IT HAS been one of the most controversy-plagued tenders around. After being dragged through the courts for years‚ the South African Social Security Agency (Sassa) has finally issued the tender again for the distribution of 15 million social grants across the country.
The agency will pay up to R14.50 per grant made‚ which adds up to well over R2.6-billion per year. It is a large chunk of change.
It is the third attempt to successfully grant the tender. The payouts are currently handled nationally by Cash Paymaster Services (CPS)‚ a subsidiary of US-listed Net1 UEPS. It won the tender in 2012 but in April this year the Constitutional Court ruled that tender to be invalid and ordered Sassa to conduct it again.
While the courts have not specifically mentioned corruption in the tender process‚ the Constitutional Court found that the process of granting the tender was irregular. Various press reports have pointed to specific cases of bribery. Net1 is being investigated by US authorities for possibly breaking strict US foreign bribery legislation. Net1 insists it did nothing wrong.
The tender process has a much greater chance this time of staying clean. The Constitutional Court made an unusual order that Sassa make quarterly reports to it on its progress with the tender. Also‚ since it was set up in 2012‚ the Treasury’s tender office has a direct oversight role in large government tenders.
In short‚ there is a lot of official oversight and very little scope for previous shenanigans. While the fees on offer look juicy‚ the new tender specifications are much tougher than the 2012 version. I asked Sassa to give me details‚ but its spokesperson said I would have to pay R5000 to get the official bid documents. So instead I spoke to some who have seen the documents. The R14.50 fee is down from R17.50 in 2012. In addition‚ the winning bidder will have to find a way to deliver grants in person to those too infirm to reach pay points to receive them‚ an expensive logistical undertaking.
Sassa also wants every grant to be verified by fingerprint biometrics‚ with exceptions only if a recipient has some physical problem with their fingerprints. The use of biometric verification has already done a lot to cut out fraudulent grant recipients‚ but it requires people to have to collect their grants in person.
CPS tried to overcome this with a voice biometric system that allowed recipients to phone a call centre to be verified‚ but it has been plagued with technical difficulties. At the moment‚ about a third of grants are paid into bank accounts (held by Grindrod Bank) without proper verification.
The right solution would be fingerprint biometrics at ATMs. Then‚ only the correct recipients could draw their grants. CPS uses fingerprints at cash pay points‚ which are used largely in rural areas. It also has a network of retail agents that uses fingerprint machines to pay out to recipients.
But so far this use of biometrics has stopped short of ATMs because of the capital costs involved in replacing ATMs across the country. The technology is available and proven. For instance‚ Brazil’s fourth-largest bank‚ Caixa‚ uses fingerprint biometrics for its ATMs. It was driven to do so because it handles one of Brazil’s welfare programmes.
Banks in South Africa have discussed and tested fingerprint-based ATMs but so far avoided them. Apart from the capital cost‚ there is a sense that it may increase security risks for customers. If someone wants to rip off your account now‚ they just need your card and code. If ATMs require fingerprints it creates an incentive for criminals to take you with them. On the other hand requiring fingerprints cuts out much other fraud‚ such as identity theft.
Another specification of the tender is that the winner may not lodge deductions against recipients’ grants. CPS and the Social Development Minister‚ Bathabile Dlamini‚ clashed heads in September when the minister accused CPS and its subsidiaries of “immoral” deductions for airtime‚ funeral insurance and microloans. The new tender effectively forbids such activities‚ which makes it less lucrative. As the incumbent‚ CPS clearly has an advantage. It understands many of the logistical and technological challenges. CPS already has the paypoint and other infrastructure though it would incur additional capital costs if it decides to roll out biometric ATMs.
But the big banks are all studying the tender. Absa‚ which pursued the litigation over the previous tender all the way to the Constitutional Court‚ is likely to bid. The other banks will also undoubtedly be crunching the numbers.
An award should be announced around April next year. Here’s hoping that this time Sassa will get it right.
Stuart Theobald is a financial analyst and chair of Intellidex. This column first appeared in Business Day
Sassa tender won't be easy picking this time
The agency will pay up to R14.50 per grant made‚ which adds up to well over R2.6-billion per year. It is a large chunk of change.
It is the third attempt to successfully grant the tender. The payouts are currently handled nationally by Cash Paymaster Services (CPS)‚ a subsidiary of US-listed Net1 UEPS. It won the tender in 2012 but in April this year the Constitutional Court ruled that tender to be invalid and ordered Sassa to conduct it again.
While the courts have not specifically mentioned corruption in the tender process‚ the Constitutional Court found that the process of granting the tender was irregular. Various press reports have pointed to specific cases of bribery. Net1 is being investigated by US authorities for possibly breaking strict US foreign bribery legislation. Net1 insists it did nothing wrong.
The tender process has a much greater chance this time of staying clean. The Constitutional Court made an unusual order that Sassa make quarterly reports to it on its progress with the tender. Also‚ since it was set up in 2012‚ the Treasury’s tender office has a direct oversight role in large government tenders.
In short‚ there is a lot of official oversight and very little scope for previous shenanigans. While the fees on offer look juicy‚ the new tender specifications are much tougher than the 2012 version. I asked Sassa to give me details‚ but its spokesperson said I would have to pay R5000 to get the official bid documents. So instead I spoke to some who have seen the documents. The R14.50 fee is down from R17.50 in 2012. In addition‚ the winning bidder will have to find a way to deliver grants in person to those too infirm to reach pay points to receive them‚ an expensive logistical undertaking.
Sassa also wants every grant to be verified by fingerprint biometrics‚ with exceptions only if a recipient has some physical problem with their fingerprints. The use of biometric verification has already done a lot to cut out fraudulent grant recipients‚ but it requires people to have to collect their grants in person.
CPS tried to overcome this with a voice biometric system that allowed recipients to phone a call centre to be verified‚ but it has been plagued with technical difficulties. At the moment‚ about a third of grants are paid into bank accounts (held by Grindrod Bank) without proper verification.
The right solution would be fingerprint biometrics at ATMs. Then‚ only the correct recipients could draw their grants. CPS uses fingerprints at cash pay points‚ which are used largely in rural areas. It also has a network of retail agents that uses fingerprint machines to pay out to recipients.
But so far this use of biometrics has stopped short of ATMs because of the capital costs involved in replacing ATMs across the country. The technology is available and proven. For instance‚ Brazil’s fourth-largest bank‚ Caixa‚ uses fingerprint biometrics for its ATMs. It was driven to do so because it handles one of Brazil’s welfare programmes.
Banks in South Africa have discussed and tested fingerprint-based ATMs but so far avoided them. Apart from the capital cost‚ there is a sense that it may increase security risks for customers. If someone wants to rip off your account now‚ they just need your card and code. If ATMs require fingerprints it creates an incentive for criminals to take you with them. On the other hand requiring fingerprints cuts out much other fraud‚ such as identity theft.
Another specification of the tender is that the winner may not lodge deductions against recipients’ grants. CPS and the Social Development Minister‚ Bathabile Dlamini‚ clashed heads in September when the minister accused CPS and its subsidiaries of “immoral” deductions for airtime‚ funeral insurance and microloans. The new tender effectively forbids such activities‚ which makes it less lucrative. As the incumbent‚ CPS clearly has an advantage. It understands many of the logistical and technological challenges. CPS already has the paypoint and other infrastructure though it would incur additional capital costs if it decides to roll out biometric ATMs.
But the big banks are all studying the tender. Absa‚ which pursued the litigation over the previous tender all the way to the Constitutional Court‚ is likely to bid. The other banks will also undoubtedly be crunching the numbers.
An award should be announced around April next year. Here’s hoping that this time Sassa will get it right.
Stuart Theobald is a financial analyst and chair of Intellidex. This column first appeared in Business Day
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