KHAYA SITHOLE: Delivery of fees and grants a head–scratcher

Of all SA’s public expenditure items none is more prominent than social grants and higher education.

For most of the past two years, these issues have been in the public eye for different reasons. In relation to social grants, the central issue has not been whether they ought to be paid, but rather how the distribution process ought to work. In relation to higher education, the conversation has migrated towards the question of whether more resources need to be allocated.

For social grants, the current distribution model — with Cash Paymaster Services (CPS) and Grindrod Bank at the epicentre — has been soundly condemned for the criminal element associated with the original granting of the tender to CPS. In addition, CPS has been criticised for the practice of processing deductions from the cards of social grant beneficiaries, which leaves them with precious little to spend on core necessities.

The Constitutional Court directed the state — through the South African Social Security Agency (Sassa) — to find a new distribution platform by April 2018. Various delays, disagreements and dismissals later, the interministerial committee has finally announced that Sassa will collaborate with the Post Office to take over the process of grant distribution.

However, the Post Office does not have the same distribution footprint — incorporating banking facilities and physical delivery infrastructure — that CPS has used over the years.

In response to this, the expert panel advising the committee recommended that beneficiaries who have accounts with commercial banks already should simply have their grants paid directly into those accounts.

A key point of deliberation is whether the beneficiaries have the appetite to absorb the transaction costs associated with the use of commercial bank accounts. In instances where social grants can be as low as a few hundred rand, failure to contain transaction costs — bank charges, debit order fees — will result in some beneficiaries being worse off.

In addition, this still leaves roughly 2-million grant recipients who have traditionally collected from cash pay points. They would need to be catered for using the logistical arrangements that CPS already has in place. Such beneficiaries need to be migrated onto the banking system and the Post Office should take the lead in this case, so it can use its vast geographical footprint.

I suspect getting Postbank to deal with 2-million rather than 17-million clients in the short term provides the best chance to get the banking footprint right. But looking at the timeline between now and April, there is a huge risk that the proposed solution has not been given enough time to materialise. Surprisingly, Minister in the Presidency Jeff Radebe indicated there is no plan B at this stage.

The recently released Heher commission report on the funding of higher education has received mixed reviews. At the heart of its proposal is that higher education should be funded through income-contingent loans available to everyone and guaranteed by the state. Commercial banks are being asked to provide the loans upfront.

The problem with this proposal is that it introduces an unlimited contingent liability that the state quite simply cannot absorb. The appetite for banks to get involved also remains tentative at best.

But perhaps we are jumping the gun here. The president still has the chance to reject the commission’s report outright and go for something else. We can only wait.

• Sithole (@coruscakhaya), a chartered accountant, academic and activist, chaired the Lesedi Education Endowment Fund as part of the #FeesMustFall campaign. He writes in his personal capacity.