The inside battle for R120bn social grants distribution tender

2017-02-16 21:05


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Johannesburg - The race for the tender to distribute R120bn a year in social security grants is on.

But who should get it and what would it mean for the 17 million beneficiaries?

With seven weeks to go to before the Constitutional Court deadline of April 1 for a new service provider to be appointed, Social Development Minister Bathabile Dlamini is expected to file papers with the court to ask for an extension of the current contract with Cash Paymaster Services (CPS) to avoid the non-payment of beneficiaries.

The court found in 2014 that the contract was invalid but gave the department until March 31 to find a new distributor or take over the payments.

At least 18 companies have submitted bids. These include CPS, Standard Bank and the South African Post Office (SAPO).

READ: Everybody will be paid, I stick by it - Sassa CEO

A compulsory briefing session took place in January with 74 companies and service providers represented. Of these, seven were banks, but on the closing date, February 10, only three banks remained as part of the 18 companies who submitted bids.

Absa, which took the CPS tender all the way to the Constitutional Court, is not part of the bidding firms.

Treasury and the Department of Social Development are at war over the grants system, with Dlamini rejecting Treasury's proposals for banks and the Post Office to be used to distribute the money.

Here are some of pros and cons of the proposals put forward based on various documents seen by News24:

Minister Dlamini's proposal:



- Dlamini says she wants a system that protects the beneficiary

- Not paying the 17 million beneficiaries is not an option – the pursuit for a perfect system risks continuing an invalid contract in violation of the Constitutional Court order.

- Sassa says its norms and standards dictate that a beneficiary should not travel more than 5km to a pay point.

- Bad track record. The department has had since 2014 to find a solution, but has failed to meet the deadline.

- Dlamini wants the Sassa card to allow beneficiaries to shop beyond the formal retailers such as Boxer, Shoprite and Woolworths.


She wants beneficiaries to be able to use it with informal traders including hawkers and township spaza shops. The latest stats show that the billions distributed gets spent in retailers and she wants the money to remain in communities where beneficiaries live.

- Critics see the insistence on a biometric system as an attempt to maintain CPS as a grants distributor.

- She is also insisting on a biometric system that she says has saved the country R2bn in fraudulent grants.


- Cards must be Sassa branded and have the country's coat of arms.





- A new supplier for cash distribution could use banks for beneficiaries with bank accounts.

- Using banks will require a massive communication campaign to encourage beneficiaries with bank accounts to submit details to Sassa and those without bank accounts to open them. Sources within the Department of Social Development said this would create chaos and reverse the gains of the current national payment system.

- Some beneficiaries already have bank accounts or accounts at the Post Office.

- Who pays for the banking charges to be incurred by beneficiaries? Treasury proposed for Sassa to meet with all banks to negotiate service fee charges. Treasury says 60% of the beneficiaries currently using the banking option with Sassa are paying out of pocket bank charges already.

- Treasury proposed the exclusion of biometric verification which would have favoured those companies with the system, including CPS, and discriminated against other potential bidders.

- Using a PIN does not work as a proof of life solution and this could open the system up to fraud and micro-lenders keeping the card to withdraw on payday.

- Treasury said the biometric system would be suspended during the interim period but will be considered for the long term.

- Beneficiaries will pay higher charges to get cash back.


- The 5km radius required to access pay points might not be guaranteed, especially rural in areas.


SA Post Office:



- Being a distributor of billions of rand in grants would make it one of the biggest banks in the country.

- The Post Office is yet to complete its banking licence application but it said it expects it to be completed by July 2017- at the moment it only offers savings accounts through Postbank.

- It has agreements with all the banks to utilise their ATM networks - beneficiaries will be able to use their issued bank cards at any ATM or merchant shop across the country.

- It does not have its own ATM structure which could lead to increased transaction costs that either Sassa or the beneficiary would be liable for every month, but the SA Post Office says adjustments can be expedited to meet Sassa requirements.

- It has around 2 647 outlets across the country: Beneficiaries can access their accounts and make over-the-counter transactions from any Post Office branch.

- It does not have a biometric system but says it is working with VISA to look into match-on-card biometric authentication.


- It is costly to replace the current cards as they have CPS logos and to keep the cards would require extensive negotiations between Sassa and Grindrod/Master Card, the network behind the current cards.


- The Post Office is currently processing a very limited number of transactions at R30m a month and would need three times the capability to process grants.


- Sassa is concerned about the limited number of Post Office distribution points, especially in rural areas.

Read more on:    sassa  |  bathabile dlamini  |  social grants

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