5-million Sassa beneficiaries could stop getting grants at Post Office as entity BRPs decry millions lost

More than 5-million South African Social Security Agency (Sassa) beneficiaries receiving their grants at the South African Post Office (Sapo) might be forced to get their payouts elsewhere as the entity's business rescue practitioners have proposed the discontinuation of the service.

Sapo business rescuers Anoosh Rooplal and Juanito Damons, in their plan to save the entity, said the service was not profitable and worsened state-owned Sapo's financial woes. Sapo has been in business rescue since July and Rooplal and Damons published their plan last week.

“The Sassa payments are made by the Post Office at an estimated loss of more than R200m a year,” the business rescue plan document read.

Rooplal and Damons said Sapo lost millions of rand because of operational challenges and  grant beneficiaries opting to receive their payouts at different service providers such as private banks and retailers.

“The revenue generated by the Post Office from Sassa grants was R798m for financial year 2022 and reduced to R318m for financial year 2023. Sassa fee revenue accounts for R48m for the first six months of financial year 2024.”   

According to a recent Sassa report, the Post Office paid out grants to 7.2-million people in March 2022, but had lost more than 1-million clients a year later. In March 2023, it had 6-million clients.

The downward trajectory continued as only 5,115,092 beneficiaries received their grants at Sapo by September 2023.

The payments of grants at the Post Office in 2019 led to its branches being targeted by criminals.

“Sapo commenced  a contract with Sassa in 2019 for the payment of grants. This led to a sharp increase in the value of cash handled at Sapo branches which led to a dramatic increase in armed robberies, branch burglaries, fraud and theft of cash. The aggregate losses amounted to more than R400m since 2019,” the business plan read.     

The payment services provided by Sapo were not only financially burdensome, but also deterred potential customers from visiting its branches for other products such as motor vehicle licences. To address this, the rescue plan proposed discontinuing Sassa payments which are a significant drain on the Post Office's resources.

The rescue plan proposed the payments be taken over by Postbank. 

“This plan also suggests migrating or selling certain Sapo branches to Postbank, which would allow Postbank to expand its banking network and accommodate Sapo's remaining over the counter clients. This strategic move would enable Sapo to focus on its core competencies and enhance its overall financial position.” 

The Postbank dominated headlines in September after about 600,000 Sassa beneficiaries collecting grants at the post office did not receive payouts on time due to a payment system migration glitch. Some people had to wait for only a few days, but others waited a week to two.

According to Sapo, it last made a profit in 2004 and the decline in revenue started in 2006.

The business rescue plan will be submitted to creditors and voted on by December 7.

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