Progress Update on SASSA Transition & Payment of Social Grants

1. Progress Update on SASSA Transition & Payment of Social Grants Presentation to Portfolio Committee on Social Development 13 March 2019 Out with the Old In with the New CPS SAPO

2. Purpose • To present the Portfolio Committee on Social Development with a progress update on: • Card swap/ Migration process for beneficiaries with old SASSA card • State of social grants payments in the country • SASSA/SAPO collaboration/partnership • Fraud and corruption management

3. Card Swap/ Migration Process • The migration of all cash beneficiaries was completed by end September 2018 • In order to fully decommission the old SASSA card by end December 2018, SASSA had planned to swap 523 420 beneficiaries before end of December 2018 • This would be done through the migration of beneficiaries who were still using the old SASSA card in the National Payment System to the new SASSA Gold card or any Bank of their choice • To meet this target SASSA embarked on a communication campaign urging beneficiaries to swap their old SASSA cards before 14 December 2018 to ensure they got their grants in the new SASSA card in January 2019 • Approximately 374 899 beneficiaries had not swapped their old SASSA cards by 20 December 2018 and these were auto migrated by SASSA to the new SASSA Gold card • These beneficiaries were required to come to SASSA to receive their new SASSA cards in order to immediately access their grant money

5. Card Swap/ Migration Process • By end of February 2019 a total of 220 271 (59%) auto migrated beneficiaries had collected and activated their new cards • A total of 154 628 beneficiaries had still not collected their cards • The North West, Eastern Cape, Northern Cape and Western Cape Regions all had 60% or higher card activation rates • Limpopo (47%) and Free State (51%) had the lowest • SASSA is currently looking into the reasons for non activation Factors being considered include beneficiaries being deceased, not living in the country or alternatively fraudulent beneficiaries.

7. STATE OF SOCIAL GRANT PAYMENTS

8. February and March 2019 Payments • The March 2019 payment file consisted of 11 090 090 beneficiaries, an increase of 37 406 from those paid in February 2019. • The March number of beneficiaries paid to date reflects an increase of 73 877 compared to the number paid in December 2018. • The breakdown of the 11 090 090 beneficiaries paid per bank: • Approximately 71% (7 877 224) of the beneficiaries are paid through Post Bank. This is a slight increase (43 149) from 7 834 075 paid in February 2019. The number of beneficiaries paid through the Post Office has increased by 515 114 from December 2018. • Around 9.5% (1 055 271) of the beneficiaries are paid by Grindrod Bank through the Easy Pay account, a decrease of 11 832 from February 2019 and a decrease of 466 163 from December 2018. • The balance 19.5% (2 157 595) are paid through other banks - an increase of 24 926 from December 2018.

9. Payment Extraction Statistics to March 2019

10. SASSA Card Usage – February 2019 • A review of usage of the SASSA card in the February payment cycle indicates that just over 78% of the grant money paid by SAPO was withdrawn in the first 5 days of the month • By 27 February, 87% of the R9 482 536 536.88 to be paid by SAPO had been withdrawn. • In terms of channels used to access these funds, 61% of grant money was drawn at ATMs, followed by 34% at POS (retailers) and 4% over the counter at Post Offices (this includes cash payments at pay points). • Previous month’s data indicates similar withdrawal patterns and similar payment channel usage • Beneficiary behavior monitoring is still in progress but there is a shift from cash paypoints to other channels

11. SASSA Card Channel Usage

12. SASSA Card Usage February 2019- Channels and withdrawals

13. Cash Pay-Points • In terms of the Master Services Agreement SAPO should service 1 740 pay points • However, SAPO serviced 1 914 pay points in February 2019 • This number was reduced to 1 595 in March as pay points that have had zero beneficiaries for over 3 months were removed from the list

14. Cash Pay Points • SASSA and SAPO are currently analyzing cash pay point data over the last 6 months to finalize the list of pay points to be serviced • Payment schedules for the rest of 2019 will be confirmed and communicated once the pay points have been confirmed • Preliminary analysis is illustrated below as at end of February 2019

15. Payment Cycles Observations • The payment cycle has over the last few months stabilized and generally been successful • Beneficiaries have been able to access their grants through a variety of payment channels without major challenges • Access patterns suggest that most beneficiaries have found a way to access the NPS and get their money • Monitoring of beneficiary behaviour indicates that the majority of beneficiaries don’t want to wait for scheduled cash paypoint dates • Most use the first 5 days of the month to access their grants at ATMs and retailer POS. This results in long queues and over crowding at ATMs and retailers • The number of beneficiaries and amounts drawn at Post Offices is very low • Cash pay point numbers have shown a slight increase in some areas but a decrease in others • The incidence of fraud appears to be on the increase

16. Challenges • The continued uncertainty relating to use of biometrics and compromised verification systems remains a major challenge • Integration between SASSA and SAPO systems needs to be improve in order to have real time information flow • The capacity of the IGPS system to meet demands on the 1st day of the payment cycle is a concern • Payment Reconciliation needs to be improved • SAPO systems currently do not allow for full reconciliation of all paid and unpaid transactions particularly for cash pay points • SASSA backend systems require enhancement and improvement • The payment system at cash pay points is still not functioning at the appropriate optimal level • Need to optimize payment system, customer interface, information management to increase beneficiary confidence in the system.

17. SASSA / SAPO COLLABORATION/PARTNERSHIP

18. COMPLETION OF TRANSITION PHASE • Following the signing of a Master Service Agreement between SASSA and SAPO on 28 September 2018, a Service Level Agreement (SLA) was signed on 5 November 2018 to regulate all aspects of the business and working relationship between SASSA and SAPO. • The signing of the SLA effectively means that CPS has been completely phased out, the payment transition phase has ended and the South African Post Office has been introduced as the government partner to SASSA in the payment of social grants

19. Next Steps • Post Transition stabilization • Establishment of Contract Governance Structures underway being finalized (Steercom, Operational committees, Executive) • Joint-Ministerial Interaction • Payments business being taken over and managed by the appropriate Operational Units and no longer the Payment Transition Project structures • In preparation for 1 April 2019, SASSA and SAPO are undertaking a review of the SLA to refine aspects such as governance arrangements and contract management, fee structure and service standards

20. FRAUD/ CORRUPTION ISSUES

21. Overview of Fraud and Corruption-related Challenges • There has been an increase in a number of fraudulent beneficiary grants withdrawals • It is believed that organised syndicates who work with both SAPO and SASSA staff are involved • The fraud incidents reported can be grouped into 3 zones of responsibility: • SAPO: incidents that have SAPO staff involved in the fraud committed • SASSA: where fraud originated within SASSA • Not SAPO/ SASSA: No SASSA or SAPOemployees involved • Some beneficiaries leave their cards with “mashonisas” and report them as lost or as having not withdrawn the money • SASSA and SAPO are working with law-enforcement agencies to combat all reports of fraud • Several arrests have been made in KZN and Gauteng • A joint task team has been established to work with Crime Intelligence and other government agencies on this

22. Nature of incidents reported • Disputed withdrawals • Fraudulent account opening at SAPO • Re-issued cards at SAPO • Beneficiary account changed at SASSA • False beneficiary registration at SASSA • Illegal card swap/ exchange at SASSA and SAPO

23. Steps to address fraud • Both SASSA and SAPO have reviewed and strengthened their internal control measures at SASSA local offices and Post Offices • To address the verification challenges SAPO has agreed to perform on-line biometric verification of beneficiaries against HANIS • The reintroduction of Biometric Identity and Access Management within SASSA is underway • SAPO is enhancing IGPS controls and functionality features to reduce opportunities for fraud • Co-operation between both SASSA and SAPO related specifically to the fraud issues has been strengthened • An approach has been made to SSA and DPCI for assistance in identifying and addressing the challenges

24. Recommendations It is recommended that the Portfolio Committee on Social Development notes progress report on SASSA Transition and next steps to stabilize the payment of grants

25. Thank you