If the embattled South Africa Social Security Agency (Sassa) makes good on its promise, the South African Post Office will be contracted to take over social grant payments from incumbent Cash Paymaster Services (CPS) in the next seven days.

Sassa told parliament’s standing committee on public accounts (Scopa) that the Post Office will be contracted to distribute social grants by 13 September, according to committee chairman Themba Godi.

The agency was hauled before Scopa on Tuesday night to give an update to MPs on the process and timeline to phase out CPS’s contract, in line with a constitutional court order.

By end of March 2018, Sassa must terminate its contract with CPS and have an alternative way to distribute social grants. It appears that by 1 April 2018, the Post Office will be responsible for distributing social grants to more than 10m beneficiaries.

Godi said the Post Office was supposed to be contracted by 31 August, “but there were delays in technical evaluations and due diligence processes”.

Although the Post Office, led by CEO Mark Barnes, is being punted as the next paymaster, Godi said it’s not clear whether Sassa intends giving the state-owned entity the entire contract or a portion of it. Barnes was not available to comment at the time of publishing.

The type of contract to be awarded to the Post Office will be made clear when its technical systems are evaluated for readiness in the coming weeks.

Barnes has expressed interest in the Post Office taking over the social grant system, which he believes will be a cost-effective measure for the fiscus. The Post Office has over 2 000 outlets across the country and operates Post Bank, which has 5.8m clients with savings accounts.

Finding a solution

Although the Post Office has not signed a contract with Sassa, it has an agreement to collaborate with the agency in finding a solution after CPS is phased out. This agreement was supported by national treasury.

The agreement emerged after former Sassa CEO Thokozani Magwaza was fired by social development minister Bathabile Dlamini in July. Days before Magwaza left Sassa, he sent a formal letter to Barnes detailing the agreement between Sassa and the Post Office.

The Post Office is seen as an interim solution as the long-term plan is for Sassa to takeover the grant system instead of outsourcing this responsibility. Sassa officials have estimated that it will cost R6bn and take five years for the agency to take over social grant payments.

Godi said the Post Office has to sign a contract before the end of September in order to prepare its systems. “Once they are contracted, we need time lines on how they prepare to deploy their systems by at least November. Some testing and an adequate phasing out period from the CPS contract has to happen.”

He believes that the Post Office will be the best option to pay social grants as it’s a government institution and the personal data of grant recipients “would be in safer hands”.

CPS has been accused by civil rights group The Black Sash of using the personal and confidential information of grant recipients to cross-sell financial services products such as funeral policies, prepaid airtime and electricity. This information is at CPS’s disposal by virtue of it being responsible for grant payments.