23/03/2017 14:38 SAST | Updated 23/03/2017 15:40 SAST

This Is The World Bank's Role In Sassa's Social Grants Payment System: R1.6bn

Don't they do research? The World Bank invested R1.6 billion in Cash Paymaster Systems' owners Net1 and that was after the damning 2014 Constitutional Court ruling.


As the main South African investor in Cash Paymaster Services' (CPS) parent company, Allan Gray has been under the spotlight over the social grants payment controversy. As a result, a bigger investor, the World Bank, has not received much attention.

With a 16 percent stake, Allan Gray is the second biggest shareholder in Net1 UEPS, parent company of CPS, which delivers social grants to 17 million South Africans. Net1 also owns other subsidiaries which make profits from selling financial services to grant recipients.

As the drama over the SA Social Security Agency (Sassa) payment contract has played out over the last few weeks, Allan Gray has been under pressure to answer for its investment, seen as increasingly controversial.

But this focus on Allan Gray has obscured the largest institutional owner of Net1. The World Bank's investment arm, the International Finance Corporation (IFC), edges out Allan Gray with a 19 percent percent share.

On 11 April 2016, the IFC invested $107.7 million (almost R1.6 billion) in Net1.

The timing of this investment is interesting. The IFC investment came well after the CPS tender had been declared invalid by the Constitutional Court in April 2014. It also came November 2015, when after Sassa promised the Concourt it would develop its own capacity to pay grants when the CPS tender ended.

The IFC investment also came after the Black Sash had launched a campaign to stop unlawful deductions from beneficiaries' accounts by Net1 and affiliated companies, and even after the Minister of Social Development issued new regulations to stop deductions from social grants in February 2016.

In other words, there was substantial information in the public domain questioning the ethics of Net1, particularly its use of beneficiary information and proprietary technology to profit from the social grant programme.

But in a press statement about its investment, the IFC's Atul Mehta trumpeted Net1's prowess as a supplier of technology for financial inclusion in South Africa. "Net1 has created impressive proprietary technology for the delivery of services and demonstrated its effectiveness in South Africa", Mehta said. Mehta also promised that the IFC investment would help Net1 expand regionally, "especially into African countries where there is limited banking infrastructure and availability of financial services for the poorest segments of the population."

So why did the World Bank, one of the largest development finance institutions in the world, ignore all the information circulating about Net1 and, instead, invest R1.6 billion, less than a year ago?

The answer is to be found in the way the World Bank has promoted social grant programmes worldwide for the last decade. The Bank has developed a discourse about what a "good" social grant programme should do: pay grants electronically to beneficiaries verified by biometric technology, through a competitive tender process resulting in the selection of a bank or private financial firm, which can profit by cross-selling products to beneficiaries. The World Bank has consistently used the South African case as a model.