Court nudges government on illegal deductions from social grants

The Supreme Court of Appeal (SCA) ruled on Thursday that it is up to the social development department – which oversees the operations of the South African Social Security Agency (Sassa) – to consider drafting legislation that will protect social grant beneficiaries from predatory marketing practices and unlawful deductions.

The controversial seven-year relationship between Sassa and social grant distributor Cash Paymaster Services (CPS) came to an end on October 1.

The judgment delivered by Judge Mahomed Navsa upheld the SCA’s suggestion during hearings that instead of it making an order “directing the government to make measures, it might suggest to government that it consider taking legislative steps to protect social grants beneficiaries.”

The judgment offers a glimmer of hope to SA’s more than 10 million beneficiaries, some of whom have suffered unlawful deductions from their social grants relating to unsecured loans, funeral cover and prepaid products including airtime and electricity.

Civil rights group the Black Sash has long accused JSE-listed Net1 UEPS, the owner and operator of CPS, of profiting from vulnerable beneficiaries by using its other financial-services-related companies – including Moneyline, Manje Mobile, Finbond and SmartLife – to aggressively market unsecured loans and prepaid products to them.

The company allegedly used the confidential personal information of beneficiaries to cross-sell financial services products; this information has been at CPS’s disposal by virtue of it being responsible for grant payments in the past seven years.

However, Net1 rejected accusations that it uses beneficiaries’ personal data for financial gain and engages in unethical lending practices.

At the centre of the SCA judgment is the interpretation of regulations 21 and 26A of the Social Assistance Act, introduced by former social development minister Bathabile Dlamini in 2016, which are aimed at limiting deductions from social grants.

The regulations allowed one deduction per month not exceeding 10% of the social grant amount, and only if the beneficiary consented to the deduction in writing.

Net1 and other companies successfully fought Sassa over the regulations at the North Gauteng High Court, with acting judge Corrie van der Westhuizen ruling in May 2017 that the regulations do not operate to restrict how beneficiaries use their bank accounts, thus giving Net1 permission to continue making deductions.

Sassa appealed the ruling at the SCA, while the Black Sash and six social grant beneficiaries (represented by the Centre for Legal Applied Studies) applied to intervene as a party in the matter, wanting an order that compels Shabangu to make regulations that protect beneficiaries from the deductions.

Among the six social grant beneficiaries is Patricia Saptoe, a 63-year old pensioner, who had a total of R90 deducted from her Sassa grant of R1 270 in March 2015 without her consent. The deductions were in 18 tranches of R5 each for prepaid airtime. A month later, 10 more deductions of a similar amount for airtime were processed from her account.

Although Saptoe has queried the deductions with Sassa and CPS, she has not been reimbursed for the full amounts.

The SCA judgment comes as the South Africa Post Office takes over the payment of all social grants from CPS. The Post Office is now, from October 1, responsible for all forms of social grant payments (electronic and physical cash payments).

The SCA judgment notes that the new Sassa-Post Office gold card, which social grant recipients use to withdraw their money at Post Office outlets, retailers and ATMs, does not allow for unauthorised debit and stop orders, which is one mechanism to stop predatory deductions.

The only deductions allowed on the gold card are payments for funeral policies for adult beneficiaries, and the deductions must amount to no more than 10% of the beneficiary’s total grant.

“We receive thousands of complaints that corporate entities have unjustifiably depleted the social grants of beneficiaries,” says Hoodah Abrahams-Fayker, Black Sash’s national advocacy manager. “These are not isolated incidents, but endemic across South Africa, affecting millions of beneficiaries. These practices need to be stopped by effective regulations and oversight as the court suggests.”

The Black Sash says it is still unclear how the confidential data and personal information of beneficiaries will be retrieved as the Post Office takes over social grant payments from CPS.

It wants auditor-general Kimi Makwetu and information regulator chairperson Pansy Tlakula to intervene in ensuring that the personal information of beneficiaries is protected.