The South African Social Security Agency (Sassa) has lashed out at the South African Postbank, accusing its sister entity of losing social grant recipients at an alarming rate as they flee to private banks for better services, despite the subsidy provided to the bank.
This comes as Sassa tries to fend off a Constitutional Court challenge launched by Postbank to compel the agency to subsidise beneficiaries so they can continue receiving their grants free of deductions.
The subsidy was governed by a master services agreement (MSA) which particularly sets out the banking and transactional services that social grant beneficiaries are currently entitled to if they bank with Postbank.
For example, the grant beneficiaries have a choice of accessing their social grants at major retailers, Pick n Pay, Spar, Shoprite/Usave and Boxer, and spaza shops using multiple entities and are not charged when withdrawing grants at the retail groups.
The social relief of distress (SRD) grant beneficiaries are also not charged to access their grants through Postbank’s cardless solution. These fees are currently subsidised under the MSA up to a certain threshold. Postbank incurs a charge for each of these transactions.
However, Sassa pulled the rug out from under Postbank’s feet when it issued a notice to terminate the agreement in 2023, drawing the umbrage of Postbank, which is now seeking legal recourse from the apex court in a rare urgent direct-access case application.
Postbank’s customers for the purpose of receiving social grants are declining in number and were last advised to be of the order of 2-million people
— Solly Malatsi, minister of communications & digital technologies
The presidency tried to intervene in the dispute, setting up a ministerial task team to settle the matter amicably. But these efforts came to naught, with the parties resolving to settle the matter in court. In essence, Postbank wants the ConCourt to interdict the termination of the MSA.
In its court papers, which Business Day has seen, Postbank argues that Sassa’s decision is not constitutionally justifiable, as it would deny grant beneficiaries subsidies that have existed for many years.
The bank says millions of beneficiaries who rely on it to receive their grants free from unwarranted banking charges would bear the brunt of Sassa’s decision, as these costs would substantially reduce their income.
“Sassa’s decision was taken, absent any discernible government policy to stop subsidising social grant beneficiaries serviced by Postbank for at least seven years under the MSA and without any public consultation,” Postbank’s papers read.
“Postbank assists Sassa in fulfilling its constitutional mandate to provide social grants to beneficiaries. Through the MSA, social grant beneficiaries have been subsidised for years and protected from exorbitant bank charges on their social grants received through Postbank. In other words, these beneficiaries receive their grants free of deductions.
“Given the value of the grants, which does not correlate with the demands of the economy or the expenses these grant recipients must meet, the government took a conscious decision to protect them from exorbitant bank fees by subsidising them through a preferential arrangement with Postbank.”
Postbank is a state-owned bank established to promote universal and affordable access to banking services, particularly in low-income and marginalised communities. Sassa bears the constitutional and statutory obligation to administer and pay social grants in a manner consistent with dignity, equality and accountability.
The ConCourt showdown between Sassa and Postbank is set for May 12, when the matter will be heard.
Sassa, in a sharp rebuke of Postbank, said it was overestimating its role and that social grant beneficiaries had already started fleeing from the bank in droves. “Postbank has lost more than 75% of social grant beneficiaries, who have opted to receive their grants through private banks, where they pay their own bank charges and make use of available free services,” the agency’s court papers read.
In a blow to Postbank’s case, shareholder Solly Malatsi, minister of communications & digital technologies, has told the court he’d prefer the matter to be settled outside court via a process initiated by the inter-ministerial committee. “There are other service providers who disburse social grants. Postbank’s customers for the purpose of receiving social grants are declining in number and were last advised to be of the order of 2-million people,” his court papers read.
“This is not a reason to dismiss the valid concerns about the ability of citizens to access social grants but is indicative of the fact that these citizens have other ways to receive social grants, and many more citizens use these other options.”
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