Pension Pay-out Contractors: follow-up briefing

Social Development

18 September 2001
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Meeting Summary

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Meeting report

SOCIAL DEVELOPMENT PORTFOLIO COMMITTEE

SOCIAL DEVELOPMENT PORTFOLIO COMMITTEE
19 September 2001
PENSION PAY-OUT CONTRACTORS: FOLLOW-UP BRIEFING


Chairperson:
Mr E Saloojee (ANC)

Documents handed out:
Statement by Mr Eckley in response to the Mail and Guardian article, 31 August 2001(Appendix 1)
Memorandum to the Portfolio Committee by Mr Eckley (Appendix 2)
Overview of Eckley involvement in the Field of the Aged (Appendix 3)

SUMMARY
The Committee convened in order to consider the problem relating to the poor service delivery that was occurring at pension pay-points, where pensioners were subjected to awful conditions and long queues. Cash Paymaster Services was invited to return for a follow-up meeting regarding the matter.

MINUTES
Mr Saloojee (ANC) introduced the guests. They were Mr Bellemant (Chief Executive Officer of Aplitec), Mr Mazwiyako (CEO of CPS), Mr Hlekane (Senior Manager), Mr Eckley (Age Secure), Mrs Mkwane (Age Secure), and from the Department of Social Development, Ms Mahlamite and Mr Masutha. He then handed the meeting over to Cash Paymaster Services.

Cash Paymaster Services
Mr Bellemant explained that the company was called Nekwan Applied Technology Holdings Limited (Aplitec), and that it was listed on the Johannesburg Stock Exchange Market as a public company. Cash Payment Services (CPS) is a subsidiary of Aplitec, and although CPS used to be an independent company, it was acquired for the purposes of implementing better efficient service delivery programmes.

Mr Bellemant explained that the Smart Card Technology was developed in 1989 with the aim of initiating banking and providing banking services. Over the past 11years the company had successfully provided these services throughout South Africa and all over the world, including Russia, Eastern Europe, Ghana, Burundi, and more recently Malawi. Its mission is to provide banking or alternate banking methods to the poorest members of society, as this did not occur in formal institutions. This was because the poor could not afford the bank fees, and the banks would not be able to viably provide them the services. Infrastructure in formal institutions was designed to serve A, B, and C income groups, and would not cater for E, F, and G income groups.

The development in 1989 allowed Aplitec to provide those services across all income boards. Four years ago the company was listed on the JSE in order to allow Aplitec to raise funds as a means of accelerating development. This had occurred in many ways:
Aplitec had worked with many unions in an attempt to enable the company to have access to a large number of working South Africans who could not afford formal institutions. This led to the development of many products. For instance the introduction of the Salary and Wage Payment Product (WPS). Using the WPS, employers are enabled to pay their employees via the smart card, and the result is that an employee is immediately given access to a bank account. This is at no cost to the employee, and does not involve the payment of any fees. This initiative was completely opposite to those in formal institutions.

He explained that the Aplitec model had worked very well. In addition, it had been established that formal institutions were willing to make developments that would assist the underprivileged. However, they did not possess the necessary knowledge in order to facilitate such developments, that is, to access the market or to collect premiums at a certain risk level. The technology was the key to bridging the gap and to forming links between the informal and the formal sectors, and that this had occurred directly with the smart card system. He expressed the opinion that this type of development was critical to any modern country.

The problem was always the same in that the poor could only afford to purchase necessary products. It was in this regard that Aplitec was looking for a payment instrument that would allow them to manage their money as best as possible. This also gave people the opportunity to acquire products they previously could not afford. The smart card made people become part of the formal sectors. Unfortunately, South Africa has a population in which 80% of the people are poor. He said that capitalism failed in developing countries because individuals did not work together, and that it was technology that would allow everyone to work together and that this would allow for the restoration of dignity.

The vision of the company had been administered under the banner of a public company over the last four years.

Mr Bellamant then said that the need to protect pensioners was one of the areas of concern. He added that CPS was previously owned by the First National Bank (FNB). Aplitec purchased the company in order not to continue the work begun by CPS, but to change CPS in order to promote the vision and technology of Aplitec, and in order to assist in this area. The company was purchased two years ago, but time is needed in order to achieve this goal because a change in attitude and culture, for instance, would be necessary. However, on 1 January 2002, the name CPS will be removed, and the company will be fully incorporated as a division of Aplitec with the sole purpose of facilitating social welfare programmes. The name CPS would no longer be used in any tenders. He said that this was because Aplitec wanted to promote its vision and not the vision of CPS.

He said that other products had also been developed. One responsibility of the company was to ensure that negotiations with formal companies were facilitated for those that could not undertake them on a personal level. He said that this began by researching the market in an attempt to find out the lifestyle of pensioners, and in order to hear their problems. He said that what was clear from these studies was that they did not have sufficient income to meet monthly needs. It was his opinion that this would require Aplitec to either find a method to allow the budget to be stretched, or to find ways of enabling welfare payments to go further. He said that it was discovered that pensioners frequently used their income to purchase financial products such as funeral insurance, and not food. He said that it was also discovered that many of them had taken out loans (with charges of about 30% annum). He stated that the technology allowed products to be redefined and revisited. For instance, daily premiums instead of monthly premiums could enable total premium amounts to fall because it would become easier to control and manage the system, and it would provide greater flexibility to allow the provision of more appropriate products.

Mr Bellemant gave an example of what he meant. He referred to the situation when Aplitec targeted the taxi industry. This was a rich business, and he stated that their technology allowed insurance to be provided at a rate more than 60% lower. This resulted from the guarantee of payment and the easy access to the owner of the taxi. Thus the card became the link. In addition, rates for buying taxis fell by more than 50%.

He said that this system allowed people to use their own capital and to climb out of the poverty status.

Mr Bellemant went on to say that there had been a great amount of research, and that this was ongoing. The meeting today gave them an opportunity to give an introduction into the workings of the company, and to open their doors to suggestion. If the Aplitec business models were unacceptable to the committee in any fundamental way, this would be looked into and modified in order to ensure the most efficient service delivery, ultimately.

The vision was to pay out pensions and welfare payments, and that in addition to this, to make further payments from the point at which the payments were left by the government. Aplitec would ensure that the money went a lot further as this is what the company was all about. Pensioners and poor people were the main targets. This was because there is not any company in South Africa or in the world that cared about those markets. Aplitec had shown that this was a lucrative market. He added that it was their responsibility to analyse and to compare the formal companies willing to assist, and to facilitate falling prices by raising the supply of the product. Aplitec was trying to do this, although it was not saying that it was the best.

Mr Bellemant gave a summary of his presentation. A major goal was the provision of alternate methods of banking. Any South African person qualified to be automatically accepted by the company. From this point the individuals would choose personal market baskets. The network would advise and would attempt to refinance debt. In addition, the statistics over the past years proved that this debt free policy was possible, as there was a 60% success story. Debt free individuals would be able to increase savings. Furthermore, small savings of between R5 and R10 a month would qualify for interest earnings. This money would then be saved in the formal sectors and high returns could be developed.

He concluded by saying that Aplitec was trying to build a profitable business while at the same time still delivering services with the social and moral content it contained. This is because the two were not mutually exclusive.

Discussion
Mr Masutha (ANC) began by saying that the presentation in part related to issues that were discussed at the previous meeting. He mentioned Section 11 of the Social Assistance Act that provided for legal protection against any legal claims for grants paid in terms of this Act. He said that he had since looked at a court judgement relating to that section, and it was his opinion that a complexity of issues arose from that situation.

The court held that Section 11 was not unconstitutional per se, and felt that once money had been transferred into the beneficiary's account, the beneficiary should have the discretion to decide what happened to the money. The practical problem was that service providers were taking advantage of this situation and were depriving the beneficiary of basic resources. However, based on the judgement there was nothing in law to protect the beneficiary. Curbing further exploitation of these groups would go a long way, and it was up to Parliament to introduce consumer protection measures. This should not be left up to both private and public companies, and there was a need for a proper framework as a result of the vulnerable nature of the situation.

Mr Bellemant responded by saying that he was not a lawyer and thus would not answer this question from a legal point of view. Everybody understood the Constitutional fundamentals. However, what came to mind was the fact that at present pensioners were paid either at the post office, via bank transfers, or in cash over a fixed point. (He reminded the floor that this third option was the practice solely followed by CPS). It was his opinion that S 11 would not apply if all three categories involved opening bank accounts. He interpreted the section as being applicable only within banking structures. If a pensioner wanted access to a bank account, the issue of stop order or debit accounts would end. It is not necessary to treat pensioners with bank accounts and pensioners without bank accounts differently, and the most important task was to ensure that they were not ripped off. The view held by Aplitec was that it was better to replace loan sharks with bodies that operated with a social and moral conscience. This involved introducing standards and norms, and by increasing the accountability of the service providers.

Mrs Kalyan (DP) asked for clarity regarding the specific products provided by the company.

Mr Bellemant responded that 19 products had been introduced, including the removal of cash from the hands of pensioners where it was easily stolen, lost, and did not generate wealth, through the use of electronic funds. Facilities were provided for saving because many pensioners had the practice of saving at home. The system would allow them to define how much would be spent on specific products within a month. In addition a budgeting tool was provided. Introducing clubs that provided money instead of affording the opportunity to collect points. This was achieved by convincing retail stores to provide discounts to cardholders.
Burial insurance was essential, and was presently provided at rates of between R20 and R70 per month. By bringing together underwriters such as Old Mutual, Aplitec attempted to initiate cheaper insurance covers that were still as efficient.

He said that Aplitec was most proud of its refinancing project through which the overall debts held by pensioners were lowered. This was achieved by finding out from pensioners the loans they owed and who they were held by. After 6months some of the target market was debt free. He said that today the company was looking at linking pensioners into credit union structures in order to allow for the reinvesting of loans at interest rates that were lower than 15% / month.

Other services included the facilities to transfer money which were provided free of charge from one cardholder to another. In addition, the card recorded any transaction performed on it and it was possible to obtain statements via the machines. The card allowed holders to pre-pay for water and electricity, for instance. It can also handle payments for cell phone recharge cards. Transportation costs could be paid using the card. The general purpose of the card is as a payment instrument.

Mr Chalmers (ANC) agreed that formal banks were not designed to service the poor. However, he wanted to know the bank that Aplitec used in the provision of its services, and whether it was a registered bank. In addition, did account holders receive statements?

In his response Mr Bellemant said that as a result of deposits, Aplitec acted as an agent for People's Bank, which is part of Nedcor. This meant that the funds were managed by formal institutions. Their job is to provide the opportunity to facilitate such transactions, but that the actual responsibility for the money lay with the banks. This had been cleared with Nedcor and with the Reserve Bank. In addition, the lack of physical addresses meant that it was not possible to send personal statements. However, all transactions were recorded on the cards and they could be obtained via the terminals. He reminded the committee that providing postal facilities was the practice of formal institutions, and that the fact that Aplitec provided informal facilities meant that it was not able to undertake such aspects.

Mr Salojee (ANC) referred to the mention of the 19 products. He wanted to know whether they had been assessed by any kind of Consumer Protection Organisation. In addition, he wondered whether there was any regulation over the matter. He was also concerned whether the pension salary of R570 every month was sufficient to purchase the wide range of products mentioned. .

Mr Bellemant responded that the business model could be taken through in detail in this regard. However, Aplitec did not necessarily provide all the products. It was their job to collect and to market any premiums on behalf of the pensioners, which is how the company would make a profit. Service providers would be charged for the access given at a rate of 5% to 15%, and some of this money would be directed towards cardholders. This worked by viewing the consumer as part of the company, and all suppliers as the enemy. He concluded by saying that looking over the financial statements of the company for this year showed the viability of such practices.

Mr Mbadi (UDM) said he was still very concerned with the situation and thus required further clarity. He said that the presentation indicated that Aplitec was dealing with an elite group of elderly people and urban people. However, certain disadvantaged pensioners lived more than 60km from the nearest town. He invited Mr Bellemant to travel to the Eastern Cape with him in order to see the infrastructure that is available there. It was his opinion that Mr Bellemant needed to get more information from these people.

Mr Bellemant said that he would not be able to say too much about this situation because a tender had not been granted to operate in that region. He had visited other areas such as Kwa-Zulu Natal and was aware of what was happening. However, he felt that because the smart card technology was able to record all transactions, one was able to analyse this database in order to determine what products were purchased and at what cost. This would enable Aplitec to curb the cases in which suppliers ripped them off.

Mr Bellemant went on to say that discounts would be automatically granted upon use in stores because there were control mechanisms ensuring that this occurred at the point of sale. It would help to view Aplitec as a bank with a division of the company providing cash in rural areas. In addition, the company was looking to using existing infrastructure all over the country in order to implement their structures.

Mr Mbadi (UDM) said that some deductions were done without the knowledge of the pensioner, who did not know the amount actually due to him. He had found that in the Eastern Cape only welfare cheques were accepted by funeral homes, for instance. The pensioners be consulted before providing them with the services that would result in their exploitation. In addition, many pensioners were illiterate.

Mr Bellemant responded by saying that Aplitec had a 100% ownership of CPS. In addition, Nedcor has a 25% shareholding base in the company. All this means that Aplitec had ensured that it had many shareholders because it was necessary that the bank was legitimate. It was also the job of Nedcor not to interfere with Age Secure regarding the banking product. Aplitec was looking for competition. He gave the example of Mpumalanga where their technology had been provided in order for the province to use it at its discretion. This showed that the belief that Aplitec ethics were 100% where they ought to be was justified. He ended by saying that the company was not trying to control pensioners but to give them the opportunity to control their own spending.

Mrs Mars (IFP) wanted to know more about the banking system. She felt that this was not happening in the smaller towns. Damaged cards were taking about three months to be replaced although it was only meant to take up to 2days. In addition, grants would be cancelled if they were not collected within 3months, notwithstanding the time it was taking to replace the cards. She wanted to know how that banks were operating because they seemed to be pay systems.

Mr Bellemant said that the way in which the system was supposed to operate was that money would be transferred directly into the pensioner's account. His view was that the grants should not be cancelled and the fact that legislation was undermining this right suggested that the change would have to begin with legislation itself. This was the way the system was supposed to work. The last time he was in Kwa-Zulu Natal he found that the local government would sit on money if it were not collected. Their system would allow them to remain custodians of the money, but only until it was debited. However, over the last 10 years the systems were not available. It was his opinion that the law was wrong in this regard, but he clearly stated that he did not make the law and that he did not want to be blamed for implementing the system the way it was.
Mr Saloojee (ANC) added that the problem was therefore with the system.

Mrs Mars (IFP) said that she was looking seriously at the problem in South Africa. At present there was a banking system and the products were part of the system. There should be two completely separated structures and it was in this regard that where did ethics come into the system, that is, to link the payment system to the products.

Mr Bellemant responded by saying that Aplitec was 100% behind the ethics of its system, and the structures it provided for service delivery. He added that it was not their fault that Aplitec was the only company willing to provide the service. In addition, competition was welcome, but Aplitec would have to do its best given the present situation.

Mrs Mars (IFP) asked how people living in townships would receive the grocery discounts given the fact that they could not afford to go to the big stores where the discounts were offered. She said that this required a radial change in the local infrastructure, as township pensioners would in any event pay more at local township stores.

Mr Eckley (Age Secure) responds to allegations against him
Mr Saloojee (ANC) referred to the recent article in the Mail and Guardian newspaper, implicating Mr Eckley and Age Secure as being micro-lenders and said he would need a briefing on this.

Mr Mfundisi (UCDP) added that the involvement of Mr Eckley in Age Secure was a serious concern because although he was meant to be representing the elderly, the article indicated ulterior motives that could not be reconciled. He required clarification on this aspect.

Mr Bellemant said that for Aplitec the answer was simple. In an attempt to understand that wants of the people, Mr Eckley showed himself to be the person who could provide this information. The fact that Mr Eckley worked for Age Secure was not relevant to Aplitec. This is because the aim was simply to build a team with the first-hand knowledge of what people from the ground were looking for.

Mr Bellemant went on to say that Aplitec was making money, but that this was necessary in order to continue with service delivery. This would open the doors for questions relating to ethics, and morality, for instance. However, it was necessary to deliver an affordable service and this was possible. He believed that Aplitec had genuinely tried to deliver the services.

Mr Saloojee (ANC) pointed out to Mr Bellemant that he had completely missed the point. He sternly said that the relevance of the concern was the fact that Mr Eckley worked for the Ministry as well. He said that by mentioning only that he was a consultant of Aplitec, he was not giving the answer being sought.

Mr Bellemant said that Mr Eckley worked for Aplitec because of the value he had to offer the company, and that was as cut and dried as the matter was.

Mr Saloojee (ANC) told him there was no need to take the point any further at this stage.

Mr Eckley laid out his position by reading his prepared submission.

Discussion
Mrs Makasi (ANC) vehemently commented that it did not make a different to her whether it was CPS or Age Secure that was doing the work. Since they were both contracted to deliver services, whether interest rates had been reduced or not did not make a difference. What she wanted was to see a change in the present situation, and the lack of it indicated to her that Aplitec was simply doing it for the money.

Mrs Makasi (ANC) asked what policy governed the making of deductions. She angrily stated that pensioners were not given a choice, and she felt that CPS should have gone back to the pensioners in order to discover how they felt about the situation.

Mr Saloojee (ANC) interrupted her saying she had made her point and that it had been understood.

Mr Bellemant told her that he was just as angry as she was about the situation. Displaying the same amount of passion that Mrs Makasi had shown, he said Aplitec held the belief that it could provide a better service, and unfortunately it would not be able to provide anything without any money. It was for this reason, he explained, that the company needed to run at a profit.

Mr Bellemant added that the loan product, refinancing product, was not linked to mandatory funeral policies. This meant that for every loan provided, a certain amount would be paid over in order to cater for the possible event of death. He added, with frustration, that Aplitec was doing the best it could, but that it needed help.

Mr Saloojee (ANC) pointed out that this was the reason members of the committee were airing their views.

Mr Bellemant said that that is why he was emphatic about what Aplitec was doing because in order to be successful, the company had to believe that it was a success.

Mr Hlekane stressed that he was aware that the committee was just as concerned with the present situation as Aplitec was. This interaction was necessary in order to direct the legislature through the oversight role of the committee. He stated that if the committee had any more questions, even at a future date, Aplitec would continue to be accountable and understood that no-one was trying to point fingers.

Mrs Makasi (ANC) was very concerned with the fact that more essential products such as chairs and tables were not provided as she felt that the whole process was futile if it did not get to the core of what was essential and what was not.

Mr Bellemant said that providing such services would require a substantial amount of money. While Aplitec cared greatly about its area of concern, it needed money to run efficiently, otherwise it would be no different from any other Article 21 company.

Mr Saloojee (ANC) said that he would continue to visit the provinces. However, he noted that in his visits, it became apparent that the poorest people were the ones receiving the least amount of money. If some members spoke with passion, this was out of the commitment they had to ensure service delivery. It was the job of Members to understand the economic viability of the service provision, and he had to see the present situation in this context.

Mr Bellemant said that he felt that Mr Salojee was looking for a conflict of interest.
Mr Saloojee (ANC) replied that this was not so.

Mr Newhoudt-Druchen (ANC) said that he personally had no problem with companies that operated to make a profit so long as they were providing genuine services. However, he wanted to know how Nedcor would make a profit in this instance.

Mr Bellemant said this information was contained in the business models, and that Mr Newhoudt-Druchen was welcome to come and discuss them in detail. He added that Nedcor would reinvest a float amount into the money market. In addition, the bank indicated a willingness to provide these services to the people and through its People's Bank.

Mrs Solo (ANC) stated that the briefing by CPS indicated that the company had no knowledge of the deductions that were levied upon pensioners. She wanted to know for how long the relationship with Aplitec had existed, and whether the companies were in co-existence. The briefing had suggested that the companies were in no way linked, and she felt there had to be some clarification with regard to the marriage between the two companies.

Mr Bellemant said that CPS began in 1989, but only became involved with Aplitec two years ago when it was purchased from FNB. Aplitec relied on CPS to continue dispensing cash while Aplitec, on the other side, continued the smart card vision. This began only 18months ago, and because change required time, it was only now that a stage has been reached where the CPS name would be lost. He noted that Age Secure operated within its structures with the role of identifying necessary products.

Mrs Solo (ANC) asked who had tendered for the contract between the two companies. She added that the CPS presenter in the previous meeting cunningly removed himself from this situation and from giving an opinion.
Mr Saloojee (ANC) told her that she could pursue this question after the meeting.

Mrs Solo (ANC) asked whether there had been an education campaign to increase awareness in these areas. Given the fact that this club system had been introduced, why were rural societies not included in the considerations?

Mr Jassat (ANC) asked whether possession of the card automatically enabled one to become part of Age Secure.

Mr Bellemant responded that the cards did not grant automatic access to all the products that were offered. The card entitled one to membership of the banking service, and from that point one was free to choose what services were desired.

Mr Jassat (ANC) asked if there were any security provisions in the event of a card being stolen.

Mr Bellemant said that the fingerprints of the cardholder protected all the cards, and this was fantastic in providing security.

Mrs Rajbally (ANC) mentioned that research identified the needs of pensioners by introducing various schemes. Did the introduction of this system infringe any of their rights? After all payments are made would the pensioner still have a budget of R570 for the month?

Mr Bellemant said that the pensioners were free to choose the products they wanted. In addition, they had a right of access to the products they wanted. The reality in any event was that they would look for insurance cover, and as a result the next best thing was to provide them the services at the lowest cost possible.

Mrs Cupido (DP) said that the possession of a funeral policy was required in order to qualify for a loan. It was for this reason that she wanted to know the fate of those without such policies.

Mr Bellemant responded that as of today the policy was that the possession of a life policy was not required. Aplitec reinsured the policies itself as the insurance and the loans were split completely.

Mrs Cupido (DP) asked for the interest rate that was charged by Aplitec for its services.

Mr Bellemant said that he believed that the 14% mark per month was less than the interest rate charged by loan sharks. In addition, Aplitec was constructing a credit union in order to enable the money that was saved by pensioners to be lent back to them. He said that nothing would be possible unless they began by building from the bottom up.

Mrs Cupido (DP) asked for the insurance cover on loans.

Mr Bellemant said that this required about 2 to 3 rands each month.

Mr Saloojee said that it was obvious from the visits made that social security affected the lives of millions. Because the matter required intensive analysis, the 2hours provided for engagement in these meetings would never suffice to get the job done. For this reason, he concluded that they would all soon have about 1 or 2 days to thoroughly look at the issue. However, the brief accounts indicated that as legislatures with the oversight role, they had to delve into the areas. He added that this was a matter of deep concern to the committee, and that he was not saying that Aplitec was a failure.

Mr Baloyi (ANC) argued that Mr Bellemant had not touched on necessary products, but only luxury products. He said the average family expenditures per month were the sole indicators of what was needed. It was his opinion that his presentation referred to the 'nice to haves'.

Mr Bellemant pointed out that Aplitec also facilitated food parcels at half the normal price, in N Cape, N Province, and K-Z Natal, which was absolutely critical. However, Aplitec was also aware that pensioners would purchase other services, and this meant that all issues had to be dealt with.

Mr Baloyi (ANC) firmly stated that this did not mean that pensioners had to be threatened with the prospect of death, which itself was only inevitable. The group that Mr Bellemant visualised was not the 90% he was dealing with.

Mr Masutha (ANC) said that it would be necessary to overlook the contracts that the Department held with the service providers. If this did not happen the debate would continue in circles. He said that without any doubt the government was ultimately accountable.

Mr Saloojee (ANC) concluded by saying that it would be necessary to create a proper opportunity to engage. He noted that a terrible situation had been inherited and that it would be necessary to finally be able to provide a maximum benefit to pensioners.

The meeting was adjourned.

Appendix1 :
STATEMENT BY SCA ECKLEY REGARDING THE ARTICLE IN THE MAIL & GUARDIAN DATED 31 AUGUST 2001 WRITTEN BY PAUL KIRK
This statement represents my personal response and not that of any other party.

Preamble
I have been charged and found "guilty" by Mr. Kirk without being given the opportunity to speak to him. Mr. Keith Ross from the Daily News in Durban referred a letter by Mr. Henry Spencer to me for comment. It was decided to meet Mr. Ross and Mr. Spencer on Monday 3 September 2001 in order to provide information regarding Age Secure as a consumer organisation. These meetings will go ahead. A similar meeting with the Black Sash will take place on Tuesday morning, 4 September 2001.

1. The report by Mr. Kirk is biased, vindictive and slanderous. There is no way that I personally can be linked to Top-Top or Cash Paymaster Services (CPS). I have nothing to hide and my primary concern was and remains, the protection of the rights of older persons and to fight injustices mainly caused by the previous regime. My track record stretching over 30 years, speaks for itself. Surely, if the Mail & Guardian did a proper investigation, they would have discovered this fact. I have no alternative but to refer the questionable way in which Mr. Kirk conducted his work, to the relevant media authorities for investigation.

2. What are the facts? I will answer this in two parts.
Clarify my role and position with Age Secure
Why I am involved with Age Secure

I am not a Board member of Age Secure and have not been involved in setting up the company. I am under contract to provide consultation to, oversee the development of the Age Secure Club and to act as the watchdog in respect of operations. I am thus the ombudsperson for the Age Secure members. In all documents and guidelines I have developed, there is confirmation of the above-mentioned aspects. To assist me I have a number of persons with years of experience in working with older persons as consultants and developers. All these persons are in good standing with the community and have impeccable credibility. They are supportive of the Age Secure concept. Age Secure is aware of the fact that if older persons are being placed at risk or being exploited, we as consultants, representing the interests of older persons, will act accordingly. In this regard we will not hesitate to walk out and publicly disclose the reasons for our action.

The article suggests a direct link between Top-Top with Age Secure. I am not aware of such a link. Mr. Myeni from Top-Top, at a meeting on 23 August 2001, hinted towards such a link. However, as part of my mandate, I immediately requested the Age Secure Executive to clarify Mr. Myeni's position. I am still waiting for the reply and let me state categorically, that in the event of such a link, the community developers as well as myself, will not accept it.

Why am I involved in Age Secure?
Firstly, nobody including organisations that champion the rights of older persons has done anything to protect pensioners against lone sharks and other exploitations and come up with reasonable solutions. The practices of exploitations and abuse are well documented. Interest rates of 30% to 48% per month, illegal retaining of identity documents, use of strong arm tactics, including assaults on pensioners by lone sharks and funeral policy agents who have only one interest at heart and that is to get as much commission as possible at the expense of the pensioner, are at the order of the day.

Secondly, at the heart of Age Secure lies the development of a consumer organisation that is prepared to mobilise older persons in combating the problem of money grabbers. The R570-00 per month in pension received by the social pensioners will never be enough to enable these pensioners to get out of debt, because they borrow from month to month and in many cases keep whole families alive on this meager income. I have many examples of persons who have initially borrowed R300-00 and have over a period of seven to eight years, paid more than R10 000-00 in interests, while still owing the initial amount. In Kwazulu-Natal alone, more that R100 million per year, goes into the pockets of lone sharks, money that should have gone to keep the pensioners and their families alive. I believe that by lending to the pensioner that are in debt an amount at a more favourable interest rate, and allow the pensioner to pay this off over a six-month period, gives the pensioner a chance to get out of debt.
I accept this is not a perfect solution, and the risks are real that he or she may not get out of debt. However, an intensive educational programme to advise and guide the pensioner to strive and work towards a debt-free life has been implemented by Age Secure Club. It is policy to review, every three months, the situation with pensioners and they are constantly reminded that the purpose of the re-financing loan is to get out of debt. The estimate, based on research findings is that one can expect a third of pensioners participating in this programme to get out of debt in six months. If there is any other plan in South Africa that is available to get pensioners out of debt without an upfront funding operation, I would really like to know about it.

Thirdly, the Age Secure Club has only one objective and that is to mobilise pensioners to take responsibility in addressing the problems that have bugged them for years. Examples of these are inaccessibility to basic services such as health, high taxes, abuse, exploitation at pension pay points and crime. The Club in St Wendolines have already mobilised the elderly to address many of the above-mentioned problems. It is high time that we stop talking about older persons and their problems and to start supporting them in solving their problems.

Finally, Age Secure is still at an experimental stage and there is much to learn. There are many risk factors involved. I believe that Age Secure should be given a fair chance to go out on a limb to make a difference in the lives of older persons.

In closing, I wish to state very clearly that I am involved for only one purpose and that is to help pensioners to have a better life. I honestly believe that to mobilise the consumer power of pensioners, has potential to achieve this goal. If Age Secure in any way cause more harm and place pensioners at risk, I will be the first person to disassociate myself from such exploitation. I wish to extend an invitation on behalf of community developers and myself, to any person or organisation to come and investigate what we are doing and to listen to what the pensioners are saying.

SCA ECKLEY
Signed on computer
2001-09-02

Appendix 2:
PUTTING THE RECORD STRAIGHT ON AGE SECURE
A report in the Mail & Guardian (31 August 2001) created certain impressions that Age Secure is a micro-lending company which uses its position within the Aplitec group and specifically CPS (Cash Paymaster Services) to promote business interests. Further than there is conflict of interest in respect of my role with Age Secure.

This memorandum presented as evidence to the Portfolio Committee on Social Development will address the above mentioned issues in a transparent and open way. The following are my personal views which may or may not reflect that of Aplitec or CPS.

Background
Thousands of pensioners, estimated at 50,000 per year, have their pensions suspended. This happens because the outdated computer system failed or programming errors occur or pensioners were not timeously re-registered or because of wrong identity documents. There are even allegations that names fall off the system because government wants to balance their books.

Almost all of these pensioners care for children and other family members and a loss of monthly income is a disaster. What should they do and who will help? In impoverished communities, help is a far cry. Easy loans are the way out, but to get out of the trap is almost impossible. Many pensioners pay over R1,000 in interest per annum, money that should have gone to maintain families.

The above picture is well known to Government welfare organisations and the finance and social development portfolio committees. Evidence upon evidence has been presented. However, when it comes to action taken, you find nothing, not at national, provincial or local levels.

Research undertaken by me over some time and as part of my involvement initially with Aplitec and recently as part of Age Secure has proven that a new approach is required. Developing a consumer organisation was seen as a possible way forward. By ensuring credible, tailor made and affordable products, backed by up front and ongoing information and educational material, the potential is there to develop informed consumers.

The Age Secure concept was born and then tested in Upington from February 2001, involving ± 3,000 pensioners. Based on this experience, it was decided to test the concept in Pinetown, KwaZulu-Natal from 1 June 2001.

Right from the beginning of the testing phase, it was clearly understood that Cash Paymaster Services (CPS) and Age secure would be regarded as two separate entities. CPS is a pension paymaster under contract from Government and Age Secure a consumer organisation.

Age Secure is still in a learning curve as answers are being sought to address the many problems of older persons. The Age Secure way is not the welfare way - it rather wants to help mobilise the consumer power of pensioners which it does through local infrastructures and leadership. Community buy-in and involvement is a critical component of Age Secure.

The community leaders and my involvement is purely to explore and develop a tangible and dynamic response to some of the critical problems of pensioners. To those of us who give of our time and energy, the Age Secure concept is an innovative option. We would not like to see that the baby is thrown out with the bath water, however, a number of issues and concerns need to be addressed and resolved in order to forge ahead.

The Age Secure Concept
The mission of Age Secure
is to develop a national consumer organisation of social pensioners in providing members' access to tailor-made, affordable and credible services, presently inaccessible to social pensioners.

2.2 The main objectives are:
To establish local Age Secure clubs for members who bought products and to commence addressing the needs and problems of members and negotiate special deals.

Ensure ongoing communication with members, including information and education programmes ie human rights, utilisation of smart cards, how to live without debt, how the insurance cover works, newsletter etc.

Ongoing evaluation of products and services and the impact on members - three monthly club meetings, completion of questionnaires.

Establish and monitor a network of accredited service providers including regular evaluation by members of services. Club members will have the right to propose new products or change existing products.

Establish a national and regional Boards of Advisors who are people with integrity, knowledge and leadership that will set and approve acceptable standards and monitor Age Secure operations (The boards are in the process of being set up - presently myself and community leaders fulfil this role).

Needs of Social Pensioners
Based on research, the most serious needs are in respect of:

2.2.1 A Refinancing Plan to pay off debt
This plan must give pensioners an opportunity to work towards a debt free life.
Between 30 - 70% of pensioners owe money to micro lenders, shebeen owners, shops, churches, pension committee members, welfare organisations and local authorities. There is deep concern about growing evidence that pension committees are amongst the main loan operators.

On average debt is about R350 per person, the average period 58 months and interest rate varies between 27% - 60% per month. This may mean that R6 billion per annum is owed to money lenders and at least R2 billion in interest goes to them.

In almost all cases, Identity Documents and pension cards are retained by micro lenders.

Once a pensioner owes money to a micro lender, he/she is hardly ever able to pay off the debt. This is because pensioners borrow from month to month as the micro lending industry does not make provision for the down payment of loans.

The impact of this practice is devastating to the pensioner and his family. It means less money for basic necessities like food and clothing. A vicious cycle of dependence on loans has been created with little chance of escape.

Funeral cover has been identified as very important to ensure a dignified funeral and provide additional income to the family.

Many pensioners do have a funeral plan but this only provides for a bare necessity funeral.

Pensioners generally have additional responsibilities in respect of children and family. There is thus a need for a cash benefit.

2.2.3 Nutrition
It is common knowledge that some pensioners deprive themselves of basic foods in favour of the children they care for.

Pensioners pay at least 20 - 50% more for basic foods, depending on the area, available transport and access to bigger shops.

Opportunities for the rearing of live stock, growing of vegetables, organising bulk buying etc are not always available.

2.2.4 Savings
Although limited, there is a group of ±30% of pensioners who wish to save money on a regular basis.

Banks are not accessible to pensioners who wish to save limited amounts of R30 - R40 per month.

2.2.5 Health Care
Primary health care is a problem, including access to medicines.

Personal Problems
This Includes suspension of pensions, incorrect identity documents, high rates and taxes are some of the serious concerns. Existing infrastructures, both at the Department of Social Development and other departments, are not able to respond to these needs. Welfare organisations are so cash-strapped that they can hardly respond to all these problems.

Social Service Infrastructures
The majority of pensioners are not able to access services due to ignorance, distance or unavailability. The need for a consumer organisation has been confirmed.

Age Secure Products and Services
A number of products and services were developed to try to address the needs mentioned above.

The Refinance Plan
A social pensioner may apply to pay off his debt to a maximum of R500 and pay this off over 3 - 6 months at an interest rate of between 12 - 14% per month.

No "loan" is given unless the pensioner and his family fully understand this is a refinancing plan and gives their support. A guideline is made available.

Life cover was previously required as collateral. This has been replaced by a credit insurance at no cost to the member.

Members are monitored on a three monthly basis to ensure they understand the product and are constantly reminded of the purpose of the plan.

Contracts in line with existing legislation are signed.

Members have the right to monthly statements and may cancel the transaction at any time.

Remarks: If a R500 "loan" is compared with a traditional micro loan, the pensioner will over 6 months, pay R900 interest (30%) and still owe R500, while with Age Secure, he will pay R780 over 6 months, including the original amount of R500.

The interest rate of 12 - 14%, depending on the loan amount, is too high and we have expressed concern. However, as this is basically risk capital, financial institutions are not willing to reduce the rates further.

Every attempt will be made however to reduce interest rates to an acceptable level.

3.2 Insurance Cover
In Upington, a pensioner may obtain an Age Secure insurance cover with no age or health restrictions.

In KwaZulu-Natal existing policies sold by Top-Top or Cornerstone insurance companies are honoured. There is no Age Secure policy in operation in KZN. This is a matter of concern as we have received numerous complaints from members. At club meetings, members have already requested that Age Secure discontinues these policies.

3. Food Hamper
A food hamper at R150, consisting of basic foods and cleaning items, is available to pensioners, who may purchase it in cash or on debit order. With regard to the debit order purchase, the price is fixed for six months. The normal retail price for the hamper is R165 - a saving of R15.

The food hamper is not yet in operation in the KZN region.

Savings Plan
This product is not yet available but is expected to be introduced by November 2001.

3.5 The Club
The club offers a wide range of services and discounts.
Let me highlight a number of these:

Three monthly meetings are held where members can talk about their problems, organise themselves and take action. Members are also offered information and educational material.

Members visit the offices or local leaders to raise concerns in respect of health services, suspension of pensions, high taxes, abuse, problems with CPS, crime etc. All cases are investigated and answers are sought. In a number of cases, problems with ID documents, distance from pay points, non-availability of medicines and lack of services was addressed.

Members with inadequate funeral cover have in the past been assisted to bury family members.

Discounts have been organised at shops, on taxi fares etc.

Local organisations and clubs have been assisted financially and with advice to develop services eg small stock farming, home industries, vegetable gardens etc.

3.6 The Stop Order
This issue is sensitive because pensioners are vulnerable and possible targets for exploitation. During the Upington pilot, important lessons were learned that if pensioners were given adequate information, including the involvement of the family and were constantly reminded, the stop order method could work. Cash in the hands of the pensioner can be very dangerous in light of the high crime levels around pension pay sites. The ideal situation would be that pensioners can use smart cards to draw pensions where, when and for how much, they desire.

Although in principle I have no real problem with the stop order principle which, if applied correctly could actually provide cheaper and better protected services, I do, however, have certain concerns which I wish to share:
Persons selling products on commission need to adhere to a strict code of ethics. A system of checks and balances need to be in place that protects customers ie supervisor checking of all transactions.

An ombuds system should be compulsory and accessible to pensioners.

Community monitoring through human right organisations.

A ceiling level should be negotiated and introduced.

4. An evaluation on the impact of Age Secure
Upington
was the main testing area where Age Secure has been involved since February 2001. Based on research done and response from members and community leaders, the following outcomes can be presented:

A total of 913 out of 3 410 members are now loan free after six months. Please note that the 913 do not include 91 people who have died. As members pay their last instalments, the above number will constantly increase. It is estimated that at least 65% of the 3 410 members will be loan free after 12 months. Community leaders are applauding these results.

The above figures mean that after six months, R32, 000 per month more is available to families in Upington. After one year this is expected to increase to R82, 000 per month or R984, 000 per year. More money for families and a debt free culture are some of the outcomes.

Insurance claims are paid out within 48 hours after receipt of the correct documentation.

4.4 Discount of 10% on purchases at a local supermarket was secured.

4.5 53 people who died and where the funeral cover was not sufficient, were assisted either with food, coffin, grave etc.

Local clubs were supported to develop services ie catering,
food gardens, home industries etc.

In 7 small communities, local club structures are in the process of being developed and they may soon apply for subsidies. These clubs are encouraged to develop their own identities.

4.8 In KwaZulu-Natal the first club meetings were held in the Pinetown area. The response from members has been very positive.

4.9 In St Wendolins near Pinetown a strong club infrastructure has been formed. Discussions have been held with town councillors, the Civics, SA Police Services, Post Office, health authorities and other stakeholders.

A food garden project for members and live stock rearing projects are on the cards. Mrs Mkwane will give a detailed account on how the club functions.

5. Suggestions
There is merit in the concept of a consumer organisation for pensioners. Age Secure is pioneering this concept. Much has been learnt but all answers have not yet been found.

I believe the Portfolio Committee needs to avail themselves the opportunity to study more closely the concept of Age Secure and its implementation.

I would also like to extend an invitation to all organisations interested in older persons to learn first hand how Age Secure operates.

SCA Eckley
18.09.2001

Appendix 3:
Overview of involvement in the field of Ageing: SCA Eckley


Consult Age
This is my personal consultancy which provides a variety of services to organisations, companies or individuals. Over the past two years I was and am still involved with the following:

Since April 2000 to January 2001 acting as part-time consultant
To Aplitec in researching consumer needs of older persons as well as the design of products and services.

Since January - May 2001 marketing consultant on a full-time
basis with Age Secure with the task to oversee the Age Secure pilot project in Upington.

1.3 Research Project: Social Mapping of Clubs for the Aged in South Africa: June 2000 - to be completed by November 2001.

1.4 Publishing of a book on the Aged with Open Hand Press.

2. Advisor to a number of welfare and other organisations serving the Aged regarding transformation and economic empowerment.

2.1 Member of the Ministerial Committee on the Abuse, Neglect and Exploitation of Older Persons: March - November 2000
Since June - August 2001 member of the Task Team to oversee the implementation of certain recommendations of the Ministerial Committee specifically tasked to oversee:

The audit of homes for the Aged
Investigating the discounting of government loans
Intersectoral co-operation on matters concerning the Aged.

Contract worker (full time) with Age Secure since June 2001 to
oversee the development of the Age Secure Club marketing, look after members' interests and ensure their protection.

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