Net1 subsidiary Cash Paymaster Services (CPS) is likely to play a role in the distribution of social grants for several months after its contract expires in March 2018, according to the services agreement between the South African Social Security Agency (Sassa) and the South African Post Office.
The agreement, seen by Business Day, envisages a "phased migration" period during which CPS will hand over its responsibilities gradually to the Post Office by September 30.
Sassa and the Post Office signed the five-year agreement earlier in December to ensure social grants continue to be paid to beneficiaries after Sassa’s arrangement with CPS expires on March 31 2018. According to the agreement, the deal with the Post Office will cost R2.25bn in the first year, which is similar to the amount CPS had proposed earlier in 2017.
CPS told the Constitutional Court in March that its pro-posed fee to distribute social grants over two years was R4.7bn, or R2.35bn a year.
Sassa’s deal with the Post Office involves a hybrid model that allows the country’s 17-million social grant beneficiaries to choose their payment method. Payment channels will include Postbank, commercial bank accounts, merchants in large retail shops and a "second tier" of merchants comprising village banks, general dealers, small retailers and spaza shops.
Minister in the Presidency Jeff Radebe has said a primary objective of the changeover plan is to reduce the number of beneficiaries who used cash pay-points, which are expensive and posed security challenges.
The biggest cost under the Post Office’s services-pricing schedule is the delivery of cash to pay points, which will cost an estimated R1.26bn in year one, or R55.60 for each of the 1.9-million beneficiaries who use this channel.
The agreement stipulates that the Post Office will be able to purchase or procure "replacement cash-dispensing equipment currently provided by CPS", in consultation with Sassa. Net1 owns the technology used to pay grants, while the equipment belongs to CPS.
Net1 said that after its contract expired the technology and equipment used for the grant distributions would be "redeployed to assist other business ventures".
However, the group would consider a request by the Post Office to use its technology and equipment "in accordance with our business strategy", Net1 said. "Furthermore, we may tender as appropriate, since the Constitutional Court judgment specifies that only the invalid contract with Sassa needs to be replaced and at no point precludes Net1 or CPS from engaging in a fresh and properly vetted process," it said.
The Post Office, in consultation with Sassa, is entitled to make use of black-empowered subcontractors in delivering its services under its agreement.
Net1 said Sassa already had all the required beneficiary information to ensure a smooth handover process, given that the social security agency received complete beneficiary data sets from the company on a continuous basis.
Sassa and the Post Office did not respond to requests for comment on migration of beneficiary data and confidentiality.
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