Social Development Minister Susan Shabangu said she is unhappy with the R10 transaction charge Grindrod Bank is currently charging grant beneficiaries and is working on finding a new arrangement.
Shabangu was in Parliament on Wednesday to account for her department’s annual performance and budget plans.
Addressing issues around the South African Social Security Agency (Sassa), Shabangu said the department was challenging Grindrod’s new charges to cover the costs of their transactions, following the lapsing of the old terms of the Cash Paymaster Services (CPS) contract on March 31.
Grindrod had been one of the main providers of banking functions under the old system, and had produced the more than 5 million Sassa cards used in the system.
The Constitutional Court extended the CPS contract for a further six months in March to continue assisting with cash payments, leaving Grindrod to cover its own bank charges.
Talks under way for short-term solution
“As we moved toward our first payment (under the new terms) last month for cash payments, Grindrod started charging R10.
“We are challenging that, because we never agreed that they must pay themselves R10. We are challenging that.
“We’ve told our beneficiaries, and we are not just saying ‘it’s okay’, because there was never an agreement that Grindrod could charge R10.”
Shabangu said Sassa no longer had the mandate to continue paying for those services, but talks were currently underway with Grindrod and Treasury to find a solution for the period until the end of June.
The three entities will be meeting to “come up with a clear plan” to handle Grindrod’s needs.
“If Treasury comes back and says no, we must say, ‘Treasury, this is where the money must go to ensure the beneficiaries are not affected’.”
Grindrod Bank’s managing director David Polkinghorne told News24 that the charges were necessary to cover the costs of the banking transactions that are no longer covered by the CPS deal.
R9.50 to cover costs of service providers
Polkinghorne said that under the previous agreement, the R16.44 fee that CPS charged Sassa per beneficiary helped cover the banking costs.
However, following the six-month extension under new terms, they need to cover their own costs as beneficiaries will still be using the bank’s product in the short term.
“What we originally hoped for is that Sassa would continue paying a fee that would cover the cost of those cards, but unfortunately they were not able to do it. We would have to charge the beneficiaries directly.”
Polkinghorne said the company only earns 50c from the charge, as the other R9.50 goes to cover the costs of service providers.
“Net1/CPS effectively was earning R16.44 from Sassa under the original contract. That R16.44 is no longer paid by Sassa on these accounts, and as a result, the accounts are still functioning, but we have to cover the costs ourselves now.”
Polkinghorne said Grindrod received a letter from Sassa stating that the agency was no longer able to cover the costs of the bank charges.
“But that meant we were obliged to charge the beneficiaries ourselves unfortunately.”
He said Grindrod had made Sassa and representatives of Treasury aware of that fact during meetings where it was discussed.
The timing of the ruling by the Constitutional Court in March gave all parties involved little room to plan for the shortfall once the old CPS contract lapsed.
If the costs can no longer be covered then the accounts would have to be closed, he said.
The South African Post Office (SAPO) meanwhile will be rolling out its replacement Sassa card this month, having completed a test run in Worcester in late April.
SAPO, which will be taking over core banking functions from CPS and Grindrod, will also be offering its own low-cost bank account using its new cards, which will have no deductions.