The likelihood of SA’s big commercial banks being involved in the payment of social grants has been dashed.
A letter written by South African Social Security Agency (Sassa) acting CEO Abraham Mahlangu – dated May 7 and addressed to Banking Association SA (Basa) CEO Cas Coovadia – reveals that there’s still no policy for subsiding banks to administer the payment of social grants.
This a clear indication that Sassa faces another delay in achieving its stated goal of including commercial banks in its social grant system.
Commercial banks were meant to collaborate with the South African Post Office to administer the payment of grants to 10.5 million beneficiaries by availing their ATM infrastructure, payment processing systems and bank accounts to Sassa.
Essentially, this option would allow social grant beneficiaries to use a bank of their choice to access their money after the Cash Paymaster Services (CPS) contract to administer social grants expired on March 31.
However, Mahlangu’s letter shows that Sassa and commercial banks, which were represented by Basa during negotiations, are still at loggerheads about the low-cost bank accounts social grant recipients would use to withdraw their money.
Mahlangu said it became clear during engagements with individual banks that the Sassa-envisaged low-cost bank accounts would not be ready by April 1.
Moneyweb understands that the individual banks are Barclays Africa, Nedbank, Standard Bank, FNB and small retail bank Ubank.
Sassa asked larger banks to create standardised low-cost bank accounts. However, most of the four largest banks were unhappy about this request, saying the accounts would create problems with competition authorities. They also argued that they each have unique products that are appropriate for grant beneficiaries, hence why standardised bank accounts won’t work.
“Sassa [during engagements with banks] also explained a process through which recipients and/or beneficiaries could provide written authorisation to Sassa to have their grant paid through their chosen method,” said Mahlangu.
He added that there was an absence of a policy to subsidise banks to distribute social grants and no procurement process in place to contract banks. And without policies in place, Sassa “is not in a position to subsidise any bank account”.
Basa’s Coovadia was not available to comment at the time of publishing.
Banks still committed
A Barclay’s Africa spokesperson said the bank was working with government to ensure that social grant beneficiaries used its services. “Absa has always been willing to be part of the solution in terms of ensuring that grants are distributed. As a financial services company with a footprint across the country, we have the infrastructure to deliver this critical service to those who need it.”
Nedbank’s Joanne Isaacs said the bank was also still committed to working with Sassa. “Nedbank already has existing products aimed at inclusive banking. We continue to position these products to Sassa beneficiaries and will work with Sassa on any future needs,” said Isaacs.
Ryan Prozesky, the CEO of FNB Consumer Core Banking, said Sassa beneficiaries can elect to receive their grants through its “cost-effective” pay-as-you-use Easy account. He added that by June 2018, grant beneficiaries will be able to access their money through a mobile bank account, with no monthly fees.
At least three banks – Standard Bank, Barclays Africa and Nedbank – have engaged Sassa since 2014 about their inclusion in the grants payment network. However, the mismanagement of Sassa under former Social Development Minister Bathabile Dlamini and the agency’s onerous tender requirements have discouraged the banking sector.
Banks have previously also complained about an information vacuum, accusing Sassa of not releasing information about how many of the eight million beneficiaries (excluding those using CPS cash pay points) access their grants via ATMs.
Mahlangu said preliminary reports from banks indicated that at least 80% of beneficiaries are banked and are actively using their accounts, although not necessarily for receipt of their social grants.