By Pinky Khoabane
Finance Minister Pravin Gordhan wanted the requirement of biometric verification to be excluded from the terms and conditions of service providers bidding for the pay-out of social grants. Such a requirement would “favour CPS and discriminate against other potential bidders,” he said in a letter sent to the Department of Social Development (DSD) Minister Bathabile Dlamini.
In the same letter, the finance minister offers options in ensuring SASSA pays out “social grants seamlessly as from 01 April 2017”. This is when the current contract with Cash Payment Services (CPS) comes to an end. The first option is to continue with the current service provider; second, “procuring the service from the Bank that services the majority of the beneficiaries (i.e. Grinrod); procuring from Banks wishing to comply with SASSA’s requirements; procuring from Banks that comply with SASSA; procuring the South African Post Office; and lastly, “appoint a service provider for cash distribution to grant recipients who are currently using cash pay points and utilise existing bank accounts”.
Who owns Grinrod Bank?
Grindrod Bank is owned by Grindrod Limited whose shareholders include billionaire Johann Rupert’s Remgro and Mustaq Brey’s Brimstone Investment Corporation. Both Rupert and Brey are close friends of former finance minister Trevor Manuel. Rupert for example, hosted the wedding ceremony of Manuel and his wife, Chief Executive Officer Maria Ramos, at his plush vineyard in the Western Cape.
In a recent analysis of Gordhan’s share portfolio, UnCensored discovered that among his bouquet of banking shares, the finance minister also held shares in Grindrod Bank. http://uncensoredopinion.co.za/pravins-portfolio-shares-reveals-much-state-capture/
The finance minister offers the continuation of CPS and Grindrod Bank as the first two options respectively, to deal with the payout of social grants. However, Grindrod Bank in its affidavit to the Constitutional Court, declared that it did not have the capacity to undertake the payouts of social grants without CPS and I-Net. Grindrod’s Managing director David Polkinghome says in meetings with the DSD, Treasury and South African Reserve Bank (SARB), “At all times Grindrod Bank was clear on its reliance on the infrastructure and technology support by CPS and Net 1”.
Why the Biometric system was introduced
The biometric fingerprint system provides for proof that the recipient is indeed a living human being. Corruption in the provision of social grants in South Africa is well documented. It is a problem that the DSD has grappled with for years to a point that it appointed the Special Investigating Unit (SIU) – a state anti-corruption agency – to help identify fraudulent beneficiaries. There were four commissions set-up between 1996 – 2000 to look into social grants and corruption and fraud thereof.
A report in the Mail&Guardian of February 1997 said R1 billion was being lost to pension fraud per annum. That was 6.99% of the R14.3 bn annual budget for social grants. In 2006, pension fraud was estimated at R1.4 bn of the R57 bn allocation.
There are numerous stories of the involvement of government officials in the corruption which did untold harm to the DSD.
In response to Gordhan, Dlamini explains among others, the reasons for introducing the biometric verification.
- Eliminate all duplicate registrations. This was later extended to remove the multiple registrations of children. This has resulted in savings amounting to about R2 billion per annum. There is more work currently taking place to remove more duplicate entries which could amount to a saving of a further R 1 billion per annum;
- Provide proof of life so as to ensure that grants are only paid once proof of life has been confirmed. This has always been a requirement for payment. The proofs of life certificate are also unreliable as these can be easily counterfeited. A once a year certificate is also not a solution as it would create a 6 months loss on average when a death of a person is either not reported or reported tardily;
- Provide proof of receipt by a legitimate beneficiary. The Personal Identification Number (“PIN”) based transactions can be performed by anyone in possession of the PIN number. This leads to massive fraud against the beneficiaries often committed by (a) procurators, (b) family members, (c) friends and (d) micro-lenders. The PIN based systems is more suited to first world countries where clients are fairly sophisticated and available call centres are efficient. We all know quite well that this does not apply to our country as the majority of our people are still poor and as such cannot afford high bank fees; and
- Provide proof of use by the legitimate beneficiary. The banking card and PIN are still being captured by micro-lenders as a means of ensuring repayment of loans. This is demonstrated by the number of transactions that are effected at certain ATMs between 11 p.m. and 2 a.m. on a payment day.
- Biometric verification is the only methodology that ensures that the right person is paid, the EMV/U.E.P.S system ensures that the correct amount is paid and the Pay Points ensure that the beneficiaries are paid at the right place and time.
SASSA, during the award of the initial tender in 2012 recognised the need for biometric.
The issue of the provision of social grants in South Africa cannot be divorced from the apartheid legacy which discriminated and excluded Blacks from all means of service delivery including the provision of social grants. Even when Blacks were eventually included under apartheid, they were paid much less than their white counterparts. This discrimination was rectified in the new dispensation.
The infrastructure of banks and the post office is based in the cities and excludes the millions who live in the rural areas. Beneficiaries will have to walk long distances to access their grants.
UnCensored will post some of the documents in this article later today