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Minister: Susan Shabangu
Deputy Minister: Hendrietta Bogopane-Zulu
Deputy Minister
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Statement by the Minister of Social Development, Ms Bathabile Dlamini, during SASSA Media Briefing in East London, Eastern Cape Province Print E-mail
Monday, 30 October 2017

Monday, 30 October 2017

Programme Director, Ms Lumka Oliphant

Acting CEO of SASSA, Ms Pearl Bhengu

Senior Managers of the Department of Social Development

Executive members of SASSA

Members of the media

Ladies and gentlemen

Thank you for being part of this media briefing convened with the intention of reporting to the nation on progress we have made towards finding a sustainable solution for the payment of social grants in the country.

I would like to reiterate that the South African Social Security Agency (SASSA) was established in 2006 and given the mandate of administering and paying social grants. It is always important to understand what we are trying to achieve by understanding the reason we have SASSA so that when we discuss this matter, we do not lose sight of why SASSA was established. South Africans have a right to social assistance and also have a right to receive their social grants with dignity.

There has been much speculation about what has been the progress thus far on the process to make sure that social grant beneficiaries receive their social grants uninterrupted.

The Constitutional Court ordered earlier this year that we report every quarter on our progress - we have thus far complied with the requirements of the Court.

Ladies and Gentlemen of the media,

In June this year, SASSA sent a request for deviation from normal procurement processes from the National Treasury. The deviation from normal procurement processes was approved by the National Treasury in July.

The reason for deviation was for SASSA to procure payment services of social grants directly from the South African Post Office (SAPO) first, before inviting other bidders. This decision was informed by the fact that SAPO is a government agency and a Request for Proposal (RFP) was subsequently sent to SAPO.

In its RFP request, SASSA required four services from SAPO as a potential service provider which were:

provision of an integrated payment system,

banking services,

card body production, and

provision of cash payment services.

I would like to put it on record that SAPO responded to the RFP and a Bid Evaluation Committee (BEC) finalised its work on 17 September 2017. The evaluation process had incorporated the technical due diligence findings conducted by the Centre for Scientific and Industrial Research (CSIR) to determine the ability of SAPO to perform the requirements as outlined in the RFP. A copy of the CSIR report is available on the website of the Department of Social Development for your perusal.

As per Supply Chain Processes, the Bid Adjudication Committee (BAC) convened and adjudicated on the recommendations of the BEC. The outcome of the adjudication processes revealed that SAPO can only provide one of the four services, namely; the provision of an integrated payment system.

This requires the development of a payment platform with features for biometric enrolment as well as biometric proof of life. SAPO was awarded the provision of a payment system and requested to respond to the offer by the 25th of October 2017.

The conditions attached to the award were as follows:

SAPO should accede to providing the service they were found competent to deliver;

Deliverables be met within the prescribed timeframes;

SAPO provides written confirmation of its financial reserves equal to at least three months as per the RFP;

Quoted price be subjected to negotiations; and that

SASSA will have real time and direct access to payment data.

On the requirement to provide card body production and distribution, the bid evaluation process discovered that SAPO can only produce 2,4 million cards per annum as opposed to the minimum requirement of 4,2 million cards per annum stipulated on the RFP.

The RFP also required that SAPO disclose if any of the services/work in the RFP would be sub-contracted and to whom it would be sub-contracted to. However, SAPO did not disclose this information even after being requested through correspondence sent to them. It should be noted that in its bid documents, contrary to its response, SAPO mentioned that a reputable supplier will provide bank cards.

This omission resulted in the bid committee being unable to assess the capacity of the SAPO sub-contractor, consequently making it impossible for SASSA to award the card body production element of the bid. The CSIR report, as well as the report submitted to the Constitutional Court by the Panel of Experts also expressed similar concerns.

Another element of the bid that could not be awarded to SAPO, is the provision of banking services which included the provision of a special disbursement account with FICA (Financial Intelligence Centre Act) / KYC (KnowYourCustomer) exemption (17) and an EMV (EuroPay, MasterCard/Visa) prepaid debit card with biometric proof of life as well as the provision of a biometric verification solution in line with the current exemptions afforded to SASSA by the Payment Association of South Africa (PASA).

SAPO could only provide FICA Exemption (17) but did not propose a solution for dealing with large sums of deposits and could not propose a debit card linked to a special disbursement account.

Another important aspect is that Postbank does not have a fully-fledged banking license. This means SAPO cannot settle and acquire.

Inter-operability within the National Payment System (NPS), including the utilisation of the ATM and retail point of sale network requires for the card to be EMV compliant as determined by VISA and MasterCard. EMV is the standard as defined by the three international companies that provide for inter-operability, specifically for international transacting. In South Africa PASA has prescribed only the EMV standard coupled with a MasterCard/Visa card to operate within the NPS. Our research tells us that countries like Russia, China and India utilise a white label EMV standard that allows for local inter-operability without the exorbitant costs of international transacting.

The non-compliance to this standard will simply remove the current convenience afforded to the beneficiaries of social grants. SAPO could not provide a solution for inter-operability between an on-line and off-line solution.

It is a requirement that all banking solutions in South Africa should have on-line network connectivity for transacting purposes. SASSA currently has registered 4,8 million beneficiaries in more than 10,000 pay-points. The connectivity and communication in these pay point services vary from poor to non-existent. Off-line capability is therefore a pre-requisite for any service provider to participate in the payment and distribution of social grants.

The idea that pay-points should simply be shut down and recipients be forced out of their communities to receive their social grants contravenes their constitutional right to receive their grants with dignity. SASSA norms and standards dictate that beneficiaries should be within a 5km radius.

We are still committed to eliminating long queues, cash heists, and loss of life of grant beneficiaries at pay-points and banks that used to be the order of the day in the past.

This option will not only inconvenience the beneficiaries, but it will also destroy the local economies that have been developed and are solely reliant on social grant spending for survival. It is important to note that the pay point infrastructure provides a market for locals to sell their wares.

The SAPO infrastructure consists of approximately 2,700 points of service, of which more than 500 are agencies within retail stores. More than 1,200 have less than 100 square metres of operating space and this makes it impossible to expect this infrastructure to service millions of people, even if they were to be staggered.

Ladies and gentlemen,

SASSA believes that SAPO can participate in the distribution of social grants by supplementing the current distribution infrastructure with the SAPO brick and mortar. This can be achieved in a very short space of time, through the deployment of ATM’s and point of sale devices that provide cash back. Authentication and verification can be achieved through biometric and the testing of biometric enrolment should start in February 2018.

This will assist the SAPO to revive its closed outlets, in particular, the ones that are based in rural areas and townships so that employment is also created. To facilitate this process, the SASSA Committee will revise its project plan in order to incorporate the project’s roll out.

As part of the insourcing element, SASSA will open paymaster general accounts to enable social grant transfers to be deposited directly to beneficiaries with their own private commercial banking accounts. This process will include black-owned smaller banks, as well as co-operative banks.

We are moving towards ensuring that everybody has proof of life.

The National Treasury has already approved the opening of these accounts and testing will be done by 01 December so that direct transfers can be made from January 2018.

There are approximately 2 million beneficiaries that have opted to utilise an external bank card as opposed to the SASSA card.

SASSA will also insource the management of Social Assistance Regulation 26 (A). This regulation provides for the deduction of funeral policies authorised by beneficiaries. The deduction is not supposed to be more than 10% of the social grant concerned.

SASSA is already taking over this function by capturing mandates from beneficiaries on its social pension system.

The migration of data is in the process of being insourced and an interim database has been created to enable SASSA to perform comparison reports on the completeness of beneficiary enrolment data.

SASSA will initiate another procurement process starting on 03 November 2017 in order to secure the three services which SAPO is not capable of providing. This procurement process will be concluded on the last week of February 2018 and an award will be announced. As part of business continuity, SASSA also facilitated the extension of its current payment card lifespan.

These cards were supposed to expire in December 2017 and beneficiaries are being informed of these developments through a nationwide communication campaign using multiple communication platforms which include face to face meetings. I wish to stress that no card will expire come December 31.

I would like to thank the Acting CEO of SASSA and her team for working hard to ensure that we find the best solution for the payment of social grants which will be beneficiary centred, eliminate fraud and corruption in the system and promote dignity for the poor of this country.

Thank you