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Post Office slammed for sky-high social grant payment fees

Expert panel says the state-owned enterprise’s expected profits from ‘unnecessarily high’ fees are difficult to justify.

With a few days remaining before the South African Post Office plays a major role in administering social grant payments to beneficiaries, the monthly fees it will charge the South African Social Security Agency (Sassa) for this function have come under fire for being exorbitant.

The Post Office is at loggerheads with a panel of experts appointed by the Constitutional Court over the monthly fees it will charge, which might have an adverse impact on the national fiscus.

In its ninth report to the court dated September 14, the panel says some of the fees charged by the Post Office are higher than those of Cash Paymaster Services (CPS), whose contract to distribute a portion of social grants expires at the end of September.

The panel – featuring highly experienced individuals, including auditor-general Kimi Makwetu, former Reserve Bank governor Gill Marcus, Reserve Bank national payment head Tim Masela and regulatory financial specialist Anthony Felet – was appointed by the court in 2017 to oversee the process related to phasing out the CPS contract. From October 1, the Post Office will be mainly responsible for administering electronic and physical cash payments to more than six million social grants beneficiaries.

Awarding the Sassa contract to a state-owned enterprise like the Post Office was hailed as an affordable option for the fiscus compared with choosing a profit-driven private company.

However, the panel has accused the Post Office of inflating its monthly fees only eight months after it agreed with Sassa and the National Treasury on its preferred fees. These fees relate to the maintenance of the bank accounts that social grant beneficiaries will use to access their money, the processing of over-the-counter payments and physical cash payments at Post Office branches.

In August the Post Office proposed almost doubling its monthly account servicing fee – to R13 from the R6.71 agreed to in December 2017.

The proposed fee changes:

“The panel is concerned that Sapo [the Post Office] is requesting these increases only eight months after its original fees were negotiated. This suggests that Sapo had significantly understated the costs it would incur in providing payment services to beneficiaries,” the panel’s report reads.

Although the Post Office is proposing a reduction in its cash payment fee from R55.60 per beneficiary to R51.77 (see above table), the panel says it is still above the R51 the National Treasury recommended for CPS.

If Treasury accepts the fee increases, this will result in Sassa paying approximately R1.5 billion per annum to the Post Office, which equates to an average monthly fee of about R19.50 per beneficiary. “This is nearly 20% higher than the current fee paid to CPS of R16.44 [per beneficiary],” says the panel. “This will have adverse budgetary impacts on Sassa and may affect the long-term service delivery at Sassa offices in the absence of additional funding from National Treasury.”

The panel has also warned that there is no mechanism in place that would stop the Post Office from “repeating such increases in the next fiscal cycle.”

Post Office investments

The Post Office says it has to make necessary new investments to expand its payment capacity to more beneficiaries than initially anticipated – hence its proposed fee increases. Apart from technology infrastructure, the Post Office will require equipment upgrades to process cash payments, and more security to protect beneficiaries at its branches.

The Post Office has a five-year capital expenditure budget of R3.5 billion, which begins in 2019 with a R1.8 billion spend. Over the same five-year period, the Post Office is expected to generate operating profits of R2.4 billion, which the panel says is more than the amount CPS generated over a five-year period.

“Profits of this magnitude are difficult to justify, particularly if they are derived from unnecessarily high charges to Sassa and/or beneficiaries.”

According to the panel, Sassa and the Post Office are yet to agree on the final fee structure and finalise a service level agreement for paying social grants. The Black Sash, a human rights group that monitors the social grant payment process, wants the contract between the Post Office and Sassa to be shared publicly. “[This would] ensure transparency, especially with regards to the contract scope and cost of services as well as Sassa’s subsidy of bank charges for beneficiaries.”

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Surprise ! Another rip-off from a SOE. Once they have captured the revenue stream they will divert as much as possible.
Black Sash and Corruption Watch – where are you now? Decision was made to give payments to Post Office without even a costing exercise. Unbelievable.

What a surprise, a state owned company do things more expensively than a private company! Who would have thought it?

You cannot be so – useless, without consistently applying yourself – its a gift.

If it means the Post Office will then have enough money to get back to what it’s supposed to do – actually delivering the mail – I’m all for it.

I think that was Mark Barnes’ strategy, and I partly agree with you. But surely he shouldn’t be basing the whole of the recap of the Post Office on one client (SASSA)!

The source of SAPO’s issues must be addressed, and not at the cost of the tax payer and grant recipients.

Sure, but addressing those issues takes money and they sure ain’t making any at present.

There was loads of adverse comments about CPS now Post Office takes over cost go up and complaints will go down. TYPICAL.
If the new fees go through why doesn’t SAPO pay CPS to do the work then they can pocket the profit for doing nothing.

Not surprised at all, this was long overdue. They must embraced themselves for another increase soon

Prior to the privatisation of the payment of pensions and the granting of the contract to pay pensions to CPS, the Post Office handled pension payouts. I remember that on pension payout days one could spend hours in a queue at the Post Office to get service.

Since the contract was awarded to CPS, the Post Office lost its major source of revenue and its banking side collapsed leading to its ability to provide a decent service.

Government was responsible for this.

Couple this with modern business practice of electronic document transmission and the Post Office lost another source of revenue.

Now take another contract altogether unrelated – the catering contract for DCS (Department of Correctional Services) held by that “most corrupt” of companies, Bosasa. Bosasa supplies 3 meals a day for the unbelievable amount of less than R33 p.d. By the way, there are also other catering companies who contract out to DCS and their rates are much the same as Bosasa.

DCS spends more than double at prisons where it has not contracted out the catering and the food is always of inferior quality and smaller portions which has lead to riots in the past.

Then let’s take the military catering contract. It has been held by a well known catering company for almost 15 years and has not gone out to tender in this period – fishy? Perhaps some enterprising journalist could investigate this. Sad seeing that the Defence Force at one stage had its own catering corp.

So, can government handle its own administration? Looks like it can’t even come close to its sub-contractors.

“Government was responsible for this.”

Yes indeed. I recall those time very well. But let’s emphasise the “corrupt” aspect. This shows it up.

What happens when (not if) there is a post office strike?

Hahahaha! I predicted that they will drastically increase their fees as soon as the initial contract is signed. I also predicted that they will struggle to pay beneficiaries on time every month because they have a history of striking for months. As it is now they struggle to deliver mail.

yes, it is ironic….can’t do what they supposed to do ( delivering mail )

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