Grindrod Bank breaks silence on social grants fiasco

Johannesburg - Grindrod Bank, which provides banking services for South Africa’s social grants, has spoken out publicly for the first time on controversy around the welfare system.

The statement from the company comes as Johannesburg’s Constitutional Court on Wednesday heard an application by human rights organisation Black Sash for the court to exercise oversight over the process to find a new social grants payment provider.

Controversy has erupted over social grants as the South African Social Security Agency (Sassa) recently admitted that it won’t be able to take over the payment function when a tender with Net1 UEPS Technologies’ unit Cash Paymaster Services (CPS) expires on April 1.

While Net1 and Sassa have been quoted in media in recent weeks on the debacle, Grindrod Bank, which in cooperation with CPS facilitates monthly grant payments, has been quiet on the matter.

But on Wednesday, the bank, in a lengthy statement, broke its silence by first heaping praise on what it said are benefits of the current system, such as biometrics and a smooth running system.

However, the bank goes on to further clarify the flow of funds in the social grants system by saying that it pays back interest earned and doesn’t retain idle cash at Sassa’s expense.

Grindrod explained that National Treasury pays about R11bn each month into Sassa’s bank account. Sassa then pays this amount over to an account held in trust for Sassa at Nedbank.

“Any interest earned in this account is paid back to Sassa,” said Grindrod.

“CPS then transfers funds over to Grindrod Bank in tranches to cover the anticipated demand when the pay cycle opens, leaving as much as possible in the Nedbank account for the benefit of Sassa.

“We receive the funds several hours before being required to ensure no service interruption due to upstream risks. This process is managed in the same way that other banks manage their short-term liquidity,” said Grindrod.

Grindrod then explained that transfers to beneficiary accounts occur when the account users present themselves at the likes of a pay point, ATM machine or retail outlet.

“As the cash is typically withdrawn or spent immediately, we have no control over how much is retained in the Grindrod Bank accounts. As with traditional retail current accounts, there is no interest paid on what is essentially a transient deposit,” said Grindrod.

“At the end of the pay cycle any funds that are not transferred into individual beneficiaries' accounts (i.e. they have not demonstrated 'proof of life' via a PIN or biometric identification) is paid back each month to Sassa. Grindrod Bank does not retain any idle cash at Sassa’s expense,” said the company.

Personal information, charges

Grindrod, in its statement, also appeared to respond to an opinion piece in the Daily Maverick by Sygnia CEO Magda Wierzycka who questioned certain clauses associated with Grindrod bank accounts.

One of the clauses Wierzycka shone a spotlight on is Grindrod account users' consent to “providing your personal information to third party service providers, subsidiaries and affiliates for the express purpose of providing you with the banking services referred to in these Terms and Conditions”.

The clause goes on further to say that “in this regard, you also consent to CPS as well as the aforementioned parties storing and processing your personal information”.

But Grindrod played down this aspect of its business in its statement on Wednesday.

“As is required in terms of legislative and regulatory requirements, Grindrod Bank holds information on each Sassa card holder including FICA data, relevant to what is required by any banking service, and in terms of what is necessary in order to transact with our clients,” said Grindrod.

“We do not share nor sell this information to any third party,” said the bank.

Meanwhile, regarding costs around social grant bank accounts, Grindrod said it has “not charged beneficiaries monthly account fees, and has kept general bank charges, in effect passing millions of rands back to Sassa beneficiaries every month”, it said.

“In addition, purchases at till points, the withdrawal of cash at retailers and at pay points are free,” said Grindrod.

Debit orders

Over the years, Net1 has received criticism over marketing products such as insurance and airtime to grant beneficiaries.

The controversy even sparked noises from government, which has sought to implement legislation preventing deductions of social grant accounts.

And Grindrod also communicated its stance on this issue in its statement on Wednesday.

“Debit order abuse has been widely discussed in the press and is a legitimate issue for grant beneficiaries. The Department of Social Development and Sassa have said that they want to increase protections for vulnerable grant recipients. One such solution is to restrict the functionality of the bank accounts used by Sassa beneficiaries,” said Grindrod.

In 2016, the Social Welfare Act’s regulations were prohibiting deductions on Sassa client bank accounts. A declaratory order to get clarity on these regulations, and how they are to coexist with banking regulations, was heard in the North Gauteng High Court on the 17-18 October 2016.  "We are currently awaiting the Court’s ruling on this issue,” said Grindrod.

Finally, Grindrod said it is “ready to continue to provide banking services to the Sassa client base, ensuring continuity for grant beneficiaries and peace of mind to all concerned South Africans”.

Grindrod Bank, a registered financial services provider in South Africa, is part of JSE-listed Grindrod Limited, a logistics company, with a market capitalisation of just over R11bn.

In a one page affidavit filed to the Constitutional Court earlier this week, Grindrod Bank also said that it needs Net1 UEPS Technologies’ technological and infrastructure support to continue the welfare system.

READ: Grindrod Bank: We need Net1 to ensure grant payments