be done in a way that pro­tects the rights, in­ter­ests, and con­fi­den­tial data of grant ben­e­fi­cia­ries. CPS and Net1 hold all the cards. At present, the Con­sti­tu­tional Court and Trea­sury have al­most no lever­age to pre­vent their ser­vice provider from sim­ply walk­ing away on 1 April.

Al­ready, Net1 CEO Serge Be­la­mant has made it clear that he is not in­ter­ested in ex­tend­ing the con­tract on its present terms. He is in a po­si­tion to ask for what­ever he wants – in­clud­ing pro­vi­sions that lock claimants even more tightly into his em­pire.

Sassa’s in­ac­tiv­ity has cre­ated the worst pos­si­ble out­come in the short and in the long term. A cri­sis over grant dis­tri­bu­tion looms, and the op­por­tu­nity to pro­vide mean­ing­ful fi­nan­cial in­clu­sion has been missed.

Min­is­ter of so­cial de­vel­op­ment,

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