PROGRESS REPORT 24 OCTOBER 2017

Purpose The purpose of this presentation is to give progress report about SASSA’s change programme in relation to payment of social grants. The report provides feedback on the following: Procurement of payment service provider i.e. South African Post Office (SAPO) Phase-in Phase-Out Plan Progress on Insourcing certain payment functions Risks and Mitigation Plan and Business Continuity/way-forward

A: CONTEXT

Objects of SASSA Objects of SASSA are Stated in Chapter 2 Section 3 of Act No. 9, 2004: SOUTH AFRICAN SOCIAL SECURITY AGENCY ACT, 2004 The objects of the Agency are to; (a) Act, eventually, as the sole agent that will ensure the efficient and effective management, administration and payment of social assistance (b) Serve as an agent for the prospective administration and payment of social security; and (c) render services relating to such payments.

B: PROCUREMENT OF SAPO

Procurement of Payment Services Process followed for the procurement of social grants payment services from SAPO is outlined below: Request & approval for deviation from National Treasury was made and received on the 29 June and 4 July 2017 respectively; Request for Proposal (SASSA RFP 01/17/SP) was given to SAPO on the 24 July 2017; The closing date was set for the 07 August 2017 at 11H00 and the bid from SAPO was received on time; The Bid Evaluation Committee commenced with evaluation on 22 August 2017 and finalised it on 17 September 2017

Procurement of Payment Services Process followed for the procurement of social grants payment services from SAPO (continued): The technical due diligence to confirm SAPO capability which formed part of the evaluation commenced on 31 August 2017 and was concluded on 15 September 2017; The Bid Adjudication Committee (BAC) process commenced on 19 September 2017 and was finalised on 21 September 2017; The Minister concurred as per section 4(2) of the SASSA Act 2004, with the ACEO’s decision on the 06 October 2017.

Outcome of the Procurement Process In terms of the SASSA RFP, the following services were required: Provision of an integrated payment systems Beneficiary Biometric enrolment Biometric proof of life Banking Services Holding Bank Account Special Disbursement Account Card Body production and distribution Provision of cash payment services

Outcome of the Procurement Process SAPO has been awarded the provision of an Integrated Payment System that entails; SASSA payment platform development Beneficiary Biometric enrolment Biometric proof of life The award is subject to SAPO responding on or before 25 October 2017 on the following conditions among others (letter received): Acceding to perform only one of the four services required Deliverables to be met within the prescribed stipulated timeframes SAPO to provide a written confirmation of its financial reserves equal to at least three months as stated in the RFP The SAPO quoted price is subject to negotiations SASSA will have direct and real-time access to all payment data

SAPO’s SHORTCOMINGS Card body production and distribution: The Bidder was required to produce a minimum of 4.2 million cards per annum; SAPO offered only 10 000 per day, totalling 2.4 million in a year (10 000 x 5 days a week); (50 000 x 4 weeks a month); 200 000 x 12 months a year equals 2, 400, 000; In the SBD 6.1 the bidder has to disclose sub- contracting and if any what percentage of the work; SAPO did not disclose even after a correspondence was sent to them, but in the bid document it made mention of an appointed supplier to provide bank cards. This omission meant that the capability of the SAPO supplier could not be assessed.

SAPO’s SHORTCOMINGS Banking Services: The Bidder to provide transaction clearing and settlement services; SAPO can only provide clearing services The Bidder to provide SASSA with a Special Disbursement account that is FICA:KYC Exception (17) and an EMV prepaid debit card; The SAPO undertook to provide FICA Exception (17) but did not propose a solution for dealing with large sum deposits and also propose a normal debit card linked to the Special Disbursement account;

SAPO’s SHORTCOMINGS Provision of Cash Payment Services: The Bidder to demonstrate capability to eliminate fraud and to prevent ‘double dipping’ where there is no network connectivity; SAPO will comply with the request for paying off-line but indicated that the cost of carrying out the implementation of the ‘currently unknown’ closed loop payment will be factored and transferred to SASSA; The Bidder to provide SASSA beneficiary with a card that is interoperable, card that operates in the ATM, POS and pay-points; SAPO proposed restricted payment options as well as staggering of payments;

SAPO’s STRENGHTHS SAPO has technology for collecting biographic data (names, telephone numbers, addresses, etc; SAPO has biometric sensors used for verification through the DHA HANIS-OVS; SAPO is planning to incorporate biometric recognition capability to deal with the one-to-many searches ; SAPO Trust Centre will be used to store the enrolled biometric data though it needs up scaling new envisaged volumes; SAPO has been awarded the provision of an Integrated Payment System that entails; SASSA payment platform development Beneficiary Biometric enrolment Biometric proof of life

SAPO TO PARTICIPATE AS MERCHANTS SAPO as a state entity could play a role and participate as merchants where they meet SASSA's mandatory radius; This can assist SAPO to revive some of its closed outlets especially in the rural areas and townships and is in line with the Department's commitment in promoting Government to Government partnership as outlined in the report to the Constitutional Court; This is a long lasting partnership which will exist beyond SASSA’s insourcing of the entire payment function;

C: PHASE-IN PHASE OUT

SAPO Phase In Process In giving effect to the award to SAPO on the Integrated Payment System; the following is underway: The Standing Steering Committee between SASSA and CPS will revise its Project Plan to incorporate the roll-out of the project; This aims to manage the Phase in Phase out SAPO should start with the testing of the Beneficiary Biometric enrolment by February 2018; The Standing Steering Committee on Phase-In Phase- Out Approach will further guide and monitor the interface with all other payment service providers

D: PROGRESS ON INSOURCING

Services SASSA will in-source Opening of the Paymaster General Accounts (PMG) to enable social grant transfers/funds to be deposited to enable direct transfers to beneficiaries commercial bank accounts inclusive of Walvis Bay beneficiaries; Approval for the opening of the PMG accounts has been received from National Treasury on 17 October 2017; Six (6) weeks of testing is required (this will be done in November & December 2017); SASSA will do the direct transfers (ACB) for the January 2018 payments;

Services SASSA will in-source Work Break Down in progress for the Direct Transfer of January 2018 payment; A working tool has been developed to compare CPS and SASSA beneficiary bank details, including Easy Pay Everywhere (Green Cards) Accounts; Process to separate the payment file into two categories (ACB & other) is in progress for testing in November 2017 and roll-out in January 2018; Administrative planning is in progress to consider legislative/regulatory compliance, cash flow process and resource requirements; Information for 2 million (ACB) beneficiaries will be submitted on 18 December 2017 to National Treasury for processing

Services SASSA will in-source Management of Regulation 26A deductions i.e. deductions for payment of premiums for funeral insurance policies that beneficiaries took out; SASSA has commenced the process of taking over the function by: Capturing the mandates live on SOCPEN since 1st October 2017; To date 421 mandates have been captured and 23 beneficiaries from the same group requested the deductions to be cancelled;

Services SASSA will in-source Migration of Data progress report; Monthly biometric data transfer is ongoing (2 cycles per month) Enrolment status of beneficiaries are received on a monthly basis (banking details, ID # grant type and Enrolment date) Process for Bulk verification for remaining Data with DHA is in progress (Qualitative status comparison) An interim Database was created to allow SASSA to perform a comparison report on the completeness of Beneficiary enrolment Data. These Data sets include a download from Socpen/ CPS/DHA interface (identity verification).

E: RISK AND MITIGATION PLAN

Risks and Mitigation No Description of Risk Current mitigating control 1 Failure to pay grants on the 1st April 2018 Comply to deadlines/timeframes Process of appointing a new service providers expedited Brief Con.Court on progress,challenges and risks 2 Failure to comply with the Constitutional Court judgement Schedule of reports to the Con.Court in place Con.Court appointed Panel of experts Continuous weekly evaluation of progress by HO EXCO 3 Panic & confusion amongst beneficiaries Intensive communication with beneficiaries and stakeholders 4 Potential Litigation Compliance with SCM processes to the letter

Risk and Mitigation (Cont.…) No Description of Risk Current mitigating control 5 Budgetary Constraints Phase-in Phase-Out Reprioritisation in the baseline Engagement with National Treasury 6 Financial Risk Reprioritisation Prepare convincing Bid for additional resources 7 Lack of Systems Integration Earlier piloting and testing 8 SAPO unable to deliver some of the services SASSA will go on open competitive Bidding process

F: WAYFOWARD

Revised Procurement Timelines Open Procurement process and timelines set as follows: RFP revised and approved by BAC 10 November 2017 Advertisement: 17 November 2017 Briefing session: 24 November 2017 Closing date: 16 January 2018 BEC evaluation: 25 January to 10 February 2018 BAC adjudication: 12 to 17 February 2018 Approval and Concurrence: 19 to 24 February 2018

Business Continuity SASSA facilitated the extension of the current card life which has been granted; This implies that the National payment system will allow the SASSA cards to work beyond the current expiry date printed on the cards; Communication in this regard is being rolled out to both internal and external (through print and electronic media) stakeholders; SASSA to invoke Order 9 of the ConCourt judgment to explain the reason for any material change arising in relation to circumstances and consequences of the change in meeting the deadline of 31 March 2018

Conclusion In conclusion the committee should note progress made towards: Procurement of payment service provider i.e. South African Post Office (SAPO) Phase-in Phase-Out Progress; Progress on Insourcing certain payment functions; Risks and Mitigation Plan; and Business Continuity/way-forward

Thank you