South Africa's Court Challenges Bank Role in Verifying Welfare Payments

SOUTH AFRICA’S DIGITAL GRANTS SYSTEM RELIES ON BANKS TO VERIFY INCOME, RAISING QUESTIONS ABOUT ACCURACY AND OVERSIGHT

Judge Leonard Twala’s January 2025 ruling that bank-based income verification is unconstitutional sits at the centre of a deepening accountability dispute over how South Africa administers its social grants. The South African Social Security Agency, Sassa, has contracted six commercial banks to conduct means tests for social grant applicants and beneficiaries under a contract running from 1 March 2025 to 31 July 2027. Absa Bank, African Bank, FNB, Nedbank, Standard Bank and Tyme Bank will verify income not only for the Social Relief of Distress (SRD) grant but also for seven other grants, including the Child Support Grant, Disability Grant and Old Person’s Grant.

The reliance on private banking data traces directly to a governance failure. When the Department of Social Development introduced the SRD grant during the Covid-19 pandemic, it chose an entirely online administration model to reach applicants quickly. Sassa’s contracted state entities, the South African Post Office and Post Bank, lacked the technological infrastructure to process the volume of applications. Sassa’s own offices and call centres were overwhelmed.

Three private digital platforms filled the gap: a website portal by Prosense Technology, a zero-rated USSD platform by Vodacom, and a WhatsApp portal by GovChat Pty Ltd. Sassa itself assessed applications using public databases, including its legacy system Socpen, the Personnel and Salary System (Persal), the Unemployment Insurance Fund (UIF), the National Student Financial Aid Scheme and the South African Revenue Service IRP-5 registrations database.

Those public databases proved unreliable. Sassa executive manager of grants operations Brenton van Vrede told investigators in September 2025 that the databases were either not up to date or did not provide real-time information. Tax returns are often filed only once or twice a year, creating an 18-month lag in SARS data. UIF records presented similar problems because employers do not consistently update employee information. Van Vrede acknowledged that “a lot of people got excluded that should not have been excluded” as a result.

The government’s answer was to route means testing through commercial bank account data. Van Vrede explained that Sassa sends a file to the banks, which sum all deposits into an applicant’s account and report back whether income exceeded the R624 threshold. The Department of Social Development had insisted this was “one of the most effective and accurate mechanisms used to retrieve the SRD applicant’s financial means for the particular month concerned.”

Judge Twala’s ruling contradicted that position directly. The judgment, handed down on 23 January 2025, found that banking verification cannot account for income fluctuations over time, can erroneously register income when none was received, and cannot distinguish between actual earnings and other deposits such as funeral assistance or loans. The case was brought by civil society organisations the Institute of Economic Justice and #PayTheGrants against the Department of Social Development and Sassa, with National Treasury joining to oppose it. Seventy-nine testimonies documented the system’s inadequacies. One applicant, Buhle Sibya from Amanzimtoti in KwaZulu-Natal, testified that her grant was declined after bank verification flagged R1,000 received toward her mother’s burial as income, cutting off her only source of support for herself and her daughter.

The ruling ordered the government to improve the system, raised the grant payment from R370 to R624, and declared it unlawful to conduct SRD applications exclusively online.

On 13 February 2025, the Department of Social Development, Sassa and National Treasury appealed, arguing the entire ruling is flawed. The appeal is scheduled for hearing on 25 August 2026 in the Supreme Court of Appeal. Twala’s orders have been suspended pending that outcome, allowing the government to continue expanding its digitalised processes while the constitutional questions remain open.

Oversight of the bank verification process itself raises further concerns. Van Vrede stated that accuracy monitoring is “all IT-driven.” When beneficiaries lodge complaints through the SRD virtual call centre, the complaint passes to Sassa’s IT department, which then engages the bank’s IT personnel to determine whether the program made an error. Van Vrede maintained that “chances of error is small” because the program simply sums deposits. That framing, however, is precisely what the high court rejected.

Meanwhile, the system’s design assumes digital access that many applicants do not have. Temoho Kgosipula, coordinator of #PayTheGrants, told investigators that the process offers no alternative for those without phones or data. “We have people living in not-so-urban establishments, townships, villages and they don’t have access to digital stuff,” Kgosipula said. Van Vrede acknowledged that Sassa’s office staff cannot handle the volume of SRD applications through physical assessments, which is why the online model persists despite the court’s finding that it is unlawful.

The appeal suspension has delayed the ordered improvements, but those improvements remain legally required once the Supreme Court of Appeal rules. Whether the court upholds, narrows or overturns Twala’s judgment will determine not only the future of bank-based verification but also the accountability framework governing how the state delegates core welfare functions to private financial institutions.