1. PROGRESS REPORT PAYMENT OF SOCIAL GRANTS ON 01 APRIL 2018 14 March 2018
2018/10/14
CONFIDENTIAL

2. Purpose
The purpose of this presentation is for Portfolio Committee to note progress:
State of readiness for the 01 April 2018
SASSA’s change programme in relation to insourcing grant payment functions;
South African Post Office (SAPO) progress in relation to the project plan
SASSA engagement with Banks
2018/10/14
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3. Current Payment Channels
Method of Payment
Customer Touch Point
No of Beneficiaries
Total
Paypoint (Biometric CVM)
Cash payment
SASSA Cash Pay-points
1,936,662
2,894,040
Merchant (Biometric CVM)
Merchants
215,117
ATM (Biometric CVM)
742,261
ATM (PIN CVM)
Electronic payment
Commercial Banks (ATMs)
5,375,936
7,778,157
Private Commercial Bank Accounts
(2,001,233)
Merchant (PIN CVM)
2,402,221
10,672,197
[1]
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4. SASSA Insourcing
Direct transfers to ACB beneficiaries bank accounts through SASSA PMG account
Commercial personal accounts
SASSA/Grindrod Accounts (short –term)
Management of Regulation 26A deductions
Biometric Enrolment
Alternative Payments – LED (Cooperative banks & Local/village/township shops)
Reconciliations (Grants Payment Control and Monitoring)
2018/10/14
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5. Direct Payment (ACB) Transfers
SASSA successfully effected direct transfers to commercial bank accounts including EPE which started in the January payment cycle
SASSA has also conducted Temporary Direct Transfers to SASSA branded Payment Cards (Grindrod Accounts)
Pilot of direct transfer to Accounts of (Grindrod Accounts – Test file) of the 5,776,924 million beneficiaries was done for March payment
This segment of beneficiates will subsequently be migrated to the SASSA/SAPO card, if they do not choose personal bank accounts
SASSA is in receipt of correspondence from CPS that the direct transfer to the Grindrod Accounts has caused systemic risk (in the test phase) and cannot be done for all for April payment cycle ( )
Engagement underway with SARB and CPS to address the concerns
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6. Summary Direct Payment (ACB) Transfers March 2018
Banks
Grants
Amount
ABSA BANK
60 945
R ,96
AFRICAN BANK
511
R ,15
ALBARAKA BANK 36
R ,66
BANK OF ATHENS
729
R ,86
BANK WINDHOEK
152
R ,42
BIDVEST BANK
518
R ,79
CAPITEC BANK
74 786
R ,38
FINBOND MUTUAL
4 945
R ,54
FIRSTRAND BANK
52 274
R ,33
GRINDROD BANK
R ,64
INVESTEC BANK LTD 5
R 6 920,00
ITHALA
401
R ,30
MERCANTILE BANK 50
R ,96
2018/10/14
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7. Summary Direct Payment (ACB) Transfers March 2018
Banks
Grants
Amount
NBS 58
R ,42
PEOPLE’S BANK 2
R 5 485,70
STATE BANK OF INDIA 1
R 1 600,00
NEDBANK INCORP BOE 13
R ,00
NEDBANK LIMITED
33 549
R ,45
NEDBANK NAMIBIA 40
R ,74
POSTBANK
8 309
R ,41
STANDARD SA
41 772
R ,34
VBS MUTUAL
155
R ,41
TOTAL R
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8. Regulation 26A deductions
A contract was signed with Qlink on 16 January 2018 to effect 3rd party deductions (funeral cover deductions)
SASSA has effect deductions through Qlink on 1 March 2018 for 15 Insurance Companies duly registered
Of the 15 insurers registered, only 6 provided full details to SASSA as per Central Supplier Database requirements, and only once the rest comply will the premiums deducted be paid over
All the affected insurance companies have been formally notified of the reason for the non payment of premiums and requested not to penalise policy holders due to the delays.
A total of 727 243 deductions from beneficiary grants were done in March 2018.
The total value of the direct deductions for March 2018 is R
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9. Regulation 26A deductions
Upon analysing the deductions file of the policies, a number a multiple policies were identified as follows:
– 1 policy deduction
– 2 policy deductions
317 – 3 policy deductions
8 – 4 policy deductions
The majority of the multiple policies were for the same beneficiary and different insurance companies, but a small number (496) were found with the same insurer.
3 351 Policies for more than 10% of value of single grant have been identified, of which 16 are for more than 30%
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10. Biometric Enrolment
SOCPEN enhancements to integrate with the Biometric Identity and Access Management Solution are in progress.
One thousand three hundred (1 300) devices have been procured. The deployment of the infrastructure to SASSA local offices will be completed by 15 March 2018.
Training of super users is scheduled to be completed by 18 March 2018 (Starting 13 March).
The testing of the in-house biometric enrolment of beneficiaries is scheduled to commence on 19 March 2018.
Final Data Sets migration from CPS will be done under the auspices of Information regulator
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11. Migration to Banks
SASSA, through National Treasury and SARB, has engaged the undermentioned banks for the development and provision of a Special Disbursement Account for social grant money;
All banks engaged, except for Ubank, confirmed that the envisaged Low Cost Bank Product will not be ready for 1 April 2018 (the product or low cost bank account will take between Six (6) to Twelve (12) months to develop and approve).
The banks further indicated the costs of the envisaged product are likely to be higher if banks were to develop the product for SASSA
The industry instead canvassed for their existing Low Cost / entry level bank accounts and bank infrastructure, which can be activated in a short period of time.
SASSA provided a file consisting of 10 819 063 records to Bankserv through National Treasury on 5 March 2018 for banks to validate information on the beneficiaries who have bank accounts, which will assist in targeting these beneficiaries specifically.
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12. List of Banks Engaged First National Bank VBS Mutual bank
Standard Bank
Ubank limited
Capitec
Ithala bank
FINBOND
SASFIN
Grindrod
ABSA
NEDBANK
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13. Existing low cost bank accounts
Monthly Fee
Withdrawal (Native)
Withdrawal (Other)
Withdrawal (POS)
Cash Deposit (ATM)
Absa
Transact
R4.95
R5.00
R8.50
R1.15
R R1.35/R100
Standard Bank
Access
R4.99
R1.60/R100
R R1.60/R100
R1.60
Nedbank
PAYU
R6.50
R R1.85/R100
R2.00
R R1.40/R100
FNB
Easy
R5.25
R1.85/R100
R1.40
R0.90/R100
Capitec
Global One
R5.50
R6.00
R1.50
Finbond
Finsave Value
R6.55
R13.10
R2.39
Grindrod
EPE
 --  -
NB: Finbond ATM withdrawal and R13.10 for R1010 to R2000 , *SASSA awaits information from Grindrod
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14. Migration to Banks BANKS MARCH ‘18 FEBRUARY ‘18 DIFFERENCE ABSA BANK
60 945
31 034
29 911
AFRICAN BANK
511
123
388
ALBARAKA BANK 36 23 13
BANK OF ATHENS
729
117
612
BANK WINDHOEK
152
154 -2
BIDVEST BANK
518
110
408
CAPITEC BANK
74 786
26 684
48 102
FINBOND MUTUAL
4 945 18
4 927
FIRSTRAND BANK
52 274
23 213
29 061
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15. Migration to Banks BANKS MARCH ‘18 FEBRUARY ‘18 DIFFERENCE 2 109 152
GRINDROD BANK
65 012
INVESTEC BANK LTD 5 3 2
ITHALA
401
140
261
MERCANTILE BANK 50 25
NBS 58 56
NEDBANK INCORP BOE 13 14 -1
NEDBANK LIMITED
33 549
13 328
20 221
NEDBANK NAMIBIA 40 41
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16. Migration to Banks Total 2 388 403 2 160 157 228 246 BANKS MARCH ‘18
FEBRUARY ‘18
DIFFERENCE
People's Bank 2
Postbank
8 309
1 510
6 799
Standard Bank
41 772
19 360
22 412
State Bank of India 1
VBS Mutual
155 64 91
Total
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17. Growth of Migration to Banks Provincial Statistics
Province
Mar-18
Feb-18
Difference
Amounts
No of Beneficiaries
Eastern Cape
461,683,019.47
411,514
379,394,568.25
346,621
82,288,451.22
64,893
Free State
160,104,752.86
149,517
141,368,923.10
135,226
18,735,829.76
14,291
Gauteng
336,459,661.62
299,083
292,248,608.70
264,594
44,211,052.92
34,489
KZN
613,905,186.13
580,875
570,875,656.16
550,197
43,029,529.97
30,678
Limpopo
312,034,155.24
282,992
275,656,687.33
250,339
36,377,467.91
32,653
Mpumalanga
174,796,066.07
156,239
156,807,473.01
140,970
17,988,593.06
15,269
Northern Cape
86,973,400.28
75,257
78,120,808.35
68,701
8,852,591.93
6,556
North West
203,565,567.69
184,937
184,037,813.57
169,238
19,527,754.12
15,699
Western Cape
283,855,244.10
247,989
249,487,059.83
222,530
34,368,184.27
25,459
Total
2,633,377,053.46
2,388,403
2,327,997,598.30
2,148,416
305,379,455.16
239,987
2018/10/14
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18. Cooperative Financial Institutions as a Payment Channel
Cooperative Banking Development Agency (CBDA) is willing to explore the use of the CFI’s as a social grant payment channel.
It is a fact that CFI’s in their true nature are ambitious to grow as financial players in the country, mostly in the space of social grant payments.
A meeting convened with the nine (9) cooperatives financial institutions which have been migrated to an electronic accounting system to establish their willingness to serve as a payment channel for social grants
3 of the 9 are ready to be used with immediate effect while further engagement is required for the rest. This will continue within this financial year
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19. Challenge with EPE cards
CPS and Grindrod have embarked on an aggressive roll out of the current EPE account. SASSA has had to implement the following steps:
Issued circular confirming that no marketing of any product will take place at any SASSA office or pay point
CPS staff to concentrate on functions for which they have been contracts only – enrolment and payment. Anything else will be seen as a breach of contract
Only SASSA branded cards to be issued by CPS enrolment officers
Beneficiaries who choose to take the EPE account still have to complete the “method of payment” form and return this personally to SASSA for capturing on the system
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20. Cash Payment
The objective with the cash payment is to migrate the beneficiaries who are using SASSA card for cash payment (2,5 million) to a new cash payment card to access their money at SASSA cash pay-points.
Bid15/17.SP/HO advertised and a briefing session held on the 24/02/18
The Bid was due to close on 28 February 2018 but extended till the 07 March 2018 and a further request was received from G4S for extension and now the final closing date is 12 March 2018.
Tight time frames are set: awarding and contracting will be completed by 04 May 2018
A new service provider would be afforded an opportunity to set up and be ready to pay grants from 01 July 2018.
It should be noted that SASSA has received a further request to extend the closing date to 30 March 2018 which has not been entertained.
2018/10/14
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21. Cash Payment Services
CPS on the 07/02/18 lodged an urgent interlocutory application to the Con Court to declare that CPS is not prohibited by Court Order of 17 March (CCT 48/17) to tender for the provision of cash payment services for social assistance bid no 15/17.SP/HO.
The Con Court has since ruled on the matter that CPS is not prohibited from bidding for the cash payment tender
It should be noted that CPS did attend the compulsory briefing session held on the 24/01/18
As part of the phase-in, SASSA applied to Court 08/02/18 for CPS continue to administer and pay cash up until September 2018, SAPO supported the phase-in phase-out application
Con Court on the 06/03/18 reserved judgment to SASSA’s application
On the 09/03/18 the Con Court issued a Court Directive for SASSA and SAPO to file affidavits on 12/03/18 explaining why information was withheld from the Court (council indicated there is no contingency while in the media briefing the contingency was announced)
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22. SAPO Branches replacing SASSA Paypoints
SAPO branches currently have counters that are classified as ‘ATMs’ and provide banking experience to its customers. In relation to SASSA pay-points, SAPO’s footprint detail is as follows;
53.5% of the branches are within the 5 km radius
17.6% are between 5 & 10 km
20.9% between 10 & 20 km
8% are outside the 20 km radius
As a quick win, SAPO has identified 860 branches within a 5km radius of a SASSA pay-point which potentially could be used for cash distribution after a suitability assessment (as per SASSA’s norms and Standards) has been conducted. SAPO has developed a business case to upgrade the IT infrastructure and capacity at these branches that will be submitted for approval to the SAPO Board. These branches could serve as:
Designated additional pay points; or
They could replace the existing pay points.
As a second phase, SAPO will commence a programme to identify and upgrade suitable off-line ‘agencies’ to allow them to be used for SASSA grant payments
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23. SAPO as a Payment partner
SASSA and SAPO signed a Service Agreement on 8 December In terms of the Agreements, SAPO will provide the following services to SASSA for a period of 5 years: 
Electronic banking services, through a corporate holding account and special disbursement accounts for beneficiaries
On-boarding of new beneficiaries through instant account opening and card issuance at SASSA local offices
Biometric authentication of beneficiaries
Development of software, in conjunction with other state entities
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24. SAPO READINESS Opening of Holding/Control & Cash Disbursement Accounts
The application to National Treasury (26/01/18) as stipulated in the PFMA for SAPO to open the SASSA holding account & Cash Disbursement account was unsuccessful (05/03/18),
Due to the status of Postbank: not a bank registered in South Africa and also not approved in writing by National Treasury.
Consequences
the NT decision changes the SASSA payment model (special disbursement accounts were going to be linked to the holding accounts)
the costing model by SAPO has to change since it was based on the current Service Agreement and pricing, is based on a fully pre-funded model
the Cash Disbursement Account will be opened with another bank (bank of the cash payment contractor)
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25. SAPO READINESS
Opening of Holding/Control & Cash Disbursement Accounts (continued)
Consequences
SAPO, in its current financial state, may not be in a position to ‘buy’ such volumes of cash and will not, be able to proceed with the current contract without the pre-funding of cash payments expected to be made at SAPO branches
Recommendation by SAPO as a result of the NT decision:
National Treasury agrees to pre-fund the expected value of cash payments to be made at SAPO branches to SAPO at least 36 hours before the payment date
That SASSA and National Treasury assist SAPO/Postbank with the development of the necessary cash payment prediction solution to be able to forecast the demand for cash at each SAPO branch
That National Treasury, SASSA and SAPO agree and develop the reconciliation process to reconcile the pre-funding
The costing model by SAPO has to change since it was based on the specifications provided by SASSA
The Cash Disbursement Account will be opened with another bank (bank of the cash payment contractor
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26. SAPO READINESS Special Disbursement Account
The special Disbursement Account product created and individual accounts ready to be opened (however, these will not be linked to a holding account)
The bulk account opening with a sample of a existing beneficiary data was successfully tested on the 26/02/18.
Integrated Grant Payment System (IGPS)
Due to the procurement process that started late and the integration and testing that still has to happen, system not ready for use on 1 April 2018 but;
Contingency
Special Disbursement Accounts to be hosted in the Postbank’s core banking platform (FCUBS),
All data and transaction history of SDA opened on FCUBS will be transferred seamlessly to the new IGPS at no cost to either SASSA or beneficiaries.
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27. SAPO READINESS Card Body Production Contingency
SAPO will receive its first batch off Cards on 16/03/18
Upon receipt the card has to undergo testing (PASA & VISA) certification expected 19 and 30 March respectively before card roll-out from 03 April
Contingency
In the event the cards are not certified the existing Postbank Mzansi accounts & cards will be issued
On-boarding of new beneficiaries
On 22/03/18 ‘Dry Run’ using 300 untested cards at four identified SASSA offices will take place,
From 03 April 2018 either the New SASSA / SAPO card or the Mzansi card will be issued to new beneficiaries at SASSA offices
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28. SAPO READINESS 1 month delay
Card Swap
1 month delay
Mobile ‘packaged suitcase’ card issuance equipment not yet available
Equipment already in use at SAPO will be availed at SAPO branches and ‘depots’ for card issuance and on boarding of beneficiaries
Due to uncertainty of the ‘readiness’ of the SASSA/SAPO card, card swap for beneficiaries will be delayed to commence 16 April 2018 at SAPO branches only
card swap at identified community halls and other identified venues will only take place from 30 April 2018 once the ‘packaged suitcases’ have been obtained
Biometric Engine
Due to the procurement process that started late and the integration and testing that still has to happen, the system will not be ready for use on 1 April but;
Contingency
The SASSA Identity Access Management (IAM) software will be used by SAPO
Alternatively the FBCUBS system will be used
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29. Phase out of CPS
The SASSA/Grindrod Card that was due to expire on 31 December was extended until 31 December 2018 and so far it has been honoured by Banks and Merchants since the January 2018 payment cycle
A framework of the phase-in phase-out was drafted by the Tri (SASSA/SAPO/CPS) working team outlining each organisation’s responsibilities as follows among others:
SASSA effecting payment into 3rd party bank accounts,
SASSA paying directly into accounts held at Grindrod Bank & CPS to support. 
CPS to assist with cash payment (subject to approval from court)
provide individual beneficiary data payment analysis to SASSA to be used for pay points configuration and
Provide support for the Direct Transfer to the SASSA/Grindrod accounts
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30. Phase out of CPS
In order to ensure that both SASSA & SAPO are ready for 1 April 2018, the technology and human resource will be tested and then ‘going live’ in the month of March 2018
Four offices have been identified for ‘going live’ on 22 March 2018 and for Launching the New SASSA/SAPO CARD
Only 300 beneficiaries who choose to be paid through the National Payment system(ATMs & merchants) will be issued the SASSA/SAPO card as part of the ‘Testing’
The following offices are nominated:
Manguze – KwaZulu Natal,
Mount Fletcher – Eastern Cape 
Tonga – Mpumalanga
Worcester – Western Cape
The Portfolio Committee members are requested to grace these offices to launch the Government EMV Card
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31. Contingency Plan
SASSA developed a contingency plan covering the full spectrum of grant payments in 2017.
Aspects of this plan which have already been implemented:
Reactivation of the PMG account with SARB
Direct transfers into 3rd party bank accounts
Management of Regulation 26A direct deductions
Test of direct transfers into SASSA/Grindrod cards
Analysis of pay points to projectise the progressive reduction
Cash payments to follow open tender proces
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32. Contingency Plan
Following delays with cash tender, it was decided to strengthen the contingency for cash payments
The contingency for cash payments is premised on the following:
Direct deposits into the current SASSA card for all
Identification of post offices which can provide over the counter payments (within 5 kilometres of pay points)
Identification of banking infrastructure which can be used by cash beneficiaries
Request banks to provide mobile infrastructure in under- or un-serviced areas
Provision of transport to bus residual numbers of beneficiaries to the nearest infrastructure to access cash
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33. Regional Breakdown *9 917 pay points but some used on multiple days
Cash Beneficiaries
Cash pay points
Eastern Cape
402,005
2 629
Free State
195,129
203
Gauteng
295,410
146
Kwazulu-Natal
781,343
1 707
Limpopo
549,056
2 012
Mpumalanga
255,065
398
North West
230,906
664
Northern Cape
69,022
395
Western Cape
116,104
279
Total
2,894,040
8 433*

34. Regional Statistics Province Post Offices within 2 km
Ready Post Offices
Biometric ATMs
Biometric POS devices
Eastern Cape
362
152
130
314
Free State 88 76 54 40
Gauteng
110 65
151
122
KwaZulu-Natal
719
141
344
465
Limpopo
265
120
109
242
Mpumlanga
125 80 78
Northern Cape 96 56 18
118
North West
115 79 89
Western Cape 93 97
102
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35. Risks related to contingency
Costs to beneficiaries who are forced to transact in NPS
Costs and logistics for transport
Resistance by community to summary closure of pay points
Inconvenience to beneficiaries
Disruption of payments as a result of changes – especially given short time frame
Need for additional resources – support PIN set and reset for those who have not used PIN before
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36. Conclusion It is recommended that the Portfolio Committee :
Note progress registered thus far for taking over payment services as from 01 April 2018
Be aware of all the systems and processes that are not yet ready but due to be concluded in the phase-in phase- out period
Deliberate and prevail on all matters that poses a risk to the project
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37. Thank you
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