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.
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,