The Government of Poverty

Politics, Government and Livelihoods in Late-Capitalist Agrarian Landscapes

Month: February 2017

Selling the poor

The Sassa social grants card

On Wednesday 22 February the Minister of Social Development, Bathabile Dlamini, confirmed in Parliament that the South African Social Security Agency (Sassa), responsible for the disbursement of social grants in South Africa, would not be able to make the March 31 deadline for finding a service provider, and that they were in negotiations to extend the invalid contract currently in place with Cash Paymaster Services CPS.    The South African Treasury  opposes the awarding of any further tender to CPS, but Dlamini reported that the Treasury would consider such a contract if the Constitutional Court, which had declared the original contract invalid acceded. A letter requesting a deviation to enter into a new contract had been sent on 7 February.

The Constitutional Court now faces a fateful decision: one with potentially dire consequences for the South African social welfare system – and for the millions of poor and vulnerable people that depend on it.   At stake are not only the legal questions involved in rolling over an invalid contract worth billions of Rands.   More seriously, the dereliction of duty on the part of Sassa that brought about this crisis is in danger of perpetuating and consolidating state capture of a critical and important part of South Africa’s social policy infrastructure – an arrangement that delivers grant recipients on a silver platter into the hands of unscrupulous financial services companies.

The central facts around the Sassa crisis are well known. Cash Paymaster Services (CPS) – originally an FNB subsidiary based in Kokstad,   Kwazulu Natal, has been distributing social grants in some provinces since 2000.  In 2012 it won a controversial tender to deliver this service nationally and exclusively. This award was challenged in court, and in 2013, in a unanimous judgement, the Constitutional Court found the tender  irregular and ordered that should be set aside. In a subsequent ruling in 2014, the Concourt declared the contract invalid and ordered Sassa either to issue a new tender by or to insource, specifying that this process be concluded in October 2015.  This did not happen.  In November 2015, with no suitable external service provider identified, Sassa submitted milestones and timelines to the Court  for insourcing. But as the new deadline came closer, interested and concerned parties, including the Black Sash, sounded warning bells, claiming that the agency had failed to adhere to any of these  court-mandated milestones. By October 2016, when time came to report to the Parliamentary Portfolio Committee on Social Development, the cat was out of the bag: Sassa had again done almost nothing to implement the Court order.  On Monday 13 February, with the end of the CPS contract only six weeks away, Sassa  announced   that they would file papers with the Constitutional Court proposing that the invalidity of the contract would be suspended for a further year.   But even this eleventh hour action was blocked by the Minister.

The Constitutional Court and the South African Treasury have thus been presented with a fait accompli: if the invalidity of the contract is not further suspended, the lives of millions of South Africa’s poorest and most vulnerable people, many of whom depend on grant income for survival, will be thrown into chaos. Quite aside from the pain and suffering this will cause them, it is likely to bring about political turmoil. Sassa has put a gun to the head of South Africa: condone an illegal contract, or face social and political chaos.

Bigger stakes

But this is not the whole story.  Much more is at stake here than the extension of an invalid contract and the risk of non delivery.  Beyond these urgent issues lies a more fundamental question about Sassa’s complicity in a subtle but fateful form of state capture: one that threatens the long term future of South Africa’s social policy infrastructure.

Here, it is important to understand that CPS is not acting alone. They are a subsidiary company of Net1, a listed global financial services and logistics company. Also part of Net1’s empire are financial services companies like MoneyLine, EasyPay, Manje Mobile Solutions, Smart Life and others. Central to  Net1’s business model is their Universal Electronic Payments System, a proprietary fingerprint-based biometric authentication  and payment infrastructure . This  has been central to the roll-out of the Sassa smart card that enables electronic payment of social grants.  While this has enabled great efficiency gains, and while CPS claims it has also resulted in significant reduction of fraud, this setup has another important consequence: as scholar Keith Breckenridge has pointed out, grant beneficiaries are captured within a private technological and financial network owned and controlled not by SASSA, but by its service provider.

An advertisement for EasyPay everywhere

These relationships were factored into Net1 and CPS’s strategy in rolling out grant payments. 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 explicit two-stage strategy on the part of Net1: a ‘First Wave’ in which it rolls out its technological infrastructure in an area where there is a clear and demonstrated need, and then a ‘Second Wave’ in which they use this infrastructure to market a wide array of products and services to an essentially captive customer base.

This creates two problems. Firstly, this arrangement appears to 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 potentially vast client base.

This raises an issue that’s often forgotten in sweeping generalizations about the need to include ‘the unbanked.’ Poor people do need access to banking services, but these need to be appropriate. And the reality is that, while electronic services are convenient poor people also need and value cash. Financial policymakers may sneer at tiny amounts kept under mattresses and in jars, but given the realities of rural and township life, those concrete practices may often give poor people much more say over their money than an electronic facility under the control of unknown and unaccountable third parties.

Deborah James and Dinah Rajak have shown 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.  Here it is important to remember that South Africa’s legal system is greatly slanted in favour of creditors.

Already, the Black Sash has collected evidence of numerous instances of unauthorized and unlawful deductions from SASSA and EasyPay accounts; often with very little recourse. CPS’s close collaboration with Grindrod Bank delivers social grant beneficiaries – many of them aged, infirm, illiterate, and unsophisticated in the ways of the modern world – into the hands of unscrupulous operators who are only to ready to sell them services they do not need, or to secure their unwitting consent to arrangements that are not in their favour.

This is the real threat to South Africa’s future posed by the SASSA deal. The ConCourt’s order tasked SASSA with ensuring that the payment of social grants happened in a manner that protected the rights, interests, and confidential data of grant beneficiaries. This ruling created an important opportunity to ensure that financial inclusion happened in a beneficial, ‘pro-poor’ way. But SASSA appears to have squandered that opportunity. Instead, it has created a situation in which CPS and Net1 hold all the cards.

At present, the Concourt and Treasury have almost no leverage to prevent their service provider from simply walking away on 1 April 2017. Net1 CEO Serge Belamant has made it clear that he is not interested in extending the contract on its present terms.   He is in a position to ask for whatever he wants, including provisions that lock claimants even more tightly into his empire. If he is not stopped, SASSA will have created a situation in which the social grants payment system in effect becomes simply a financial conduit between the South African fiscus and the shareholders of Net1 and its subsidiary companies.

Serge Belamant, CEO of Net1. (Photo: Sunday Times)


An edited version of this article has also been published in The Conversation

Out of step, or leading the way?

Welcome address: Inaugural Conference,  Young African Researchers in Agriculture Network, 6 February 2017, Ocean Breeze Hotel, Strand.

It is my pleasure to welcome all of you today to the inaugural conference of the Young African Researchers in Agriculture network. In particular, I would like to welcome all our guests and colleagues who have traveled great distances from all over the continent to be with us today.

Today these welcomes feel as if they are more than routine. As you are all aware, we find ourselves at a very particular junction in history. In the last few weeks, we have heard about thousands of people – some of them traveling to scientific conferences like this one – who have found themselves turned away at border posts, stopped at airports, and detained at passports control as a result of an executive order signed by a bigoted president.

And they are not alone. In the UK, hundreds of thousands of people find themselves thrown into doubt and confusion about their residence status as a result of Brexit, their residence status suddenly up for grabs because of the opportunism of populist politicians. In Europe, the fortunes of the far right are on the rise. And this morning we have heard that our own Minister Malusi Gigaba has announced that his department intends to crack down on the employers who employ too many immigrants in their businesses. All over the world, millions of people are fleeing war, injustice, poverty and persecution, seeking a place of safety, only to find doors closing in their faces.

I’d also remind you that in recent months we have also been told that we are living in post-truth times. That the processes whereby facts are established in the public mind as facts are under siege. You can manufacture any news you want, and few will notice  — and fewer will care. In fact, science and research in the public interests are themselves under threat. In the UK, Michael Gove has famously asserted that the British people have had enough of experts.   In the US, the incoming administration has removed all mention of climate change from the White House website.

All over the world – from the industrial North to South Africa, from the USA to the Philippines, the forces of nativism, xenophobia, populism and chauvinism are on the rise. The star of evidence-based policymaking seems to be waning.

Yet here we are, at a conference fostering transnational co-operation between scientists and researchers, creating networks meant to be nurturing policy oriented research. So the question comes to mind: are we out of step? Or are we leading the way?

Cameroonian scholar, intellectual and writer Achille Mbembe seems to think that we are out of step. In December this year, he wrote an impassioned and despairing article in the South African Mail & Guardian, announcing that the age of humanism had ended. The great enlightenment project, in which economic development was held to be inseparable from the spread of democracy, human rights, rational bureaucratic management and scientific progress is over. The inner logic of finance capital, Mbembe asserted, is not compatible with liberal democracy. In the future, the scientific knowledge will belong to powerful corporations that own and manipulate desire itself for the benefit of their shareholders. The world will be run for a privileged few; and the rest of its people will be relegated to the fragmented margins.

I do not agree with Mbembe. I think that we in Africa may yet prove him wrong. To explain why, I will refer you to the arguments of another scholar of Africa, Keith Hart, whose long study of the nature and networks of the informal economies of this continent imbues him with a far more optimistic view. A century ago, he noted in a recent essay, Africa was the world’s least populous continent, with only about 7.5% of the world’s population, most of whom were living on the land. Today, our share of global population is double that, and they are rapidly urbanizing. By the year 2050, Africa will be home to one quarter of the world’s population, and great many of them live in cities. The growth markets of the 21st century will be here, on this continent.

The question is who will profit from these markets. As Hart reminds us, much depends on the nature of our agrarian transition. Will Africa’s growing cities provide opportunities for its farmers to sell their wares? Or will they be dumping grounds for subsidised agricultural products from Europe or the Americas? Will they provide employment for those leaving the land and seeking new opportunities? Or will our nascent industries be choked off by cheap  imports?  Will agricultural policy be made by supermarkets, food manufacturers and purveyors of biotech, or will they be determined by accountable officials, informed by sound analysis, aimed at the health and wellbeing of our populations?

The answer depends in part on the pattern of growth, the terms of trade, and the political economy of policy making.  As Hart points out, this means among other things that we should abandon the false dichotomy between protectionism and free trade. We need both.  We need to ensure that the economic exchanges between city and countryside – and between the countries of Africa – redound to our benefit.  We need to pay attention, not only to the productivity of agriculture, but also to the nature of the food system that agriculture is a part of and the social relations within which it is embedded.    And critically, we need to ensure that we create transnational associations and networks for economic and intellectual exchange that transcend the rigid national frameworks we have inherited from colonial rule. In Africa, it may yet be possible to construct broad alliances around a programme of reform and change that can support and invigorate the livelihoods and strategies of the great mass of its people.

This is why I am happy to see you here and inspired by the task you have set yourself.   Most of all, I am proud to be part of this process of creating a transnational network of young scholars dedicated to the production of knowledge for the benefit of all the people of this continent. You are our hope, and your work is the seeds of our future. I hope you make the most of this opportunity. I’d like to enjoin you to debate and to disagree passionately among yourselves, for new knowledge and new unifying visions can only arise out of disagreement.   Welcome to your conference, and good luck!


Our YARA welcome committee at Cape Town International airport