Sassa’s R2bn funeral insurance rip-off

Yet again we’ve been reminded of just how awkward a liability social development minister Bathabile Dlamini is for her department as it battles to resolve the overwhelming difficulties with social grant distribution.

Horror at the prospect of the department and the SA Social Security Agency (Sassa) managing “26A deductions” — third-party deductions from social grants for funeral insurance — reflects the growing perception that Dlamini is in cahoots with a shadowy force determined to extract a portion of the hefty profits made on social grant distribution.

The fear is that by allowing the department to manage the estimated R2bn/year of funeral insurance business, more scope is provided for carving out a slice of these profits.

The DA’s Lindy Wilson says the funeral insurance proposal has come up before.

“Up to now it has been ignored, but Sassa recently issued a request for information to deal with it and [is] thought to be in negotiations with someone, but we don’t know who,” says Wilson.

Given all that’s happened around Net1, it is important to find out.

The proposal was stitched onto a recent presentation to parliament’s social development portfolio committee, which marked the unveiling of yet another garbled version of a Sassa plan for the transfer of grant payments from Net1 subsidiary Cash Paymaster Services (CPS).

It seems committed executives at Sassa are making good progress on a coherent plan that involves the SA Post Office.

Post Office CEO Mark Barnes would not comment other than to confirm constructive discussions with Sassa.

However, details of the Sassa plan do not sit well with Dlamini, says a Sassa source, and so are reconfigured by her advisers and Sassa transition project manager Zodwa Mvulane into an inevitably garbled version for presentations to parliament.

The proposal relating to the 26A deductions has been on the cards for some time. It is in line with regulations in the Social Assistance Act that require the written consent of the minister for deductions for funeral insurance (the only deductions allowed by law).

To date the requirement has been ignored with impunity, not only by Net1-aligned entities but by insurance companies.

Last November, when announcing proposed amendments to the act, deputy director-general Brenton van Vrede said the department could probably provide funeral benefits for considerably less than grant recipients were being charged.

At the time Dlamini said the amendments would enable government “to provide funeral benefits to the elderly and a savings vehicle for caregivers of children with the aim of linking social grants to developmental activities”.

In theory, and with a different minister, this plan would not sound as scary as it did at the recent parliamentary committee presentation. Given its central role, an effective and law-abiding Sassa is ideally placed to rein in the widespread abuse of deductions.

The Sassa source says the proposal discussed in the agency would not involve any management of the process, but merely the payment to third-party providers. However, at this stage Sassa does not even have the capacity to play this limited role, says the source.

Meanwhile the next big date for the unfolding Sassa saga is June 18, when the minister is due to update the constitutional court on progress on plans for Sassa to take over the grant payments. Having been blind-sided by Dlamini’s undertaking back in 2015 that all was well, the court will presumably want to see clear evidence of progress this time around.

The court might also take the opportunity to respond to Net1’s recent disclosure of the R700m profit made by CPS on social grant distribution.

That figure does not include any profit made by Net1 on the provision of various financial services to the recipients.

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