Food Voucher Scheme: briefing

Social Development

25 June 2002
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Meeting Summary

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Meeting report


26 June 2002

Chairperson: Mr E Saloojee

Documents handed out:
Food Voucher Project June 2002

Committee was briefed by an independent consultant from the Women's Development Business Investment Holdings, Disability Employment Concern Trust and Accor SA on the progress they had made since their previous presentation on the Food Voucher scheme in February 2001. Members were concerned that the scheme would not benefit people in the most remote rural areas where there were no shops, banks and even roads. Members were informed that if Government agreed to utilise the network as a social delivery mechanism the infrastructure could be extended to these regions.

Mr C Millward, an independent consultant to the Women's Development Business Investment Holdings (WDB), Disability Employment Concern Trust and Accor SA (hereafter referred to as 'the Consortium') had revisited the issue of food vouchers because of its discussions with government and business. The Consortium had first made a presentation to the Committee in February 2001.

The concept of food vouchers was well-known internationally. It had been developed in Europe in the 1950's (in the post-war period). A system was introduced whereby employed people were fed by their employees for societal good. The system remains in place in Europe. In France there were more than two million users. Britain expanded the concept to include tax benefits for employers. The government therefore in effect pays one third of the cost of the scheme. Since it has become a strong and viable business in Europe the concept has migrated to include other benefits.

In the developing world the system moved from the concept of lunch vouchers to food vouchers and family feeding vouchers. In Brazil food employers issue vouchers to low-paid employees hereby subsidising the family income. Employees are issued booklets of twenty vouchers, which are exchangeable for food.

It is evident from research by the National Institute of Economic Policy that many employed persons supported informally employed and unemployed persons. Research has shown a shortfall in money spent on food as opposed to money needed in order to ensure adequate nutrition.

In Brazil the scheme is the largest Public Private Partnership with eleven million users. Criminal sanctions and civil prosecution prevent abuse of the system. The Consortium issues food vouchers to eleven million people around the world.

Progress made with the Food Voucher Project until June 2002
Mr Millward read the document entitled 'Food Voucher Project-June 2002'. Government had responded favourably to the concept during discussions and accepted its validity and its potential to address the nutritional needs of the people. Government's main concerns had been (1) how the scheme could assist the unemployed and (2) whether the Consortium could deliver from a technical point of view. The Department of Finance supported the idea and stated that if the Consortium could deliver from a technical point of view and assist beyond the lower paid workers to include the unemployed, it would provide budgetary support.

Dr T Ndlovu, (a Non- executive member of the WDB) referred to the visit to Brazil the previous year. The delegation had witnessed how the network could be extended beyond food vouchers, such as buying medicines from pharmacies and in some cases it even extended to transport. In South Africa it could perhaps be used as a social delivery mechanism such as a means for paying pensions in remote areas. This would be beneficial since stopgap solutions (such as transporting an ATM to rural areas at the back of a bakkie) involve a very high cost.

In South Africa a magnetic card would be used to implement the scheme. Historically a stamp book was used, but there has been a shift toward the use of magnetic cards. Two to three million of the eleven million users in Brazil now use the magnetic card which is swiped at the supermarket terminal. This technology can then be transferred to any social delivery programme. Cards can be provided immediately. There is ongoing research to determine the areas with the greatest poverty in South Africa.

The scheme will be competitive and not an exclusive venture for any particular company. Brazil has established a framework for the issuing of food vouchers. The market is made up of ACCOR, which owns 50% of the market, as well competing infrastructures.

The card reading system is already established. There are 150 terminals in South Africa. Where there is a lack of infrastructure in the rural areas and the townships, the system would piggyback on the wireless network of the national lottery. The system can therefore be introduced in the rural areas at low cost. The Consortium has interacted with the major banks, two of which are willing to negotiate on costs. The infrastructures, which will be created by the private sector, can be utilised by government for purposes beyond the issuing of food vouchers, such as pension payments and poverty relief. Government would therefore tap into existing infrastructure to assist the poorest of the poor, (which is government's responsibility) hereby making the scheme cost effective for Government. In addition it would lead to additional economic activity due to increased food consumption (as it did in Brazil). One should also take into account the tax benefits to employers. The net cost to Government would be R370m per annum.

One would not be able to purchase alcohol and cigarettes using the card. In Brazil this is actively policed and contravention of this rule results in prosecution.

Prof L Mbadi (UDM) was not convinced that the technology could reach the most remote rural areas, where there are no banks, supermarkets or even roads.

Mr Millward said that they would be able to access any region that had GSM or wireless. This covered 90% of the population. These were the Consortium's constraints at present. If Government used the system to make payments in these areas it might then be possible to develop the technology. Ms T Slabbert, the CEO of WDB added that the rural areas were the domain of WDB. Their focus was specifically on rural women. If government used the network to make payment of pensions, grants, etc. then the technology may become available.

Dr Ndlovu added a partnership between government and the private sector is needed.

Dr O Baloyi (IFP) asked to what extent the scheme depended on electricity.

Mr Millward explained that where there was no electricity they would use GSM technology.

Ms S Rajbally (Minority Front) asked what happened if the card was lost. She asked if the funds on the card included the person's salary.

Mr Millward replied that it was possible to introduce PIN and identification numbers, as well as fingerprint identification. However the amount of money was relatively small and therefore did not justify spending the huge amount, which would be required to introduce these precautionary measures. A PIN alone would therefore suffice. The funds on the card do not affect the person's salary.

Ms J Chalmers (ANC) wanted clarity on how payment would work. Would all firms make payment into a common banking system.

Mr Millward explained that the employer would give the money to ACCOR and a voucher to the employee. The employee purchases items from the supermarket using the card and ACCOR then pays the supermarket. In the case of the unemployed person, local government would replace the employer.

Ms Chalmers asked why a business like Pick 'n Pay does not have an in-house card.

Mr Millward replied that employees preferred an external card to an in-house card.

Ms R Southgate (ACDP) disagreed with Mr Millward's statement that the amount on the card is small. She stated that if this were linked with e.g. the Basic Income Grant the amount would increase. Thus a PIN is insufficient to ensure safety, as there is also a possibility that crime syndicates could target people for their cards.

Mr Millward apologised for saying that the amount was small, but explained that he had meant it from the point of view of technological rollout. With regard to the possibility of being targeted by crime syndicates, he said that this could mean that the Consortium might have to follow banking technology and introduce a 'smart card system'. In addition the banks would argue that syndicates would be inclined to target conventional credit cards first, since they are able to obtain larger amounts. A PIN may indeed not be the answer. He suggested that a barcode and photograph could be used, as this is reasonably affordable.

Ms Southgate asked to what extent the Consortium had engaged the Department of Finance.

Dr Ndlovu explained that it had been very difficult to secure a meeting with the Minister himself. However the Consortium had met with the Director General of National Treasury. She had insisted that the Department would only support the scheme if it catered for the 'poorest of the poor'.

Ms C Ramotsamai (ANC) referred to abuse by beneficiaries themselves, e.g. where the beneficiary convinces the shopkeeper to sell him liquor using the card. She asked how this would be controlled.

Dr Ndlovu replied that the provisions dealing with medical aid fraud could also find application here. In Brazil there are stringent legislative provisions in place to act as a deterrent to any fraudulent practices.

Ms E Gandhi (ANC) referred to the poor quality of food to be found in shops. Since this would not improve the nutrition of families the scheme would not achieve its main objective, which is adequate nutrition. She suggested that the Consortium encourage food gardens.

Dr Ndlovu stated that the Consortium would discuss these issues with government. The WDB works with women's groups which could be set up in small businesses that can sell fresh produce. The users of the card could then be encouraged to buy from them. The Consortium could also interact with the Minister of Agriculture on this issue.

Mr M Da Camara (DP) referred to the fact that in Tribal Trust areas one shop often had the monopoly over a large area. Thus this shop was able to charge high prices. People in these areas were therefore vulnerable, as R250 in that area would not go very far.

Mr Millward answered that in Brazil a permutation of the scheme had arisen whereby staple baskets of food were sold at fixed prices. Shopkeepers in these areas would therefore be forced to sell these items at pre-determined prices.

Mr Da Camara referred to the migrant labour system. If the father was working in Johannesburg, how would dependants in the rural areas benefit from his card?

Mr Millward replied that this would depend on whether the employer allowed the card to be used back home in the rural areas. The Consortium could accommodate this, but this matter was best dealt with on a case by case basis. Ms Slabbert felt that Government should actually make this a prerequisite so in order for a company to provide the service it should agree to allow the employee's dependants to access the benefits.

Ms Chalmers said that it had been sixteen months since the Consortium made its presentation to the Committee. She asked how far they had progressed since then.

Mr Millward explained that the Consortium had done all it could up to that point. They have researched the technology exhaustively. They were now waiting for Government's response.

Mr Da Camara asked why no consultations had been done with the Department of Education. Food vouchers should be accessed at schools as well. He referred to Hoerskool Volksrus where poorer pupils were given vouchers, which can be used at tuck shops. The richer parents finance this venture.

Dr Ndlovu replied that the Consortium had discussed the issue of a school-feeding programme with the Department of Health.

Ms Rajbally asked if the PIN number would be printed on the card.

Mr Millward said that it would not.

The Chair asked if the Committee could write to the Consortium to address any additional concerns.

Ms Slabbert answered in the affirmative.

The Chair said that while he was not promoting the food voucher scheme, he was of the opinion that if it was implemented efficiently it could achieve positive results.

Meeting was adjourned.


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