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Dlamini rejects Gordhan’s social grants proposal, insists on keeping CPS

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Minister of Social Development Bathabile Dlamini. Picture: Thapelo Maphakela
Minister of Social Development Bathabile Dlamini. Picture: Thapelo Maphakela

Social Development Minister Bathabile Dlamini has rejected Finance Minister Pravin Gordhan’s proposal for banks and the post office to distribute social grants to 17 million beneficiaries.

She said the Treasury’s proposal to distribute R10 billion in monthly grants was impractical and “not thought through carefully”.

Dlamini said beneficiaries would be at risk of not receiving their grants when the Cash Paymaster Services (CPS) contract ends on March 31, under Gordhan’s plan.

“Any attempt to implement it may result in the state’s failure to pay social grants on April 1, which will be disastrous. It is a risk that my ministry is not prepared to assume,” Dlamini said.

Dlamini was responding to a letter written by Gordhan in which he proposed that CPS should not be part of the service providers to be considered for the distribution of grants, and that the tender be given to banks and the post office instead.

On Wednesday, The Star reported that Gordhan wrote to Dlamini on February 1 and said continuing with CPS would expose the government to legal challenges.

Dlamini responded in writing on February 8, saying her department was in charge of the payments of grants and that interactions with the Treasury as part of a joint technical team were not to map out the future of social grants, but to merely analyse available options.

The South African Social Security Agency (the Social development department’s grants agency), the Treasury and the Reserve Bank have been meeting to find a solution as the April 1 Constitutional Court deadline looms for the social security agency to take over the payment system.

Dlamini said banks did not have the biometric system that has eliminated fraud from the grants system.

She said they were only driven by profit, which were gained through opening new bank accounts and transaction fees. Beneficiaries should not lose part of their grants to exorbitant banking fees, she said.

“In fact, it would be regressive and an impediment if banks were to be used for controlling and managing the distribution of grants as it would immediately confine the entire functionality towards the banking sector, which at the moment is not cognisant of other functionalities such as biometric verification,” Dlamini said.

Dlamini wants the biometric system to be an essential part of the distribution system, arguing that it had saved the state R2 billion, with more work under way to remove duplicate entries which could amount to an additional R2 billion saving.

The security agency’s biometric system included fingerprinting for proof of life and to ensure that grants were paid to the right people.

She also argued that using a traditional bank card and pin code put beneficiaries at risk of abuse by micro-lenders who would keep the cards and deduct money owed on payday.

Not only did the Post Office not have a banking licence, or the necessary technology and expertise, but it also did not have enough offices, especially in rural areas, to distribute the money, she said.

Dlamini insisted that continuing with the CPS contract until the state security agency was able to take over the payment function itself was the only viable solution.

“The first option [keeping CPS] will ensure that there are no disruptions to the payment of the social grants beyond March 31, until CPS is phased out and a new service provider is appointed to take over the payment of social grants, up to the point where Sassa is able to take over the payment function itself,” Dlamini told Gordhan.

On December 9, the state security agency advertised a request for information for payment and banking services and 74 companies attended the briefing session on January 13. The closing date for bids was February 10, and so far 18 bids had been received from bidders including three banks and CPS.

Dlamini was expected to report back to the Constitutional Court on Thursday and plead for an extension of the CPS contract.

In 2014, the highest court of the land declared the contract with CPS invalid but suspended the invalidity order. The state security agency had until March 31 to find a new distributor or take over the grant system. – News24

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