SASSA progress report on implementation of Constitutional Court order, with Minister

Social Development

28 February 2018
Chairperson: Ms R Capa (ANC)
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Meeting Summary

SASSA told the Committee that there had been some changes since the previous week’s meeting. It appeared that the March 2017 Constitutional Court judgement had ruled that SASSA could accept a tender from Cash Paymaster Services (CPS). CPS had filed an application at the Constitutional Court in February to request a declaration that it is not prohibited from participating in future SASSA tenders. CPS quoted section 217 of the Constitution which stated that no one could be eliminated from a fair bidding process. SASSA opposed the CPS application, due to the deductions controversy. Black Sash had also opposed the CPS application. On 23 February, the Court ruled that CPS may participate in future SASSA tenders. It stated that the March 2017 judgment ruled that the CPS-SASSA contract was illegal and invalid. However, that judgment did not render CPS ineligible to participate in SASSA's next tender process.

Also in February, SASSA had made a request to the Constitutional Court for a six month extension on the CPS contract as a phase-in phase-out period from the 31 March. The Court would pronounce on that request on 6 March. SASSA had come up with a contingency plan in case the Court denied the request. SASSA had already opened a Paymaster General Account (PMG) account with the Reserve Bank, and was able to pay commercial banks on its own. SASSA assured the Committee that all social grant beneficiaries would be paid on 1 April. SASSA had requested an extension on the current SASSA card used for payment purposes until 31 December 2018, to allow for a process of card swopping to a new SASSA/SAPO card. Should the Court not allow the six month extension period, SASSA would face the problem of payment to people at pay points. Many of those were elderly or disabled. SASSA would have to calculate how many people had to be paid, and would have to take them to places where they could get money. Expanded Public Works Programme (EPWP) workers would have to assist with that.

On SAPO state of readiness, SASSA reported that it had had regular meetings with SAPO. SASSA wanted SAPO to open three accounts: a corporate holding account; a special disbursement account; and an account that the cash payment service provider could access for cash and to do reconciliation. The Public Finance Management Act (PFMA) stated that National Treasury had to be informed when an account was opened. SASSA wrote to Treasury, but as yet had not received a response. SAPO did not have a full banking licence, and would use Standard Bank as a mentor to act on its behalf. Post Bank could not qualify for a full banking licence, as it was classified as a government owned SOE, and did not have a standalone board of directors. SASSA could do biometric verification for the SASSA/SAPO cards, but when biometric enrollment was done, SAPO had to encrypt it in the cards. A first batch of cards would be delivered on 15 March, and would then have to be tested by the Banking Association of South Africa (BASA), the Payments Association of South Africa (PASA) and industry players. SAPO could do card issuing at all offices by 3 April. The card issued by SAPO would be used at all pay points. For a period of six months there would be two cards in circulation, namely the old SASSA Grindrod card and the new SASSA/SAPO card.

In discussion, the strongest challenge to SASSA came from the IFP who suggested that SASSA had created a situation where only CPS could pay. DA concerns were about the conflicting reports from SASSA and the media. The ANC position, as stated emphatically by the Chairperson, was that state institutions had to be capacitated to deal with social grants, as commercial banks were motivated to exploit the situation for profit. There was general concern about the adequacy of the contingency plan, in the event the Constitutional Court did not grant the six month extension on the CPS contract. Members asked if the plan was concrete and practical enough. There had to be a map of cash points, and such a map had to be provided at the following meeting. There had to be information about how many people required cash payment. Concerns were raised about the risks of transport and security attached to cash payments. There was general concern about the Easy Pay Everywhere (EPE) Green card, as it enabled beneficiaries to receive loans. There was a call for the number of EPE cards to be reduced. There was consensus that information about developments had to be communicated effectively to beneficiaries. SASSA was asked why there were delays with the tender for a cash payment service provider. Some Members objected that SAPO was not invited to report to this Committee but only to the Telecommunications and Postal Services Portfolio Committee. It was agreed that a joint meeting should be held. The Committee also requested a report on how many people affected by illegal deductions had been refunded.

Meeting report

Introduction by the Chairperson
The Chairperson welcomed the newly appointed Minister of Social Development, Ms Susan Shabangu. Ms Shabangu had migrated from the portfolio of Women in the Presidency, and was still a champion of women and children. The Social Development Portfolio Committee was a capable committee that held people to account. She invited the Minister to share challenges with the Committee in a relaxed atmosphere, and to get to know the Committee. The day’s agenda included an update by SASSA on its state of readiness. She The Committee and the Department had to work together as a collective to serve the people. The disasters of poverty had to be faced.

Ms L van der Merwe (IFP) remarked that she had never seen the Deputy Minister.

The Chairperson noted the concern.

Ms H Malgas (ANC) agreed that it had been a concern for some time.

Ms van der Merwe reminded the Chairperson that in the previous meeting with SASSA, the Chairperson had said that the Committee would meet with SASSA and SAPO in the following meeting.

The Chairperson replied that it was not necessary for SAPO to come. The Committee could get a report on SAPO from SASSA, its own entity. SAPO reported to the Telecommunications Portfolio Committee. She conversed with that Committee Chairperson, and there would be a joint sitting in due course. The communication protocol between Portfolio Committees was not to be disturbed. The Committee did not meet with SASSA staff who dealt with operational matters. The procurement process had to be understood, and the terms of reference for the tender advertisement. For the moment the Committee had to focus on recent developments with SASSA, its own agency. The Department of Social Development had to do what was necessary to see that its agency accounted to the Committee. She asked the Minister to comment.

Minister’s comments
Minister Susan Shabangu remarked that she had only been in her new portfolio for 72 hours, and was already being thrown in at the deep end. She committed herself to working with the Committee. Her head was still spinning. The Social Development team was better known to the Committee than to her, and would engage with the agenda.

The Chairperson asked the Director General of Social Development to provide an introduction to the SASSA presentations.

Director General’s comments
Ms Nelisiwe Vilikazi, Acting Social Development Director General, said that a progress report had been prepared. At the previous meeting Members had requested an update on the SAPO status quo. SASSA would present a summary of the SAPO commitments, and what had happened in terms of the phasing-in phasing-out process.

SASSA progress report on social grant payments
Ms Pearl Bhengu, Acting SASSA CEO, said the presentation would be similar to the week before, but there had been changes since then. The Portfolio Committee had requested a letter from SAPO the week before, and a comprehensive letter was brought to the current meeting. The Court gave judgement on the application by Cash Paymaster Services (CPS) on 23 February 2018. The March 2017 judgement had been that SASSA could take anyone except CPS. CPS wrote to SASSA about their cash payment tender, and SASSA replied that CPS was to be disqualified from bidding, and that the issue at stake was the deductions. The Court judgement had been that SASSA could take any other service provider. If CPS had a problem with that, it could be taken to court. CPS then quoted section 217 of the Constitution in support of the fact that they could not be eliminated like that. If it was to be a fair process, everyone had to be allowed in. The Court gave judgement the previous week. SASSA had written to the Court opposing the CPS application, especially because of the deductions element. The Black Sash had also opposed the application. Yet the Court ruled that CPS could tender to provide for cash payments to grant beneficiaries using cash pay points and for any other business of SASSA.

Also this month, SASSA had made a request to the Constitutional Court for a six month extension on the CPS contract to be used as a phasing out period from CPS after the 31 March. The Court would pronounce on that request on 6 March. SASSA Exco had held a meeting on 27 February to come up with resolutions in case the Court denied the request. SASSA needed a contingency plan. SASSA had taken a number of phasing in actions. A plus factor was SASSA had already opened a Paymaster General Account (PMG) account with the Reserve Bank, and was able to pay commercial banks on its own. SASSA had requested an extension on the current SASSA card used for payment be extended to 31 December 2018, to allow for a process of card swopping to a new SASSA/SAPO card. SAPO could not do all the card swopping needed for the envisaged SASSA/SAPO card by 1 April, hence time had to be granted for that. The Grindrod Bank account would be used in the meantime. Should the Court not allow the six month extension period, SASSA would face the problem of cash payment to people at cash pay points. Many of those were elderly or disabled. SASSA would have to calculate how many people had to be paid, and would have to take them to places where they could get the money. Expanded Public Works Programme (EPWP) workers would have to assist with that.

There were two categories: money was received from the SASSA commercial bank accounts, and serviced through the PMG account with SARB. There was testing on the Grindrod side. The Grindrod account included people who got money at cash pay points. The account functioned well. Everyone would be paid on 1 April, whether CPS was in the picture or not. The only problem foreseen was cash payment at cash pay points. Someone had to bring the cash to the pay points. If the Court denied the request for a phase out period, there would be problems, as many of the people who received money at cash pay points were old or disabled. SASSA was setting up categories to see how many people in the provinces were getting money at cash paypoints. They would have to be given pin numbers. Some merchants like Pick and Pay in Pinetown had the biometrics, people could use there if it was still operative. EPWP workers could be allocated to help people to local offices. Paypoints had a list of days on which payments were made. SASSA could calculate how many people had to be paid, and could take them to places where they could get the money, including the nearest ATM or merchants. SASSA had a contingency plan. There would be another presentation the following week. A letter from SAPO was brought to the meeting, and Ms Mvulane would present that. Some time frames on the SAPO side would have to be adjusted.

The Chairperson commented that what was received was a comment on the state of readiness, with a contingency plan. The other matter to be considered was SAPO’s state of readiness. One had to ensure that work was done by government in the main. One had to know if SAPO could do the work, as there was a lot of panic out there. It was better for the Committee that SASSA report on SAPO readiness. There could be a joint sitting with the Telecommunications Portfolio Committee later on, but the Social Development Portfolio Committee first had to deal with the SASSA contingency plan. If something happened to SAPO, one had to know that SASSA had a plan.

Ms V Mogotsi ANC) referred to the Court outcome that CPS could be a party in a new contract. It was known that CPS was not clean. Even if CPS was allowed in, there had to be confidence in the adjudication committee to take the right action.

The Chairperson interrupted her to say that the Committee was not to interfere with the procurement process. It could not discuss service providers. She referred to the SASSA state of readiness. There were risks of transport and security for cash payments. EPWP workers could assist at all outlets, but there was a problem of moving people from one place to another. There were concerns of safety for the recipients and their money. The aged and disabled people were involved. There had to be a good plan.

Ms H Malgas (ANC) remarked that the Department had to speak with one voice about readiness for 1 April. There had to be a definite commitment. There were different signals going out. She was worried about the cards. SASSA said that the cards would continue. The Green Card was worrying, as it was the loan card. Grindrod Bank was still there, and there had been problems with them around illegal deductions. Banks did not agree to develop low cost products. She was concerned about the CPS database although SASSA had stated that it would get the database back.

Dr Q Madlopha (ANC) asked if the contingency plan was practical. The number of beneficiaries in the provinces had to be known. SASSA would know on 6 March if the Court would grant extension. She asked how the outcome would be communicated to beneficiaries, and whether it would happen on the same day. It was important that criminals not be attracted to follow. The EPE Green cards were a concern. SASSA stated that all information would be made available to beneficiaries. EPE cards were still being produced. The personal information was not confidential. The Committee was in favour of capacitating state institutions, instead of relying on commercial banks for grant payments. If things were opened up to the big commercial banks, capacity would be taken from SASSA and SAPO. It had to be communicated to beneficiaries what the benefits were if SASSA and SAPO were used. The Court outcome that CPS could tender could not be fought. But the public could be under the impression that CPS was to be excluded.

The Chairperson remarked that state systems had to be strengthened so that people could not be exploited. Commercial banks were in business and had to make a profit. SASO and SAPO understood unbankability and had to provide the service. Commercial banks wanted profits, but SASSA and SAPO wanted cost effective measures that would serve the people.

Ms B Abrahams (ANC) commented that SASO and SAPO had to communicate their strategies to people. Banks could not be fought, but people had to be given an option. SASSA did not levy service charges. She asked why the card swop could not be immediate.

The Chairperson asked that such questions be shelved until engagement with the SAPO report.

Ms L van der Merwe (IFP) referred to the statement that the various Portfolio Committees were not to step on each other’s toes. Yet it was not appropriate for Ms Mvulane of SASSA to present on behalf of SAPO. There had to be a joint meeting with the Telecommunications Committee. It was not fair to Ms Mvulane to have her present on SAPO readiness. She referred to media reports discussed in a previous meeting, and used the term “acrimonious”.
The Chairperson interrupted her to ask that the report in front of the Committee be spoken to, and that the meeting proceed in the manner she had indicated. SAPO issues could be raised when SAPO was discussed.

Ms van der Merwe protested that she was a Member of Parliament and had to raise her concerns. The Chairperson had stopped her midway through her sentence.

The Chairperson asked Ms Tsoleli to address Ms van der Merwe on the matter.

Ms S Tsloleli (ANC) told Ms van der Merwe that the Chairperson was not saying that the SAPO letter was not going to be discussed. She appealed to Ms van der Merwe that the meeting proceed in the manner indicated by the Chairperson. She supported the Chairperson that discussion had to be confined to what was on the table at that moment.

Ms van der Merwe referred to the six month extension. Ms Bhengu had said that if the Court would not allow SASSA to continue with CPS for the following six months, there was a contingency plan in place. She asked that the contingency plan be fully shared in the current meeting. It was a bit late, with 20 working days to go. She asked that the contingency plan be expanded on. There were six months for phasing in and phasing out. She asked how confident SASSA was that only six months were needed. It would not do for SASSA to come back after six months and say that another six months were needed. When CPS was discussed the year before, it was not mentioned that it would still be around after 1 April. The 23 February Court ruling on the CPS was neither here nor there. It did not matter whether the Court said that CPS could bid or not. She quoted the panel of experts as saying “SASSA’s failure to focus on the urgent need to determine the exact number and location of cash points, and its failure to timeously appoint a second service provider to promote cash payment services severely compromised the likelihood of social grant beneficiaries who accessed their grants at pay points, to be paid on time from 1 April”. SASSA had created a situation where only CPS could pay. There were only 20 working days left. The SASSA report showed no alternative plan. SASSA was not properly prepared, only CPS could do the payment.

Ms B Masango (DA) commented that it was essential that everything that was outlined be communicated to beneficiaries. She was concerned about beneficiaries who would fall between the cracks. All segments of the payment of grants were not blended, and it was doubtful if SASSA knew what to do. Beneficiaries were receiving smses to open bank accounts, or to fill in forms and have them signed. She asked how widespread that was. Information had to be communicated as widely as possible to beneficiaries. They were not to fall between the cracks during the handover process. There were conflicting reports from the Department and the media. The panel of experts was quoting CPS as saying that it would not be part of the phase-in phase-out process. Members would receive a report in a meeting, and then there was a conflicting opinion by the panel of experts to the effect that CPS had already gone to Court to say that they would not be party to the extension process. A Member of Parliament was “labeled” for asking where the Committee was when all that happened. Members walked out of a meeting where the Department had set out a step by step progress report, and they were then confronted with conflicting information. What the Department and SASSA were saying had to be placed alongside the report by the panel of experts.

The Chairperson remarked that different parties were at war. CPS was not a department. It did not want to get out of the arrangement, because it was working for them. The panel of experts got reports from wherever they wanted. The Committee would not be influenced by any party that did not report to it. The panel of experts had stated that it would not report to the Committee. It was not accountable to the Committee. The Committee and the Minister had to work together. The CPS would not be part of discussions, as it stated that it had to report to the Constitutional Court. The CPS did not want oversight. The question was if what would happen on 1 April could be communicated properly.

Ms Tsoleli agreed that communication was critical. There had been clumsy communication that had created unnecessary anxiety. A lot of confusion was created. People were asked for their addresses. Communication was discussed the year before, and she advised that the topic be returned to. When SASSA came to report, there had to be agreement on the progress it had made. There had to be a map of cash points, and such a map had to be provided at the following meeting. It had been reported that the cash payment points would be gazetted. She was skeptical about CPS. The year before, the CEO had gone to the media first. CPS was taking from taxpayers and using the money outside the country. If the phasing in and phasing out could be used as a means to bury CPS, that was in order. There had to be information about how many people required cash payment, so that people could be informed.

The Chairperson remarked that Social Development and SASSA could supply such information.

Ms Malgas asked that an overall breakdown of cash payment points be given. It had to be known where specific pay points were.

The Chairperson added that the number of pay points and the spread had to be known.

Ms Bhengu reminded members of a previous report to the effect that CPS was still part of the process. As from 1 April, SASSA would do funeral cover. R5.7 million would be paid on the Grindrod account. Cash payment for all beneficiaries would be on the PMG Reserve Bank account, as from 1 April. The PMG account was opened with the Reserve Bank when SASSA started paying commercial banks on its own; SASSA had taken over from CPS in that. Cards could be paid on 1 April by SASSA, from the PMG account. In a short time, SASSA had not delayed in taking over a lot of services from CPS. There was engagement with SAPO so that it could state what it could do. SAPO could not do cash payment, hence a cash payment provider was advertised for, hence the current overlap.

SAPO would get cards out by the middle of March, and card swapping could then begin. SASSA CPS cards would be swapped for SASSA/SAPO cards. Much was already taken over from CPS. CPS had seen that SASSA was moving fast to take over, which was the reason CPS wanted to go for the cash payment tender. The six month phase-out phase-in extension period was only for cash, and for SAPO to produce cards. Six months would be sufficient, unless there were unforeseen circumstances.

When the year deadline was given, there was no service provider in place. SASSA was not taking over anything at the time. CPS would be there for six months only. A lot still had to be done about cash payment and cards, but SASSA was already capable of biometric registration because it formed part of the account and could be done in-house. There had been some delays because instead of starting early in the year, things only started at the end of year.

If the Court said no, SASSA would have to move with speed. SASSA was already convinced that everyone would have money in their accounts on 1 April. It would be paid into the PMG account at SARB. If the Court said no, it had to be known how to move people to the cash pay points. A list was done to know how many people there were per province. There were 9 000 paypoints, but it only took a few seconds to do the payout. There had to be a concrete plan. People had to know where they had to go from being called at the paypoint. It should be easy to get there, as it had to be within a five kilometre radius. EPWP workers would marshall the payment of cash. There were 2.8 million beneficiaries involved for cash payment. Money would be in everyone’s account on 1 April.

The regulations prescribed that people get money from banks or SASSA cards. The option of banking was always there. SASSA reported to a number of Committees. The panel of experts was saying to the Constitutional Court in their second report in chapter 4 that everyone had to be taken to banks. SASSA had to answer to that, and stated that the option of a bank account could be re-opened. Beneficiaries could open a bank account, but would have to pay bank charges. SASSA was still negotiating with banks for a special product, so that SASSA could cover bank charges as was currently done. SASSA paid R16.44. Banks were not happy with that. A full report would be given. The CFO would be meeting with the last of the banks on the following day. The banks were not keen for a product where SASSA would pay the charges. They wanted beneficiaries to take their own lowest cost product. The Court stated that if SASSA could not adhere to what the panel of experts said in chapter four, reasons had to be given. SASSA replied that there was the issue of bank charges and people having to go to where they had to get their money. SASSA did not want to lose the current SASSA cards. There were benefits. If one went to university to apply for NSFAS it was known that means were already tested. If elderly people wanted to travel on a Greyhound bus, they could get a discount. Government paid R153 billion on social grants. It was explained to the panel of experts that SAPO would come in as a partner. Cards would be swapped from CPS to SAPO. There was pressure from banking from all over. Different Committees had different suggestions. SASSA did not want to lose its own strategy. If the process went to banks, the Committee had to help. Benefits would be lost. It was a huge amount that government was paying.

The Chairperson told the Minister that she was worried. Some people read what they wanted to hear. The panel of experts was recommending to SASSA. If they were really experts, they had to refer matters to where it belonged. The DPSA could assess skills in SASSA. SASSA was discouraging people from going to the banks. SASSA was established through an Act of Parliament. The system had to be strengthened and loopholes had to be closed. Instead of going to commercial banks, the capacity of SAPO had to be built. SASSA had to be used, and had to be prepared for that. It was an agency that once did well, even though it was currently not entirely ready, it had to be made ready. Even ARVs and Health could benefit from the SASSA presence. The Committee was committed to build capacity in government agencies, not to commercialise the service. It would not do to dissolve SASSA because CPS had become the expert. There could be an agreement between CPS and government that if SASSA was not operating well, it could be made sustainable through working with CPS. CPS could bring in experience to build SASSA. It could still make money, but also impart skills. It had to be established if that was within the terms of reference of the Committee.

Ms Bhengu replied that opposition to CPS was focused on the EPE Green card, and the deductions that went with it. She asked Ms Dunkerley to comment on that.

Ms Dianne Dunkerley, SASSA Executive Manager: Grants Policy Implementation and Support, commented that a lot of work had been done about the EPE card. At the outset direct transfers were done into bank accounts. There were two million bank accounts linked to the EPE card. SASSA had sent out letters to every holder of that account, stating that if the beneficiary wanted to continue using the account, he/she had to confirm that. An Annexure C method of payment form was attached, and users were asked to return that by the end of March. It was to confirm that it was their own decision for grants to be deposited into those EPE accounts. People who confirmed that they wanted to use the EPE account were captured in the SASSA system. Those who did not want to continue, and wanted to get back to the SASSA card, would be helped to get back to the method of payment of their choice. There would not be a direct deposit into a new EPE account, unless there was instruction from beneficiaries that they had chosen for that.

Statistics for February and March showed 2 million for February and 2.1 million for March. 100 000 cards under Grindrod was also included in that figure, which meant that the growth with Grindrod over one month was 65 000. It was made clear to payment staff at pay points that marketing of the EPE card was a breach of contract. It was raised sharply with CPS and monitored closely. It was made sure that people who wanted the EPE card knew that there were costs involved. Seeing that bank charges had to be paid as for any commercial product, SASSA had to be satisfied that it was chosen voluntarily as a method of payment.

Ms Bhengu answered about the possibility of information remaining with CPS. SASSA worked with the Information Regulator. SASSA had held a workshop with SAPO, CPS and the Information Regulator. It would be ensured that no information remained with CPS, and it would be deleted if necessary. With the new SASSA/SAPO card, no debit order would be allowed unless people signed for it.

The Chairperson asked which other departments were in the SASSA technical team, and whether there was anyone else besides CPS in the technical lineup.

Ms Malgas commented that she was worried about deductions, but the CEO had covered her. She was concerned about whether it could be illegal in terms of Regulation 26A to allow deductions to take place. According to the SASSA Act, money had to be clean when given to beneficiaries.

Dr Madlopha remarked that EPE Green cards were connected with loans. Such cards had to be reduced. She asked what happened to the loan when the EPE card was cancelled. It was made available to people as a poverty intervention. Who would defend beneficiaries as it was contrary to the National Credit Act?

The Chairperson remarked that the CPS was hyperactive. The EPE Green cards were promoted because people wanted loans. People could not be stopped from recruiting. People were milking government to sustain profits.

Dr Madlopha asked who qualified in terms of the National Credit Act. People who received grants could apply for a loan. The legal team had to look into the matter.

Ms Abrahams said that the EPE cards were a problem in her community. People had little machines in their homes. When she visited, people would disconnect the machines. Marketing for the EPE card was being done, and so people had to be educated to understand. She appealed to the Department to create a media clip to send to communities. People defended their use of EPE by saying that they were getting too little money. It had to be workshopped how information could be filtered down to people working for SASSA in rural areas. Something concrete was needed to communicate to people. She was seeing nothing on TV.

Ms C Dudley (ACDP) commented that letters, WhatsApp messages and smses were sent to people about debit orders. If one looked at the SASSA Twitter, it was not relevant information in the current situation. People had to be fed with important information so that they could come back with questions.

Ms van der Merwe pointed out that SASSA had mentioned the year before that people who had fallen victim to illegal deductions would be reimbursed. She asked how much had been recovered since the previous April. Ms Bhengu claimed that SASSA had only started in December, thus it could not provide the cash payment service in time. However, she recalled that SASSA had mentioned in a letter in June 2017 that it agreed that a cash payment service provider had to be found.

Ms Bhengu replied that she did not remember such a letter. SASSA only started negotiating well after June. Information would be supplied about people with EPE cards that were refunded. SASSA was currently able to do funeral cover. Deductions for funeral cover were done before the money went into SASSA accounts.

The Chairperson reminded Ms Bhengu that there was a question about how information on the do’s and dont’s would be taken down to the lower levels.

Ms Bhengu replied that local office managers were engaged through workshops. Some people were complaining that managers did not want to listen to their concerns about EPE cards. They were told to go to other banks. In Gauteng there were notices stating that all other banks would be accepted, which was not correct, and they knew it.

The Chairperson announced that SASSA had been dealt with and they would proceed to SAPO readiness. She requested that SASSA supply information about how many people had been refunded.

SAPO status quo: update by SASSA
Ms Zodwa Mvulane, SASSA Executive Manager: Special Projects, reported that there were regular meetings with SAPO. There was a meeting on the preceding Monday to agree on the contents of the letter, which was in front of the Committee. Services required from SAPO would include electronic banking and the opening of accounts. The first account was the corporate holding account, and the second was the special disbursement account. A third account would enable the cash service provider to access cash and to do reconciliation. The PFMA required SASSA to inform the Office of the Accountant-General in Treasury before opening an account with a bank. SASSA wrote a letter to Treasury on 26 January but Treasury did not respond. There was only a verbal reply.

SAPO did not have a full banking licence for the opening of a corporate holding account. SAPO would use the Standard Bank for the corporate holding account. SAPO lacked a full banking licence and could therefore only do EFT and settlements of no more than R5 million. The Standard Bank would be preferred over other banks, and would act as a mentor on behalf of SAPO. SASSA had touched base with Treasury to get a short closed procurement process. It had to be known which products were available from the bank that could add value. In its interactions with SAPO, SASSA could not get into the administrative process. The reason for delays in SAPO obtaining a full banking licence was that government had changed its policy around state owned entities (SOEs). Post Bank was classified as an SOE because it was 100% owned by government. In terms of the Reserve Bank Act, to qualify for a licence, a bank had to be a private company. There was interaction with the Department to declare that it did not necessarily include Post Bank. The Post Bank was a division of SAPO, and did not have a standalone board of directors.

The second type of account was the special disbursement account. It could be opened on behalf of beneficiaries. It was not linked to the control account. SASSA could deposit in it, through electronic payment, as in a commercial bank account.

The third account could not commence on 1 April because there was no service provider as yet. It was not a cash payment account. The cash payment service provider could tap into that account.

SASSA wanted SAPO to do the card issue. SASSA could do biometric verification, linked with Home Affairs which was in the IJS, to see if IDs were correct. When a beneficiary appeared at SASSA with an ID from 1 April, biometric verification could be done.

The second service provided by CPS that was brought in-house was biometric enrollment. SAPO would have to encrypt that in the SASSA/SAPO card. SAPO would procure a biometric engine. As it would take some time, it would use the SASSA system to get biometric information onto the card. It would be done as a stop-gap measure. A first batch of cards for the SASSA/SAPO card was procured. The first batch would be available on 15 March. The card was propelled by VISA. Initially the figure was to be two million, but it was adjusted to 250 000, as systems embedded in the card had to be checked. The Payment Association (PASA) and the Banking Association (BASA) and its members had to test the card. PASA and BASA required four weeks to test a card, to see if it was compatible to their payment system. But SASSA asked for a shorter period. Cards would be supplied by 16 March, and there would be a verdict by 30 March.

The reason the card swop could not be done earlier, was that it had to be tested by all players. It was not advisable to put two million cards out, and then have glitches. Cards had to be tested by the banking industry. There would also be in-house testing by SASSA. To see if the systems talked between SASSA and SAPO, there would be a dry run on 19 March, and it would go live on 23 March. It would not be done at all offices. It would be tested on 300 beneficiaries. Systems would be tested for SASSA and SAPO. Test subjects would be traced wherever they were. BASA and PASA would test on the same beneficiaries. Once the card had been okayed, and the rest of the cards obtained, the card swop could be done in April. It was expected of SAPO to do card acquiring and on-boarding.

The Integrated Grant Payment System (IGPS) would be handed over to SASSA in five years. Post Bank had a system that could be used for on-boarding and card issuing. SAPO would use its own IGPS. SAPO would use the SASSA IAM system for a biometric engine. For 1 April, all beneficiary accounts would be loaded with money by SASSA. SAPO could do card issuing in all offices by 3 April. The card swop could only happen in the first two weeks of April, at all SAPO branches including the mail centre depot.

It was with the procurement process that SAPO lagged behind, in procuring a mobile on-boarding and acquiring system. It was written as a “suitcase” in the letter. Some SASSA and SAPO laptops would be embedded with the required system, and it would be at SAPO branches and to a limited extent at SASSA offices. The card swop would go full steam by 25 April, when suitcases would be received. Card issuing would be to those who received cash at pay points. Whoever would be the service provider for issuing and disbursing cash would not issue cards. Cards issued by SAPO would be used at pay points. The service provider had to bring in a mobile ATM compatible to the SASSA/SAPO payment system to read the SASSA/SAPO card. For six months there would be two cards in circulation, namely the old SASSA Grindrod card, and then the SASSA/SAPO card.

The Chairperson commented that SASSA and SAPO were currently a family. National Treasury was part of procurement as observer. SASSA had to tell the Committee what capacity and support it needed. She asked if there would be compliance to account for funds, and if SASSA was comfortable with the current situation.

Ms Bhengu replied that SASSA was comfortable. Treasury would do oversight on cash payment. It could help the CFO to get a special product from the banks and it had helped with the opening of the Reserve Bank account, and Home Affairs would assist with verification.

The Chairperson asked if SAPO had written a supporting letter to the Constitutional Court.

Ms Bhengu replied that SAPO did write a supporting affidavit for the Court to grant a phase-in phase-out process.

The Chairperson commented that a response from the Court was awaited. SASSA had a contingency plan if the Court said no to an extension. It had to be ensured that what was voted for in the Budget went to beneficiaries. Government agencies had to be the priority for services, not business.

Ms van der Merwe remarked that SASSA already knew in December that there had to be a bidding process to find a cash service provider. She asked what had caused the delay in finding a cash service provider. Ms Bhengu had mentioned that SASSA worked with Treasury to negotiate with banks, but a low cost banking account could not be found. She worked closely with Ms Dianne Dunkerley and sent a lot of emails to her. The biggest complaint from recipients was the masssive amount paid for bank costs. The increase in the grant was R20, but some banks charged recipients R50. She asked if no bank was willing to offer a low cost account.

Ms Bhengu replied that SASSA wanted banks to come on board on a certain product that would have been subsidised by SASSA. However, the banks wanted SASSA to take their own low cost banking accounts, instead of a homogenous product for all banks.

Ms Mvulane replied about the tender process delays. An agreement was concluded with SAPO on 8 December. SASSA then had to do the tender specifications, but when the specifications were ready, the government freeze period had already been reached. During the period of 15 December to 15 January nothing could be done, even if it had been placed in the Tender Bulletin. SASSA advertised through the Tender Bulletin, but the specifications were only uploaded on the Tender Bulletin on 12 January. The normal running time for a tender was 21 days. But considering the amount and complexity, SASSA allowed the tender to run for 30 days. The closing date was 2 February. There was a briefing session with bidders on 24 January, which included CPS. There was a request by bidders for an extension of the deadline. The reasons given by the bidders were that the specifications had only become clear on 24 January, and the complexity of the tender was also cited. The complexity of the tender had to be taken into account. The SASSA Exco agreed, and the tender was extended to 28 February. Bidders requested further information, but there were two issues that SASSA needed a legal opinion on. Bidders wanted a list of beneficiaries per pay point, for them to be able to cost.

The Chairperson interrupted Ms Mvulane to say that she was giving too much administrative detail. She got the feeling that SASSA was not living up to expectations. A lot of work was sidelined because every detail was disclosed. The Committee wanted a summary of constraints, instead of getting stuck in to who said what on a particular date. SASSA needed to come to grips with transformation. There was a need to review the SASSA Act, to close areas that opened government up to manipulation, and to allow procuring for SASSA.

Dr Madlopha referred to the request to Treasury that was not responded to yet. The Committee had to assist through asking about the reasons for the delay. Both SASSA and the Department were affected. The Treasury was not acting in a professional manner, and was frustrating the process.

The Chairperson said that there would have to be a briefing from the Minister. If there were constraints in dealing with structures in Cabinet, the Committee would have to come on board. Processes were not to be frustrated.

Ms Abrahams asked if mail sections had facilities to disburse, like other departments. She asked how cards would be destroyed that were handed back, to avoid fraud.

The Chairperson remarked that there was a gap in Committee oversight, in that it had not been able to meet with the internal audit committee of the Department. There was concern about financial health in the Department. The question was why there were so many mistakes. The status of internal audit had to be interrogated with the legal unit present, when the Department quarterly report was presented. There had to be meetings to address new developments. There had to be rapid responses to a dynamic situation. People were aware that billions of rands for social grants went to SASSA, and there were those who saw an opportunity to take money from the vulnerable and the aged. SASSA had to be strong to assist the weak and the vulnerable. SASSA had to tighten up security around its house, and not blame criminals when the gate was left open. People were not to be allowed to manipulate and win in court. More work had to be done to close the system. She asked the Minister for final comments.

Minister Shabangu thanked the Committee. The Department was there to serve. It would make sure that the Committee understood what the Department and its agencies were doing, and would respond to the matters raised. Concern about internal auditing would be taken up as a priority. A submission would be made by the internal audit committee. When SASSA launched, there would be an invitation to the Committee as a whole to attend, not just to the Chairperson, so that there could be sharing about issues that arose at ground level. There had to be better understanding in order to eliminate a perception of “them” and “us”. She would engage with the Deputy Minister to fulfill her obligations to attend Committee meetings and to participate, and to subject herself to the scrutiny of the Committee.

The Chairperson told Members that they could interact on their own with the DG or the CEO, to ask clarity seeking questions. The first term committee programme was then adopted.

The Chairperson adjourned the meeting.

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