SAPO Presentation to Portfolio Committee on Telecommunications and

SAPO Presentation to Portfolio Committee on Telecommunications and Postal Services 28 August 2018

SASSA Update To brief the Portfolio Committee on Telecommunications & Postal Services • • Progress achieved with the Card swap; Technical System Performance Remedies August payments; Overall State of readiness 2

SUMMARY OF PAYMENTS FROM APRIL TO AUGUST 2018 Payment No. of beneficiaries channel April May June July 3 160 832 3 110 333 1 950 249 1 637 975 Biometric CVM payments (CPS) ACB Direct transfers SASSA/ Grindrod Bank (Bilateral processing – old SASSA cards ) Total August 1 098 669 2 348 107 3 531 734 8 928 107 9 236 945 9 795 132 5 342 376 4 221 999 0 0 0 10 851 315 10 864 066 10 878 356 10 874 920 10 893 801 3

Card Swap Daily Stats 4

Technical System Performance Remedies 5

July payments challenges and Remedial actions To address the challenges in preparation for the August pay run which was scheduled for 31 July through to the end of August 2018 payment cycle, SASSA, SAPO, Telkom/BCX, and SITA worked in collaboration with industry partners, such as Bankserv, PASA to : Upgrade and migrate the Integrated Grants payment System (IGPS) system to the Telkom enterprise hosted environment. (The current IGPS environment at SAPO Data centre will stay and serve as an Interim backup/ Failover environment). Better server host capacity as well as high availability on the server level resulted in improved capacity which provide capabilities for the IGPS system to process up to 200 transaction per second at peak time from the previous 15 TPS. Connectivity with Bankserv has been improved by replacing the Copper Diginet lines with high volume high speed Fibre dedicated links which can scale on demand. This addresses issues of slow response and throughput. New upgraded links were used for connectivity for the end user devices. The splitting of the card issuing function from the transaction processing function on the IGPS system was completed on 12 July 2018. The splitting will allow for better load balancing between the two processes. 6

IGPS: Migration to Telkom Cybernest Milestone &Timelines 7

Summary of Payments 8

August Payments • CPS is paying 1, 098, 669 at all cash pay-points except for those that have been decommissioned • 7, 252, 589 received payments using own bank account - This include approximately 3 million beneficiaries who are still using the old SASSA card in the NPS system • 2, 543 beneficiaries’ payments were deposited through the Post Bank accounts cards. • SAPO also piloted the cash payment solution at 18 sites across the country involving 4201 beneficiaries 9

July/August Payments Chart Title R 700 000, 00 R 600 000, 00 R 500 000, 00 R 400 000, 00 R 300 000, 00 R 200 000, 00 R 100 000, 00 POS Value ATM Value -а вг 23 -а вг 22 -а вг 21 -а вг 20 -а вг 19 -а вг 18 -а вг 17 -а вг 16 -а вг 15 -а вг 14 -а вг 13 -а вг 12 -а вг 11 -а вг 10 ав г 9 - ав г 8 - ав г 7 - ав г 6 - ав г 5 - ав г 4 - ав г 3 - ав г 2 - л ав г 1 - -и ю 31 30 -и ю л R- Branch Value 10

July/August Payments 11

August Pay Cycle preparedness • The War Room became operational at SASSA to monitor payment, trouble shoot and receive reports from pilot sites and other pay points. • Information was received through various channels such as email, telephone, SMS and a Whats. App “War Room” group • Other sources of information included other monitors on the ground and other structures such as NATJOC, retailers and BASA. • The reports received from the various channels were captured in a log format and any issues that required attention were actioned or referred for action • SASSA/ SAPO head office and regional staff deployed to pay points to assist to channel people and assist beneficiaries 12

Summary of August Payment challenges There were no major payment challenges during the August payments, except for a number of incidences relating to: -IGPS - The majority of challenges received related to the IGPS system being slow in the morning hours. - Late arrival of Cash - The late arrival of CIT affected some of the Post Office Outlets. Decommissioned pay points • A number of reports were received of beneficiaries arriving at decommissioned pay points and CPS NOT able to pay them as they were NOT on the cash payment file • SASSA officials were not allowed into the halls where pay points have been decommissioned

Summary of August Payment challenges (cont…) PIN resets: In a number of Regions beneficiaries had challenges with regard to PIN resets (both old SASSA card and new) as Information on the location of PIN reset sites was not easily accessible or available at local or national level. The ability to withdrawn cash at SAPO branches wef Sept using ID and biometric will resolve this. Deductions, beneficiaries receiving less than their grant. New SASSA Card: SAPO and SASSA are still investigating the cases and Bankserv has been requested to assist. Old SASSA Card: CPS admitted that their system was responsible for this and they are refunding the beneficiaries Limited services Post Office outlets – not all SAPO outlets were paying or doing card swap. Some Post Offices do not have adequate facilities such as toilets, adequate shelter, chairs, etc. This matter is being addressed actively by SAPO.

Progress on ACB payments

Progress: Direct Transfers on Commercial Bank Accounts The August payment file included 9, 795, 132 beneficiaries who were to receive their grant payments at different banks. The number of beneficiaries paid through other commercial bank accounts excluding Grindrod and SAPO is approximately 1 663 083 in August 2018. Payments to Grindrod (including old SASSA Cards) Of the 9. 7 million ACB beneficiaries, 5, 589, 506 beneficiaries were paid through Grindrod Bank. This include beneficiaries who are still using the old SASSA card in the NPS. The number of beneficiaries using Grindrod bank accounts reduced by approximately 2, 124, 937 between June and August 2018. This decrease is largely due to card swap /migration of beneficiaries from the old SASSA card to the new SASSA/SAPO card. There were no major reported challenges with the payment of beneficiaries receiving grants through commercial bank accounts including the old SASSA card, except for those using the new SASSA/ SAPO card.

Cash Payment file reduction • Since mid-May 2018, SASSA and SAPO Cash Beneficiaries have been swapping social grants Province August Balance of beneficiaries’ CPS/Grindrod cards for the Pay-file of Cash File SASSA/SAPO card. (23/07/1 File as at 14 8) 06 August • The card swap process reduced the total 2018 number of cash recipients from Eastern approximately 3. 1 m to 559 067 as at 20 Cape 158, 477 118, 218 100, 283 August 2018. Free State 85, 325 57, 960 48, 967 Gauteng Kwazulu Natal Limpopo Mpumalanga Northern Cape Northwest Western 109, 399 89, 412 78, 631 • The indicative payment file for September 260, 382 247, 043 100, 406 188, 005 169, 540 77, 439 payment cycle which will include full auto migration in 3 provinces indicates that CPS will be paying 304 642 cash beneficiaries. 23, 148 18, 858 17, 277 • All the remaining cash beneficiaries will 83, 407 67, 939 59, 371 153, 922 144, 351 63, 860 be migrated to SAPO during September in preparation for October payments

RISKS AND MITIGATION

RISKS/ ISSUES Failure to swop all cash beneficiaries by 30 September 2018. MITIGATION Focus all efforts to swop cash beneficiary during August 2018. Robust communication to encourage beneficiaries to go to swop their cards. PROGRESS Card swop process has been extended to take place over weekends. Conduct door-to-door to identify those who require home visits. Delays in the finalisation of Assistance from the Security Cluster the procurement of CIT will be sought to secure the safety and cash dispensing of staff, beneficiaries and money machines: until the service provider(s) have been appointed Labour disputes and strikes Ongoing engagement with Labour through existing government structures 19

RISKS/ ISSUES The use of PIN in the NPS might be a challenge for older persons and people with disabilities. MITIGATION PROGRESS utilise Auxiliary Social Workers Process to recruit Auxiliary (ASW) to conduct home visits and Social workers being advise families on the option of undertaken (7/08/2018) using procurators for the frail and people with disabilities and assist them with the application process. Over the Counter services at SAPO branches will radiate this Migration of beneficiaries The SAPS to provide support by to SAPO outlets, banks increasing visibility around merchants and merchants may and banks during the payment period. increase the risk of robberies, including robberies of retailers and merchants. Engagement with NATJOC is ongoing and a security plan will be jointly developed between SASSA, SAPO and NATJOC. 20

INTERNAL FUNDS TRANSFER 21

Internal Funds Transfer • Postbank SOC Limited is incorporated as a wholly owned subsidiary of SAPO in compliance and anticipation of the granting of the fully fledged banking licence • Postbank is currently a division of SAPO and the business, incorporating agreed assets and liabilities, will be transferred to Postbank SOC in due course in compliance with: - Capital Adequacy Ratio required by SARB (29, 625%) - 2005 MOU between MTPS and MF - Settlement of intercompany obligations • Funds transferred to settle critical SAPO obligations were surplus to Postbank compliance obligations and should not jeopardise the licence application in any way • Principle terms of agreement on the terms of these transfers has been signed between SAPO and Postbank Boards subsequent to which no further transfers have been made 22

OPERATIONAL UPDATE 23

Executive Summary Carryover Summary Improved service delivery standards from 76% -87, 5% delivery standards The National carryover on the 23 rd August 2018 is at 53. 2 Million. The following 3 areas is mainly affected: • The Wits Region carryover on the 23 rd August 2018 is at 30 Million • The Northern Region carryover on the 23 rd August 8. 2 Million § The International Business carryover on the 23 rd August is 9 Million Customer that did not mail during the strike are now logging at Witspos and Capemail and this is affecting the reduction of the backlog. Current inflows of domestic mail is approximately 2. 6 Million per day. A large percentage of the Witspos carryover is outward mail which will still flow into other Mail Centres especially Tshwane Mail Centre 24

International The International Business carryover on the 23 rd August is 9 Million § Discussion with SARS to move to Cape Town and Durban International assessment sites § Moving unrecorded mail to other mail centres § EMS to Speed Services for delivery and to Post Office where possible § Requested international counterparts to make direct despatches to Cape Town and Durban § Operators that held back mail during the strike started to send mail increasing the initial backlogs § Staff working overtime over weekend 25

FINANCIAL POSITION 26

Highlights for the year ended 31 March 2018 § Subject to AGSA and AGM signoff § Income Statement § Revenue declined by 3% from R 4, 6 billion to R 4, 4 billion § Expenses reduced by 7% from R 5, 6 billion to R 5, 2 billion § Loss for the year improved by R 79 million (8%) from R 987 million to R 908 million § Statement of Financial Position § Net asset value improved from R 901 million to R 3, 5 billion in 2018 § R 3, 7 billion capital injection utilised to settle term loans § Anticipated Unqualified audit report 27

SUSTAINABILITY/ FUTURE FUNDING 28

Sustainability • Funding requirements have been submitted: - Interim budget adjustment (Sassa) - MTEF - Public Service Mandate - Capex for future revenue initiatives • SAPO branch upgrade for SASSA project underway • Labour - Agreement signed to end strike on 20 July 2018 - 6, 5% increase backdated to April 2018 - Sec 189 process to commence 29

Network Upgrade 30

Network Upgrade • Tender for network upgrade opened on 22 March 2016 and closed in 20 May 2016 • Tender cancelled due to unjustified financial viability and termination cost of existing contract at the time. • SAPO’s network reengaged in anticipation of Sassa mandate • Engagement with Telkom approved by NT 31

Thank you – Questions? 32