Post-apartheid SA has continually struggled to balance the contending forces of modern global economics dominated by big business and innovation with the necessity to redress historical social inequalities in education, healthcare and financial services.
Today, it is financial inclusion that is at risk, threatened by the department of home affairs price increase for enhanced real-time identity verification services.
As we have learnt that from July 1, the department will charge R10 per real-time identity verification, up from a nominal 15c.
Taken at face value, 6,500% increase in the cost of identity verification is staggering. However, the need to upgrade the service with appropriate pricing to meet the demands of the 21st century is not negotiable.
The necessity for an effective identity management system in an era of digital transformation is crucial to combat fraud, cybercrime and money laundering as well as to provide effective services across all sectors.
As financial services are digitised, the verification of identity is a critical component. Financial institutions must make use of the home affairs services in the provision of their services. Bringing SA’s large unbanked population into the financial system requires an affordable, accessible digital solution.
Consequently, the home affairs’ fee increase has been met with mixed reactions from local banks. Capitec CEO Gerrie Fourie, for instance, committed to absorbing the increase, accepting the need and supporting it being funded by business.
While the “deep pockets” of Capitec may allow carrying this cost, TymeGroup CEO Coenraad Jonker expressed concerns at the increased cost, already subsidising their lower-income customers, calling it a “regressive tax on the most vulnerable South Africans”.
History tells us that ultimately, the increased cost will be carried by the consumer and it is the poor who bear the brunt, either through paying more or being excluded entirely.
Viable alternatives exist as means to financial inclusion through digitisation. Looking no further than Kenya, the M-Pesa system has empowered its financial system.
The system implemented in 2007 makes use of basic cellphones, rather than requiring sophisticated digital identity systems and bank accounts. This low-cost and easy-to-on-board transactional system has enabled M-Pesa to scale to become a national infrastructure. Today, 80% of adult Kenyans make use of mobile money empowered by M-Pesa.
Compare this to the experience in SA, where mobile money was piloted and failed to take off. Efforts were abandoned in a large part because bankers and regulators did not respond to the reality of our informal economy and townships.
Rather than making the effort to understand why mobile money failed here and was successful in Kenya, alternative approaches have been pursued. Approaches that ultimately result in digital financial inclusion become a privilege of the wealthy, not a right for all.
The aspirations of home affairs minister Leon Schreiber are commendable. He is right to make digital transformation the “apex priority” of his department.
Modernisation of home affairs is not negotiable. However, the question we must ask ourselves is: Who is going to pay the price to make progress? Certainly, it should not be the citizens and the poorest of the poor.
Yes, there is a need for and benefit in the development of a secure ID system. But it shouldn’t be achieved in a way that the poor cannot afford to use it.
Schreiber is correct that “Home affairs is also the foundation of the financial system”. However, when we build that foundation in a way that it promotes exclusion rather than enabling inclusion, we will fail to achieve the goals of our social transformation. The litmus test of SA’s digital aspirations is not the rate of modernisation but the benefit to all society.
- Prof Bvuma is director of school of consumer intelligence and information systems at UJ.