tag:theconversation.com,2011:/fr/topics/payment-35932/articlesPayment – The Conversation2020-05-21T12:24:11Ztag:theconversation.com,2011:article/1378652020-05-21T12:24:11Z2020-05-21T12:24:11ZYou don’t need to worry about spreading the coronavirus with cash<figure><img src="https://images.theconversation.com/files/335432/original/file-20200515-138610-d2330u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cash is unlikely to give you the coronavirus.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/african-american-grandmother-handing-money-to-royalty-free-image/142018467?adppopup=true">Rolf Bruderer/Getty Images</a></span></figcaption></figure><p>Some people <a href="https://www.usatoday.com/story/money/2020/03/06/coronavirus-covid-19-concerns-over-using-cash/4973975002/">worry that</a> cash may be spreading the coronavirus.</p>
<p>Earlier this year, <a href="https://www.ibtimes.com/coronavirus-can-banknotes-spread-diseases-how-prevent-transmission-2923985">both China</a> and <a href="https://www.reuters.com/article/health-coronavirus-southkorea-money-idUSL4N2AZ1TL">South Korea</a> began sterilizing their bills using UV light or high heat before putting them back into use. They also quarantined their bank bills for 14 days in hopes that any lingering viruses would die off during that time.</p>
<p>In early March, <a href="http://archive.ph/m6IK8">a World Health Organization spokesperson</a> suggested that <a href="https://www.snopes.com/news/2020/03/06/coronavirus-cash/">people should not use cash if possible</a>, but <a href="https://www.cnbc.com/2020/03/06/what-you-need-to-know-about-handling-cash-amid-coronavirus-spread-who.html">then clarified</a> that the WHO was <a href="https://www.marketwatch.com/story/who-we-did-not-say-that-cash-was-transmitting-coronavirus-2020-03-06">not issuing a COVID-19 specific guidance</a> with regards to using contactless payments.</p>
<p>I’m <a href="https://www.researchgate.net/profile/Marilyn_Roberts">a professor of environmental and occupational health sciences and global health</a>, and I believe that we don’t need to worry about money as much as some might believe.</p>
<h2>Do surfaces spread the coronavirus?</h2>
<p>Recent articles indicate that some microbes, including COVID-19, <a href="https://doi.org/10.1371/journal.pone.0128711">are unlikely</a> to spread through contaminated surfaces such as cash. </p>
<p>The only potential way to acquire COVID-19 from a contaminated surface is to get <a href="https://www.cnet.com/health/can-coronavirus-survive-on-your-shoes-and-clothes-heres-what-we-know/">the virus on your hands and then</a> touch your mouth, eyes or nose. </p>
<p>This is why everyone from the <a href="https://www.cdc.gov/handwashing/index.html">Centers for Disease Control and Prevention</a> and the <a href="https://www.who.int/gpsc/clean_hands_protection/en/">WHO</a> to <a href="https://www.tcpalm.com/story/news/2020/03/02/local-governments-wait-watch-and-urge-people-wash-their-hands-guard-against-coronavirus/4927963002/">local governments</a> have stressed that hand-washing is critically important, especially after handling money.</p>
<p>Bacteria and some viruses <a href="https://well.blogs.nytimes.com/2009/05/01/catching-flu-from-money/?mtrref=www.bing.com&gwh=F884FAC97B6B3567BEE3248A6712826A&gwt=pay&assetType=REGIWALL">have been identified on currency</a>. It’s just that COVID-19 has not been examined.</p>
<p>Little is known about how long COVID-19 might survive on currency. Laboratory testing on influenza suggests viability lasts <a href="https://doi.org/10.2217/fmb.13.161">from one hour to one day</a> without mucus.</p>
<p>However, viability in nature would depend on temperature, humidity and exposure to sunlight. Nothing has yet been done with COVID-19 survival on cash, though on other surfaces, <a href="https://www.livescience.com/how-long-coronavirus-last-surfaces.html">COVID-19’s survival has again varied</a>.</p>
<h2>The problem with going cashless</h2>
<p>One proposed solution is going cashless, meaning using methods of money that are not paper or coins, such as debit cards or cryptocurrency.</p>
<p>Some experts are <a href="https://www.cnbc.com/2019/01/15/more-americans-say-they-dont-carry-cash.html">concerned about going cashless</a>, as it may make it difficult for some people <a href="https://www.frbsf.org/cash/publications/fed-notes/2019/august/cash-me-if-you-can-impacts-of-cashless-businesses-on-retailers-consumers-cash-use/">who do not have credit cards</a>.</p>
<p>Also, some small businesses prefer cash so they <a href="https://www.thebalance.com/can-businesses-charge-a-credit-card-convenience-fee-4155333">do not have to pay the fees involved</a> with using a credit card.</p>
<p>Finally, there is little evidence that eliminating the use of cash would make a difference in the spread of COVID-19, nor do we have data to support that this virus maybe easily transmitted by any type of contaminated surface.</p>
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<p class="fine-print"><em><span>Marilyn Roberts does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Research has yet to support the theory that cash can spread the coronavirus.Marilyn Roberts, Professor of Environmental and Occupational Health Sciences, University of WashingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/756972017-04-06T05:36:43Z2017-04-06T05:36:43ZApple Pay may have won the battle but it may not win the war<p>The <a href="https://www.accc.gov.au/media-release/accc-denies-authorisation-for-banks-to-collectively-bargain-with-apple-and-boycott-apple-pay">Australian Competition and Consumer Commission’s (ACCC) decision</a> to deny some of Australia’s major banks the ability to collectively bargain with Apple and boycott Apple Pay, might have opened a whole new door for digital wallets in Australia.</p>
<p>The banks wanted to bargain with Apple for access to the Near-Field Communication controller in iPhones, enabling them to offer their own integrated digital wallets to iPhone customers. This would have been in competition with Apple’s digital wallet, but without using Apple Pay. </p>
<p>A digital wallet is essentially an app on a mobile phone that can provide some of the same functions as a physical purse or wallet. This includes making payments in-store and storing information such as loyalty program points. </p>
<p>In the example of Apple Pay, it used a digital wallet to allow customers to use their phones like “tap-and-go” bank cards. Mobile payments can also be made via wearable devices, such as the Apple Watch and various fitness devices.</p>
<p>Part of the ACCC’s rationale in deciding on the banks/Apple case was that, “digital wallets and mobile payments are in their infancy and subject to rapid change”. So the ACCC is uncertain as to how competition will develop in this space.</p>
<h2>The Australian market for digital wallets</h2>
<p><a href="http://www.rba.gov.au/publications/bulletin/2017/mar/7.html">Recent research from the Reserve Bank of Australia (RBA)</a> confirmed the use of mobile payments accounted for only around 1% of the number of point-of-sale transactions over the week of the survey, which was conducted in November 2016. By contrast, the same research revealed that the share of the number of payments made using credit and debit cards had increased to 52%, driven by the use of these payments cards for lower value transactions. </p>
<p>This has been facilitated by the rapid adoption of contactless payments by both consumers and merchants and according to the RBA’s research, in 2016 around one-third of all point-of-sale transactions were conducted using contactless cards.</p>
<p><a href="http://www.apca.com.au/docs/default-source/2016-Media-Releases/digital-payments-taking-over-from-cheques.pdf">According to the Australian Payments Clearing Association</a> by 2016, 77% of Australians owned a smartphone and yet mobile payments at the point-of-sale remain relatively rare. </p>
<p>The very success of contactless payment cards in Australia means that consumers do not see what extra advantage there is in mobile payments. Tap-and-go is increasingly available for even relatively low value transactions at the point-of-sale. Financial institutions have been speedy to issue such cards to their customers and this is matched by merchant’s adoption of the terminals to facilitate these payments. </p>
<p>For mobile payments to become significantly more attractive than contactless card payments, it would require the wallets to have additional functionality to appeal to consumers. Examples of this include: the ability to use mobile payment devices on mass transit journeys, to hold loyalty program points, to verify identity and enabling person-to-person transactions.</p>
<p>This breakthrough in functionality for digital wallets could come from another direction, other than the current mobile payments options of Apple Pay, Android Pay and Samsung Pay. Indeed, China provides an alternative example of how digital wallets can be developed, that will in retrospect make the ACCC’s decision on Apple Pay, rather passe.</p>
<h2>Digital wallet companies expanding from China</h2>
<p>According to <a href="http://www.scmp.com/tech/china-tech/article/2064396/chinas-internet-users-grew-2016-size-ukraines-population-731-million">Chinese government statistics</a>, about 750 million Chinese had moved online by 2016, with 95% of them accessing the internet via their smartphones. China’s digital payments market was by then nearly 50 times greater than that in the United States.</p>
<p>This is partly explained by the <a href="https://www.ft.com/content/00585722-ef42-11e6-930f-061b01e23655">lack of other viable alternatives</a> in China for non-cash payments. Credit card penetration is low compared to other developed markets, debit cards are not contactless and hence require authentication at the point-of-sale. </p>
<p>China appears to have <a href="https://www.researchgate.net/publication/251630948_Credit_cards_in_a_Chinese_cultural_context-The_young_affluent_Chinese_as_early_adopters">jumped directly from cash to mobile payments</a> and hence missed the step into payment cards, particularly credit cards, to which the Chinese consumers appear to have a cultural aversion. </p>
<p>The use of digital wallets in China is being driven by the success of the so-called financial technology firms in China, particularly Alibaba and Tencent. These companies have a vast and protected domestic market at their disposal and an <a href="https://uk.practicallaw.thomsonreuters.com/4-519-9017?__lrTS=20170406051212471&transitionType=Default&contextData=(sc.Default/)&firstPage=true&bhcp=1">almost complete absence of data regulations.</a></p>
<p>These companies have been able to move on from offering just instant messaging platforms, to being payment providers via Alipay and WeChatPay, respectively. These apps on a smartphone allows consumers to scan a QR code from a merchants point-of-sale terminal or smartphone, to complete a transaction. </p>
<p>Person-to-person transfers can also be done through these apps. Chinese company Tencent’s WeChat was originally a social media platform, but it has now expanded to include payments services, music streaming, taxi booking, photo sharing and a news service, to name only a few functions. </p>
<p>Its <a href="https://www.statista.com/statistics/255778/number-of-active-wechat-messenger-accounts/">over 800 million worldwide active users</a> now have fewer and fewer reasons to leave its integrated full platform of services. WeChatPay is also increasingly accepted by bricks and mortar merchants in China. </p>
<p>And now WeChat is planning to expand its services into the UK and Europe and is also looking to enter markets in the United States and Southeast Asia. Part of the company’s planned expansion is driven by the ever-increasing flow of Chinese overseas tourists. </p>
<p>This flow was 120 million in 2015 and <a href="http://www.goldmansachs.com/our-thinking/pages/chinese-tourist-boom.html">forecast to be 220 million by 2025</a>. Australia is already a popular destination for Chinese tourists, many of whom will be users of WeChatPay. </p>
<p>Who is to say that Facebook and/or Amazon will not follow Tencent’s path into digital wallets? While Apple Pay may have won the battle against some of Australia’s banks, it may lose the war against the providers of digital wallets, such as Tencent and Alibaba.</p><img src="https://counter.theconversation.com/content/75697/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve Worthington does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While Apple Pay may have won the battle against some of Australia’s banks, it may lose the war against the providers of digital wallets, such as Tencent and Alibaba.Steve Worthington, Adjunct Professor, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/743252017-03-10T08:52:27Z2017-03-10T08:52:27ZSouth Africa’s grant scandal exposes myths about how the state should run things<figure><img src="https://images.theconversation.com/files/160286/original/image-20170310-3696-12kel8h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africans waiting in line to register for social grants.</span> <span class="attribution"><span class="source">EPA/Nic Bothma</span></span></figcaption></figure><p>The social grants <a href="https://theconversation.com/the-real-risks-behind-south-africas-social-grant-payment-crisis-73224">scandal</a> rocking South Africa has been greeted with understandable shock. It’s also challenged two popular ideas about how government should operate. </p>
<p>The first is that public-private partnerships <a href="http://www.ppp.gov.za/Pages/whatisppp.aspx">(PPP)</a> are efficient. The second is that national government is better at running things than provincial government (the equivalent of states or counties).</p>
<p>Both are so widely supported that they seem obviously true – but in the wake of the social grants’ saga their truth now seems far less obvious. Both are implicated in an unfolding scandal which threatens to disturb payment of social grants to about 17 million South Africans who depend on them.</p>
<p>The idea that PPPs are efficient needs another look. The principle behind them is well known. Because the government lacks the capacity to perform some of its functions, it needs the expertise of private, for-profit, companies who have the ability to do what it can’t, presumably because they wouldn’t be in business if they didn’t. </p>
<p>The second truism under a cloud is the view that, if you want something in government done, you must take it away from the provinces that are wasteful and incompetent. It’s firmly believed across the spectrum: even critics of national government often assume that, if there’s any chance people will be effectively served, it rests with the centre, not the provinces.</p>
<p>The unfolding social grant crisis has come to prove that these widely held assumptions could be misplaced.</p>
<h2>Public Private Partnerships</h2>
<p>At first glance the PPP model sounds like a classic ‘win-win’: government gets the expertise it needs while the private provider expands its business. Citizens also win because they get the service they need. What, besides ideology, could possibly prompt anyone to object? </p>
<p>Court <a href="http://www.heraldlive.co.za/news/2017/03/08/constitutional-court-wants-answers-sassa-department-payment-grants/">proceedings</a> confirm that the PPP between the government and <a href="http://www.net1.com/business-structure/transactional-solutions-cluster/cash-paymaster-services-(cps)/">Cash Paymaster Services</a>, the company contracted to distribute the grants, may have worked for both parties – but not for millions of grant beneficiaries. The private partner received more than its fee for distributing each grant. It also used its position to <a href="https://theconversation.com/the-real-risks-behind-south-africas-social-grant-payment-crisis-73224">market services</a> provided by a network of subsidiary companies: funeral policies, microloans, smart cards, airtime and insurance. </p>
<p>It’s also <a href="http://probonomatters.co.za/who-is-responsible-for-the-sassas-epic-social-grant-distribution-disaster/">claimed</a> that grant recipients are bombarded with sms messages selling these products. If they bite, the money is deducted from their grants. The company denies this but confirms that it uses its position to sell services. </p>
<p>Using PPPs to market products to a captive audience who may well believe that what they are being asked to buy has official sanction is not what the advocates of PPPs have in mind. The social development department and the South African Social Security Agency (<a href="http://www.sassa.gov.za/">SASSA</a>) did nothing to ensure that the poor and vulnerable were protected and so it’s not clear in what way this was a partnership. It seems more like a takeover by the private provider.</p>
<h2>The public interest</h2>
<p>This doesn’t mean that all PPPs should be tarred with the same brush: there clearly are cases in which government can increase its capacity by working with private providers. </p>
<p>But it does show that PPPs are not a guaranteed cure for government incapacity: unless government has the capacity to ensure that these arrangements serve the public, they are not partnerships, but surrenders to private interests. </p>
<p>Without the necessary controls, PPPs may do more to help the government and businesses than to serve citizens: since much corruption in this country stems from collusion between public and private actors at citizens’ expense, corruption could be seen as a particular popular type of PPP. </p>
<p>The capacity which governments need to ensure that PPPs are in the public interest is the ability to assess citizens’ needs and to ensure that the agreement will meet them. This requires an understanding of what citizens want and the will and ability to negotiate terms which will give it to them. Social Development and SASSA seemed to lack either the will or the ability to do either.</p>
<p>This should challenge the simplistic idea that, to do its job, government need simply call in private providers. PPPs will not achieve their stated purpose if they are buck-passing exercises: the government is still responsible for the service and it’s failing the public unless it can ensure that its private partner really is meeting the needs of citizens.</p>
<h2>The role of provinces</h2>
<p>Before SASSA was formed, social grants were distributed by provinces. In the Eastern Cape in particular, grants weren’t paid efficiently and the courts were forced to intervene. It was widely assumed that this showed the dangers of assigning grants to provinces – a single national distribution agency would, it was assumed, solve the problem.</p>
<p>SASSA was created in 2005. Twelve years later, it still lacks the capacity to distribute grants itself or to negotiate terms with the private provider which protects beneficiaries. While grant distribution seems more efficient, beneficiaries are now subject to commercial pressures they did not face when provinces distributed grants. The shift hasn’t been the magic bullet the country was promised.</p>
<p>There was, to be fair, one good reason for changing the provinces’ mandate to distribute grants. The amount to be paid and who was eligible for grants was fixed by national government – the provinces had no say. But provinces don’t levy taxes and so they receive a fixed sum from which they must fund all their obligations. Grants were a large and growing expense and, whenever they were raised, provinces had less to spend on their other needs. A system in which a government entity must provide a service but has no control over what it costs is unfair and unworkable.</p>
<p>But this problem need not have been solved by creating a single grants agency: provinces could have been given separate funding for grants so that other budget items were not affected. </p>
<p>The problems in the provinces are not an illusion – the bad press is often justified. But the SASSA case shows that they are not necessarily solved by taking provinces out of the equation.</p>
<p>Incompetence, patronage and indifference are not a provincial monopoly: which sphere of government provides a service may be less important than whether citizens have the muscle to ensure that it works for them. There’s no reason why this should be easier at a national than a provincial level (it is easier for organised interest groups to influence government at national level, but that doesn’t make citizens any more powerful). </p>
<p>Centralising government functions creates the illusion of greater effectiveness because it makes it easier to issue orders from the top. But it gives no guarantee of greater effectiveness: the orders may be no more reasonable and they may be ignored.</p>
<p>Fixing government is about increasing citizen power and ensuring that officials and politicians are more accountable. It’s not about shifting services to national level in the forlorn hope that officials will push buttons and all good things will follow. </p>
<p>In both cases, the ‘obvious’ needs another look. Bringing in private providers and excluding provinces are not automatic gateways to better government. The social grants scandal shows that improvement requires creative thinking, not relying on truisms which are less true than they seem.</p><img src="https://counter.theconversation.com/content/74325/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Friedman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South Africa’s social grant scandal seems to back up highly regarded views on public governance that Public Private Partnerships aren’t naturally efficient.Steven Friedman, Professor of Political Studies, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/732242017-02-20T20:25:09Z2017-02-20T20:25:09ZThe real risks behind South Africa’s social grant payment crisis<figure><img src="https://images.theconversation.com/files/157480/original/image-20170220-15879-mmoju8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Social grant recipients waiting in Gugulethu, Cape Town. A battle over social grant payment tender threatens the system.
</span> <span class="attribution"><span class="source"> EPA/NIC BOTHMA</span></span></figcaption></figure><p>The <a href="http://www.iol.co.za/news/south-africa/gauteng/its-gordhan-vs-dlamini-over-r120bn-grant-contract-7765965">dispute</a> hovering over South Africa’s social grant system and threatening millions of vulnerable beneficiaries with nonpayment creates risks that go far beyond interrupting poor people’s access to desperately needed grants. </p>
<p>The failure of the South African Social Security Agency (<a href="http://www.sassa.gov.za/">Sassa</a>), which is responsible for the payment and administration of social grants, to act timeously has created a crisis that threatens to deliver grant recipients on a silver platter into the hands of unscrupulous financial services companies.</p>
<p>The latest instalment in the bizarre saga came last week. Sassa officials announced that they would <a href="http://www.enca.com/south-africa/sassa-to-file-court-papers-on-grant-payment-crisis-on-thursday">file papers</a> with the Constitutional Court proposing that their invalid contract with <a href="http://www.net1.com/business-structure/transactional-solutions-cluster/cash-paymaster-services-(cps)/">Cash Paymaster Services (CPS)</a>, which holds the contract for grant distribution, should be extended for another year. </p>
<p>This contract was awarded to CPS in a controversial tender in 2012. It was <a href="http://www.news24.com/Archives/City-Press/AllPay-wins-against-Net1-20150429">declared invalid</a> two years ago by the constitutional court, which instructed Sassa to reissue the tender. As the deadline came closer civil rights groups such as <a href="http://probonomatters.co.za/who-is-responsible-for-the-sassas-epic-social-grant-distribution-disaster/">Black Sash</a> started sounding warning bells that Sassa was not implementing the court’s orders. </p>
<p>Deadline after deadline passed, and by end the end of 2016 it was clear that Sassa had utterly failed to act on the court’s instructions. Late last week it appeared that Sassa had missed another one. It <a href="http://amabhungane.co.za/article/2017-02-18-grants-belamant-holds-a-gun-to-sas-head-as-dlamini-dawdles">didn’t</a> make its planned eleventh-hour submission.</p>
<p>This means that there is no credible arrangement in place to ensure that social grants will be paid when the court’s deadline expires on 31 March. The social grant system supports about 17 million individuals. Disrupting the payments will cause huge suffering to the country’s poorest and most vulnerable people and is likely to lead to social unrest. </p>
<p>With last week’s announcement, it seems that Sassa officials intended simply to present the constitutional court and the <a href="http://www.iol.co.za/news/south-africa/gauteng/its-gordhan-vs-dlamini-over-r120bn-grant-contract-7765965">National Treasury</a> with an impossible situation: condone an illegal contract, or face the possibility of social and political chaos. </p>
<p>But there’s even more at stake. If the court allows a further extension of the invalid contract (or approves a new contract with CPS), Sassa will have perpetuated a situation in which the accounts of grant recipients have in effect become mere conduits between the South African fiscus and the private financial empire that has taken shape around grant disbursement.</p>
<h2>More than just a contract is at stake</h2>
<p>At the centre of the storm is CPS, a subsidiary of <a href="http://www.net1.com/">Net1 UEPS Technologies</a> which is a listed global financial services and logistics group with operations in a number of countries including South Africa, India and Tanzania. </p>
<p>Net1 owns the fingerprint-based biometric identification and payment system that is central to CPS’s operations. Their proprietary <a href="http://www.net1.com/key-products/the-ueps-technology/">Universal Electronic Payments System</a> technology forms the “back end” of the Sassa smart card CPS uses in the electronic payment of grants. It is access to this system that has enabled CPS to roll out payments to the whole country. </p>
<p>While convenient for CPS, scholar Keith Breckenridge has <a href="https://books.google.co.za/books/about/Biometric_State.html?id=4YNxBAAAQBAJ&redir_esc=y">pointed out</a> that this creates an unprecedented situation – grant beneficiaries are captured within a private technological and financial network owned and controlled, not by Sassa, but by its service provider. </p>
<p>Here it should be noted that the work of CPS is only part of a bigger corporate strategy. Also part of Net1’s <a href="http://www.net1.com/business-structure/group-structure/">global empire</a> are financial services companies like MoneyLine, EasyPay, Manje Mobile Solutions, Smart Life and others. These companies act in concert to make use of the opportunities afforded by CPS’s control of the payment network. </p>
<p>Millions of grants beneficiaries, for example, have not only been provided with a Sassa account; their accounts have also been linked to EasyPay Everywhere, a bank account operated by MoneyLine and CPS’s banking partner, Grindrod Bank. All this is part of an <a href="http://ir.net1.com/phoenix.zhtml?c=73876&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTg0Mzc0ODgmRFNFUT0xJlNFUT0xMCZTUURFU0M9U0VDVElPTl9QQUdFJmV4cD0mc3Vic2lkPTU3">explicit two-stage strategy </a>on the part of Net1: a first wave in which it rolls out its technological infrastructure, and a second wave in which it uses this infrastructure to market a wide array of products and services to an essentially captive customer base.</p>
<p>The net effect is that social grant recipients are now tied up in a web of dependency on financial services companies controlled by Net1. </p>
<h2>What this means for financial inclusion</h2>
<p>This creates two problems. Firstly, this arrangement may be in violation of competition law. It looks as if Net1 is making use of CPS’s privileged position as social grant paymaster to give its sister companies first bite and privileged access to a vast potential client base. </p>
<p>Secondly, it raises an issue that’s often forgotten in sweeping generalisations about the need to cover the “unbanked” with financial services. Yes, poor people need access to banking services, and may benefit from smart cards and electronic banking. But these services should be designed with their interests in mind. </p>
<p>Deborah James and Dinah Rajak have <a href="http://eprints.lse.ac.uk/59434/1/James_Rajak_Credit-apartheid-migrants-mines-money.pdf">shown</a> how in South Africa the history of “credit apartheid” and paternalistic control over poor people’s finance has created a situation where creditors wield disproportionate power. Unbridled financial inclusion of the poor may amount to adverse incorporation into a financial sector geared towards preying on them. Already, the Black Sash has collected evidence of troubling instances of <a href="http://ewn.co.za/2016/10/12/Social-grant-beneficiaries-call-for-an-end-to-illegal-grant-deductions">unauthorised and unlawful deductions</a> from accounts set up for grant recipients, often with very little recourse. </p>
<p>This is why the social grants crisis has implications beyond the distribution of payments. Sassa has missed a major opportunity to ensure that financial inclusion happens in a beneficial, “pro-poor” way. It failed to follow the Constitutional Court’s order that the payment of social grants should be done in a way that protects the rights, interests, and confidential data of grant beneficiaries. Instead, it has created a situation in which CPS and Net1 hold all the cards. At present, the Constitutional Court and Treasury have almost no leverage to prevent their service provider from simply walking away on 1 April 2017. </p>
<p>Already, Net1 CEO Serge Belamant has <a href="https://www.pressreader.com/south-africa/business-day/20170209/281479276157572">made it clear</a> that he is not interested in extending the contract on its present terms. He is in a position to ask for <a href="http://amabhungane.co.za/article/2017-02-18-grants-belamant-holds-a-gun-to-sas-head-as-dlamini-dawdles">whatever he wants</a> – including provisions that lock claimants even more tightly into his empire. </p>
<p>Sassa’s inactivity has created the worst possible outcome, not only in the short but also in the long term. A crisis over grant distribution looms, and the opportunity to provide meaningful financial inclusion has been missed.</p><img src="https://counter.theconversation.com/content/73224/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andries du Toit is the Director of the Institute for Poverty, Land and Agrarian Studies at UWC, a donor-funded research institute that relies on funding from a range of development and policy research organisations including the Department for International Development, the Economic and Social Research Council (ESCRC), the Department of Science and Technology (DST) and the National Research Foundation (NRF).</span></em></p>The South African Social Security Agency has created a crisis that threatens to deliver social grant recipients on a silver platter into the hands of unscrupulous financial services companies.Andries du Toit, Director: Institute for Poverty, Land and Agrarian Studies, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/730872017-02-16T09:23:30Z2017-02-16T09:23:30ZWhy social grants matter in South Africa: they support 33% of the nation<figure><img src="https://images.theconversation.com/files/156969/original/image-20170215-27421-g4c06m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thousands wait in line outside the social services office in Cape Town to register for grants.</span> <span class="attribution"><span class="source">EPA/Nic Bothma</span></span></figcaption></figure><p><em>The South African government’s failure to fix a <a href="http://www.news24.com/Archives/City-Press/AllPay-wins-against-Net1-20150429">corrupted</a> R10 billion social grant payment contract has caused a crisis that <a href="https://www.dailymaverick.co.za/article/2016-11-14-sassa-social-grants-distribution-doomsday-and-behind-the-scenes-move-to-save-17-million-grants/#.WKRhXG997IU">threatens</a> to disturb monthly payments to millions of vulnerable households. The Conversation Africa’s business and economy editor Sibonelo Radebe asked Jannie Rossouw to explain what’s at stake.</em></p>
<p><strong>What would be the impact if social grants weren’t paid?</strong></p>
<p>It would have a severe impact on poor and vulnerable households. In the 2017/18 fiscal year there will be some <a href="https://www.dailymaverick.co.za/article/2017-01-27-groundup-sassa-grants-contractor-may-have-to-pay-back-the-money/#.WKVakm997IU">17 million</a> grant beneficiaries, 11 million of them younger than 18. </p>
<p>But it’s important to note that the number of dependants exceeds the number of social grant beneficiaries by a considerable margin. In most cases grants, <a href="http://www.sassa.gov.za/index.php/social-grants">which include</a> pensions, disability payments and child support grants, support entire households. These households will be destitute if they do not receive grant payments in a timely fashion. They will not be able to buy food as households receiving grants typically don’t have savings. To survive they have to spend whatever they receive. </p>
<p>This is why both the Minister of Social Development, Bathabile Dlamini, and her department have been highly irresponsible for leaving the distribution problem in limbo for so long. This even after they were <a href="http://www.news24.com/Archives/City-Press/AllPay-wins-against-Net1-20150429">instructed</a> by the Constitutional Court to make alternative arrangements. It leaves the impression that the minister and her department want to force the country into a crisis, leaving no option but to get approval to continue using the current service provider.</p>
<p>Neither the minister nor the department have shown any urgency to bring this matter to a speedy resolution. It’s also disconcerting that the minister seems to live in denial. She’s failed to admit that there’s a pending crisis of national proportions.</p>
<p>The minister should take political responsibility for this crisis. If she refuses to accept responsibility, it raises the question of whether the ministry she runs is needed at all or can be merged with another ministry, as its largest single responsibility is oversight of the legal administration and payment of social grants.</p>
<p>It is also disconcerting that others in leadership positions in the government have remained quiet. In any other country the head of state would have stepped in to try and defuse the looming crisis. But it seems that expecting any action from President Jacob Zuma in a crisis – except if he stands to gain personally – is too big an ask.</p>
<p><strong>Why are social grants so important in South Africa?</strong></p>
<p>They’re very important because of extent of poverty, the consequent number of recipients, and the amount paid out. Total expenditure on grants in the 2017/18 financial year will amount to more than <a href="http://www.treasury.gov.za/documents/national%20budget/2016/speech/speech.pdf">R150 billion</a>. </p>
<p>Grant money is not only used to support beneficiaries. It’s also used to provide broader support. Based on <a href="http://www.ajol.info/index.php/na/login?source=%2Findex.php%2Fna%2Farticle%2Fview%2F142070%2F131811&loginMessage=payment.loginRequired.forArticle">research I conducted</a> more than one-third of South Africans depend – directly and indirectly – on grant payments. Any disruption of grant payments will therefore have a massively detrimental impact on a large number of poor households. </p>
<p>In addition, the economies of small towns and villages would be hit hard because they are heavily dependent on grant payments being used to buy goods and services in local shops. One knock on effect would be that shop owners’ income streams would be affected and they wouldn’t be able to pay employees’ salaries.</p>
<p><strong>What impact have social grants had on poverty alleviation in South Africa?</strong></p>
<p>Grant payments redistribute income to poor households and have contributed to a <a href="http://sds.ukzn.ac.za/files/WP%2058%20web.pdf">reduction in poverty</a> in South Africa. </p>
<p>The social grant net is the government’s biggest poverty alleviation and redistribution intervention. There are others, such as government housing provision and free water allocation. But payments in grants outstrip these by a large margin.</p>
<p><strong>What are the weaknesses in the system?</strong></p>
<p>The main weakness is the fact that the grant system was expanded during a period of rapid economic growth. In 2002 South Africa only had some <a href="http://www.plaas.org.za/sites/default/files/publications-pdf/Woolard_McEwen.pdf">4,2 million</a> beneficiaries of social grants.</p>
<p>This grew rapidly to about 17 million beneficiaries as the grants were expanded to include older children.</p>
<p>Because South Africa was going through a period of rapid economic growth at that time it could easily afford new spending initiatives and projects.</p>
<p>But since 2008 the country has suffered a period of low economic growth. And there isn’t any expectation that the situation is likely to improve in the foreseeable future. As a result the system has become unaffordable.</p>
<p>An additional concern is that the Minister of Social Development has suggested there may be an extension of child support grants. This is simply <a href="http://city-press.news24.com/Business/Are-we-heading-for-a-fiscal-cliff-20151011">unaffordable</a> and will push South Africa closer to the fiscal cliff – the point at which its spending outstrips its revenues and it can’t meet its debt obligations.</p><img src="https://counter.theconversation.com/content/73087/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is an NRF-rated researcher and receives research funding from the NRF. </span></em></p>The unfolding social grant payment crisis in South Africa threatens the livelihoods of a third of the country’s population.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.