Sassa ‘agrees’ to Post Office’s increased social grant fees

The South African Social Security Agency (Sassa) has accepted an increase in the monthly fees that the SA Post Office (Sapo) will charge for administering social grant payments to more than five million beneficiaries from October 1.

Social development minister Susan Shabangu, whose department oversees Sassa, is yet to confirm and agree to a monthly fee structure, Sapo COO Lindiwe Kwele tells Moneyweb.

“We have agreed on the fee structure. We are just waiting for the minister to concur it,” says Kwele. “But Mark Barnes [Sapo CEO] has signed with Sassa and they are in agreement.”

The Post Office entered into an initial agreement with Sassa in December 2017 to distribute social grants, and has now proposed an increase of between 89% and 93% to two of its three monthly fees (see below).

These monthly fees – charged to Sassa and not individual beneficiaries – relate to the maintenance of beneficiary bank accounts and the processing of electronic and physical cash payments at more than 1 600 Sapo branches across SA.

A panel of experts appointed by the Constitutional Court criticised Sapo’s fees for being exorbitant and higher than those of Cash Paymaster Services (CPS), whose contract to distribute a portion of social grants expires at the end of September.

Read: Sapo fees for grant payments justified, says Mark Barnes

In addition to Shabangu having to accept the Post Office’s increased fees, Kwele says the fee structure will have to be presented to a social development committee in Parliament as a “formality”. Sassa hadn’t responded to questions sent by Moneyweb via email and text message by the time of publishing.

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Kwele has defended the fee increases, saying that the state-owned enterprise is now required to process payments to more beneficiaries than initially agreed with Sassa in December 2017.

“When we signed an agreement in December, that was only for the electronic payments. The fees [agreed to in December] were premised on a guaranteed number of beneficiaries and we at least knew how much we were going to be making every month, and a cost recovery was guaranteed,” she says.

“Now we are required to do the cash payments. It [the cost recovery] is no longer guaranteed as it’s based on a number of beneficiaries that have migrated to Sapo [the Post Office] payment systems.”

At the last minute in May, the Post Office was required to begin taking over physical cash payments to 2.5 million beneficiaries – a function currently being fulfilled by CPS (until the end of September). From October 1, the Post Office will administer electronic and physical cash payments to beneficiaries.

The Post Office has had to increase its monthly fees to cover the cost of new investments in its payments systems that will now be processing payments to more beneficiaries.

Apart from technology infrastructure, the Post Office requires equipment upgrades for the processing of cash payments as well as more security to protect beneficiaries at its branches. It has a five-year capital expenditure budget of R3.5 billion, which begins in 2019 with a R1.8 billion spend.

Kwele says the Post Office’s social grants payment technology can also be used to process Unemployment Insurance Fund payments, saving “the government huge millions of rands”.

“We are a state infrastructure and any government entity can utilise our systems because the investments have been made already.”

Although the Post Office has paid the 5.4 million social grant beneficiaries using the new gold Sassa-Post Office branded card, there have been problems, mostly at its branches.

“There are still long queues at our branches,” says Kwele. “Our queues must be supported by a dignity plan for beneficiaries. We have a responsibility of ensuring that there are chairs and water for the elderly. And that is what we are going to be enhancing for the October month.”

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