Pensions Core Course 2013: Social Pension Payments - South Africa


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Pensions Core Course 2013: Social Pension Payments - South Africa

  1. 1. Social Pension Payments: South AfricaSarah RotmanApril 10, 2013
  2. 2. Agenda1. Payment Methods up to March 20122. Messy Procurement3. New Payment Method as of March 20124. Recipient Experience2
  3. 3. South Africa’s Social Security Administration (SASSA)• SASSA implements and pays various unconditional cashtransfers that reach 9 million recipients (30% of thepopulation)• Old Age Grant• Child Support Grant• Disability Grant• Foster Child Grant• Care Dependency Grant• Grant in Aid• War Veterans Grant• Old Age Grant• Targets elderly over 60• Eligibility determined by means test• 140 USD (R1200) paid monthly3
  4. 4. Payment Methods up to March 2012Payment Instrument Cash Limited-Purpose Instrument General-Purpose InstrumentForm of Payment --• Cash-based services (CBSpayments): recipients accessa card-based electronic storeof value at pay points toreceive their cash payment• Direct deposit to existingbank accounts (ACBpayments)Providers --• Specific payment providersthat offer store-of-value viasmart cards, but no additionalfund deposits and use only atdedicated pay points• Net1, Empilweni• Banks that offer magnetic-stripe cards linked toaccounts• Mainstream bank accounts• Sekulula account offered byAllPay, a subsidiary of ABSABankPercentage of recipients -- 41% 59%Cost -- $4.46 $2.03 or $0.104Source: “Social Cash Transfers and Financial Inclusion: Evidence from Four Countries.” Focus Note 77. CGAP, February 2012
  5. 5. Provider:Instrument:Withdrawal: Any ATM (nodifferential pricing) useat POSAccount:Selection:ABSA/AllPaySekulula AccountDebit cardDefault option in 3/7provincesAll major banksAny ATM (nodifferential pricing) useat POSStandard bankaccount (Mzansi“basic account”)Debit cardCustomer must opt tobe paid into anaccount at any bankNet1 AplitecClosed loop ofproprietary biometricpay pointsLimited PurposeAccountBiometric smart cardDefault option in 3/7provincesSource: BFA (2006,2008); CGAP (2012)Another Overview of Payment Methods5
  6. 6. Overview of Costs of PaymentsOverview of Costs South AfricaAverage grant per recipient $144.7Weighted average fee per payment $3.50As % of average grant 2.4Cost by type of instrument:Cash payment N/ALimited-purpose instrument $4.46Mainstream financial account $2.03 or $0.10** $0.10 is the fee paid by SASSA to make a bulk electronic transfer into client bankaccounts via the Automated Clearing Bureau; the recipient then pays any costs associatedwith using the account directly.Source: CGAP (2012)6
  7. 7. South Africa compared to other leading countriesSource: CGAP (2012)7
  8. 8. Agenda1. Payment Methods up to March 20122. Messy Procurement3. New Payment Method as of March 20124. Recipient Experience8
  9. 9. South Africa’s Messy Procurement Story2007 - New tender to consolidatepayment arrangements in all 9provincesOctober 2008 – SASSA cancelled thetender citing irregularities in theprocess2009 – SASSA entered into agreementwith South African Post Offices withouta tender process being followed; one ofthe bidders (Net1) sued SASSA;SASSA lost the case and set aside thePost Office contract; case referred toSupreme Court of Appeals andreversed the lower court’s findingsMay 2011 – New tender processlaunched, but existing contractextended past September 2011deadlineJune 2011 – Net1 asked ConstitutionalCourt to hear the case, which wasdeclinedJanuary 2012 – New tender awarded toCash Payment Services (Net1); tenderworth about R10bn for a five-yearperiodFebruary 2012 - ABSA AllPaychallenged the tender processAugust 2012 - Judge declared theprocess invalid, but for practicalreasons did not set aside theagreement between the SASSA andCPS (Net1)March 2013: Net1 has decided to sueAllPay for allegedly injuring itsreputationSource: CGAP G2P Research Project: South Africa Country Report, October 2011
  10. 10. 10Source: Africa’s Messy Procurement Story10
  11. 11. Agenda1. Payment Methods up to March 20122. Messy Procurement3. New Payment Method as of March 20124. Recipient Experience11
  12. 12. Payment Arrangement as of March 201212Source: “The Payment Experience of Social Grant Beneficiaries.” FinMark Trust, April 2012• All beneficiaries receiving social grants will be re-registered on a new biometric based payment system.• All beneficiaries will be issued with a SASSA brandedsmart card. The SASSA card is a MasterCard whichcan be used anywhere including merchants, points ofsale and ATMs. If the card is used outside of themerchants supported by the payments system,beneficiaries will pay a fee.
  13. 13. Agenda1. Payment Methods up to March 20122. Messy Procurement3. New Payment Method as of March 20124. Recipient Experience13
  14. 14. Recipient Experience under Former Payment Arrangement14• High levels of satisfaction, whether using electronicpayments or cash payment but for different reasons• Those who receive grants in cash like this methodbecause they save money on transport and bank fees,but dislike having to be at the cash point at a particulartime and express concerns about security of cashcollection• Those who receive grants through bank account likethis method because it provides greater flexibility, butcomplain about fees• Unlike other countries in our initial study, use of bankpayment option appears to be driven by demandbased on convenience and cost.Source: FinMark Trust 2012; CGAP 2012
  15. 15. Recipient Quotes15• “It’s advantageous to get your money as cashbecause you won’t pay for transport to town whichgoes up every now and again.”• “The problem with cash recipients is that you have towake up early to catch the line and wait for aboutthree hours before the money truck comes.”• “There’s nothing as pleasing as knowing that you willget your money wherever you are. When receivingfrom the bank you do not have to come back home toget your money.”• “There’s no way you can leave money in the accountbecause it is swallowed by bank fees every time.”Source: FinMark Trust 2012; CGAP 2012
  16. 16. Advancing financial inclusion to improve the lives of the 16