The Post Office will take over the distribution of welfare grants from current service provider Net1 UEPS Technologies, minister in the presidency Jeff Radebe said on Sunday.
The agreement between the South African Social Security Agency, known as Sassa, and the state-owned national postal service will take effect from 1 April 2018, Radebe told reporters in Pretoria on Sunday. A court ruled in 2014 that the contract with Net1 unit Cash Paymaster Services was invalid, but the deal was later extended until 2018 to ensure welfare payments didn’t stop.
About 17m South Africans receive various forms of social grants costing the government more than R150bn annually. Most of the recipients are less than 18 years old, according to the department of social development.
“Sassa considered various options for the replacement of service providers and preferred the option of the South African Post Office as the most suitable one,” Radebe said.
Net1 in May agreed to pay its founder Serge Belamant US$8m and about a 14% premium on his shares after he agreed to step down as CEO amid a storm of controversy concerning the South African contract.
A handover period from Cash Paymaster Services to the Post Office would take about six months and end in August next year, according to Mpumi Mpofu, director-general of the department of performance, monitoring & evaluation and chairwoman of the technical committee overseeing the transfer.
“About 1.8m recipients will still receive their payments in cash and Sassa will seek for an alternative service provider to take this over,” she said at the same event.
The cost of distributing the grants would remain the same to government and might even fall in the future, Post Office CEO Mark Barnes told reporters. “The Post Office network has already been paid for and so the costs may even come down.”
Radebe said the new system will also allow for the participation of other partners such as enterprises and commercial banks in the payment of welfare grants to beneficiaries. — Reported by Paul Vecchiatto, (c) 2017 Bloomberg LP