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Here's what the Post Office social grants deal will cost

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Here's what the Post Office social grants deal will cost

12th December 2017

By: News24Wire

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The new social grants distribution deal between the South African Post Office (Sapo) and the South African Social Security Agency (Sassa) is expected to cost R2.2-billion in the first year – commensurate to the current amount paid to Cash Paymaster Services (CPS).

Government announced on Sunday that a "landmark" deal had been signed between Sapo and Sassa to deliver grants from April 2018 in a "hybrid" model.

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Commercial banks will also play a direct role for more than two million beneficiaries, roughly 20% of the total scheme.

Concerns though had been raised about the deal's total cost, as initial reports suggested the Sapo contract would cost more than that of incumbent service provider CPS.

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News24 has seen the signed service level agreement, as submitted to the Constitutional Court on December 8.

The total cost for the first year of services will be R2 250 261 437.

It also falls within National Treasury's budget for the grants scheme per annum.

The deal, though, will not cover those recipients who receive their grants in cash at merchants and vendors, especially in deep rural areas.

Existing infrastructure will continue to be used to cover the roughly 30% of beneficiaries who still receive their grants in cash, while Sassa goes out on tender to find a new service provider for cash payments.

For those parts of the scheme that the Post Office will handle, the following pricing schedule was agreed to.

The largest expenditure will be the delivery of cash at Post Office and Sassa pay points, which will cost roughly R55.60 per beneficiary for a total of R1.26-billion.

The cost to produce new Sassa-Post Office cards will be R6.71 per beneficiary, which will come to a total of R465-million for the first year.

Similarly, the cost of servicing the two million beneficiaries going through banks will also be R6.71. The total cost for this service will be R161-million.

Branch services at Post Office outlets will be R12.41 per beneficiary, costing a total of R148-million.

Capital expenditure will be R2.60 per beneficiary, at a total cost of R211-million.

As mentioned, Sassa will be forced to find a new service provider for the 2.8-million beneficiaries who prefer to receive cash under the current payment system.

Roughly 67% of recipients receive their cash at Sassa outlets, while a further 26% go through ATMs, and 7% use merchants and vendors.

Department of Planning, Monitoring and Evaluation Director General Mpumi Mpofu said Sassa would be utilising existing infrastructure to continue paying cash payments for six months after the April deadline.

It would have to go out on tender to find a new service provider, as this segment of the scheme would not be ready before the April 2018 deadline.

Mpofu stressed that CPS would have no part to play in the cash payment portion of the scheme, under "current terms", beyond the deadline.

Questions still remain around the securing of beneficiary data.

The migration of the data from CPS to Sassa is still ongoing, and there is no indication yet if CPS has been ordered to destroy its database upon completion.

The issue of legal deductions, which sparked the initial court challenge against the CPS deal, is currently before the North Gauteng High Court in Pretoria.

Sassa indicated in May that it intended to appeal the court's ruling that deductions were still commercially legal.

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