Minister Jeff Radebe: Comprehensive Social Security Report

Members of the IMC present here
Minister of Telecommunications and Postal Services
Minister of State Security
Deputy Ministers
Directors General, CEOs and Officials of Government Departments and Entities,
Members of the media here present
Ladies and gentlemen

Good morning and welcome to this much-anticipated press briefing.

The statement we are presenting today provides the briefing on government’s work that is the culmination of a very rigorous, in-depth and mindful process.  It also serves to provide South Africans with an update on this work the Government is doing to ensure a smooth transition in the payment of social grants from 01 April 2018. This statement summarises the information that was submitted to the Constitutional Court on Friday, 08 December 2017.

The team behind this worked around the clock, bringing their collective expertise and experiences to ensure that the needs of all social grants recipients receive government’s highest attention. As a caring government we remain steadfast in our commitment to provide a social security safety net that responds to challenges of poverty, inequality and unemployment in line with Vision 2030 of the National Development Plan (NDP).

As a point of departure let me re-emphasize and assure the people of South Africa and particularly the social grant recipients, on behalf of the Interministerial Committee on Comprehensive Social Security, that government will continue to pay social grants come 1 April 2018 and beyond.

The IMCs mandate and Terms of Reference on Comprehensive Social Security was expanded by President Jacob Zuma to oversee the implementation of the Constitutional Court Order of March 2017, under the chairpersonship of the Department of Planning, Monitoring and Evaluation. The role of the IMC is to clearly act with Political Authority to guide and direct the implementation of the Constitutional Court Order. The Court ruled in March 2017, that the order of invalidity on the contract of the current Service Provider be suspended for a period of 12 months ending 31 March 2018.

Subsequent to that, SASSA considered various options for the replacement of service providers and preferred the option of the South African Post Office as the most suitable one.  Government elected to resolve the impasse between SASSA and SAPO through the IMC, which illustrated Political Commitment at its meeting with the Joint Committee of SCOPA and the Portfolio Committee on Social Development on the 8th November 2017. We believe that the announcement we are making today, demonstrates further commitment and dedication of the Executive, to take full responsibility for the implementation of the solution that now finally resolves the challenge of payment of social grants.

Background

The Constitutional Court on the 17th March 2017 ordered that the South African Social Security Agency (SASSA) and the Department of Social Development (DSD) to find an alternative service provider to Cash Paymaster Services (CPS). The current contract with CPS for the payment of social grants was declared invalid by the Constitutional Court in 2014 bringing finality to a legal battle that began in 2012.

The declaration of invalidity was suspended until the end of the contract period to enable SASSA to “insource” the payment of grants.  Following the Black Sash action in March 2017, the Court further suspended the declaration of invalidity of the CPS contract for another year, to March 2018. This was to allow the DSD and SASSA to find a permanent solution to the payment of social grants to all beneficiaries.

Constitutional court directives

On the 7th of November 2017, the Constitutional Court issued Directives to SASSA to ensure proper compliance with its order dated 17th March 2017. It directed SASSA to:

• by Friday, 08 December 2017, report to the Court, on affidavit, as to SASSA’s plan to effect the uninterrupted payment of social grants: 
• report to the court, on affidavit, each month as to the progress achieved in implementing a communication plan;
• request GCIS to develop and implement a focused communication plan to inform current and potential beneficiaries and recipients of social grants of the implications of the transition and benefits of receiving their social grants via bank accounts provided by commercial bank or financial institution of their choice;
• combine statistics and information of all mechanisms involved in the payment of social grants in one consolidated document to be provided to the panel on a monthly basis;
• provide appropriate and sufficient detail on processes undertaken by SASSA to obtain services of service providers, including communication with the office of the Chief Procurement Officer by 12 noon Friday 17th November 2017;
• provide information to Panel of Experts within the required timeframes or provide the panel, if unable to do so, within three working days of the request;
• after filing its plan, report to the court each month as to the progress achieved in implementing the plan, the steps taken to mitigate risks which could prevent the full execution of the plan and any other matters;
• by Friday, 8 December 2017, report to the Court as to SASSA’s contingency plan if a seamless transition on 1 April 2018 is not realisable; and
• provide the Panel with appropriate and sufficient information on any steps taken to implement these directions.

It was on the basis of these comprehensive directives that the IMC committed to align its work to the Constitutional Court reporting requirements, given the similar timeframes and expectations of the dedicated period between now and April 2018.

It was also our considered view that reporting requirements must coincide with the deadlines and deliverables of the Constitutional Court. In this way, SASSA would remain dedicated to the task of implementation rather than dual and different reports to different authorities

In order to ensure the uninterrupted payment of social grants, and considering the fact that the Court ordered SASSA to identify ‘an entity other than CPS to pay social grants or take the function over itself’, SASSA’s best option was therefore to adopt an approach which will ensure insourcing of the grant system within government as well as seamless hand over within a period not exceeding five years. SASSA therefore resolved to collaborate with the South African Post Office (SAPO) to ensure a seamless phasing out of the current service provider CPS in compliance with the Court Order in the Black Sash matter dated 17 March 2017.

Announcement

I am delighted today to announce to members of the media and the South African nation that we have reached a landmark agreement between the South African Post Office and the SASSA to bring to life a new grants payment system. This new system while drawing on the resources and capabilities of the South African democratic state, will also make allowance for the participation of other partners such as enterprises and commercial banks, in the payment of social grants to beneficiaries.

As promised, the commitment of the IMC to our people was to conclude an agreement between SASSA and SAPO.   

On the 17 November 2017, the Implementation Protocol agreement was finalised and signed between SASSA and SAPO, and myself as the Chair on behalf of the IMC. This, and the work conducted under the auspices of the IMC, subsequently led to the signing of a Services Agreement between SASSA and SAPO on 7 December 2017. This Agreement gives effect to the implementation of the phasing in of SAPO and the Postbank as a service provider and also as one of the key channels through which grants will be paid.

This constitutes the first critical step of the development of an integrated grant application and in-sourcing of payment system focusing on the following critical objectives:

The need for a significant improvement in the overall service delivery to beneficiaries, including the delivery of such services in an effective and efficient manner, including:

• Flexibility for beneficiaries to access their payments;
• Consistency in beneficiary experience irrespective of grant delivery channel;
• Provision of a payment service within the SASSA regulatory environment;
• Access to funds in the most remote parts of the country;
• Reliability of payment service; and
• Most of all, safeguarding and protecting the dignity of all beneficiaries.

The reduction of fraud, corruption and leakage including:

• Provisioning of consistent payment of the right grant to the right person at the right time;
• Ensuring proof of life of beneficiaries as an integral part of the payment process; and
• Ensuring that beneficiaries are not registered more than once.

Reducing the cost to both SASSA and the beneficiaries, which also saves the country’s fiscus significant amounts.

On Friday, 8 December 2017, the team submitted a consolidated model to the Constitutional Court, as part of the implementation plan which makes provision for four key channels through which beneficiaries across the country will receive their grants:

• Payments through bank accounts of beneficiaries’ choice with commercial banks.
• Payment through merchants in large retail shops.
• Payment through the Postbank of SAPO at its outlets countywide.
• Payments through a second tier of merchants which include village banks, General Dealers, small retail outlets, Spaza shops, cooperatives etc, which are legally registered and South African owned and operated.

This will be done essentially through the insourcing of grants payments in a phased way.  One of the primary objectives of this phasing is to fundamentally reduce cash payments for security, efficiency and cost-saving purposes.

The role of the developmental state in the provision of comprehensive security

The Government of the Republic of South Africa has since 2006 been developing and implementing the Comprehensive Social Security System which provides a social safety net for various vulnerable groups of people in our society. The system comprises the Road Accident Fund, the Unemployment Insurance Fund, Social assistance provisions such as the grant payment to elderly, disabled and children, social relief of distress, amongst others. This system serves to enhance the social protection of the most vulnerable provided by the developmental state.

In addition to the above, the Government as the Executive of the developmental state is guided by the three Levers of the National Development Plan 2030, namely; Strong and inclusive economy, Capable State and Active Citizenry, and Building the Capabilities of South Africans. This latter lever includes the Medium Term Strategic Framework (MTSF) Outcome 13 of Social Protection, which includes the Social Security, part of which are social grant payments.

The government’s response to the potential crisis of the payment of social grants was to adopt the approach which is driven through its second NDP lever – Capable State and active citizenry. This intervention is intended to consolidate government capacity, to provide an effective response and sustainable solution to the social grant payment system.

In its response to the Constitutional Court, the IMC confirmed the adoption by government of a State led Hybrid Model, which included a partnership between SASSA and SAPO, increasing the role of the banks and merchants and reducing the role of cash payment for social grants. As indicated above, the IMC signed an Implementation Protocol on the 17th November together with SASSA and SAPO, in terms of the Intergovernmental Relations Framework (IGR) Act, 2005 (Act No13 of 2005), which was submitted to the Parliamentary Committees on the 21st November 2017. The IMC made further commitment to ensure full compliance with the 7th November Direction by the 8th December 2017.

This IGR legislation further provides for a very detailed framework for negotiations and a dispute resolution mechanism, which outlines court as a last resort, for public sector entities. The signed Implementation Protocol is thus in this instance the umbrella agreement binding the Public Sector parties and brought into effect through the Contractual Agreement signed by SASSA and SAPO for the implementation of the detailed project plan.

The partnership between SASSA and SAPO is founded on the principle of building the capability of the State, through services to be provided by SAPO to SASSA, in a more cost-effective manner when compared to either the Private Sector or the current incumbent service providers.  The Build, Operate and Transfer Model allows the investment made to SAPO to directly benefit and be transferred to SASSA at the end of the five-year period. The public sector-led component of this Hybrid Model allows government to effectively monitor the payment of social grants and intervene timeously if necessary with additional resources or capacity during this period.  This will be done without benefitting or breaching contractual agreements between the government and private sector parties.

This partnership allows for retention of assets, systems and data with state entities for the benefit of government and the beneficiaries. It further protects the personal information of beneficiaries from abuse by private sector companies for ambush marketing and sale of financial products and deductions which the poor cannot afford. The State information will be retained and protected and will, in the future, be consolidated with other state information such as that from Home Affairs (National Identification System), Human Settlement (Housing Subsidies) and Transport (Drivers Licences).

The Hybrid Model envisages increasing the role of financial institutions through a Migration Plan over the five-year period and beyond. The Banking Association of South Africa, Reserve Bank and some banks have met with the IMC’s Technical Committee’s subcommittee on a Financial Model to discuss the establishment of a Special Disbursement Account which will be more affordable than normal bank accounts with respect to transaction fees. An effective communication plan by government and aggressive marketing plans by the respective banks will be necessary to migrate beneficiaries to new bank accounts away from cash pay points.

The Hybrid Model further identifies the role of “second economy” merchants such as General Dealers, corner shops, spaza shops, village banks and cooperatives in township and rural areas outside of the 5km radius, which are legally registered and South African owned and operated.  This will provide a wider network of outlets, greater accessibility for beneficiaries within rural villages and townships and eliminate transport costs to banks and town centres.

SAPO role and responsibilities

SAPO will be responsible for the provision of the following services:

• electronic banking services, including the provision of a central holding account and special disbursement accounts;
• on-boarding of new beneficiaries;
• biometric authentication of beneficiaries;
• development, in conjunction with such other state capabilities as may be required of the required software solution to replace the incumbent systems.
   

SAPO will also provide cash disbursement through its branch network, particularly in locations close enough to replace existing cash pay-points.  SAPO may develop a competitive alternative to the current cash in transit pay-point service, subject to the approval of SASSA.  SAPO will at all times ensure compliance with the SASSA Act, 2004.

SASSA roles and responsibilities

SASSA is responsible for the following in this agreement:

• The provision of all related information SAPO will need to make all decisions necessary in the payment of grants.
• Providing timeously to SAPO a beneficiary payment file prior to the grant being paid.
• Providing SAPO with Beneficiary biometric data and beneficiary biographic data.
• The provision of the funding for the payment of social grants.
• Providing SAPO with all reasonable assistance in order to render the services.

SASSA will also be responsible for:

a) managing and overseeing SAPO’S performance;
b) monitoring the quality of the Services;
c) convening meetings with SAPO as agreed; and
d) assisting SAPO, where reasonable and necessary.

All of this is to ensure SAPO provides beneficiaries with the highest level of service as per the requisite legislation.

Reviewed payment channels

While a review is considered, it has to be stated that SASSA’s grant distribution and service is a national imperative which will be informed among others by the following principles:

• Accessed in the most convenient way to beneficiaries that accounts for their socio-economic, educational and other related aspects of the beneficiary profiles;
• Flexibility for Beneficiaries to access their payments
• Access to funds in the most remote parts of the country

The implementation of the Hybrid Payment Model as espoused in the SASSA Act will be intensified and beneficiaries will be given a number of options to be able to exercise their wider choice.

To this end,

SASSA has adopted a 5-year phased in plan as follows:

• Phase 1: Payment of Social Grants as from April 2018 and CPS Exit. (Year 1);
• Phase 2: Implementation of Hybrid Model that addresses the Constitutional Court directives (Year 2 & 3);
• Phase 3: Development of SASSA Insourcing Infrastructure (Year 4 & 5)

Social Grants have played a significant role in stimulating and supporting business in general, government has taken a conscious decision to place Social grant payments as a platform for integration of local enterprises into the social grants distribution value chain and unlock the potential of small, medium and micro enterprises (SMMEs), cooperatives, township and rural enterprises. This move will also assist to reduce the government’s bill on service fees for cash disbursement.

With the signing of the SASSA / SAPO Agreement our implementation plan commences immediately and more details about this will be shared with beneficiaries over the coming weeks and months. 

The main issues we would like South African grant recipients to be aware of as implementation starts, are the following:

• First, for about over 2 million beneficiaries who receive their grants through bank accounts, SASSA has received the details of all these bank accounts and has confirmed them, and from 1 January 2018 your grant will be paid directly into your bank account by SASSA.
• The implementation plan builds in the option for recipients to migrate to the banking sector.  SASSA is in discussions with commercial banks for the establishment of a special low cost bank account.  More than 5 million South Africans who receive their grants at the moment through electronic means – that is using a PIN number at an ATM, a retailer or other pay point – will be eligible for this special, low cost account.  To ensure that there are no problems as beneficiaries move from their current payment point to the new commercial bank, the current SASSA card held by Grinrod Bank will be valid until the end of December 2018 – let me emphasizes this - the current card will remain valid beyond the current validity date of December 2017.
• Nearly 2.9 million South Africans (which is 29% of beneficiaries) receive their grant payments in cash at more than 10 000 cash points across the country.  These beneficiaries use biometric verification at the point to receive their grant in cash.  For a short to medium term, these beneficiaries will continue to use the current cash payment method.    SASSA will go out on a competitive bidding process to procure the service of a service provider for cash distribution at pay points.
• SASSA and SAPO will embark on a process to verify the mapping done by SASSA of pay points and SAPO branches. The intention is to determine pay points that can be migrated to SAPO infrastructure to minimize duplication without compromising service delivery to beneficiaries. However, the norm of keeping pay points within a 5 kilometre radius of the beneficiaries will be maintained.  The migration of pay points to the SAPO facilities will facilitate natural migration to the SAPO and electronic payment channels.
• Additionally, SASSA and SAPO will cooperate on to conducting the biometric authentication of beneficiaries through linking with HANIS.  SASSA on the other hand will verify the biometric data of all beneficiaries in its possession and transferred such to SAPO for uploading for utilisation during payment.
• In as far as the enrolment of new beneficiaries is concerned, SASSA will build capacity to take the enrolment function from CPS. This will include the design of the requirements, upgrading of infrastructure, procurement of biometric enrolment equipment and training of staff. The SASSA and SAPO systems will have to be configured to enable SAPO to issue a payment card once a beneficiary has been enrolled.
• Finally, SASSA and SAPO will identify card issuance sites where interface with beneficiaries will happen. Consideration was made to use pay points on payment days to issue new cards to beneficiaries. Communication will therefore be issued to beneficiaries to request them to visit identified sites to receive their new cards.

The project will be implemented by government through the following departments and agencies:

• The DSD, SASSA, the NDA, Telecommunications and Postal Services and SAPO
• Trade and Industry; Small Business Development; Rural Development and Land Reform; Agriculture and COGTA
• GCIS will lead the communication and public awareness work stream involving all IMC departmental and agency communicators

Let me reiterate:

Today, government has announced a landmark agreement between the South African Post Office and the South African Social Security Agency on a new grants payments system to be implemented from 1 April 2018.

Social grants will continue to be paid as directed by the Constitution, and through existing channels until then.

No SASSA Card will expire come December 2017.

Social grants remain an essential part of Government’s social protection programme which protects the poor and vulnerable.

Together we will achieve the NDP Vision of an inclusive and responsive social protection system.

In conclusion

Government is committed to making the payment of grants as easy as possible.  We are cognizant of the fact that grant recipients live across the length and breadth of the country, in areas with different characteristics of demography, geography and culture which will influence significantly the method to be used in their distribution. We are also conscious of the challenges we may face due to the phase in process.

It is against this background that government will embark on a massive communication and education programme aimed at giving information on the choice of payment channels to be availed as well as specific requirements of beneficiaries to enroll in new channels.  We hope to be doing this in collaboration with all partners and stakeholders in this process. The process of information dissemination starts here with you members of the press, and we appeal to you to further amplify the message to all, directly and indirectly affected.

I wish both SAPO and SASSA as well as other partners who will be involved in rolling out the establishment of this new system all the best moving forward. Together we can move South Africa forward.

I would like to thank the members of the IMC, my fellow Ministers: Minister Cwele of Telecommunications and Postal Services; and Minister Dlamini of Social Development, amongst others and the Technical Team of the IMC on Comprehensive Social Security, who have been working for the past month in ensuring that all elements of this new plan of paying Social Grants according to the Constitutional Court directive are met.

I wish all the grant recipients, their families and all South Africans, including members of the press, a safe festive season and a happy entrance to the New Year!