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More costs looming for grant payments - new proposal suggests R145m to CPS

Faced with decreased pay points, CPS wants to be paid extra to service fewer social grant recipients . / Sandile Ndlovu � Sowetan
Faced with decreased pay points, CPS wants to be paid extra to service fewer social grant recipients . / Sandile Ndlovu � Sowetan

Taxpayers will have to fork out four times more what is being paid to Cash Paymaster Services (CPS) - amounting to at least R100-million a month - for it to continue issuing social grants to recipients.

The proposal is contained in the fifth report to the Constitutional Court by the auditor-general and a panel of experts, submitted over a week ago.

The panel was appointed by the court to monitor the South African Social Security Agency's (Sassa) monthly progress reports on issues relating to the payment of social grants and submit regular reports to the court.

The latest report showed that CPS now wanted to be paid R58 per beneficiary as it distributes grants to about two million cash recipients.

The company had been distributing grants at a cost of an average of R16.44 per beneficiary, to more than 10 million recipients before the South African Post Office took over the bulk of the distribution in April.

National Treasury had already recommended a fee of R44.00 (excluding VAT) or R50.60 (VAT inclusive), which still awaited the court's ruling.

"In that request, CPS proposed a price of R58 (excluding VAT) per beneficiary or a fixed monthly fee of R145-million," the report stated.

Two million social grant beneficiaries receive cash payments from pay-points across the country, mainly at community halls and centres. This service was being rendered by CPS on behalf of Sassa.

In 2014, the Constitutional Court found CPS's contract with Sassa was invalid, however, the invalidity of the agreement was twice suspended by the court to ensure that beneficiaries, mostly the poor and elderly, continued receiving their grants.

Responding to questions from Sowetan, National Treasury said the matter was not being negotiated with CPS as the court had ruled that Treasury should investigate and make a recommendation.

"The court will make a ruling in due course, but did allow some time for other parties to comment," stated National Treasury.

Despite the increase, which seemed to be way above inflation, Treasury indicated that the overall cost average of paying social grants would drop, largely thanks to the involvement of the post office as electronic payments now cost under R10 per beneficiary.

However, Treasury admitted the costs of cash payments were "very expensive because of security, transport, staffing and related costs".

"So the previous average fee of R16.44, if accepted, will now become R9.39 for electronic payments, to be managed by the South African Post Office, R19.48 for other biometric payments including free ATM withdrawal charge and R51 for cash payment at a traditional community-based pay-point," stated National Treasury.

CPS spokeswoman Bridget von Holdt said: "Essentially, CPS is being asked to maintain its full infrastructure, which has a fixed cost, to pay fewer beneficiaries."

She then referred Sowetan to an affidavit by CPS director Herman Kotze, in which he responded to the recommendation by Treasury and raised concerns about it.

"National Treasury has recommended a price of R44.35 (excluding VAT) per beneficiary paid by CPS. It has done so, however, without providing for any minimum monthly fee payable to CPS to ensure that CPS recovers its fixed operational costs," Kotze stated in his affidavit.

Kotze stated that this was "highly problematic because it makes no provision for Sassa's announced intention to dramatically reduce the number of beneficiaries being serviced by CPS".

"CPS's operational model for cash payment services is such that its operational costs will only be materially reduced with the closure of a sufficient number of pay points to allow for the rationalisation and reduction of its pay point servicing routes," he stated.

However, the panel of experts recommended to the court that "a cap be imposed on the number of beneficiaries to be paid through pay points to prevent CPS from encouraging beneficiaries to migrate to this costly channel".

Sassa spokesman Paseka Letsatsi said an announcement would be made soon on low-cost banking accounts by local banks that could be offered to social grant recipients.

"We have started negotiations with the Banking Association of SA. The talks are positive and a solution will be announced soon," he said.

Human rights organisation Black Sash said the looming increases were a "direct consequence of Sassa's inability to manage this illegal contract it has with CPS".

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