Treasury shoots down CPS social grant payment fee

National Treasury has shot down a request by Cash Paymaster Services (CPS) for a higher fee for cash payments of social grants to beneficiaries. CPS wants R66.70 per beneficiary per month. Treasury recommends R51.

Until the end of March this year, CPS distributed all grants on behalf of the South African Social Security Agency (SASSA). Since then, the Post Office has taken over the enrolment of beneficiaries and payment of the grants, except for those who are paid in cash. CPS will continue to pay the cash grants, in terms of a Constitutional Court decision which granted SASSA’s request for a six month extension of the CPS contract.

The Court ruled that CPS could ask the National Treasury to make recommendations on the price SASSA would pay CPS to distribute the cash grants until 30 September.

It is unclear what will happen after that because on 26 April Social Development Minister Susan Shabangu halted SASSA’s tender process for the cash payment of social grants.

In its report to the Constitutional Court on Monday, Treasury said the R66.70 fee requested by CPS was based on the full service rendered by CPS in the past, including electronic payments. “Treasury’s view is that costs should be based on cash payments only.”

According to Treasury’s calculations, the CPS charge per cash beneficiary could be as low as R45.59.

Treasury said CPS had based its price on a minimum number of 2.5 million recipients, which amounts to R166.75 million including VAT per month.

“The infrastructure that CPS uses to pay social grants is also used by other clients of CPS … The full cost of maintenance and updates should not be charged to cash recipients only,” it said.

Treasury used four methods to calculate the fee. The average of these methods was R51.

Treasury said that because “cash pay points are the most expensive form of payment”, SASSA should encourage beneficiaries to move to a non-cash payment system.

Treasury broke down its four different calculations of the fee per cash beneficiary:

Using a top-down method: R57.25 per beneficiary. Calculated by taking the total expenditure for 2016/17 financial year and disaggregating it to identify the costs associated with only making cash payments, and adding an estimate for 2018 inflation.
Using a bottom-up method: R46.46 per beneficiary. Calculated by disaggregating costs at a service level: the number of beneficiaries per day, number of pay points, number of CPS staff, security and vehicles costs, and excluding capital investments as CPS would be using its existing infrastructure for the payments.
Using an affordability method: R55.01 per beneficiary. Calculated by taking SASSA’s total budget for grant administration and disaggregating to identify the cash component and the affordability price for the services.
Using an adjusted price based on the original tender in 2011/12, adjusted for inflation: R45.59 per beneficiary.

According to papers filed to the Constitutional Court by SASSA’s newly appointed acting CEO Abraham Mahlangu on Monday, 10,851,442 beneficiaries were paid in April. Of these, 2,252,175 were paid at cash pay points, 900,000 at merchants and ATMs, 5,342,376 through SASSA branded cards, and 2,348,107 had their grants paid directly into personal bank accounts.

Treasury shoots down CPS social grant payment fee

R51 recommended to Constitutional Court instead of R67 per cash beneficiary