The Standing Committee on Appropriations (SCOA) convened virtually for a briefing by the Department of Social Development and its agency, the South African Social Security Agency on the 2022 Adjustments Appropriation Bill.
The Committee was troubled by the reallocation of funds from the Social Relief of Distress (SRD) grant to state-owned entities (SOEs). Funds had been transferred to the Department of Defence for the extended deployment mission in Mozambique and to the Department of Public Enterprises for Transnet to repair and replace assets and infrastructure damaged by the KwaZulu-Natal floods. The Committee was informed that shifting of funds between votes is a National Treasury process. But the Department vowed to be more vigilant in future in its role of protecting the most vulnerable members of society. The Committee resolved to engage National Treasury on the matter.
The Committee found it unacceptable that R1.769 billion allocated for social relief had been declared as unspent funds. It was suggested that stricter measures were cynically introduced to reduce the number of beneficiaries thereby creating the opportunity for the reallocation of funds to SOEs. Stricter qualification criteria and the verification of income against all bank accounts of applicants were introduced to ensure that payments are made to the correct beneficiaries. These additional measures resulted in a significant reduction in the number of beneficiaries by 40%. It is reported that the number of applicants had been steadily increasing after amendments to the qualifying criteria had taken effect.
Chairperson’s opening remarks
The Chairperson greeted everyone on the platform.
Today, the Committee was meeting with the Department of Social Development and its agency, SASSA.
The apologies were read out and noted.
The Chairperson thanked the Minister for always being available to the Committee. This Department is important in dealing with the lives of poor people.
The Minister of Finance presented the Medium-Term Budget Policy Statement on 26 October. As a follow-up on this, this Committee dealt with the Division of Revenue Amendment Bill, which was passed by Parliament on Wednesday. As part of the work that the Committee must do after the MTBPs, it must also deal with the
2022 Adjustments Appropriation Bill. These are the changes to the appropriations that were passed by Parliament.
The Committee noted the changes affecting DSD and SASSA and requested them to interact with the Committee concerning this.
The Chairperson asked the Minister to introduce the team and allocated them 45 minutes to present.
Mr Linton Mchunu, Acting DG, DSD indicated that the Minister was experiencing loadshedding.
The Committee gave the Minister a few minutes to join the meeting.
After the Minister joined the meeting, the Chairperson repeated his opening remarks. Their presence here was in response to the Committee’s invitation.
He added that while there were challenges, they must try and deal with them together so the government can provide a safety net that the Department and agency are responsible for.
Minister’s opening remarks
The Minister said the Department and its agencies were working together as a portfolio in an attempt to act in unison and cooperation at the national and provincial levels.
She shared the concerns of the Committee about the R1.7 billion declared unspent SRD funds because the money was supposed to support and uplift people from poverty, unemployment and inequality. The Department was at the frontline of pandemic-induced poverty, food insecurity and growing unemployment. Climate-related disasters were adding to the unbearable cost of living. The main reason for the under-expenditure was not due to lack of demand but the limited scope and stricter eligibility criteria that accompanied the allocation. Both factors resulted in the exclusion of a large number of applicants. Additionally, the bank verification process was introduced as part of the eligibility requirements. The Department was put under pressure by National Treasury and the Auditor-General which meant that poor people were rendered impoverished. Some previously employed and above the poverty line citizens, who were finding themselves without income due to slow economic growth, had difficulty accessing the grant as a result of the bank verification process. At the peak of the pandemic and before the introduction of the means test, SASSA was paying nearly 10 million beneficiaries. This number had been reduced due to structural limitations imposed on the SRD grant. The matter had been brought to the attention of the President and the Minister of Finance who both agreed that the means test threshold should be amended. The Department and SASSA would be elaborating on the demands of changing the means test. She was expecting a report from the Department and SASSA in this regard. Since the implementation of the amended regulations, a steady increase in the number of applications had been noted. She requested the Committee to invite National Treasury to appear on this subject.
She reported progress on the investigations linked to public servants who had unduly benefitted from SRD relief as flagged by the Auditor-General. She expressed her dissatisfaction with the slow pace of holding people accountable. The Department of Public Service and Administration and the Public Service Commission were assisting in monitoring the financial recovery and disciplinary actions. The agility of the systems are being improved because data collection is the driving force of the core business of SASSA. Technological advances meant that data collection could be translated into future programmes. The Application Programme Interface (API) was developed by SASSA to interface with other databases including PERSAL, GEPF, and the national population register of the Department of Home Affairs to confirm the identity and status of applicants. These measures were strengthening the ability to validate the income of applicants. SASSA also implemented interfaces for bank account verifications and biometric identification as part of the multi-factor authentication requirements in the SASSA corporate system. The introduction of technology was initially met with resistance, even from staff, but it was the only way to ensure that the money goes to the right people and to secure the data that resides within SASSA.
DSD / SASSA Presentation
Mr Mchunu said that the Minister provided the context of the presentation and the Department would be responding to the direct requests of the Committee. The mandate of the Department is to provide services to vulnerable groups through various mechanisms and to improve the quality of life of the people that get served by the Department. It was, therefore, important to have a conducive operating environment to address the triple challenges, slow economic growth, high levels of poverty and the impact of climate change. These were all important variables that affect the manner in which the Department and its agencies were able to provide services. Additional funding had been requested from National Treasury to assist people affected by the floods in KwaZulu-Natal. The Department experienced a backlash when the means test was introduced but the implementation of the stringent measures was forced by National Treasury. The Department would not have received the money if it did not comply with National Treasury requirements.
Mr Fanie Esterhuizen, CFO, DSD, briefed the Committee on the three areas highlighted in the 2022 adjusted estimates of national expenditure:
Declared savings for the 2022/23 financial year
Due to the low uptake of the R350 SRD grant, R1.769 billion in unspent funds had been declared. The low uptake was due to the introduction of stricter qualification criteria and the verification of income against all bank accounts of applicants. Before these additional measures were introduced, 10 million payments per month were processed but payments had since dropped to 60%.
Approval was granted to write off R537.7 million related to Social Assistance Debtors in the 2022/23 financial year. Transfers to households will fund the debtors’ write-off.
Funds shifted between votes
R755 303 million was transferred to the Department of Defence for an extended deployment to Mozambique. A further R2.937 billion was transferred to the Department of Public Enterprises for Transnet to repair and replace assets and infrastructure damaged by the KwaZulu-Natal floods.
Ms Totsie Memela, CEO, SASSA, said SASSA is guided by regulations in exercising its mandate. The timing of the amendment was impacting the contract with stakeholders. She reported an uptick in the number of applications. The impact of the means test on the number of applications was going to be an important factor in the future.
Mr Brenton van Vrede, Executive Manager: Grants Administration, SASSA, said the biggest challenge was the short-term provisions because it becomes difficult to manage large tenders. Tenders can only be issued once the budget is allocated. The grant system was being compromised by the lack of funding allocated for the administration process. He found it unreasonable to expect the agency to grow the client base without an increase in the budget. He urged the Committee to ensure adequate allocation of the administration budget. The cash-send option had seen a huge uptake but it was the most expensive option. Without additional funding, the cash-send option would have to be cancelled.
Mr Mchunu explained that shifting of funds between votes is a National Treasury process. The shifting of funds to the Departments of Public Enterprises and Transport was sending a bad message. The number of beneficiaries had significantly reduced after stringent conditions were imposed. The Department was investigating a new seamless process to provide for the R350 grant within its limited financial space. He indicated that the Department omitted to share information on the impact of the R350 grant in alleviating poverty and how the grant was able to shift the Gini coefficient. The Department remained committed to the cause of allocating money to people in need and addressing inequality and poverty.
Mr O Mathafa (ANC) welcomed the politically and administratively correct remarks of the Minister. Besides the appeals process, he enquired whether the Department was considering investigating if the 3 million individuals who were no longer receiving the SRD grant had been unfairly excluded. He asked if an analysis had been done to determine the extent to which the SRD grant was contributing to economic development and upliftment from poverty. He found the reference to the unspent funds as savings not in good taste. He was expecting a justifiable explanation for the underspending. He asked if the Department had considered outside-the-box interventions to ensure that those who need, get help.
Mr X Qayiso (ANC) said the reduction in the Gini coefficient from 0.68 to 0.65 reflected the positive impact of the SRD grant on the poor. But the Department still had a long road ahead to reach the NDP objectives. He found the underspending by the Department unacceptable. He wanted to understand the reasons for the underspending and what role the stringent measures imposed by National Treasury had played in the reduction in the number of recipients. It is the responsibility of the state to take care of the most vulnerable in society. The stringent measure made no sense and needed to be reviewed. He asked if the Department had done any research on the impact of the stringent measures on the number of applications submitted.
Ms D Peters (ANC) expressed her concerns about the R1.769 billion underspending in the SRD grant. The Committee had raised concerns about potential underspending when the grant was initially introduced. She argued that it would be an indictment if the Committee did not raise concerns about the re-allocation of the funds to the Department of Defence and Transnet. As a key custodian of the most vulnerable, the Department needed to improve relief measures and work towards the eradication of poverty. In her previous area of responsibility, she visited Malaysia where a governor reported only 1 000 households living in poverty in his district. They deal with the problem of poverty through a War on Poverty Programme. Similarly, South Africa was in need of a similar programme to deal with poverty eradication. The Finance Minister announced that the SRD grant was going to be extended to the 2023/24 financial year. She urged the DSD and SASSA to motivate for the extension of the SRD grant beyond the 2023 financial year. She asked if the general public was aware that the Department had been working on extending basic income support. She appealed to the DSD and SASSA to make it easier for beneficiaries to access support services. She proposed the introduction of a wealth tax to introduce a better increase in child and old age grants. The SRD funding for April 2022 was delayed and only received during June and July 2022. She requested the Department to intervene and ensure that back payments are made to beneficiaries. It was important for the Department to engage the Departments of Health and Justice where there was a need to cater for unemployed social workers.
Mr A Shaik Emam (NFP) asked if the Department was able to create a communication platform where Members could engage the Department to raise concerns. He agreed that South Africa was the most unequal society but stated that it was also the most unproductive country. An environment must be created for people to be less dependent on grants. The government was not going to be able to sustain the SRD grant in the long term. He called for the introduction of the Safety Ambassadors programme in schools to assist social workers in identifying dysfunctional families at an early stage. He asked if the NGOs are being held accountable for identifying dysfunctional families. Collaborative engagements with the Department of Basic Education and other role players were needed to collectively address challenges in order to reduce the load of the DSD. The number of pay points had been reduced which is leaving older people vulnerable to attacks at ATMs. People have been complaining about their applications being rejected and the difficulty to communicate with the Department. He wanted to know how the Department was planning to deal with the funding of the SRD grant and the employment of social workers considering the budget constraints. He thanked the Minister for her interventions whenever she is called upon to assist.
Ms Peters asked if the Department had control over interventions or relief efforts to assist people affected by flood disasters or when their houses burn down.
Mr Shaik Emam asked if the DSD system was integrated with the SAPS and other stakeholders to keep track of the history of beneficiaries, The information of applicants could be accessed through the ID number of persons entitled to grant payments if an integrated system was in place.
The Chairperson remarked that a lot had been achieved but some of the issues needed further consideration. He asked if the Department had a working relationship with provincial and local government. He found the optics of bailing out SOEs from DSD funds worrisome. The matter should be raised with National Treasury. It seemed that the means test was introduced to reduce the number of beneficiaries and then the money was transferred to the SOEs. He asked what was preventing the Department from processing back payment to those who were entitled to receive the money. The money should be used to fund the mandate of the Department instead of being shifted to SOEs. He found it inappropriate to label unspent funds as savings when so many people are living below the poverty line. He said the language should be used differently. He asked what impact the state of the Post Office had on grant disbursements. Due to problems at the banks, a number of people had been excluded from receiving grant payments. He asked why the Department did not apply for virement instead of transferring the money to other departments.
Mr Peter Netshipale, DDG: Corporate Support Services, DSD, said most of the services of the Department are facilitated through NGOs which makes it easier for government to provide essential services. It was the NGOs that assisted the Department during Covid-19 to forge partnerships with civil society.
Mr Mchunu added that civil society was ensuring that the Department had a larger footprint. In terms of holding NGOs accountable, he assured Members that only registered NGOs receive payments.
Ms Memela said opportunities to create better livelihoods for beneficiaries are being explored. SASSA was engaging international and local NGOs to create pathways for beneficiaries, focusing on the child support grant through school networks. To date, seven sites in three provinces had been identified. Work had started in the seven areas. A commitment had been made in one province to include an additional site. The system was not integrated but data is collected to assess grant applications. Assistance is being provided to indigent people beyond the SRD grant. She agreed that people needed to be able to access grants at any time. To this end, SASSA was working with the Post Bank and engaging retailers as well as general dealers and Spaza shops to create more pay points in communities.
Mr van Vrede said the biggest challenge regarding the exclusion of the three million applicants, was understanding the means test. Previously, the means test was used only at the appeal stage. It is now being used at the application stage. He regarded the unfair exclusion of three million applications as a subjective statement. It was found that applicants have multiple bank accounts. E-wallet payments were also taken into account during the assessment. Bank payments were the most secure payment mode. Mobile payments were introduced in 2021, but it is more difficult to link a mobile phone number to an ID number. SASSA was dependent on the Post Office for payment distribution because 96% of the clients are Post Bank account holders. SASSA had been working with the banks to promote a cashless environment given the high charges and risks involved in the distribution of cash payments. Back payments, dating back to June 2022, had been made to all qualifying beneficiaries. The error with the means test which affected child support grant beneficiaries was fixed in August 2022. Back payments for this category of beneficiaries would be made in November and December 2022.
Mr Esterhuizen said the Department, unfortunately, had to approach National Treasury for additional funding and was awaiting the outcome of the funding requests that had been submitted. In response to the comment about using virements, he said it was a difficult question because SRD funds are exclusively appropriated by Cabinet. The Department would engage National Treasury about the virement proposal but SRD funds are ring-fenced and not supposed to be used for other purposes.
Ms Brenda Sibeko, DDG: Welfare Services, DSD, said the primary reason for the exclusion of the 3 million beneficiaries was the inflow of money that was traced to multiple bank accounts. The contracts between SASSA and the banks allow the banks to check the income of individuals into all bank accounts against ID numbers and not only the account provided in the application. Qualitative research was needed to determine if the money in the accounts of applicants is kept on behalf of other persons. The appeal application process allows people to indicate the reason for the appeal. From this data, it was established that only 3% of the beneficiaries had been unfairly excluded. The implementation of the relief measures had a remarkable effect on poverty alleviation and inequality. The result of the Covid-19 interventions introduced between March and June 2020 was surprising. The poverty estimation measurements at the beginning of March 2020 indicated the proportion of people below the poverty line at 20.6%. Without the relief measures, the level would have increased to 32%. But due to the interventions, the proportion of people below the poverty line declined to 18.8% in June 2020. The introduction of the SRD grant and the increases in existing grants proved that it was possible to significantly reduce poverty. Similarly, the Gini coefficient or income inequality measurement decreased from 0.65 in March 2020 to 0.61 in June 2020. It is important to note that the NDP target is 0.60 which meant that the 2030 target was within reach. The issue was the government’s commitment to dealing with poverty. The grants programme is a key element of the interventions to deal with poverty and inequality. The Department was forced to introduce additional criteria which resulted in the exclusion of people who initially benefitted from the programme. It was important to learn lessons from what was achieved and what could be achieved to reach the NDP target sooner rather than later.
Mr Mchunu said the moral of the story is that social interventions had a significant impact. Coupled with this was the need for active labour market policies to deepen the reach and achieve the NDP income inequality target of 0.60. The grant programme should be linked to skills development initiatives and job opportunities. The Rapid Assessment of the Covid-19 SRD grant indicated that the money was largely used for food and services including electricity, data and transport. It was useful to involve retailers to assist beneficiaries to access the grant. A broader payment channel was needed to make it easier to access the funds. He suggested that the success of M-Pesa in Kenya and why it did not work well in South Africa should be explored. In light of the re-allocation of the SRD funds by National Treasury, the Department had learnt that it should play a more active role to protect the poor and avoid the narrative that money is been taken from the poor to benefit of SOEs. He confirmed the existence of unfunded mandates in the Department to address crises, e.g. due to homelessness and natural disasters. In response to the request to establish a communication platform, he said the Department do have a Citizens Engagement Platform. He agreed to investigate the option to allow interaction with Members of Parliament. In the interim, the names of secretaries within the Department would be shared to facilitate interaction with Members. He agreed that there was a need for a more integrated system with a single view of all citizens. But while the system is not in place, the process of data sharing with entities such as NSFAS, UIF and SARS is being used to identify fraud through grant payments. Covid-19 had assisted in aligning datasets in a more effective manner. The Department had been appealing for the appointment of social workers for a while and was seeking guidance to ensure that it becomes a reality in the next financial cycle. The inter-departmental forum would be implementing a plan to employ social workers as soon as the budget is allocated. He welcomed the proposal to extend the BIG beyond one year. He indicated that the Minister may want to invite the Committee to some of the engagement platforms on the BIG. He had taken note of the request to communicate more effectively with communities about the progress being made towards the BIG.
Minister’s closing remarks
The Minister thanked Members for the engagement. She, together with the Department, was taking the BIG very seriously. The R350 is viewed as the stepping-stone to the introduction of the BIG. There is a need for the government to pay greater attention to the issue because too many people do not have money to even apply for jobs. She was grateful for the hard questions because it was assisting the Department to look for better solutions and making it easier to serve our people.
Chairperson’s closing remarks
The Chairperson thanked the Department for clarifying the issue of back payments. People should not be punished for errors that the government was supposed to fix. The issue of an inflation-adjusted grant would be taken up with National Treasury so that the value of the R350 does not change in real terms. He was taking note of the commitments on the BIG but cautioned that there should be a level of certainty for recipients. The problem with the government is that it does not communicate its successes. He argued that the impact of the R350 grant was a good story to tell. But he cautioned against the use of terminology such as the Gini coefficient because most of the beneficiaries had not been to school. He thanked the Minister for availing herself and the full bench of officials.
Minutes and Oversight report
The Committee considered and adopted the minutes of 11 November and 15 November 2022.
The adoption of the draft report on the oversight visit to the SANDF and related entities in the Gauteng province was postponed.
A member of the Secretariat announced that the study tour had been approved. Flight details would be forwarded to Members in due course. Members who had not yet submitted abridged versions of their CVs were requested to do so before the end of the business day. The next meeting would be with COGTA.
The Chairperson urged Members to sign and submit the travelling insurance forms. He thanked Members for the engagement and reminded the Secretariat to include in the report, items that had been highlighted.
The meeting was adjourned.
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