Top SA retailers, banks slug it out

South Africa’s retailers in 2012 signed an agreement with JSE-and Nasdaq-listed Net1 to become official distributors of social grants.

Net1 subsidiary Cash Paymaster Services still holds the multibillion-rand contract to administer grant payments to more than 16 million South Africans‚ even though the Constitutional Court ruled that the contract was awarded improperly.

But‚ the free service has seen long queues at the tills at month-end and has created a hotbed for criminal activity at Shoprite‚ Spar and Pick n Pay. They want banks‚ which are charging social grant recipients as much as R18 to retrieve their grant money at ATMs to waive the fees.

Grant beneficiaries previously collected their money from South African Social Security Agency (Sassa) paypoints or a network of retailers. The retailers also installed machines in stores so fingerprint biometrics could ensure that only the correct recipients could draw grants.

Retailers received 10c per withdrawal and teamed up with Net1 largely to attract extra customers. While the move eased pressure at Sassa paypoints‚ the Sassa card cannot be used at bank ATMs.

Retailers say it is “only just” that the cards should work at bank ATMs‚ given that they are burdened with the cost of cash management‚ additional security and have to swallow transactional and interbank charges on grant payouts.

“We provide it as a service; it pulls additional feet in ‚ but it comes at a cost. no financial benefit to it and it is an area of concern that banks charge for withdrawals. Everyone involved in paying out pensions makes money‚ but at a retailer‚ you can withdraw for no fee whatsoever‚ but it actually costs us money‚” says Mike Prentice‚ group merchandise executive at Spar Group.

Net1 chief executive and chairman Serge Belamant says merchant stores such as Pick n Pay and Checkers provide a standard cash-withdrawal function for beneficiaries.

“Large stores want the financial spend of beneficiaries‚ but not the queues or the associated risk … The rules governing transactions at point-of-sale cannot discriminate between clients.”

Retailers are caught by the banking rules and the Visa and MasterCard brand regimes‚ he says.

“Net1 has no issue with the waiving of ATM fees for beneficiaries. Why banks would allow this‚ however‚ is another story. They would dispense cash at their cost and lose the transaction fees at merchant stores.”

Net1’s tender was ruled invalid by the Constitutional Court in April last year. The court ordered Sassa to reopen the bidding after it found the tender process was flawed. Sassa dismissed three new bids for the contract last month for not making the cut‚ leading to Net1 retaining the tender.

Shoprite’s security costs exceeded its transport costs‚ at R1-billion for its last financial year. Armed robberies‚ particularly on payout days‚ have surged. From February last year to August this year‚ there has been more than 230 armed robberies at its stores.

Pick n Pay chairman Gareth Ackerman says banks should join retailers in waiving the ATM fee for Sassa withdrawals and rely on a government fee‚ as retailers do.

Before 2012‚ beneficiaries were paid outside the banking system‚ operating outside the rules and regulations imposed by the SA Reserve Bank (SARB) and the Payments Association of SA.

Banks appear to be unwilling to forgo bank charges for grant recipients. Capitec says it does not intend to discriminate or favour any income group‚ while First National Bank (FNB) says it did not lobby to be included in the grant-payment chain‚ but supported the strategies and objectives of the SARB, and particularly its National Payments System Department.

“FNB’s wide ATM footprint allows grant holders to withdraw; however‚ cash results in substantial direct costs – security‚ transport‚ insurance – and are recovered to ensure sustainability‚” FNB said.

Absa said interchange fees applied across the banking industry. — BDLive