NOMPU SIZIBA: After tumultuous negotiations with the social development ministry under the leadership of Bathabile Dlamini, the four major banks say they are now working hand-in-hand with its new leadership to see how the industry can get involved in the distribution of social grants. Already the banks are servicing over 2.5 million social grant recipients, but there is still more work to be done to secure more of the 10.5 million recipients.
Well, to expand further on what’s happening with this story, I’m joined on the line by Cas Coovadia. He is the MD at the Banking Association of South Africa. Thanks very much for joining us, Cas.
How has the communication changed between yourselves and the social development ministry since the change of leadership?
CAS COOVADIA: Hi. Thanks for having me. Since the change of leadership, we have had a sea change in the relationship between the ministry, Sassa and ourselves.
We had been under the previous minister requesting data, which just wasn’t forthcoming. The day after the cabinet shuffle we got the data, and started processing the data.
We have ongoing interaction between ourselves and Sassa to address issues as and when they come up and we continue discussions on how best to actually get social grants to people. The information we requested was to determine from about eight million grant recipients who use ATMs, to see which ATMs they use, and which banks the ATMs belong to, so that banks can then start offering those people accounts and the social grants can be transferred into those accounts.
We’ve got that information and that is being processed. And, as a result of that, on April 1 banks started processing about 2.8 million clients through whose accounts the social grants went, and that will continue to increase as we increase the data.
So, having said that, we had always thought that we could use existing bank infrastructure to deliver social grants in a cost-effective way. We don’t want to make money from this. We want to do this in a cost-recovery way, and we started to do that as soon as the blockages caused by the previous ministry were removed.
NOMPU SIZIBA: Now you are asking the state to do a wholesale subsidisation of the opening and running of low-cost accounts, and that’s not happening yet. Is that correct?
CAS COOVADIA: Ja, look, Sassa has to go through certain processes. The original idea that Sassa had put on the table was that banks should offer a dedicated account for each client with specific characteristics. We rose issues related to competition on that, we raised issues related to cost and the time it would take to establish such accounts. And so, we said let’s rather do it through existing bank infrastructure, which we started doing.
Sassa’s plan was that the subsidy would then be linked to that account. But we all asked Sassa to link the subsidy to the grant recipient. Whatever account, whatever product the grant recipient uses, link the subsidy to that. Sassa has been through some processes to look at that and we understand they have to go through certain processes. That doesn’t mean we are not going to service clients; that doesn’t mean that the 2.8 million is not going to go up. We will continue to open accounts, we will continue to service clients and when Sassa goes through the process and the subsidy can be put into place, that’s great. It will actually help, but we are not waiting for the Sassa deal to be put into place before we actually start.
NOMPU SIZIBA: In terms of the type of accounts that beneficiaries will ideally have, or the ones who already have accounts, what type of accounts are these? What are their basic functions, and do they include things like internet banking – or does that become a bit more of an expensive offering
CAS COOVADIA: As an industry body we couldn’t get involved in discussion around particular types of products that different banks would offer. That would be colluding and so we didn’t get into those discussions.
What we facilitated is discussions between Sassa and individual banks, and in those discussions the individual banks talked about the range of products they could offer.
Sassa said, in fact themselves, that those products would be appropriate different products. There are also different products for different types of recipients. A young person receiving a child support grant might not want the same sort of product that an old-age pensioner might want.
So, the banks are looking at products that are appropriate to the grant recipients. We have committed to do this on a cost-recovery basis. We’ve committed to ensure that we solve for the problem of abuse and so on, and that there is no abuse through these accounts and Sassa can keep track of the programmes. And this is the advantage of using the current bank infrastructure. Banks can do this using a range of products appropriate for different products, appropriate for different people.
And what it also means is that a whole lot of people are beginning to interact with the banking sector through these products. And, as their conditions improve, as the economy improves and they want access to different functionalities and so on, they can do it through these products. So, we see this as an opportunity for financial inclusion.
NOMPU SIZIBA: Indeed. But then on the other hand we need to be careful that people are not abusing the system. Will the accounts be able to take deposits only from Sassa, or will they take deposits from anywhere? And, if so, will you have a mechanism that will be able to red-flag accounts that seemingly receive on the one hand state benefits while at the same time receive a regular income from Pick n Pay, for example?
CAS COOVADIA: The grants will be deposited into these accounts by Sassa.
NOMPU SIZIBA: Right, okay, and only Sassa?
CAS COOVADIA: Only Sassa.
NOMPU SIZIBA: Somewhere in the picture is the Post Office, which has recently also been granted a banking licence. Where does it fit in this whole story?
CAS COOVADIA: In all the interactions – and we’ve had numerous interactions as you said in your introduction under the previous minister – the Post Bank and Post Office were part of those interactions. They had indicated at that time that they were ready to deliver the social services. The discussions have been between them and Sassa since then. We indicated as the industry body and as banks that the Post Office needs to be part of the solution to this. They have a significant geographic outreach and, as far as banks are concerned, we are more than willing to see what role the Post office can play as part of the sort of integrated system. But if Sassa has been talking to the Post Office, we haven’t had interaction through broad discussion.
NOMPU SIZIBA: Lastly, and still very importantly, concerns have been raised that naturally banks do hold a lot of personal information, and that could land up with people who want to sell products like insurance or whatever it may be to essentially vulnerable members of society. So, what measures will be taken to ensure that that doesn’t happen?
CAS COOVADIA: We’ve been in touch with Pansy Tlakula, the Information Regulator. We’ve been in touch with her office. We’ve spoken to her. She has actually indicated that in the way we are doing this she is quite happy that information will be protected. Even the data we got from Sassa we didn’t put directly into banks. We asked Sassa to provide that data to BankservAfrica.
Bankserv processed that data and ensured that it is safe and will remain safe. These are issues that are in discussion with the relevant authorities and we can ensure that those authorities are satisfied that sufficient safeguards have been put into place, and we can track this on an ongoing basis. If we pick up any abuse we can deal with it.
NOMPU SIZIBA: Alright and thank you, Cas. We wish you all the best with the facilitation.