Court: Laws preventing deductions from grant beneficiaries could disrupt banking

The Reserve Bank further cautioned this would result in a broader economic impact due to unsuccessful debt collection.

Picture: Supplied

CAPE TOWN – The High Court in Pretoria has cautioned that if government prohibits deductions from Grindrod Bank accounts held by social grant beneficiaries, it would be interfering with the banking system.

In a ruling on Tuesday, the court said amended regulations don't restrict beneficiaries from authorising electronic debits on their own bank accounts.

It follows an application by Cash Payment Master’s parent company Net1 Technologies, which had gone to court to get a declaratory order against the government’s 2016 amended regulations prohibiting direct deductions.

Grindrod Bank, which was most affected by the regulations, handles the payment of about R550 million each month to more than 10 million accounts held by social grant beneficiaries.

In his ruling, acting Judge Corrie van der Westhuizen cited a Reserve Bank warning that a government instruction to prevent any debit orders from these accounts would disrupt the system of collection and payment.

The Reserve Bank further cautioned that this would result in a broader economic impact due to unsuccessful debt collection.

Judge Van der Westhuizen says the new regulations allow for debit or stop orders, provided that the beneficiaries consent to such deductions in writing to Sassa.

He also made it clear that it was illegal for Cash Paymaster Services or anyone else to make deductions other than for funeral policies before funds were paid into the bank accounts.