The Reserve Bank held numerous meetings with the South African Security Agency (Sassa) and the Department of Social Development to discuss options for the payment of social grants‚ the head of the bank’s National Payment System department Tim Masela said on Wednesday.
Masela made a presentation to Parliament’s social development committee which is concerned over the lack of preparation by Sassa and the department for the payment of grants to nearly 17-million beneficiaries once the current contract with Net1 subsidiary Cash Paymaster Services (CPS) – declared unlawful by the Constitutional Court three years ago – expires at the end of the month.
Sassa has not made alternative plans to take over the payment of grants and starts negotiations with CPS today about the extension of its contract.
Masila said Sassa needed to decide on a payment system “urgently”.
He said the Reserve Bank was not in a position to express an opinion on whether Sassa would be in a position to mitigate risks relating to the current transition or takeover of the system as the committee expected it to do.
It could offer regulatory guidance to Sassa if this was required.
“The Sarb expects Sassa to exercise its choice (of payments system) with due regard to compliance to the regulatory framework of the national payments system and preferably adhering to the principle of interoperability.
“The open architecture approach supported by the Reserve Bank is based on the principle of interoperability and avoidance of concentration risk while leveraging the existing infrastructure of the national payments system‚” Masila said.
The benefits of an open architecture system included greater choice of banks by beneficiaries‚ the inclusion of special Sassa features‚ the avoidance of repeated tenders and the probable lowering of costs.
Masila said the Reserve Bank believed Sassa should leverage off existing infrastructure where this was appropriate to prevent duplication.
An open architecture would enable competitive product offerings to beneficiaries.
It would allow a beneficiary to select an account at a bank of choice. A co-branded product with Sassa and the banks could be considered.
“This open co-branded offering would limit the need for a “winner takes all” tender approach and promote competitiveness among banking providers‚” Masila said. Such a system would use the existing payment system infrastructure and would probably result in lower costs.
A specific tender might be necessary to ensure payments in remote rural areas. If Postbank was used for this purpose it would need to build the necessary capacity.
Masila said CPS’s utilisation of Grindrod Bank – a relatively small bank with no branch network and limited infrastructure – contributed to operational difficulties for the national payment system when the current grant payment system was launched in 2012. – TMG Digital/BusinessLIVE