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CPS social grants dominance haunts Post Office

Expert panel wants to review social security agency’s decision to source all grant payment services from the state-owned entity.
The Post Office may have been contracted to distribute social grants to more than six million beneficiaries through, but only 500 000 beneficiaries withdrew their grants at its branches in September 2018; others opted to use bank ATMs or points of sale at retailers. Image: Supplied

It’s barely a month since the South African Post Office started playing a major role in distributing social grants, and it’s already facing accusations of holding the South African Social Security Agency (Sassa) ‘hostage’ in terms of the fees it charges.

A panel of Constitutional Court-appointed experts has repeated its concerns about the Post Office being a dominant player in the social grants system, which could allow it to extract more revenue for rendering services to Sassa.

So concerned is the panel that it wants to review the decision by Sassa and the Department of Social Development to source all social grant payment services from the Post Office.

“It is highly unlikely that this decision [to source the Post Office’s services] will result in the best use of taxpayers’ money,” the panel said in its 10th report to the Constitutional Court dated October 15.

The panel, which features auditor-general Kimi Makwetu, former Reserve Bank governor Gill Marcus, Reserve Bank national payment head Tim Masela and others, was appointed by the court in 2017 to oversee the process of phasing out the contract between Sassa and former social grant distributor Cash Paymaster Services (CPS).

The panel believes the selection of the Post Office as the sole service provider has been “the primary failing of Sassa” as its decision was “contrary to the principles of the government’s supply chain framework and sound procurement practices.”

In fact, the selection of the Post Office was “flawed” as there was no competition from other bidders, the process was not “open and transparent”, and Sassa didn’t consider affordable payment technologies such as mobile money, the panel said.

The panel’s concerns around the Post Office mirror those that have dogged former social grant distributor CPS, which was the sole service provider for nearly seven years. CPS enjoyed repeated last-minute extensions to its contract with Sassa to distribute social grants to 10.5 million beneficiaries, despite the contract being declared invalid by the court in 2012 for not going through proper tender processes.

CPS is no longer paying social grants. From October 1, this function is now played by the Post Office, which distributes social grants to more than six million beneficiaries through the processing of electronic and physical cash payments at its more than 1 600 branches across SA.

At the centre of the panel’s concerns is the monthly fees that the Post Office charges Sassa to distribute social grants, which are mostly higher than the fees previously charged by CPS. The Post Office entered into an initial agreement with Sassa in December 2017 to distribute social grants and has now increased two of its three monthly fees between 89% and 93% (see below).

Fees in rands (including Vat) per beneficiary

Dec 2017

Aug 2018

Monthly service fee

R6.71

R13.00

Over-the-counter payments

R12.41

R23.49

Cash paypoints

R55.60

R51.77

CPS’s fees were capped at R16.44 per beneficiary. For cash payments, the fee was capped at R51.

Source: Sapo

Post Office COO Lindiwe Kwele recently defended the fee increases, telling Moneyweb that the state-owned enterprise is now required to process payments to more beneficiaries than initially agreed with Sassa in December 2017. 

Read: Sassa ‘agrees’ to Post Office’s increased social grant fees

She said the Post Office has had to increase its monthly fees to cover the cost of new investments in its payments systems that will now be processing payments to more beneficiaries. It has a five-year capital expenditure (capex) budget of R3.5 billion, which will be deployed in upgrading its payment technology infrastructure as well as security to protect beneficiaries at its branches.

But the panel is not convinced. “It appears that the Post Office is seeking to derive significant revenues from servicing beneficiary accounts in order to fund its branch refurbishment capex that support other Post Office services,” it said.

The panel also questioned the need for the Post Office’s capex as only 500 000 beneficiaries withdrew their social grants at its branches in September 2018 while others opted to use bank ATMs or points of sale at retailers.

“If more beneficiaries decide to avoid accessing grants at Post Office branches due to long delays and non-functioning terminals … then this will further undermine the rationale for the planned Post Office capex.”

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As I have said before, CPS/NET1 might have charged a lot but their cost will be low compared the PO and SASSA cost.

I full agree with you. CPS/NET1 paid on time and at the beginning of the month. Post Office pay out of town clients “sometime” around 5th

Not too bad, considering that the PO was asking government for more guarantees before the SASSA deal

The post office is broke and clearly needs the money. Why? Because it has failed miserably to perform its central function and has been haemorrhaging customers for years as a result. Basically, actually receiving your mail nowadays is such a rare event it feels like winning the lottery. One just hopes that now that they have this new source of revenue, they will actually use some of it to get the mail flowing again. Having a properly functioning postal system not a ‘nice to have’, its an essential function of a modern nation!

It is currently taking 4 months to get mail from the UK delivered to SA – that’s if it hasn’t been stolen before it gets to its intended destination. Four months, coincidentally, is the time it took for mail to travel to SA by sailing ship in the late 16th century.

My Telkom accounts are 3 months arrears and that to a post box. I do notice that SAPO delivery cyclist rides the same routes occassionally with practically zero mail in the cycle satchel

LOL -Da peeple wanted da post offies to pay da grands – so kry vir julle!!!!

My overseas orders have disappeared at the Post Office. They made it through customs clearance and handed to the SAPO and then went missing. I cannot take the risk when exporting to my overseas customers anymore. I only have to two options left: use expensive local shipping agents/intl couriers OR shift my entire business overseas to be closer to my customers and in a safer economy. The performance of SAPO tells me that their only chance of survival is to start a new business where they are protected from competition, i.e. government contract to social recipients

End of comments.

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