Minister of Social Development Ms Bathabile Dlamini has vowed to take action against unlawful deductions from social grant beneficiaries. These include deductions for airtime, loans and electricity. Many grant beneficiaries have reportedly been picking up unauthorised deductions from their grants and have been unable to have such deductions reversed. In a media briefing held in Cape Town Ms Dlamini explained that, "I had received many complaints from beneficiaries about deductions that had not been authorised. These include loan repayments, prescribed debt, multiple funeral schemes, advance electricity and airtime, often without their knowledge or consent.
Our investigation found cases of multiple deductions involving Old Age Grants. In one case, a beneficiary's account was debited for "airtime" by different network companies," she said. According to the Minister, deductions on old age grants are illegal except for a single funeral policy for the beneficiary. She also said government has noticed a spike in these deductions since the contract to pay grants was awarded to Cash Paymaster Services (CPS), a subsidiary company owned by the Net 1 Group which has more than 40 companies under its wing. Some of the companies under the Net.l Group are selling airtime, electricity and other services which are then allegedly deducted from the unsuspecting grant beneficiaries.
However, lawyers representing CPS are of the view that the deductions are not illegal but rather serve as a convenient method of payment for some. In a letter dated 10 September 2014 and addressed to Black Sash, Smit Sewgoolam Attorneys argued that, "Once payment has been effected to a beneficiary, the beneficiary is at liberty to utilise the funds received in such manner as he/she deems fit. If the beneficiary elects to pay debts therewith, he/she is free to do so. If the beneficiary wishes to do so by way of a debit order, for the sake of convenience or otherwise, nothing prevents the beneficiary from doing so." The lawyers also came in defence of Moneyline, another Net 1 Group company which is allegedly deducting loan payments from grant beneficiaries. "Moneyline has been providing financial services (including loans) to the South African public (including social grant beneficiaries) for many years. It continues to do so independently from CPS and within the relevant legislative framework. It has been subject to audit by the NRC, without issue."
The gains of freedom are, according to Ms Dlamini, reversed by these deductions as they entrap the vulnerable into a vicious cycle of over indebtedness. "While some of these deductions may be technically legal, they remain immoral as they serve to rob the poor from the resources that we as South Africans provide for them, to meet their basic needs. Worse still, the money lenders do not even carry out appropriate risk and affordability checks as required by law. This exacerbates their vulnerability and in turn drives borrowers into a vicious cycle of never-ending debts", she said. It is not clear what immediate actions the Minister will take but she has accepted recommendations from a committee formed earlier this year to look into the deductions.
The recommendations include enforcing CPS to comply with all regulations such as restricting third parties from accessing the grants, immediate blocking and reversal of any debit deductions for Umoya Manje services, loans and any other financial service providers and also holding reckless lenders accountable for the debts incurred by grant recipients. Dlamini said it remains the government's responsibility to protect poor people from loan sharks and unscrupulous money lenders. "As Government we have both a legislative and moral duty to take action against those who feed ruthlessly on the vulnerability of the poor".