SASSA progress in procurement of alternative payment services: hearing

Meeting report

The Chairperson expressed discontent at the letter of apology from the Minister of Social Development, Bathabile Dlamini, on her unavailability for the joint sitting. It was problematic as the meeting date was by mutual agreement with the Minister.

Ms L van der Merwe (IFP) asked for more detail on the contents of the letter.

Mr T Brauteseth (DA) requested the same and added that the Minister was in the parliamentary precinct the previous week. He saw her and it was quite clear from her conduct last week and her letter to the Committee that she is shying away from her constitutional mandate to be accountable. A severe letter of censure from this Committee needed to be addressed to the Minister as well as to the President who appointed the Minister, indicating the Committee’s dissatisfaction with the Minister.

Ms E Wilson (DA) said that the Minister had previously told them that a contract had been signed with SASSA which SASSA came back and categorically denied. There is no accountability without the Minister being here. That the Minister is a disgrace.

The Chairperson said that he only received the apology at the start of this meeting. The Minster’s reason was that she had to be present in KZN for an appearance at a week-long Active Agent programme.

Ms van der Merwe was displeased and said we are doing ourselves a disservice by continuing the meeting without the highest power. The Minister should have prioritised at least one day for her parliamentary duties. In the Minister’s absence, the Minister could have at least have made provision for a Deputy Minister to be present on her behalf.

The Chairperson said it needs to be respected that there are officials present and that the Committee cannot afford to waste any more time on this. Even in the Minister’s absence, we need to deal with the matter at hand with absolute urgency.

Mr E Kekana (ANC) said that we need to allow the Department to make a presentation and immediately after we can discuss the Minister’s absence. There are serious timelines that need to be addressed regardless of the Minister’s absence.

The Chairperson stated that there is agreement that the Minster’s absence is unacceptable but that the meeting needs to continue regardless.

South African Social Security Agency (SASSA) presentation
Ms Pearl Bengu, Acting CEO, said the purpose of the presentation is to give a progress report about SASSA’s change programme for the payment of social grants.

The process followed for the procurement of social grant payment services from SAPO is that there was a request and approval for deviation from National Treasury which was made and received on the 29 June and 4 July 2017 respectively.

The Request for Proposal (SASSA RFP 01/17/SP) was given to SAPO on the 24 July 2017 with a closing date of 07 August 2017. The bid from SAPO was received on time and the Bid Evaluation Committee commenced with evaluation on 22 August 2017 and finalised the matter on 17 September 2017.

Technical due diligence which formed part of the evaluation commenced on 31 August 2017 and was concluded on 15 September 2017. The Bid Adjudication Committee (BAC) commenced its process on 19 September 2017 and was finalised it on 21 September 2017. The Minister, pursuant to section 4(2) of the SASSA Act 2004, agreed with the Acting CEO’s decision on 6 October 2017.

The SASSA Request for Proposal required:
- provision of an integrated payment system which include beneficiary biometric enrolment as well as biometric proof of life,
- banking services which include a holding bank account and special disbursement account,
- card body production and distribution and
- provision of cash payment services.

After the outcome of the procurement process, it was reported that SAPO has been awarded the provision of an Integrated Payment System which entails the SASSA payment platform development, beneficiary biometric enrolment, biometric proof of life. The award is, however, subject to SAPO responding on or before 25 October 2017 on conditions which amongst others include acceding to perform only one of the four services required, deliverables to be met within the prescribed stipulated timeframes, SAPO’s provision of written confirmation of its financial reserves equal to at least three months payments as stated in the RFP, that the SAPO quoted price is subject to negotiations and that SASSA will have direct and real-time access to all payment data.

To give effect to the SAPO award for the Integrated Payment System, the Standing Steering Committee between SASSA and CPS will revise its Project Plan to incorporate the roll-out of the project which aims to manage the Phase-in Phase-out. SAPO should start with the testing of the Beneficiary Biometric enrolment by February 2018. The Standing Steering Committee on the Phase-In Phase-Out Approach will further guide and monitor the interface with all other payment service providers.

On insourcing, SASSA will insource the opening of the Paymaster General Accounts (PMG) to enable social grant transfers/funds to be deposited and to enable direct transfers to beneficiaries’ commercial bank accounts. Approval for the opening of the PMG accounts was received from National Treasury on 17 October 2017. There will be six weeks of required testing which will take place throughout November and December 2017. SASSA will do the direct transfers (ACB) for the January 2018 payments. A working tool has been developed to compare CPS and SASSA beneficiary bank details, including Easy Pay Everywhere (Green Cards) Accounts. A process to separate the payment file into two categories (ACB & other) is in progress for testing in November 2017 and roll-out in January 2018. Administrative planning is in progress to consider legislative/regulatory compliance, cash flow process and resource requirements. Information for 2 million (ACB) beneficiaries will be submitted on 18 December 2017 to National Treasury for processing.

On the management of Regulation 25A deductions, which are deductions for payment of premiums for funeral insurance policies taken out by beneficiaries, SASSA had commenced taking over the function by capturing the mandates live on SOCPEN since 1 October 2017. To date, 421 mandates have been captured and 23 beneficiaries from the same group requested deductions to be cancelled.

There has been an assessment of the inherent risks and mitigation strategies to remedy them. Amongst these are the risk of failure to pay by the 1 April 2018 deadline which can be mitigated by the appointment of new service providers and within consultation with the Constitutional Court; panic and confusion amongst beneficiaries which can be mitigated by intensive and effective communication with beneficiaries and stakeholders; risk of SAPO being unable to deliver some of the service which may be combated by SASSA embarking on an open competitive bidding process.

On the way forward, deadlines have been set to ensure a smooth Phase-out Phase-in process while ensuring business continuity. The final deadlines are set to be concluded between 19 and 24 February 2018.

SASSA would be meeting with SAPO on 26th October 2017 to discuss a letter from the SAPO CEO, Mark Barnes, in which SAPO has accepted conditions set by SASSA in its letter to SAPO.

Discussion
Mr Brauteseth said that he is pleased that SASSA is present to deal with grant payments but he looks forward to meeting with SASSA again very soon as SASSA still needs to explain the R1.4 billion in irregular expenditure as reported but the Auditor General. He is very concerned about SASSA’s financial controls. He questioned why SASSA said it had nothing to report to the Committee a week ago but are now before the Committee with a lot to report.

Ms Bhengu responded it was not that SASSA had nothing to report but rather she wanted to give SAPO an opportunity to respond to the letter and concerns addressed to it before coming to the Committee with a comprehensive report.

Mr Brauteseth said SASSA was misleading the Committee in saying that it had nothing to report. In the report it mentioned where SAPO can assist in the banking but also where they cannot help. The Minister previously advised that it would cost about R6.4 billion to invest in this system provided by SAPO and also that in the Black Sash’s report it was advised by SASSA that there would be an additional R2 billion in annual fees for cash distribution. He accordingly asked for a financial breakdown of what SAPO would be handling and what SASSA would be handling.

Ms Zodwa Mvulane, SASSA project manager, advised that the R6.4 billion was on the SASSA readiness part which included the development of the payments and the R2 billion is for the cash handling which is the current amount being paid to CPS for cash handling per beneficiary. Starting in January 2018, SASSA would be paying directly into the bank accounts of certain beneficiaries and this is the service into which the R2 billion would be invested.

Mr Brauteseth complained bitterly about SASSA’s inability to provide adequate information timously. He said the panel appointed but the Constitutional Court to engage with SASSA has a serious concern with the lack of cost justification for the R6.4 billion which will be invested by SASSA in appointing SAPO’s services. He is concerned that an entity, as integral as SASSA, with R1.4 billion in irregular expenditure, now also has R6.4 billion in their budget for which they cannot give justification.  

Ms Mvulane agreed that they would concede that they do not have the information but would be in a position to furnish the Committee with such information at a later stage.

Mr Brauteseth raised another concern which was the timelines in his view are too tight. It is impossible for all of the timelines to be met at a decent standard within those timeframes. If he looks critically at the situation it seems as though the timelines have been set with one clear favourite in mind, that being CPS, which he suspects has been in the works with SASSA on this project long before the advertising leg of the procurement process. He has seen this play out before and it is a clear sign of collusion with an entity before an advertising date to ensure that that entity has a proof of concept at the date set. He asked then, how long SASSA has been in collusion with CPA on their product. The truth will come out eventually and that it would be better to be honest about it now than to lie about it.

Ms Mvulane explained that they have not been working with CPS on any further projects but that CPS is the provider of the current services.

Mr Brauteseth asked who sits on the steering committee and how many CPS members are on that committee.

Ms Dianne Dunkerley, SASSA Executive Manager: Grants Administration, explained there is a standing steering committee with CPS which she chairs and on which there are two CPS members, who are both senior managers at national level, and then there are also SASSA staff members of which three are from the payments unit. Apart from this steering committee there is also a focus task team that works specifically on the Phase-in Phase-Out project which is comprised of a number of SASSA staff and no CPS members.

Mr Brauteseth asked how many people from the work streams are involved on the focus task teams.

Ms Dunkerley said that there are no representatives from the work streams in the task teams and that the panel report has been complied in insofar as it requires no members from the work streams to be involved.

Mr Brauteseth said he assumes that the final report from the work streams has now been finalised and wanted to know when those reports would be made available to the Committee.

Ms Mvulane said that those reports will be made available as soon as practically possible.

Mr Brauteseth said that because the work stream reports were not being used, SASSA would be embarking on a completely new road. He asked if it can be concluded that the work stream reports were fruitless and wasteful expenditure.

Ms Mvulane replied that the work stream reports are being used and even the Phase-in Phase-Out is based on the work stream report.

Mr V Smith (ANC) said it will be helpful for the Committee to know what the other services are. It is mind boggling that the state cannot provide and that the state would have to go and outsource services. He wanted to know what the services are that SASSA claims SAPO cannot provide and that an outside service provider is rather required.

Furthermore, in the presentation it said that SAPO was disqualified because it cannot provide sufficient cards. It does not make sense because a few minutes later in the presentation it mentioned that the use of the old cards was extended. He asked what the use was for a disqualification and then also an extension.

His understanding of the report is that the panel must play an active role in evaluation and adjudication but the report totally marginalises the panel. He asked for an explanation. Part 12 of the court order clearly outlines the role of the panel but this report before the Committee makes no mention of the role of the panel.

Ms van der Merwe asked why they are showing so little respect for the Constitutional Court. On numerous occasions the panel was ignored by SASSA despite being constitutionally mandated to work in conjunction with the panel. It is an indictment on SASSA.

She added that all of the information put to the Committee contains the information has been given to SAPO but the problem is that SAPO is not willing to deal with SASSA unless they issue the bank cards which SAPO has said is well within its function. What is the point of having two service providers as this would just open the door for illegal deductions? She asked what SASSA would discuss in the next meeting with SAPO because to her it looks like a stalemate if no conclusion is reached on who would issue the bank cards. She asked if SASSA envisages reaching a deal with SAPO.

Ms Mvualane replied that it is SASSA’s desire is to negotiate with SAPO in good faith. SASSA wants to bring to SAPO’s attention that once the procurement process has been followed, any decisions made are based on the strength of the documents which have been subjected to the necessary evaluations and due diligence. There is no way that SASSA can change evaluations and the basic process which had taken place.

Ms B Masango (DA) asked how the Committee can believe what is being reported here today because the body which is entrusted with overseeing this process has not even being given the necessary information.

Ms N Mente (EFF) said that all the information received relates to the shortcomings of SAPO and that she feels it unfair that SAPO is not present to answer for itself. She thus requested a meeting with the SAPO team together with SASSA. Whatever information would come from SASSA is not attested for, so a meeting in SAPO’s absence is fruitless.

The contract they signed with CPS did not include the specifics of the phasing-in project in January in that it does not deal with what CPS would be paid for. She asked who decided to be bound to two service contracts simultaneously for overlapping services as it does not seem like an informed decision, given the information SAPO has previously given SASSA on their competency.

Ms Mvulane replied that there was a miscommunication between the panel of experts and SASSA in the accusation of the panel not being furnished with information. The panel had wanted the information in the form of a disclosure register. What SASSA did, however, was give to the panel the forms on which all information is filled out since SASSA does not have such a register as requested. When these forms were presented to the panel, it was not considered as information because it had not been processed and compiled into one conclusive register. It may have seemed as if no information was tendered but in fact such information was, just not in the requested register form. This was explained in a meeting with the panel.

The request from the panel of experts to provide them with the RFP report was during a time when she was on leave and that upon her return she came to learn of the miscommunication which had taken place. She acknowledged that this is unfortunate but that an apology was put forward and remedied.

M T Chiloane (ANC) interjected and asked if she was referring to the miscommunication between SASSA and the panel or between SASSA and this Committee and the report presented in this sitting.

The Chairperson asked that there be no interjections and that SASSA be given an opportunity to respond comprehensively in their right.

Mr Smith questioned the Chairperson, asking what the Committee is to do in instances where SASSA gives responses which are clearly misleading. He fears that they will get away with murder if the question and response process is not effective in giving all parties an opportunity to cross examine certain responses.

Mr M Booi (ANC) said it is not the first time the Committee is dealing with SASSA and that he believes that there is no way that members have to sit here and accept not getting answers. He read an excerpt from the panel’s report which essentially says that failure to provide any information for whatever reason calls into questions the integrity of SASSA which is a reflection of its inability to perform its duty. The onus is not on member of the Committee to prove the truth but rather on SASSA and the executives to provide the truth. Members are forced to make interjections because of the lack of comprehensive answers from SASSA executives and perhaps indulgence from the Chairperson is necessary to extract the truth.

Ms Mvulane replied that the other services which SAPO cannot provide are card production and distribution in which SAPO did not meet the threshold of 70 points. There are currently 10 million cards being held by beneficiaries. 10 million cards were thus needed within five months of concluding the contract and SAPO was not going to be able to deliver on this. On a monthly basis, SASSA issues close to 80 000 cards per month and nearly 130 000 new cards per month. Annually, this comes to 4.5 million cards. The bid document submitted by SAPO revealed SAPO’s inability to meet this demand. It is acknowledged that card production would have to be outsourced and that all bidders were required to provide, with the bid document, a list of all their suppliers so that SASSA could conduct a verification of them. SAPO failed to provide SASSA with this list despite SAPO advising that such a list would be provided in due course. SAPO then later indicated that they were not going to be using any partners.

The other services which SAPO would not be able to provide fall under banking services. First, on the management of holding accounts and second, the management of disbursements accounts with is linked to the issuing of the cards as well. SAPO did not meet the threshold because the card used for the management of these accounts are not to be the same as debit cards in order not to allow deductions. In the bid document SAPO proposed cards linked to debit accounts which would open the potential threat of deductions.

The other service which SAPO would be unable to provide is the cash handling and distribution service. This is linked to the fact that the card has to be an interoperable card which can be used to withdraw at pay points or ATMs. The SAPO bid documents indicated that SAPO would not be able to deliver interoperable cards and that the pay point system would be ring fenced. This would mean that a if a beneficiary were to opt to be paid through a pay point, they would be confined to the this method of payment unless such beneficiary approaches the SASSA office to reissue another card to be paid in the alternative.

On the disqualification of SAPO, she said that based on the working history replacing 10 million cards takes too long. Half of the cards in circulation expire in December 2017 while CPS cards expire in March 2018. The extension was therefore necessary to allow for the phasing-in of a new service provider and phasing out of the current service provider.

The CPS contract was extended by the Court on the same current terms and conditions except that SASSA was to agree to the condition of prohibition on selling of data and information of beneficiaries. If the same contract is extended, the old contract did not factor in the phasing-in and phasing-out. So this extended contract has to continue on the same reciprocal terms until the last day of the contract which means that the new contract with a new service provider will come into effect and there will be a brief period in which two service providers will need to be paid.

Furthermore, the process which was followed in procuring from SAPO was a procurement process. Since it was not an open competitive process, a deviation approval had to be requested from National Treasury which was duly granted. That deviation was clear that the proposals would have to be scrutinised by the Bid Committees to adjudicate. Whatever has been awarded to SAPO is thus the outcome of those processes. These was also a due diligence done by CSIR which was to verify the ability of SAPO to deliver on its responsibilities. If members are insecure about the information provided, SASSA is amenable to allowing the process to be audited.

Ms H Malgas (ANC) asked how beneficiaries in the deep rural areas will be accommodated. She asked about the progress of the amendment of the Social Security Act insofar as it deals with deductions.

Ms Mvulane responded that people in rural areas would still be using pay points. Deductions are dealt with in section 26 of the regulations to the Social Security Act and currently this issue will only be dealt with in the manner in which SASSA structures the new payment system.

Ms R Capa (ANC) reiterated that there needs to be a joint meeting with all the stakeholders so that each party can answer for themselves.

Ms B Abrahams (ANC) asked when the Grindrod Green Card will be phased out. She asked when progress reports will be given to the Committee.

Ms G Tseke (ANC) said that there is a mandate in terms of the Court order at paragraph 12, one of which outlines the responsibilities of the panel. She asked what the relationship is between SASSA and the panel because the report given shows that there is no working relationship. She asked what SASSA will do if SAPO does not respond by 26 October 2017. She asked for assurance that this process will be finalised by March 2018 and each contingency option is in place, should it not.

Ms Mvulane responded that there have been two meetings with the panel so far. She mentioned that the panel has also met with certain departments to see how biometric data will be migrates from CPS to SASSA. The panel has also conducted visits but she will admit that SASSA has only been in consultation with the panel upon the panel’s request. In future SASSA will be taking the initiative in this respect.

Ms Wilson asked if there is an idea of the costs are that the task team has formulated as per their mandate to determine the quantum of the process of phasing in and phasing out. SASSA was required to enlist legal assistance in drafting letters, proposals and alike and asked if this had been done in the procurement process and particularly in communication with SAPO. She asked if monthly reports are being received by the panel and whether the Committee can also get copies of those reports.

Mr Smith said that the Committee is being misled by SASSA and noted the casualties of this exercise.

Mr Brauteseth said that he has been in communication with the CEO of SAPO and he can categorically state that the Committee is being lied to by the SASSA’s representatives. The CEO has agreed to take the stand and be cross examined on the issue before the Committee.

Mr Kekana said that he is not confident in what SASSA is reporting. Perhaps there need to be a joint meeting with all stakeholders.

The Chairperson agreed that a follow-up meeting would be necessary which will be arranged with the Minister of Communications, leader of government business, Minister of Social Development, House Chair, National Treasury, SCOPA, SAPO and SASSA, which is likely be scheduled for Tuesday, 24 October 2017.

The Chairperson adjourned the meeting.