The SA Post Office (Sapo) should not get the contract to distribute social grants until it has demonstrated it can do the job, says CEO Mark Barnes. He seems fairly certain of being able to achieve that goal in the next six to 12 months. Barnes says an incremental handover would be the best way to go, with the auditor-general (or whoever the constitutional court appoints) to monitor the process.
At recent parliamentary committee meetings members from all parties expressed support for Sapo playing a role in the distribution of grants, though the nature of that role was not discussed. Even the average teller seems excited about the prospect.
That the court allowed it to participate as an amicus curiae (friend of the court) in the recent high-profile action helps to cement the notion of Sapo as a part of grant payment.
The biggest challenge for Barnes is likely to be Sapo’s reputation. "If it can’t deliver a letter on time ..." is the common refrain. While he accepts the criticism, Barnes says Postbank has 5.6m account holders and does 20m transactions a month without incident. As for disruption by strike action, it’s likely grant distribution will be deemed an essential service, with restrictions on the right to strike.
Barnes says within nine to 12 months Sapo will have produced a solution superior to Cash Paymaster Services’ (CPS) current system. The main challenge will be collecting and processing the raw data relating to the beneficiaries.
He is about as dismissive of CPS’s infrastructure as CPS is of Sapo’s. He reckons the approximately 4,000 CPS paypoints scattered across rural areas can be replicated relatively easily. "There are key players we have to engage with, such as Fidelity Guards, but it is doable within a matter of months."
Taking over or replacing the 6,000 paypoints in urban areas is a relatively easier challenge, involving engagement with existing merchants and banks.
Barnes says Sapo is ideally placed to play a central role in the distribution of social grants. It has previous experience in grant distribution though, as CPS’s Serge Belamant points out, on a much smaller provincial scale. Through Postbank it has full membership of the Payment Association of SA and participates in the National Payment System.
Perhaps, given the enormous value of the contract (R2bn/year and counting) a particular attraction is that when Sapo makes profit, government makes profit.
But Sapo would need a lot more than 2,400 "points of presence" and membership of the Payment Association to pull off SA’s biggest (and politically most sensitive) logistics challenge. Barnes says certainty of the contract would allow Sapo to make the necessary investment without having to tap national treasury for more money.
Not one to be distracted by self-doubt, Barnes also dismisses concerns that — given all that Sapo has on its plate — plans to develop a fully fledged banking service as well as the Sassa contract might be life-threateningly ambitious.
Tim London, from the UCT Graduate School of Business, says Sapo is adding additional levels of complexity to the already challenging situation it faces. "Developing the banking business represents an opportunity to diversify but it should be done from a position of strength."
Right now Sapo looks weak. An organisation going through the sort of change Sapo needs should take on relatively small changes, one at a time, says London.
Barnes does not have the luxury of time. If the Sassa contract slips out of his hands this time, he may never get another opportunity.
As for the full banking licence, he says this does not represent much of a change for Sapo. The current bank is profitable, efficient and has the necessary expertise as well as the systems capability. Without it, says Barnes, the Reserve Bank would not have entertained its application.
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