Post Office CEO: We are ready and willing to take over Sassa payments

Johannesburg - South African Post Office (SAPO) CEO Mark Barnes said the parastatal is “finding it difficult to understand” why it is not tasked with distributing social grants.

South Africa’s social grants are currently under the spotlight as concern grows over whether 17 million recipients will receive their payments next month amid a contract expiry.

In 2014, the Constitutional Court declared the R10bn grant payments tender run by Net1 UEPS’ Cash Paymaster Services as invalid amid irregularities in the awarding of the deal.

Subsequently, the court ordered the South African Social Security Agency (Sassa) to reissue the tender.

Sassa did not award a new contract as it said the bids were non-compliant. The agency said it was not ready to assume the payment function itself by April 1, as previously planned, putting the welfare project in limbo.

But the Post Office, which is owned by government, is ready and willing to take over the payment function, said Barnes.

"I must emphasise this; we're not trying to start a fight with anybody. Although in the end we do believe that the Post Office is the right vehicle for this in the long term - well, in the immediate term for that matter,” Barnes told Fin24 by phone.

"The one thing we can't afford in this country is for the social grants not to be paid, and the other thing that we can't afford is for the continuation of an illegal contract.

"And so, we're just saying can we step into the breach, can we help; tell us what to do,” Barnes said.

Barnes told Fin24 that Sassa had contacted SAPO to seek possible help with the project, and that SAPO had responded this week that it can take over the payment function.

Yet after engagements with Sassa, Barnes said he is still to hear back from them, despite the lack of a clear plan from Minister of Social Development Bathabile Dlamini, who has come under fire from the likes of trade union federation Cosatu for her inaction on the issue.

“My telephone is waiting. My email is open," said Barnes.

He said government’s white paper on ICT policy, which was released last year, also expects SAPO to deliver payments of social grants. He added that “we (are) finding it difficult to understand why we're not involved, which is why I am responding to these things”.

"We have been trying to get an engagement of the highest level on this subject for over a year now,” he said.

'Workable' transitional solution

While it could take months to put infrastructure such as payment cards in place, Barnes said SAPO could, in the short term, facilitate basic social grant payments across its almost 2 500 national outlets and 10 000 payment points.

SAPO could also tap cash-in-transit suppliers for deeply remote and rural areas.

The Post Office also already uses a solution to pay beneficiaries in the Department of Public Works in the Eastern Cape that can be used for grants, said Barnes.

“What we're talking about here is a solution, a workable solution, which would prevail during what we believe is the correct process of a transition period from the existing incumbent to the Post Office,” Barnes told Fin24.

“We send electronic vouchers to the recipients of social grants, which we have to do on a basis that Sassa has shared its data with us so that we could do that.

"They [grant recipients] arrive with an electronic voucher at a post office and/or a paypoint, together with their ID document, and we pay out accordingly,” he added.

Apart from giving it a revenue boost, distributing social grants could also help SAPO achieve its turnaround goal of being profitable again in 2018, added Barnes.

"It would underwrite that profitability in my view and it could also underwrite some of the bigger ambitions we have in financial services (and) e-commerce, where in e-commerce we are looking for international partners and potentially outside investors to produce what we think could be the e-commerce hub for Africa centred here in Africa,” he said.

Can SAPO deliver?

Barnes, who is a former banker, was hired by government to help turn around the struggling Post Office in January 2016.

SAPO is still emerging from financial struggles, stemming from large labour strikes and the churn of top executives.

Last year, government recapitalised the Post Office with R650m and Finance Minister Pravin Gordhan in his Budget Speech promised more money this year for the parastatal.

In October 2016, Barnes said SAPO had secured a three-year loan facility of R3.7bn from major financial institutions such as Standard Bank.

When Fin24 asked Barnes whether SAPO can deliver social grants amid the troubles surrounding its business, he played down these fears.

He said that while SAPO is busy fixing its postal delivery problems, there are no problems with its Postbank operation

"In the Postbank there are no confidence issues - we've got 5.7 million clients. We do 20 million transactions a month (with a) ... net asset value there of R2.7bn.

"The bank is a completely functional entity that's profitable and insulated from all of the operations, systems and otherwise from the Post Office."

Further, SAPO is also looking to the application of a banking licence for Postbank to help turn around its overall business and possibly boost its cause with distributing social grants.

"But you don't need a licence to pay social grants. You don't need to be a bank. This is a transaction mechanism; not a credit risk or anything of that sort,” Barnes told Fin24.

"When you fix a post office, an animal this big, it takes time to do it properly. We're not doing a cut and paste job here. We changing systems and standards and things of that nature."

Last year, the SARB approved the Post Office’s first level application for a banking licence for Postbank.

The awarding of the licence means the Postbank is closer to offering more than just savings accounts, as it will be able to offer banking cards and other services. And Barnes told Fin24 that the awarding of the licence could happen in July, if they comply with all the processes.