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Post Office eyes CPS social grants technology

MONEY WEB / 11 DECEMBER 2017 - 00.07 / RAY MAHLAKA

The state-owned entity’s service agreement with Sassa allows it to purchase the equipment and technology of CPS after its contract is phased out next year.

The newly-signed service agreement between the South African Social Security Agency (Sassa) and the South African Post Office has provided a window for the state-owned entity to purchase the underlying technology and equipment used by incumbent social grants distributor Cash Paymaster Services (CPS).

The service agreement between Sassa and the Post Office allows the Post Office to purchase or procure – in consultation with Sassa – the specialised “cash disbursement equipment currently provided by CPS”.

Picture: Moneyweb

After nine months of delays and infighting between Social Development Minister Bathabile Dlamini and Post Office CEO Mark Barnes, a social grants payments deal has been finally struck that will be effective from April 1 2018, until 2023.

As expected, a hybrid model that will see the Post Office collaborating with commercial banks to distribute social grants has been adopted to replace the current contract of CPS when it expires on March 31 2018.

The contract of CPS, which is the subsidiary of Nasdaq-listed Net1 UEPS, was declared invalid three years ago by the Constitutional Court as it didn’t go through proper tender processes.

Sassa has since failed to find another service provider to replace CPS.

Moneyweb has seen the service agreement between Sassa and the Post Office, which allows the latter to purchase the technology used by CPS to pay social grants to more than 10 million beneficiaries.

The agreement allows the Post Office to purchase or procure – in consultation with Sassa – the specialised “cash disbursement equipment currently provided by CPS”.

The technology and equipment owned by CPS is used specifically for the administering of grant payments and if the company is no longer the paymaster, it has no use. However, Business Day reports that Net1 plans to take its technology underpinning CPS globally for large-scale financial inclusion opportunities in emerging markets across the globe.

Arguably, any association with CPS in the social grant payment system beyond March 31 2018, would be criticised given the controversy surrounding the company.

The Post Office has proposed paying social grants through its 2 000 outlets across the country, using the services of its Post Bank to deposit money into accounts and using cash-in-transit services to deliver cash to pay points for beneficiaries without bank cards in far-flung areas.

Although the Post Office will play a core function in paying social grants, it will also collaborate with commercial banks, which will provide support services including the withdrawal of grants at ATMs and retail points.

Existing Sassa/CPS payment infrastructure at a pay point in Jakkalsdans, North West.

Picture: Moneyweb

The Post Office’s capacity to pay social grants has been called into question on numerous occasions, with market watchers saying that its operations and technology have limited reach across SA and that it is unable to distribute grants offline.

The Post Office has hit back at critics saying that it plans large-scale capital investments to bolster its reach across SA for the distribution of social grants including the acquisition of new Post Bank ATMs, cash pay point and branch infrastructure, and point-of-service devices.

The service agreement also allows the Post Office to make use of sub-contractors on services it cannot deliver. The use of sub-contractors hinges on Sassa’s verification and approval of the contractor’s Broad-Based Black Economic Empowerment credentials.

The first report to the Constitutional Court by a panel of experts and the Auditor-General – appointed by the court to oversee the process to phase out the CPS contract – warned in September that it’s possible CPS may still be required for the payment of social grants or might be indirectly involved beyond March 31 2018.

“CPS owns the infrastructure and technology used in the payment of social grants, used primarily in rural areas, and would probably attempt to lease or license this new service provider,” the report noted.

Another possibility is that Net1 might establish a new company with black empowerment partners that could bid on a Sassa contract.

Barnes didn’t respond to Moneyweb’s request for comment.

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LINK - https://www.moneyweb.co.za/news/south-africa/post-office-might-buy-cps-social-grants-technology/

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