Universal Basic Income Grant: What should a payment system look like?
South Africa can learn from Brazil
A Universal Basic Income Grant is not possible without an efficient payment system, safeguarded against predatory practices. South Africa can learn from Brazil how to do this, say the writers.
What should an effective social grant payment system look like?
In the first two instalments of this series, we examined the weakening of the social grants payment system in South Africa and how private companies are entering the space looking to profit from access to a still largely untapped market.
Access to online platforms for grant application and payments can reduce the time and money recipients spend applying for and accessing their grants and make it safer to do so. Many grant recipients have keenly taken up the chance to use new digital channels to apply for and receive grants - especially when these are accessible, low-cost, and user-friendly.
However, many social grant recipients, especially in rural areas, are still eager to receive their grants in cash, as close as possible to where they live. Civil society organisations that work closely with social grant recipients in South Africa have stressed the need to maintain a hybrid payment system in the short-term, to make the system as fair as possible.
The March 2024 Black Sash documentary Broken Promises showed the consequences of the Department of Social Development’s (DSD) decision to close some 10,000 cash pay points in 2018. This followed the transition to the South African Post Office (SAPO) for the payment of grants, and SAPO’s failure to do the job.
Some pay points were reopened in 2019, following pressure from Black Sash. But in late 2023 it was announced that all such points would be phased out and closed by March 2024, and that recipients would have to start using retailers, ATMs, or other means to receive their grant.
Broken Promises reveals that many grant recipients have been forced into longer, often dangerous, and more expensive travel to access their grants since their local cash pay points have been closed. One grant recipient who used to walk to a local pay point must now spend R130 on a return taxi trip to collect the grant. Many beneficiaries have to borrow money to pay for that transport, and sometimes there is no money when they arrive, leaving them not only without the grant but also with new debt.
SASSA says having so many cash pay points is inefficient and costly. This may be true, but for many grant recipients living in rural areas a locally available cash pay point remains the most effective way for them to access their grant. For many, access to a digital system or bank account is still impractical, and Black Sash argues that grant recipients’ constitutional right to social security would be better protected by continued access to a local cash pay point.
Then there is the question of communication.
#PaytheGrants’ Elizabeth Raiters told Open Secrets that general communication by the South African Social Security Agency (SASSA) about issues and updates regarding grant payments has been very poor. The responsibility is passed on to beneficiaries themselves to stay informed and share information. Organisations like Black Sash and #PaytheGrants do much of this work and help many people navigate the grants system.
Amandla.mobi’s Koketso Moeti and Tlou Seopa pointed out continued lack of diversity in the language options for grant recipients in the system. For example, consent forms for the bank verification processes are almost always only available in English.
State entities need to provide consistent and easily accessible communication channels for grant recipients on updates regarding payments. When it comes to the informed consent by grant applicants and recipients, all forms and online application and payment platforms must be available in multiple official languages.
As #PaytheGrants and the Institute for Economic Justice (IEJ) have pointed out, grant recipients receiving the R370-a-month Social Relief of Distress (SRD) grant directly into a bank account are subjected to greater financial surveillance by SASSA, which checks the balance and inflows to their bank account every month. This has allowed SASSA to exclude millions of people who are in fact eligible for the grant. In their court application to challenge the constitutionality of the regulations governing the SRD grant, the IEJ and #PayTheGrants provided evidence that the bank verification process used to monitor grant applicants has resulted in the unfair exclusion of many applicants.
Also, due to the automated system for both applications and appeals against rejection, less than 1% of appeals against this exclusion are successful. A system like this, that does not provide clear reasons to grant recipients for their application or appeal being dismissed, is a violation of the right to just administrative action.
Then there is the danger of the predatory use of information about grant recipients by private companies. How can we offer recipients the benefits of technology while still protecting their rights?
There are global examples that South Africa can look to. One of these is the system used in Maricá in Brazil, a small city close to Rio de Janeiro. The city, run by the Brazilian Workers’ Party, introduced a Renda Básica de Cidadania (RBC) – a “citizen’s basic income” – in 2013. Though not yet universal, the RBC is paid to anyone who has lived in the city for at least three years and who has a “moderately low income”, defined as three times higher than Brazil’s minimum wage (237 US dollars a month, about R4,350). Today, more than 25% of the city’s population receives a grant of 39 US dollars which is more than 95% of the individual poverty line in Brazil.
In 2018, the RBC grant was switched to a new fintech platform and digital currency with great success. Grant applicants who meet the qualifying criteria, receive their grant in a digital community currency called ‘Mumbuca’, via a pre-paid credit card or a dedicated mobile phone application. The Mumbuca is tied to the national currency to ensure confidence in it, and can be used to pay many local bills. The 2018 move to the fintech platform improved the efficiency and reach of the grant, and lowered costs for all parties involved.
The key distinguishing feature of the use of fintech in Maricá is that the fintech platform and Mumbuca currency are regulated and issued by a community owned bank – the Banco Comunitário de Maricá. This has led to a radically different approach compared to investor-driven fintech applications. For example, the bank offers services at a lower cost than its commercial competitors. It also charges businesses per transaction and uses these fees to ensure that RBC beneficiaries face no costs when accessing their funds.
Two other crucial differences are:
- Banco Comunitário de Maricá does not sell purchase-related data to third parties like most fintech companies do. This means that RBC recipients are not constantly bombarded with calls and messages offering extortionate loans, goods, and other financial services; and
- Any surplus made by the bank is returned to the municipality rather than paid to shareholders. This means that there is little financial incentive for the bank to push financial products, such as loans, onto grant recipients that cannot afford them.
The RBC model in Maricá shows that fintech platforms can be rolled out in a way that improves operational efficiency, reach, and costs of accessing a basic income grant. This is because it is designed to benefit the community rather than a narrow group of shareholders. The communal and local nature of the ownership changes the incentives of the platform, maximising its impact, and minimising the risks of abuse.
A Universal Basic income Grant cannot be possible without a functioning grant payments system. This payments system must not only be efficient; it must also be safeguarded against predatory profit-seeking practices. Civil society organisations in South Africa have the basis of where to start and examples from across the world show that it is possible. Our call to action is that policy makers and political parties vying for the 2024 elections prioritise a just and equitable grant payment system, now and in the future.
Open Secrets sent questions on the administration of social grants to the Department of Social Development, SASSA and the Postbank. They have yet to reply.
Views expressed are not necessarily GroundUp’s.
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Letters
Dear Editor
I have been a recipient of the grant since early last year, even though I had lost my job in 2019. I had applied and all the time the results were that source of income identified (even though that was untrue).
For the month of April it was pending and when I checked the outcome on the website it was now declined due to "source of income identification" which is untrue because I haven't received any monies from anywhere.
I have tried the appeal process and every time I do the results always come back as declined again. I'm so frustrated as I truly am in need of the money and it's the only income I have.
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