The SA Social Security Agency (Sassa) is toying with the use of mobile money technology to distribute grants.
Mobile money largely fizzled in SA in 2016, when Vodacom and MTN pulled the plug on their offerings. Though they were doing well in other markets, they struggled to gain traction at home because of SA’s high rate of banking inclusion relative to the rest of the continent.
But as Sassa searches for new ways in which to pay social grants when Net1’s Cash Paymaster Services finally hands over the reins in September, it’s possible that mobile money could make a comeback.
The technology “is under consideration for future use, and consultations are under way”, Sassa spokesperson Kgomoco Diseko tells the FM.
The social security agency is trying to reduce the number of beneficiaries who receive their grants in cash, and has already made some headway on that front.
Of the 17m South Africans who depend on grants, about 1.9m received their payments in cash at Sassa paypoints this month, Diseko says.
That’s down from 2.5m a month ago, “and we intend to decrease it rapidly until September”.
The decline in cash disbursements is due to Sassa’s efforts to move beneficiaries to electronic methods of payment, including ATMs — both mobile and fixed — and direct payments into recipients’ bank accounts, Diseko says.
At the same time, Sassa’s new distribution partner, the SA Post Office (Sapo), will play a greater role in future.
“Sapo outlets are going to replace some Sassa paypoints, which are going to be decommissioned by the end of September,” Diseko says.
At least one mobile operator — Vodacom — is in talks with Sapo about grant disbursements.
“Vodacom confirms it is in discussions with the SA Post Office as the appointed social grants distribution partner to Sassa,” Phumza Dyani, Vodacom’s public sector managing executive, tells the FM.
“These discussions related to the financial services platform capability, in response to the specification that was set out in the [Sapo] bid.”
The department of social development earlier invited mobile money providers to pitch their offerings.
Cape Town-based Wallettec, for instance, says it was invited to present its mobile payments solution to Bathabile Dlamini when she was still minister of social development.
The company told Dlamini at the time that by disbursing all grants using mobile money, Sassa would save R3.7bn in account management and cash handling fees every year, while the agency would also not have to pay R465m to issue Sassa cards.
At the same time, the social security body would be able to generate R387m/month in transactional income, Wallettec claimed.
Wallettec CEO Johan Meyer says in addition to saving costs and reducing fraud, mobile money could be used as a “trading platform” for the informal economy — much the same as the M-Pesa platform in Kenya.
Approved shop owners and merchants would be able to accept mobile money payments, giving Sassa the ability to control what the state’s grants are spent on. For example, it could bar purchases of alcohol using grant money.
Also, all transactions on a Sassa account would have to be approved by the beneficiary using security PIN confirmation. Grant beneficiaries would not need smartphones, as basic handsets would suffice.
Meyer says mobile grant payments would happen instantly and there would no longer be a need for human assistance — reducing the likelihood of errors or fraud. This would also address “one of the biggest complaints about the current grant process”, which is the time spent travelling and waiting in queues to receive payments.
And people would also be able to remit money to relatives, Meyer says.
Meanwhile, if Vodacom or MTN were to win the contract, it would boost their ambitions to build meaningful financial services businesses in their home market.
MTN CEO Rob Shuter said in March that while mobile money “has been tried quite a few times here” without success, the group wants to introduce related services.
“We’re building quite a lot of new features around [mobile money]: loan products, investment products, insurance … It’s different across the different markets, but [advanced financial services] is a big focus of ours.” The group, he said, is looking at “all markets”, including SA.
For the moment, MTN has a small financial services business in SA in the form of a microinsurance partnership with MMI.
Vodacom, which offers handset insurance and funeral cover in SA, has similar ambitions.
Vodacom CEO Shameel Joosub said in May that the network operator could have 50m mobile money customers in the next three to five years.
At the end of March, Vodacom had 32.3m M-Pesa customers in Kenya (through its stake in Safaricom), Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo.