Department working to stop unlawful social grant deductions - Minister

SEPTEMBER 11, 2014

Discussions are underway between the Social Development Department and the South African Reserve Bank to protect the bank accounts and confidential information of social grant beneficiaries.

Briefing the media on unauthorised deductions of social grants, Social Development Minister Bathabile Dlamini said the department is in talks with the Reserve Bank, the Competition Commission and National Treasury.

The talks are centred on the need to scrutinise the imminent sale of Grindrod Bank/Bidvest in a bid to protect the bank accounts of 10 million beneficiaries from further unlawful debit deductions.

This follows a report submitted by the Ministerial Task Team (MTT) on 27 August 2014, which shows that since 2012, when the contract to pay social grants was awarded to Cash Paymaster Services (CPS), the rate of debit deductions from grant beneficiaries appeared to increase significantly.

CPS is a subsidiary of Net 1 Holdings, which offers financial products, including micro-loans to grant beneficiaries.

The deductions in question were made from South African Social Security Agency (SASSA) branded Grindrod Bank accounts, into which the social grants are paid. 

Work of MTT

The MTT comprises Black Sash representatives, the Association for Community Advice Offices in South Africa, Social Development and SASSA, as well as other civil society partners.

The team was appointed by Minister Dlamini in February 2014. It was mandated to explore the nature of the deductions, provide recommendations to stop them and ways to ensure that grant recipients had access to appropriate recourse.

The team found that the deductions associated with NET 1 products are deducted via the EFT payment system within the national payment system.

Minister Dlamini explained that loan repayments are pre-loaded before the social grant amount is transferred into the bank account of the beneficiary.

“Access to grant beneficiaries’ confidential data, including identity numbers, bank account and contact details, biometric data, appear to fuel the marketing and sale of financial products including loans, the Umoya Manje [airtime] products of advance airtime and electricity coupons.

“What is more alarming is that civil society brought to the attention of the MTT that even debit deductions were made for the purchasing of water, which is a free basic service.

“Big sharks in suits are now in the tank with almost unrestricted access to funds in the bank accounts of grant beneficiaries,” said Minister Dlamini said.

She said the department wants to put a stop to this.

“The different financial institutions threatened to take us to court because of section 26A of the Social Assistance Regulations Act. That’s one of things we are looking at right now. Already, social assistance is busy looking into the regulations because it’s easy to change the regulations,” the Minister said.

The department is also looking into changes that need to be made to the SASSA Act.

While this process is ongoing, Minister Dlamini said the reviewed service level agreement has been with CPS for more than six months.

“The main issue in the reviewed service level agreement is [that] of deductions, and they have refused to sign it. We are giving them 14 working days to sign the agreement.

“Thereafter, we are going to take court action, because we think it’s honourable to do so. We are in the meantime mobilising a number of NGOs dealing with vulnerable groups and we will take class action,” she said. –

Photo caption: Social Development Minister Bathabile Dlamini. Image: DSD.