For now, Cash Paymaster Services (CPS) is prepared to charge the South African Social Security Agency (Sassa) R45 to pay social grants in cash, rather than its initial pitch of R66.70 per beneficiary. But the company is still hoping to negotiate a higher rate.
On 23 March, the Constitutional Court granted a request by Sassa for CPS to continue making cash payments to beneficiaries for six months, until September. The court also said CPS could ask the National Treasury to make recommendations on the fee Sassa would pay CPS to distribute the cash grants.
“CPS, in terms of the Constitutional Court order, is still required to provide the services on the same terms and conditions. CPS is unable to reduce the infrastructure or associated costs without the details of [Sassa]’s phase out plan,” Herman Kotze, Net1 CEO told GroundUp. (CPS is a subsidiary of Net1.)
The company initially requested R66.70 per beneficiary but this was shot down by the National Treasury. In a report to the Constitutional Court on 30 April, Treasury recommended an average fee of R51 (including VAT). Treasury’s lowest calculated fee was R45.59.
In papers filed earlier this month, Kotze told the court that CPS had not been given an opportunity to respond to Treasury’s report. Kotze said Treasury’s recommended fee per beneficiary would not allow CPS to recover its fixed operational costs.
Kotze said CPS’s attorney had asked the court to allow it to return to negotiations with Treasury on the fixed monthly fee to pay grants at over 10 000 cash pay points across the country.
Though the number of cash beneficiaries was dropping, Kotze told GroundUp, this would not mean a drop in costs to CPS.
“The reduction of beneficiaries at a pay point will not result in the reduction of costs, as the same cost infrastructure such as staff, security, vehicles will still be required. In the interim, CPS has requested to invoice Sassa R45 per beneficiary pending the final court order,” he said.
Kotze said CPS’s current total operational costs were over R147-million per month. These costs would only drop if a sufficient number of the 10 000 pay points were closed, he said.
CPS has since December “repeatedly requested Sassa” to provide details of its plan to move beneficiaries from the cash payment services, said Kotze.
He said CPS expected a drop of 800,000 in the number of beneficiaries getting cash grants by September. In March, 1 916 555 beneficiaries collected at cash pay points and in April 1 835 612. This is in line with Sassa’s plan to pay social grants through the banks.
Kotze said that until the price issue was resolved, CPS could not invoice Sassa for its services.
The Court is expected to rule soon on the fee and other issues. — GroundUp