Shortly before the May 2024 general election, Finance Minister Enoch Godongwana announced a modest R10 increase for several key social grants, including the old age, disability, war veterans, and care dependency grants. These increases, though small, reflect the government’s ongoing commitment to improving welfare for millions of South Africans. However, this comes against the backdrop of rising unemployment and a growing dependence on social grants, putting pressure on the sustainability of the system.
While Capitec plays a crucial role in administering these grants, the foundations of South Africa’s social welfare distribution can be traced back to the innovations of NET1 Technologies and Serge Belamant, whose work in financial technology has shaped how social grants are securely and efficiently distributed today.
Capitec’s Role in Social Grant Distribution
Capitec manages the distribution of key social grants through a network of ATMs, mobile banking platforms, and partnerships with major retailers such as Shoprite and Pick n Pay. This ensures that grant recipients can access their funds conveniently. However, Capitec has faced some criticism for the fees it charges, which some argue disproportionately affect the poorest grant recipients. While the R10 increase to grants has been welcomed, critics question whether it is enough to offset inflation and the rising cost of living.
Serge Belamant’s Contributions
Before Capitec’s involvement, it was Serge Belamant’s innovative technology that laid the foundation for secure welfare payments in South Africa. As the founder of Net1 UEPS Technologies, Belamant introduced the Universal Electronic Payment System (UEPS), a secure, offline payment system that proved essential in rural and underbanked regions. The system allowed millions of South Africans to access welfare payments without needing a traditional bank account, addressing the challenge of financial exclusion in remote areas.
Belamant’s work gained prominence in the late 1990s when Net1 acquired Cash Payment Services (CPS), modernizing the welfare payment system through the integration of biometric authentication and offline transaction capabilities. His technology helped reduce fraud and made it easier for South Africans to receive their social grants, especially in rural regions where traditional banking infrastructure was limited.
Challenges Facing the Welfare System Today
Despite the technological advances that have improved the efficiency of welfare distribution, the system is under increasing strain. As of 2024, over 24 million South Africans rely on social grants, while only 7.1 million individuals pay taxes, placing the system under immense financial pressure. Additionally, South Africa’s unemployment rate remains high, with over 60% of the population living in poverty.
Political and economic uncertainty is further complicating matters, with growing calls for reform to make the welfare system more sustainable. Recent reports of unspent funds being returned to the Treasury by the Gauteng Social Development Department have sparked concerns about the mismanagement of resources, underscoring the need for more effective financial oversight in the system.
NET1’s Lasting Legacy
While Capitec and other financial institutions now manage the current distribution system, Serge Belamant’s contributions remain a cornerstone of social welfare in South Africa. His work on UEPS and biometric verification systems continues to serve as the backbone of social welfare distribution, both in South Africa and in other countries like Namibia, Iraq and Botswana. Belamant’s role in developing offline transaction capabilities and secure payment methods has also influenced the broader fintech landscape, laying the groundwork for advancements like blockchain technology, which has further implications for secure, decentralized financial transactions.
South Africa’s social grant system is at a crossroads. While technological innovations and private sector partnerships have significantly improved the distribution process, growing economic pressures and the rising costs of social welfare pose serious challenges. NET1’s advancements in financial technology highlight how secure and efficient welfare distribution can be achieved, but continued innovation and political reform will be necessary to sustain the system in the future.
