For the Basic Income Grant to eradicate extreme poverty and close the "poverty gap" by 74%, it must be administered and delivered in a way that is widely accessible, flexible and suited to the needs of beneficiaries.

Current system of grant administration

Currently, social assistance is administered through each province separately, which means that there are no national norms or standards.

In most provinces, grant applications are made through government "application points". Officials scrutinise the applications to see whether the applicant complies with the complex means test.

If the beneficiary is successful, then payment of grants is made in a number of ways. The most common method of payment is through pay points - points at which people receive payment through the services of a company that has been contracted by the state to pay out grants.

There are a number of problems with using pay points. These include:

• Long queues
  Citing safety reasons, the payment companies do not advise in advance the time at which delivery of money will take place, so people have to queue from early morning.
• Unreliable money supply
  Frequently the company delivering payment will run out of money for the day and so people will have to return the next day to repeat the process.
• Safety
  Because the payment company has to carry such a lot of cash, their vehicles are frequently hijacked and attacked. This means that the system poses a danger to the employees of the company, and also adds to the cost of the service because of the amount of insurance that has to be taken out to cover losses.
• Expense
  In 2001, payment companies charged the government between R13.99 and R23.06 per grant per month.

However, the vast majority of current grant recipients do not have bank accounts, and are unable to open accounts because of the stringent requirements of most banks. In addition, the high charges that banks assess on other account transactions make it prohibitively expensive for many poor households to use the banks, even though for those living in areas that have access to ATMs and banks, this is by far the easiest method.

Redesigning the system

The current delivery system is seriously flawed. It is unable to deliver existing grants reliably and efficiently, and it would be incapable of coping with the increased demands of a BIG.

The government has recognised that the grant administration and delivery system must be radically overhauled. Cabinet has already approved the establishment of a single national grant agency, taking the function out of the Department of Social Development (DSD), and also centralising the payment functions. Legislation setting up this agency should be enacted in the first half of next year.

The question remains: what kind of system could cope with payment of a basic income grant to everyone in South Africa?

Home Affairs National Identification System

A number of public and private bodies, including the Department of Home Affairs (DHA) and the Reserve Bank, are developing "smart card" technology. The Department of Home Affairs is already in the process of introducing a "smart" Identity Card to replace ID books. This card will have an electronic chip built into it that will store personal information, such as your identity details, driving licence, state hospital health records, access to other basic services, etc. The card will also have the holder's thumbprint on the face of it, to assist in biometric identification (identification based on unique physical traits). This will ensure that no one else can use your card. Alternatively, the card could be protected by a pin number like current banking cards.

Using smart cards to deliver grants

The smart chip would enable the card to carry information about social grants. This data could be updated every month. The card holder could then use the card like a debit card - until the value has been depleted. This would mean that everyone could access the value of a grant without having to stand in long queues.

Smart card technology can be used to deliver social grants in a number of ways. For people living in urban areas, the cards could be used to draw cash at ATMs. For those in more rural areas, the possibility of having remote points of access at local spaza shops will mean local access with far less travelling and queuing.

Resolving the issues associated with the delivery of the BIG can also facilitate the development of more efficient grant administration systems, extend rural infrastructure and promote development. For example, Post Bank Public Information terminals could be used to load the value of the grant onto the card every month. Placement of terminals in community halls should also be investigated.

The role of the Department of Public Service and Administration should also be explored, especially with respect to the multi-purpose community centres that the Department is establishing throughout the country.

Practical considerations

Because of the need to load all current fingerprints onto the new system, HANIS will only be up and running in about 3 years time. The DHA is committed to giving children and other vulnerable groups first priority in terms of accessing the services.

The DSD has already begun to stipulate that all contracting paymasters have to ensure that the technology that they use is compatible with the HANIS technology, which will aid the transition. Cabinet has already decided that pensions will be the first application to be rolled out when smart ID cards are issued.

The current redesign of the grant delivery system creates a unique opportunity to introduce new technology with the capacity to administer and deliver a Basic Income Grant.

Getting there…

It is imperative that the lead government organisations recognise the urgency for the completion of a state smart card. The government must also take steps to encourage rationalisation of the various independent smart card initiatives already underway. In particular, the private payment companies must be compelled to ensure that their payment technology is compatible with HANIS to avoid strictly proprietorial systems.

In terms of the declaration of the August NEDLAC Financial Sector Summit, both private and public financial institutions have committed to developing accessible financial services for all, including payment facilities appropriate for social assistance delivery. These undertakings must be enforced. Private institutions who do not wish to open more branches in rural areas should considered contributing to the capacitation of the Post Bank.

In addition, the DSD needs to consider their immediate needs with regard to delivery of grants. The BIG Coalition needs to continue to engage with the department to ensure that the system that they select will be capable of delivering a BIG to avoid duplication in costs of delivery systems.

Many people working in civil society and other stakeholders have knowledge about what systems will be most advantageous to beneficiaries. In addition, there are a number of technological experts that could be called on for their expertise.

The BIG Coalition thus calls on the government to set up a task team to consider, as a matter of urgency, the logistics of delivering a BIG and the other components of a comprehensive social protection package, as recommended by the government-appointed Commission of Inquiry into a Comprehensive Social Security System.

¹ Table 5.15, 2001Intergovernmental Fiscal Review