Banks can pay out grants much cheaper
• Former director-general drew up detailed plan
The controversial social grants contract administered by Net1 subsidiary Cash Paymaster Services (CPS) would be obsolete if banks were approved to distribute grants at a lower cost to taxpayers, an inquiry into the matter suggests.
Former Department of Social Development director-general Zane Dangor, in consultation with the Reserve Bank and the Treasury, had proposed using the existing national payments system to deliver social grants to 10.7-million recipients.
Allowing any member of the national payments system to pay social grants — provided certain requirements, such as cost of withdrawals, were complied with — would prevent abuse by a single service provider and reduce the cost.
This would also mean the South African Social Security Agency (Sassa) would not need to duplicate infrastructure in order to insource the service.
Postbank could provide the banking platform to pay money into bank accounts, while competing with commercial banks to win grant beneficiaries as customers, said Dangor.
The Reserve Bank would regulate the banking platform, developing a biometric standard to be used for transacting. The central bank could impose strict conditions on cross-selling and deductions, he said on Friday.
According to the Payments Association of SA, 88% of social grant transactions are processed through the payments system infrastructure, including ATMs and points of sale. The big four banks had expressed a desire to participate in grant payments.
Sassa spokesman Paseka Letsatsi confirmed that the agency was considering the use of individual commercial bank accounts to disburse grants.
However, Department of Social Development spokeswoman Lumka Oliphant said SA’s banking infrastructure did not provide for grant payments in rural areas. “The government supports the involvement of [the Post Office] in the payment of grants given its widespread footprint in rural areas.”
About R3bn of the R12.5bn that was distributed every month went to recipients in rural areas, said Grindrod Bank, CPS’s banking partner.
CPS is paid R14.42 per account per month, amounting to R174m monthly, which included cash distribution in rural areas. Commercial banks offer bank accounts for R5 per month, which could be subsidised by the department.
Dangor said a small tender could be awarded to a thirdparty service provider to service rural recipients.
Banks could check accounts every quarter to identify dormant accounts and return funds to Sassa, when beneficiaries were confirmed dead, he said.
Dangor’s proposal “involves getting all banks, including the Postbank, to pay grants”.
Dangor quit in March citing a breakdown in his relationship with Social Development Minister Bathabile Dlamini. In papers filed in the Constitutional Court, he said Dlamini had created a grants payment emergency to ensure a continued relationship with CPS under conditions favourable to the company.
Sassa CEO Thokozani Magwaza’s contract was abruptly terminated last week.
THE GOVERNMENT SUPPORTS POSTBANK’S INVOLVEMENT IN THE PAYMENT OF GRANTS IN RURAL AREAS