Biometric verification critical for social grant payments - Bathabile Dlamini

Minister says new Payment Plan will be implemented over four phases

Minister Bathabile Dlamini: Social grants payment media briefing

5 Mar 2017

Programme Director, Ms Lumka Oliphant

The Acting CEO of SASSA, Ms Thamo Mzobe

Executives of SASSA and the Department of Social Development

Members of the media

Good morning.

Thank you for honouring this briefing which gives me the chance as the Executive Authority of the Department of Social Development and its agency the South African Social Security Agency (SASSA) to brief South Africans who are benefitting from the 17 million social grants.

SASSA was established in 2006 through the SASSA Act to administer and pay social grants. During this period it has been able to only administer the grants and relied on third parties to pay the grants.

Ladies and Gentleman

It is important to explain to South Africans the developments at SASSA from where they were to where they are now. It has always been my aim as a Minister and in my role as leader in the social development sector to build for the benefit of the millions of South Africans living in poverty, a world class social security system that is based on lessons, experiences and best practices of the world.

It has always been our aim to build the best infrastructure and obtain the latest information technology systems.

Throughout the decade of SASSA’s existence, we have gone through numerous transitions starting from the establishment of the organization; the consolidation and standardization of the payment systems from fragmented Provincial systems; the introduction of a new payment service provider plus re-registration where we took over from more than five payment providers to one integrated grant payment system.

The road has been very long and full of challenges but South Africans were always guaranteed their payments.  True to our commitment to pay the “right social grant, to the right person, at the right place and time.

NJALO! We will continue paying social grants beyond March 31 when the contract with the current service provider comes to an end. This is and has been our singular focus and we remain committed to this vision.

In South Africa, social assistance is a Constitutional right and we dare not fail in delivering this statutory obligation as mandated by the SASSA Act.

Social Assistance is at the heart of this Government’s poverty alleviation program and the restoration of the dignity of our people.  SASSA is an agency of the Department of Social Development whose sole mandate is to protect children, older persons and people with disabilities. We are the custodians of every legislation that speaks on the protection and upholding the dignity of all vulnerable groups.

I mention dignity and protection because this is the foundation upon which I am obligated to make sure that social grant beneficiaries receive their grants with dignity. We come from a very painful past where we have witnessed long queues, deaths and robberies at paypoints.

Older persons, majority of them being women, sleeping outside banks just to be first in line to receive their money. We needed a system that will make sure that your status in society does not make you less of a human being.

Additionally, the National Development Plan makes specific pronouncements around the role of this programme as part of building and developing a sustainable nation that guarantees dignity and social welfare to all its citizens.

The Governing party is also committed to radical economic transformation. As mandated by the African National Congress, the Department of Social Development and SASSA have R140 billion social assistance muscle which goes directly to beneficiaries that has a potential to help equalise and change the lives of the majority of people in our country.

Currently, the money revolves around the same retailers and leaves communities the minute beneficiaries get the money.

This has to change.

Ladies and Gentlemen

Fraud and Corruption is well documented in cash transfer systems throughout the world and South Africa is no different. We constantly need to innovate and remain ahead of both syndicates and recipients working with some of our officials to protect the social grants investment.

South Africans through their taxes contribute more than R11 billion every month and we must manage this investment with utmost care and diligence. 

The majority of staff at SASSA understand this and are committed, hard-working and loyal individuals who know that theirs is about putting on the table the most basic needs of our people. Our system has seen the worst form of abuse and theft.

This is the reason biometric verification must be at the centre of recipient authentication as advised by the Taylor Committee report in 2002 and I will not backdown on this requirement. It has saved the fiscus R2 billion and has provided SASSA with an accurate and a secure transaction environment.

Today the work of SASSA has influenced the banking sector through the Payment Association of South Africa (PASA) to adopt a biometric standard for the industry.

Members of the media

When I joined the Department of Social Development in 2010, I was presented with a report by SASSA which was developed by a panel of independent advisors who analysed the challenges relating to the then payment system, problems faced by beneficiaries and the administrative issues within SASSA.

It contributed to the decision of establishing the Ministerial Advisory Committee. The sole mandate of the committee was to advise me on the future payment model for social assistance benefits.  The committee commenced its work on September 2, 2013. 

It had to interrogate the shortfalls of the old system, investigate the most suitable payment system and recommend options that can be adopted and adapted for South Africa.

The Committee benchmarked with international best practices and also with experts from all over the world acquired through SA-EU dialogue facility. They submitted their report in December 2014 which recommended that SASSA should build its own payment system; and that work-streams should be established to facilitate the implementation of the recommendations of the Committee.

It further advised that in order to speed up the in-sourcing process, some members of the Advisory Committee could be retained. It should be noted that the Ministerial Advisory Committee completed its work long before its prescribed date of completion. By August 2015, in their draft report, the committee had already recommended that it be disbanded in order to speed up the implementation of the recommendations.

Ladies and Gentlemen

It should be noted that at this time, the tender with Cash Paymaster Services had already been awarded and we had been through a tedious court process with a pronouncement that the tender was constitutionally invalid.

In upholding the challenge, the Court ordered that SASSA run a new tender process for a period of five years and that SASSA must file a report with the Court setting out all relevant information on when it would be ready to take over the payment of social grants.

The declaration of invalidity was subsequently suspended pending SASSA’s decision to award a new tender after completion of the tender process. In the event of SASSA not awarding a new tender, the said declaration of invalidity was further suspended until the expiry of the contract on 31 March 2017.

Towards the end of 2014, SASSA advertised the tender, as per the Court Order, with the intention to appoint a service provider for a period of 5 years for the payment of social grants.  The new contract would have ended in 2019 at which point and thus SASSA would have taken over by that period.

It should be noted that the tender was adjudicated in October 2015, in line with the Constitutional Court timelines. However the tender was not awarded due to non-responsive Bids. 

On the 05 November 2015, SASSA filed progress report to the Constitutional Court.  The progress report by SASSA set out the steps in terms of which SASSA proposed to assume the duty to take over the payment function itself after 31 march 2017. 

Pursuant to the filling of the progress report, the Court issued an order on 25 November 2015, in terms of which the Court stated its satisfaction with SASSA’s progress report and as such the Constitutional Court discharged its supervisory jurisdiction over SASSA on this matter.  

Work-streams were formed in line with the recommendation of the Ministerial Advisory Committee because, firstly, the SASSA management team had their day-to-day running of the organisation and could not simultaneously run a hugely complex and intense transition project.

Secondly, SASSA was preparing to take-over the payment of social grants and did not have the expertise within the organisation because this function it was planning for, was always outsourced.

The work-streams started in August 2016 and they have since fleshed out the advisory committee’s proposal and developed a project plan and preliminary costing for the project. By end of October 2016, the work-streams had issued the first draft report.

After due diligence conducted to both the SASSA and the current service provider, the phased approach to the optimal model was recommended. It was through their analysis that we appreciated the complexity of the programme and that the initial timelines that were presented to the ConCourt underestimated the effort and capacity required to prepare SASSA for the in-sourcing process.

Subsequently, legal opinions were sought to advise on possible critical steps to ensure successful payment of social grants come 1 April 2017.

Summary of the legal opinions:

Wim Trengrove SC Opinion

SASSA would need to go on a competitive procurement process however due to time constrains SASSA could consider contracting CPS through emergency procurement process. To follow on the latter, SASSA had options of:

Minimising the extent to which it might enter into an unlawful arrangement with CPS both in duration and scope

SASSA should apply for National Treasury’s prior approval for a deviation from normal bidding processes in terms of paragraph 8.5 of the National Treasury Instruction 3 of 2016/17

SASSA to seek agreement to an interim arrangement to continue to pay social grants in the same or similar terms that limits the scope of the CPS’s function

SASSA should file a full disclosure report of its interim arrangement to Constitutional Court, National Treasury and Auditor General

We embarked on stakeholder engagements:

Task team (SASSA, DSD, National Treasury, SARB)

An interim task team was appointed by the CEO of SASSA together with the Directors-General of the Department of Social Development and National Treasury and the Deputy Governor of the South African Reserve Bank to ensure that the transition over the short and medium term happen smoothly.  The task-team comprised of technical managers from the four institutions. 

The team evaluated the risks associated with the transition options which exist for SASSA to ensure that grants are paid on 1 April 2017. They sought to outline these transition options, analyse the risk of each and set out a timeline for the transition arrangements over the short and medium term.

The following transitional options were considered:

Option 1: Procuring the service from the existing service provider

Option 2: Procuring the service from the Bank that services the majority of the beneficiaries (i.e. Grindrod)

Option 3: Procuring the services from all Banks wishing to comply with SASSA’s requirements

Option 4: Procuring the services from all Banks that comply with SASSA’s requirements for those (~60%) beneficiaries who have access to banking services, and procuring the services of a Service provider for those currently using cash pay-points.

Option 5: Procuring the services of the South African Post Office (SAPO)

Option 6: Appointing a new supplier for cash distribution and utilising the Banks for beneficiaries with bank accounts.

Engagements between Minister of Social Development And Minister Of Finance

As part of the ongoing consultation between SASSA and National Treasury a number of engagements around the options, recommendations made and seeking council ensued. This continued in line with our working relations and guideline around such projects.

I have a detailed account of these engagements.

On the 1 February 2017, the Minister of Social Development wrote a letter to Minister of Finance where she highlighted the options considered to ensure smooth payments of grants on the 01st April 2017; and subsequent decision to utilise the proposed interim arrangements with CPS.  Considering the important role of the National Treasury in the envisaged process, this letter was aimed at seeking preliminary with the Minister of Finance.

On the same day, 1 February 2017, the Minister of Finance also wrote to the Minister of Social Development acknowledging the work of the technical task team and supporting the option that was proposed by the National Treasury in the task team.  The Minister further stated that the National Treasury cannot support the option to use CPS if Constitutional court approval has not been sought.

On the 08 February 2017, The Minister of Social development wrote a follow up letter to the Minister of Finance to clarify the legal opinion of Senior Counsel and also to further motivate for the rationale for taking decision to proceed with CPS.

On the 13 February 2017, the Minister of Finance, responded to the Minister of Social development wherein he acknowledged that the Minister of Social development hold the sole and primary executive responsibility for the function and that SASSA has the final decision on which option to utilise from 01 April 2017 and take responsibility for the decision.

Engagements with the South African Post Office (SAPO)

SASSA has worked with the SAPO over the years.  In 2010, the agency took a conscious decision to migrate beneficiaries to electronic payment system with SAPO as primary stakeholder.  SASSA remains committed to utilise SAPO’s over 2 600 outlets as part of the payment vehicle for social grants in transition and future phases.

Council for Scientific and Industrial Research (CSIR)

Over the past 3 years consistent work has been done to prepare for the payment function insourcing. Through government to government collaboration, SASSA engaged the services of CSIR to conduct research on various elements of the payment process including the feasibility assessment, status quo analysis of the payment process in South Africa, and investigation towards development of biometric standards. Today based on the foundations of the work done by SASSA and CSIR, South Africa has a biometric standards for the banking industry.

Department of Home Affairs

SASSA has ongoing engagements with the Department of Home Affairs in particular with regard to identity verification and authentication through the population register and HANIS. Through this processes SASSA has been able to share with Home Affairs the biometrics of children.

Future plans for SASSA

In conclusion, I would like to summarize the path that will be followed towards the future payment model for SASSA. 

The ultimate goal is that SASSA should provide an integrated grant administration and payment process. This entails SASSA as acquiring SASSA’s own Payment Card which can operate in an open and closed system underpinned by the use of Biometric authentication system. 

The new Payment Plan is implemented over four phases:

Phase 0: Ministerial Advisory Committee investigations (2013/14)

Phase 1: Planning for the transition including Phase-out of the current service provider (2015/16 – 2016/17)

Phase 2: The Transition (April 2017 – March 2019)

Phase 3: Full Roll out (from April 2019)

Finally, on the 1 April SASSA begins a new era in continued development. As has been the case in the past no one will go unpaid. We are focused on our mandate to deliver social assistance to the country’s most vulnerable.

We will work with all the key stakeholders and with the legal and regulatory frameworks that govern our work and actions. We cannot afford to be distracted on our focus to be able to live to this promise to our grant beneficiaries to pay the “right social grant, to the right person, at the right place and time. NJALO!

I thank you.

Issued by Department of Social Development, 5 March 2017