DEPARTMENT OF SOCIAL DEVELOPMENT

AGENCY POLICY POSITION

 

  1. SUBJECT

Establishment of a focussed, specialist institution for the management and delivery of social grants.

2. PURPOSE

    1. To propose a service delivery model for Social Security.

 

3. SUMMARY

3.1 There are severe weaknesses in the management and administration of social grants. This is not a new problem in Government and irrespective of many investigations, reports and interventions implemented, the situation has not improved.

3.2 Cabinet approved in principle (1 February 1997 - Memorandum No.3) the establishment of a National Social Security System. The Department of Social Development, in close consultation with the Department of Public Service and Administration and National Treasury, explored several alternative service delivery options.

3.3 Based on outcome of the above, a business case was developed to create a separate specialist institution that could focus specifically on the management and payment of social grants for the country. The institution will be known as the South African Social Security Agency.

3.4 Delivery of benefit administration and payment services will take place through the optimal use of Public/Private Partnerships.

 

4. DISCUSSION

4. 1 Formulation of the problem

      1. The social assistance grants are paid to more than 5 million citizens on a monthly basis. These grants are the only income of the poorest of the poor. In most cases, to many of the beneficiaries this constitute the only means to support a whole family. Thus, it is a very effective way of alleviating poverty in the country.

      2. There are severe weaknesses in the management and administration of social grants. These weaknesses have been reported in numerous Government reports and investigations; including substantial negative publicity in the press. Some of the weaknesses identified are the long delays in approving grants and recording beneficiaries into payment system. There are long queues, as well as very unsatisfactory conditions at pay points. The low levels of service delivery to citizens and lack of information and support imply that there is non-adherence of Government to its own policy of placing people first and serving people with pride.

      3. There is uneven access to (some) grants between Provinces, as well as unequal service delivery standards; uneven implementation of the grant rules; and significant remaining fraud and budget uncertainty in some Provinces.

4.1.4 There is also a trend of continued litigation against Government with regard to grant administration during the last four years. One of the main reasons is the fact that Provinces do not register beneficiaries in an efficient and effective manner. The recent R 2 billion back pay issues illustrate the result of the inefficiencies in the system. The administration of the Social Assistance Act No 59 of 1992 was assigned to the provinces in terms of Proclamation R7 of 1996. Although the Provinces are responsible for the administration of social grants, legal cases are brought against the National Minister. See paragraph 8 of this document regarding constitutional and other legal implications.

4.1.6 For the current financial year, it will cost Government about R1.1 billion to disburse social assistance grants. In addition, it is estimated that the Department loses massive amounts through leakage, fraud and other inefficiencies (based on international trends of fraud in antiquated systems). Within an agency, an optimal network for the disbursement of social grants could be implemented, i.e. pooling of buying power to contract for payment, which could result in a saving of R500 million per year. The reduction of fraud by at least 2% per year would result in an additional saving of R500 million.

4.1.7 Although it is accepted that there are differences between the quality of the management and administration of social grants between Provinces and between regions/districts in Provinces, on average the service is poor. For example, it took the Eastern Cape Provincial Department of Social Development sixteen months to appoint a service provider for the payment of social pensions. Eventually, two service providers were appointed which will make integrated service delivery difficult in the Province; and also increase the burden on the already limited capacity of the Department to manage the service providers. It should be noted that citizens view the face of Government as 'one institution' and not distinguish between National and Provincial Departments when good or bad service delivery takes place. It is simply seen as a failure of Government to deliver.

4.1.8 This is a fundamental problem, which needs to be addressed urgently by the Government. The social grant system delivers services to the most vulnerable South Africans. The lack of integrated service delivery resulted in inefficiencies and deficiencies, which impact severely on the poorest of the poor, and reflects very badly on the ability of the Government to serve its citizens and to alleviate poverty.

4.1.9 Government has embarked on a major initiative to register all children that qualifies for grant payments. The aim is to register 3 million children before the end of 2003. In view of the magnitude of transactions and administration of payments, the establishment of a dedicated delivery institution is imperative. Government also intends to expand the Child Support Grant to children aged 7-14, which implies an additional 3,2 million children to be added to the system over the next 3 years.

    1. Responding to the challenges

      2. Background

      1. The above scenario is not a new problem in Government. In 1996, the Chikane Committee identified the weaknesses in the delivery of social grants. Key areas included the high levels of fraud, the inappropriate institutional framework that makes it impossible to ensure equitable service delivery of social grants. The huge disjuncture between budgeting and policy making for social security and the lack of management capacity in Provinces results in poor accountability and the absence of strategic and operational guidance to front line staff.

      2. There are different processes and procedures being followed in each Province based on different interpretations of the Regulations that govern social security. Thus, there is no uniformity in the documents being used and the way citizen relationship interfaces are managed. This leads to much inefficiency such as duplication and confusion.

      3. There is no optimal use of the private/public partnerships because the Government is not pooling its buying power in negotiations with third party contractors. Contract management is generally poor. Differences in service level agreements also result in citizens not receiving equal treatment by Government. The Committee for Restructuring of Social Security, in a report accepted by Cabinet, recommended that "a nationally organised" system is the appropriate route to go.

      4. Irrespective of many investigations, reports and interventions implemented, there is sufficient empirical evidence that the situation has not improved. One of the interventions to address the aforementioned weaknesses was the development of uniform norms and standards in August 2001. They were aimed at streamlining business processes, uniform competencies for front line staff, improved financial management and replacement of information technology and systems to support the grant application processes. It has however, been difficult for Provinces to implement the norms and standards given weak capacity, poor management and alleged budget constraints.

        5. Proposal

      5. The Department of Social Development, in close consultation with the Department of Public Service and Administration and National Treasury, explored several alternative service delivery options.

      6. A business case was developed to create a separate institution that could focus specifically on the management and payment of social grants for the country. The institution will be known as the South African Social Security Agency. The main objective of the Agency will be to ensure the efficient and effective management, administration and payment of social security grants in the country through the optimal utilisation of public/private partnerships. This does not imply central processing of information and delivery of grants. Furthermore, the national system will not preclude possibilities of provincial variations.

      7. This will ensure that there is equal access to social security for all citizens, implementation of uniform standards and norms in the country, reduced cost due to economy of scale, less duplication of expenditure, and consolidation of institutional capacity in the formulation and implementation of polices related to social security.

      8. The review of the current legislative framework for the Public Sector indicated that although the legislative framework is decentralised and has significant flexibility, it is not sufficient for the immense diversity of the public sector. Thus, the Minister for Public Service and Administration will introduce legislation for the public sector that will allow for uniformity and flexibility in the areas of accountability, conditions of service, legal mandates, systems and commercial considerations. The public sector will be structured in terms of core public services and extended public services. The South African Social Security Agency will be part of the extended public services. In terms of the Public Finance Management Act, it will be listed as a Schedule 3A Public Entity.

      9. The functioning of the Agency is described in the draft Bill attached to this Memorandum. Core benefits will be similar to that of the Public Service. Existing staff on the fixed establishment of the Social Assistance components in the National Department and Provinces could be transferred with retention of core benefits. The implementation will take place within the broader framework of the Public Service Restructuring- and Labour Relations Frameworks. The nature of the functions to be performed by the Agency requires more flexibility in terms of recruitment and procurement that are currently being offered within the Public Service Regulatory framework.

        10. Transitional Arrangements

      10. It is critical the Agency be fully operational within a short period of time. A Transitional Committee chaired by the National Department of Social Development will be institutionalised. This committee will comprise of senior managers of the Departments of Public Service and Administration, National Treasury and the Department of Social Development.

      1. The task of this Committee will be to ensure that a project implementation plan is formulated and implemented. This plan must be submitted for approval to the National Ministers of Social Development, National Treasury and Public Service and Administration before 31 January 2003.

5. ORGANISATIONAL AND PERSONNEL IMPLICATIONS

    1. The Departments of Public Service and Administration, National Treasury and National Social Development must make available dedicated skilled managers to prepare the implementation plan and to facilitate the implementation of the recommendations.

    2. The implementation of the recommendations will, over time, have profound implications when staff and budgets are transferred to the Agency. Provincial Departments will have to align their organisational structures in this regard. There will be broad consultation with staff and their employee representatives.

    3. The monitoring role of the National Department of Social Development will have to be strengthened in order to assist the National Minister with his oversight role.

6. FINANCIAL AND FISCAL IMPLICATIONS

    1. Detailed cost estimates and budgets for the Agency will be submitted for approval once it is finalised. The projected operating budget for the next five years reflects that the combined fraud, efficiency and grants distribution fee gains of the specialised, focused institution will result in a narrowing of the cash shortfall, even with an increase in beneficiary growth from 2% per annum to 8% per annum.

6.2 The ability of the Agency to focus on economies of scale should result in a total saving of over R600 million over the next five years.

6.3 The social grant transfers and the administration thereof are currently part of the provincial equitable share. The transfer of about 18% of revenue in the horizontal division to Provinces will become a part of the National share in the vertical split. These resources will be transferred to the public entity in an appropriation to the National Social Development Budget Vote.

    1. The Transitional Committee of which National Treasury will be a full time member, will address the issues related to the financial and fiscal implications.

7. COMMUNICATION IMPLICATIONS

    1. It will be very important that Provincial Departments understand the implications of this proposal and that they support the National Government in implementation thereof. A major benefit of this proposal may be the prevention of the crowding-out of social developmental welfare services such as welfare care, HIV/AIDS services, etc that are currently neglected because of the demands of social assistance benefit administration.

    2. An appropriate communication strategy will be developed by the Transition Committee with the support of GCIS to ensure that the public and beneficiaries of the social grants be informed pro-actively of the envisaged changes.

    3. The Transitional Committee will also prepare a communication strategy with the existing service providers and affected public service employees.

8. CONSTITUTIONAL AND OTHER LEGAL IMPLICATIONS

8.1 Formulation of the problem

8.1.1 The allocation of the management and delivery of social grants to the Agency will ideally require the amendment of the Social Assistance Act No 59 of 1992, or, in the absence of thereof, a national law which will prevail over the provisions of the Social Assistance Act that were assigned to the provinces. The administration of the whole of the Social Assistance Act, except section 13, was assigned to the provinces in terms of Proclamation R7 of 1996. The prevailing legal position appears to be that the provisions of laws that were assigned to provinces in terms of the Interim Constitution became provincial legislation, and may only be repealed by the respective provincial legislatures (see definition of "provincial legislation" in s239 of the Constitution 1996, and Ex parte Speaker of the KwaZulu-Natal Provincial Legislature 1996(4) SA 653 (CC)).

8.1.2 The assignment of provisions of the Social Assistance Act to provinces is currently being challenged in the High Court as being invalid and void for vagueness. The Interim Constitution 1993 authorised the President to assign to Provinces the administration of laws which were in force immediately before the commencement of the Interim Constitution on 27 April 1994 (s235(8) read with s235(6)). The Social Assistance Act although enacted was not in force immediate prior to the commencement of the Interim Constitution, but was brought into operation on 1 March 1996 only. The validity of the assignment of the Social Assistance Act is attacked on the basis that—

Concerning the likely success of the mentioned court challenge, an opinion by Senior Counsel concluded that the Social Assistance Act was not assignable to the provinces in terms of the Interim Constitution because it was not in force immediately before the commencement of the Interim Constitution. Furthermore the opinion indicates that—

8.1.3 The view is held that Parliament is competent to legislate on social grants since "Welfare services" is a functional area of concurrent national and provincial legislative competence and no other area pertaining to social grants are listed as functional areas within the exclusive provincial legislative competence. Therefore, even if elements of the proposed social grant systems does not fall under "Welfare Services" they will seemingly fall under the residual legislative competence of Parliament.

8.2 Proposed resolution

8.2.1 If the High Court declares the assignment of the Social Assistance Act invalid, it will remove the current legal impediment for Parliament to amendment or repeal the whole of that Act. Since the President is the respondent in the mentioned court case, consultation with the Presidency will take place in order to ensure the best possible outcome of the court case for the envisaged management and delivery of social grants through the Agency and also for the appropriate transitional arrangements pending the establishment of the Agency.

8.2.2 In the event that the assignment of the Social Assistance Act is held to be valid, Parliament could only lawfully repeal or amend section 13 of that Act and not the remainder. Such a ruling will however not prevent Parliament from passing a law on the same subject-matter. In such event section 146 of the Constitution 1996 must be applied to determine whether the national legislation or provincial legislation on this subject-matter will prevail. For example, the national legislation will prevail if a matter that, to be dealt with effectively, requires uniformity across the nation, and the national legislation provides that uniformity by establishing norms and standards, frameworks or national policies. The national legislation will also prevail if it is necessary for the promotion of equal opportunity or equal access to government services.

Since the existence of conflicting national and provincial legislation is highly undesirable and to curtail litigation on the question of which legislation prevails, Provinces will be approached to request the repeal or amendment of the Social Assistance Act in their respective provinces. This will imply the voluntary participation the Provinces in the Agency model. Once collaboration of the major Provinces have been secured and the benefits to the citizens are publicly known it will be advantageous for other Provinces to follow suit. The underlying thrust is to support the fight of Government against poverty. The payment of grants is one of the most successful ways of alleviating poverty. As a last resort, those Provinces not willing collaborating could be brought on board by approaching a competent court for an order declaring that the national legislation prevails over the provincial legislation.

8.2.3 The Transitional Committee must make proposals as to the required changes to the Social Assistance Act in order to align it with the functions of the Agency as envisaged in the draft Bill.

9. OTHER DEPARTMENTS CONSULTED

    1. The Joint Evaluation Panel, responsible for the evaluation of business cases for envisaged Public Entities, supports the establishment of a National Social Security System to give effect to the implementation of seamless, integrated and efficient service delivery of social grants. The Panel has identified a number of key issues that must be addressed by the National Department of Social Development. These issues will now be taken forward by the Transitional Committee.

    2. The Financial and Fiscal Commission supported the establishment of the Agency. The Commission has also indicated this support in Recommendations to Parliament for 2003/04.

    3. It is proposed that this Memorandum be discussed in the next meeting of the President’s Co-ordinating Council.

10. RECOMMENDATIONS

It is recommended that:

10.1 The establishment of the South African Agency for Social Security listed as a Schedule 3A Public Entity in terms of the Public Finance Management Act is approved

10.2 The attached draft Bill for further refinement by the Transition Committee and consultation with Government Departments is approved

    1. The establishment of a Transition Committee to oversee the smooth implementation of the establishment of the South African Agency for Social Security is approved;

 

CONTACT PERSONS

Mr Fezile Makiwane, Deputy Director-General: Social Development

Mr Muthanyi Robinson Ramaite, Director-General: Public Service and Administration