Can SASSA afford to pay out social grants?

The issue around who will pay out social grants on 1 April and whether or not recipients will actually receive their grants has made headlines over the past few weeks. However, the Department of Social Development and the South African Social Security Agency (SASSA) have emphasised that grant recipients don’t need to worry and that the grants will be paid out on time.

The issue arises with regards to who will manage the payments process. The contract with Cash Paymaster Services (CPS) was deemed unconstitutional in 2014 following apparent wrongdoing in the awarding of the tender. This contract comes to an end at the end of March. With no new service provider having yet been identified, there are attempts to get the contract with CPS extended until such a time as a new tender is published and a new service provider is appointed.

The problem comes in with how much CPS charges to facilitate the payment of the grants. Based on the current agreement which was signed in 2012, CPS reportedly earns R16.44 per grant beneficiary per month, this brings the contract to a value of R10.5 billion.

The holding company of CPS, Net1 UEPS has apparently indicated that it will seek to increase the value of the contract. The issue of affordability arises here, as SASSA has limited funds to facilitate the payment of grants.

According to reports, Social Development Minister Bathabile Dlamini has been warned to stick to her budget for the 2017/2018 financial year. In total, social services has been allocated R884 billion. However, this needs to be allocated to four sub-sections, namely education, health, local development and infrastructure, and social protection.

The payment of grants falls under social protection, wherein lie further subsections. This category of social services has been allocated R180 billion for the 2017/2018 financial year, which needs to be spread across several aspects of social protection.

The breakdown of funds for social protection is as follows:

•          Old-age grants has been allocated R64.5 billion
•          Child-support grants have been allocated R56.3 billion
•          Disability grants are set to received R21.2 billion in funding
•          Provincial social development has been allocated R19.2 billion
•          Other grants total R10.7 billion
•          Policy oversight and grant administration has been allocated R8.3 billion

The policy oversight and grant administration budget is what will go towards paying CPS (or any other service provider) for facilitating the grant payments each month. With the existing contract with CPS costing R10.5 billion, and the current budget from which to pay this being R8.3 billion, it appears that there is a shortfall between what SASSA has available to pay the facilitator (currently CPS) and what the current contract already requires.

Reports indicate that government has warned Minister Dlamini that the department will not receive additional funds.