Sassa joins forces with FNB to pay clients left in the lurch by Ithala's suspension

The South African Social Security Agency (Sassa) has teamed up with FNB to pay social grants to beneficiaries who are clients of suspended financial services provider Ithala .

Operations were suspended after a provisional liquidation application was filed against Ithala by the Prudential Authority (PA) of the South African Reserve Bank in the Pietermaritzburg high court.

That resulted in the freezing of more than 257,000 depositors' accounts, 65,000 of them beneficiaries of Sassa social assistance. They include beneficiaries of old age, social relief of distress (SRD), care dependency, child support, combination, disability, and foster care grants.

With many questions about the fate of the beneficiaries, Sassa confirmed the interim arrangement with FNB on Tuesday.

“Sassa and FNB have collaborated to ensure Ithala clients who have not yet been able to open a new bank account will receive an account with FNB in the interim until the clients are afforded an opportunity to provide Sassa with the details of their preferred bank. This process is estimated to conclude after three months.”

The interim measure will ensure beneficiaries continue to receive their grants on time amid the uncertainty about Ithala. Only SRD grant beneficiaries could be affected during this period.

“In terms of our processes we anticipate their January grant payments could be delayed. A special payment run will happen as soon as possible to remedy this.”

The partnership was facilitated by the National Treasury which approached the Banking Association SA (Basa) to find a solution for the depositors affected by the Ithala matter, particularly the grants beneficiaries.

Of the banks Basa approached, FNB offered emergency assistance to open accounts to facilitate payment for Sassa clients banking at Ithala.

The KwaZulu-Natal government has opposed the move to liquidate the bank, alleging there may be moves against Ithala to promote the interests of commercial banks at Ithala's expense.

Finance minister Enoch Godongwana told SABC last week a R2bn guarantee was made available to protect the savings of Ithala depositors and a plan was in place to ensure social grant recipients using the bank are not affected by its possible liquidation.

“The Banks Act defines my role as that of a custodian for depositors. As the custodian of depositors I have taken the view that I should protect, particularly, those who have savings of R100,000 and lower, and made available a guarantee of about R2bn to ensure that whatever happens their savings are protected.”

However, KwaZulu-Natal economic development MEC Musa Zondi claimed Godongwana had diverted the guarantee.

“The minister is now using that guarantee which was meant for Ithala and diverting it to give comfort to commercial banks. That is what we find to be injudicious in this matter,” he said.

That money had been granted after a “laborious process” where provincial government had to give undertakings and guarantees as to what will happen to the money, he said.

“That amount of money was supposed to be released by Treasury without delay after the approval was granted and we were informed before we closed for the December holidays that it had been granted. When we returned, we discovered the guarantee had not landed in KZN at Ithala.”

Finance MEC Francois Rodgers, also on Tuesday, told Newzroom Afrika a commercial bank is allegedly soliciting Ithala clients in the middle of the crisis, though he could not reveal the bank's name.

Sassa confirmed FNB had, after opening accounts, communicated with the affected beneficiaries to activate their accounts and collect their bank cards from their nearest branches from January 28 to February 4.

“Clients will need a valid form of identity to collect their card. Joint outreaches will be held by Sassa and FNB in more rural areas to limit the travelling inconvenience for clients in these areas,” it said.

However, the agency distanced itself from any allegations of trying to influence beneficiaries to choose FNB.

“Sassa is not advocating or promoting FNB as a bank of choice for grant beneficiaries, but we appreciate their ability and willingness as a participant in the National Payment System (NPS) to step in to provide emergency assistance when another participant in the NPS is struggling.

“Over the next three months all clients will have the choice to change to their preferred bank. Sassa will ensure sufficient resources are available to support clients with this.”

The liquidation application by the PA will be heard in the Pietermaritzburg high court on Friday.

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