1. Report on Implications of the establishing of the Agency.

1. In October 2002, Cabinet approved in principle the establishment of a focused, specialist institution that will take responsibility for the management and delivery of social grants. In the Cabinet Memorandum, No. 8 of October 2002 the Department of Social Development outlined the many challenges that government faces in the delivery of social grants.
2. Cabinet also approved the establishment of a Transition Committee to investigate the implications of the establishment of the Agency and approved that the Minister for Social Development report to Cabinet before full implementation. The Committee was established shortly after the Cabinet decision and comprised of senior managers from the Departments of Social Development, Public Service and Administration and National Treasury.
3. The Transition Committee has commissioned an investigation into the implications of the establishment of the South African Social Security Agency. The implications focus on the following work streams:

1. the governance, organisational and human resource implications;
2. the financial and fiscal implications;
3. information technology implications;
4. the Constitutional, legal and contractual implications; and
5. communications implications.

1. The Agency will have a Chief Executive Officer (CEO) that will report directly to the Minister. The national Department be responsible for the development of policy, monitoring service delivery and setting service delivery standards.
2. The Agency will manage, administer and pay social assistance grants. Provinces will no longer be involved in the delivery of social grants, and could look at discretionary benefits such as the provision of social relief of distress.
3. The establishment of the Agency will have far reaching implications, requiring expert management of people, structures and processes. It will affect the current provincial structures, require a review of the intergovernmental financial provisions and require new legislation for social assistance delivery. It is expected that the initial costs could be recovered over a three-years.
4. The enactment of new legislation may pose some challenges, but the Department has sought the advice of legal experts. Drafts of the "new" Social Assistance Bill and the Social Security Agency are attached for perusal. These have been widely consulted with various stakeholders.
5. This document provides an overview of the investigation of the Transition Committee. First, the document gives an outline of the proposed institutional model, then briefly sketches the envisaged areas to be affected and then outlines the implications.

1. Government is committed to fast tracking the delivery of services to improve the lives of the poorest of the poor. The establishment of an Agency is one of the priorities to achieve improvements in the service delivery commitments.
2. Social assistance grants are paid to close on 6 million citizens who often depend on the benefits as their only means of survival. The number of beneficiaries will increase to approximate 9 million over the next three years with the extension of the child support grant. However, the severe weaknesses in the management and administration of social grants often result in a failure on the part of government to ensure that those entitled to the benefit are provided with the best possible service. This continues to lead to ongoing litigation and substantial negative publicity in the press.
3. In view of the ongoing challenges of social grants delivery, Cabinet gave in principle approval for the establishment of the Agency. This institution will take full responsibility for the management, administration and payment of social grants.
4. The Transition Committee has investigated the implications of the Agency formation. The establishment of the Agency will have significant implications, however, given the current challenges of service delivery, the Committee would argue that the establishment of the Agency would significantly enhance service delivery and would overtime result in significant cost savings.

1. The Proposed Agency

Institutional Model

1. The social grants programme includes the provision of seven types of grants. It includes: the old age pension, war veterans pensions, the disability grant, grant-in-aid, and three types of grants provided to families to support their children. It is in the area of delivering these grants that the management and administration have shown severe weaknesses.
2. In constructing a functional model, a delineation of the roles and responsibilities of the four main institutions were identified to ensure effective governance for the delivery of social grants. These involve the national Department of Social Development, the future role of the Provincial Departments, the Agency and an Independent Inspectorate for social security.

The National Department of Social Development

3. The National Department of Social Development will continue to fulfil its role as service assuror. The most important of these are the following:

• Policy development and legislation for social assistance, and setting norms and standards for administration and payment of social grants;
• Channelling and managing of funds to the Agency grants;
• Setting performance standards, and encapsulating these in the form of Memoranda of Understanding between the Department and the Agency;
• Monitoring and evaluation, and rendering support to the Minister regarding his/her oversight responsibility over the Agency; and
• Establishing an Appeals Unit to handle appeals regarding decisions of the Agency that adversely affect beneficiaries.

1. The Provincial Departments will no longer have a responsibility with respect to the management and delivery of the main social grants. There may be instances though where provinces can play a role in poverty intervention. Provinces will be in a better position to provide social relief of distress and food relief programmes can be provided in addition to alternative services, such as job creation projects. The provision of these programmes will be government’s enhanced response to sustainable poverty relief as opposed to only providing transfer benefits.

 

 

 

The South African Social Security Agency

2. The Agency will become responsible for the following:

• The registration and administration of the beneficiaries throughout the entire beneficiary life cycle, from registration to de-registration;
• The payment of beneficiaries and/or managing of contracts for payments;
• The ongoing verification and monitoring of beneficiaries;
• Managing service delivery agreements for public private partnerships;
• Managing a complaints handling system or refer appeals; and
• Prevention and detection of fraud though a compliance monitoring.

1. In its deliberations, the Transition Committee considered the establishment of an independent Inspectorate. This unit must report directly to the Minister to provide objective inputs on the quality and impact of social security service delivery. More work needs to be done in this respect.

High-Level Blueprint of the Agency

Governance Arrangements

2. The South African Social Security Agency will be listed as a Schedule 3A Public Entity in terms of the Public Finance Management Act (PFMA). It is government's intention to bring the different parts of government, specifically the public service and non-business public entities closer together to improve service delivery and to maximise the impact of government interventions. This supports the principle of creating a unified machinery of government in line with the Constitutional values and principles governing public administration.
3. While the National Department will remain the service assuror for the administration and payment of social grants, the Agency will be the sole provider of social grants as defined in the relevant social assistance legislation. The Agency will ensure the uniform registration, processing of applications and payment of grants through the optimal use of public private partnerships. The envisaged system will nevertheless allow for significant decentralised decision-making, as this would enhance service delivery.
4. To ensure strong leadership and clear accountability, the Minister for Social Development will appoint a Chief Executive Officer as the Accounting Authority. The CEO will report to the Minister. To support the CEO in the execution of his/her duties and bring independent views in the management structures/institution, the establishment of Executive Committee's can make use "expert" contributions in the institutional policies pertaining to human resource management, financial manage, information technology, etc..

Organisation and Human Resources

5. The SASSA will be established with approximately 4 000 staff. It is envisaged that there will be uniform, standardised management structures and a consistent set of processes and procedures for grants across the country Existing staff on the fixed establishment of the Social Assistance components in the national Department and provinces would be transferred with retention of remuneration and core benefits. The implementation will take place within the broader framework of the Public Service Restructuring- and Labour Relations Frameworks.
6. The nature of the functions to be performed by the Agency requires more flexibility in terms of recruitment and procurement than are currently being offered within the Public Service Regulatory framework.
7. Change management will be critical to ensuring on-going service levels and to promote and encourage staff to migrate to the new Agency. This will promote the sustainability of the Agency due to buy-in from staff and increasingly the probability that staff will migrate to the Agency.

Financing of Agency and Social Security Grants

8. The primary cost drivers associated with the establishment of the Agency are firstly, the once off transitional costs to fund the transition to the Agency. The second set of cost drivers involves the incremental ongoing administration associated with establishing a national office, enhanced management and control in the provinces, administrative support functions such as Finance and IT, as well as a strong compliance and fraud function.
9. As the establishment of the Agency will take place in a phased approach, the transitional costs are expected to run over a three year period. The indicative transitional costs are provided in section 6.8 below.
10. The National Department of Social Development will also incur ongoing incremental operational costs associated with the management and administration of the Agency.
11. Service improvement costs are not included as a direct cost in assessing the impact of establishing the Agency as these costs would in all likelihood have been incurred by the Department. Examples of these service improvement costs include the replacement of the SOCPEN system, improvements of facilities at pay-points, etc. It is anticipated that these future service improvement costs could to a large extent be covered by the anticipated efficiency gains and reduction in fraud levels.

3. Process Map of the Agency Establishment

1. In line with government’s intention, the Department wishes to have the Agency operational within a short period of time. To this extent, legislation has been prepared and could be introduced into Parliament. Should Cabinet approve the introduction of the draft Social Assistance and South African Social Security Agency bills, it could be introduced by the 1^st of August 2003.
2. The Transition Committee is currently overseeing the completion of a detailed blueprint for the Agency, the final detailed costing for a five-year operational budget and a detailed implementation project plan. The above research will be submitted to Cabinet by October 2003. The proposed organisational design and structure for enhanced capacity at the national Department has been completed and costed.
3. It is proposed that the establishment of a fulltime Implementation Team who will focus on the establishment of the Agency is approved. Provinces could be asked to start a process of "ring fencing" and then separating the functions of social assistance service delivery from social welfare services. This will initiate setting up a focussed grants administration system. Consideration could be given to transferring the social assistance budget to the national sphere in the 2004 financial year. The Ministers Committee on the Budget could advise on the process and timeframes.
4. GCIS will be asked to assist in the roll-out of a communication strategy in August 2003, to run parallel with the legislative process. This will give effect to appropriate engagement with the legislature, civil society, social development employees and their representatives and the wider public.
5. It is difficult to anticipate the duration of the legislative process. It may be possible to appoint the Chief Executive Officer and the senior management by the middle of the 2004 calendar year. The Agency could become operational before September 2004. The Committee would provide more detail in terms of the phasing out of the current provincial arrangements.
6. This establishment of the Agency and subsequent transfer of functions is a complex exercise and it is envisaged that the process will at least take more than two years before all the provinces have transferred the full function to the Agency. A process map that outlines the envisaged plan is provided below.

1. The Agency will be a new institution and the establishment will have far-reaching implications with a significant transformation process for social assistance service delivery. A large budget will be transferred to the Agency, and will have to be managed. This will require a strong governance structure, oversight and control mechanisms.
2. The need to transfer staff from the departments to the Agency may affect between 25 – 30% of existing staff in the provincial and the national departments. Provincial Departments will have to align their organisational structures as a consequence of the transfer of staff to the SASSA, and in a number of provinces the Departments would be relatively small. Criteria will be developed to facilitate the identification and transfer of corporate and support staff to the Agency. The Committee is reviewing the best mechanisms to ensure an optimal choice is made in this regard, and oversee the establishment of a consultative structure to engage organised labour and non-affiliated staff regarding the transfer of staff to the Agency.
3. The monitoring role of the National Department must be strengthened in order to support the National Minister with his oversight role. An organisational design has been developed to strengthen capacity at the national Department. The national Department should as far as possible be in a position to monitor all aspects of service delivery of the Agency, and provide an appeals function to separate decision making and redress that may adversely affect applicants.
4. To ensure a unified machinery of government, the Minister for the Public Service and Administration shall determine the human resource policy, remuneration and core benefits, and other required non-pensionable allowances for staff of the Agency.

1. This shift of the function social security grants administration and management, financing and payment of beneficiaries to the national sphere requires the flow of significant funds and related resources, and by implication a review of the current fiscal policy arrangements between national Government and provinces.
2. Social security grants, excluding the associated administration cost, increases significantly over the MTEF period to 2005/06, from R27,2 billion (2002/03) to R44,5 billion (2005/06). This significant increase includes the R10,9 billion conditional grant to fund the Child Support Grant Extension Grant. This Grant amounts to R1,1 billion in 2003 increasing to R3,4 billion in 2004 and R6,4 billion in 2005.
3. The National Treasury, in consultation with provinces and affected national Government departments, is in the process of reviewing both the equitable share and the financing of social security grants. During the months going forward, the National Treasury will submit proposals on the National Fiscal Policy Framework and its implications for financing of social security grants, the administration of these grants and the financing of the Agency to the Budget Council, MinComBud and the Cabinet for consideration.
4. In addition, the National Treasury and the Department of Social Development would do a financial assessment of the functional breakdown between the social security grants programme and the other social development services, with a view of ring-fencing social security grants.
5. The consolidated social grants administration cost for 2002/3 ranges from R1.3 billion in 1999/2000 to R1.4 billion in 2002/3. The finalisation and unbundling of the administration costs for social security grants (comprising overall social security grant administration and the Agency) would be completed before the Cabinet meeting on the 2004 Budget.
6. Preliminary cost estimates and budgets for the Agency have been prepared, and will be submitted for approval after finalisation in August 2003. After the transfer of current administrative costs from the provinces, amounting to a projected R1,8 billion in 2003/04, an initial additional R157 million in the first year will be required for the set-up and transition. In year two, amounts of R124 million and R137 million in year three are being projected respectively. These indicative figures assume full functioning of the Agency within a given financial year. In practice these amounts will be phased-in as the Agency is being established. The projected operating budget for the SASSA projects that savings achieved through reduction in fraud, improved efficiency and grants distribution fee gains will offset the increased cost of establishing the SASSA within three years.
7. The costs of the social grant transfers and the administration thereof are currently part of the provincial equitable share. After a detailed costing of the administrative component, the Treasury will asses the options for the transfer of the necessary resources to the national sphere share in the vertical split.

1. Effective communication will be critical in the successful establishment of the SASSA. This will include communication to relevant stakeholders such as the relevant national and provincial departments and the staff, organised labour organisations, parliament and the relevant portfolio committees. In addition there will be a need to have an effective external communication programme to beneficiaries and representative organs of civil society, and existing service providers.
2. An appropriate communication strategy has been developed and will be rolled out with the support of GCIS to ensure that the public and beneficiaries of the social grants are informed pro-actively of the envisaged changes.

Mr. Vusi Madonsela, Director General: Social Development

Mr Fezile Makiwane, Deputy Director-General: Social Development