Who would have thought that the Covid-19 pandemic would present a potential gold mine for companies specializing in collecting and selling data?
Apple’s market capitalization, now $ 2.6 trillion, has risen 136% since the inception of Covid. If it were a country, Apple would be the eighth largest in the world, just behind France and India, with a GDP of $ 2.8 trillion and $ 2.7 trillion, respectively.
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Microsoft’s market capitalization of $ 2.5 trillion has risen 116% since Covid’s inception. The market capitalization of the Google Alphabet holding company is $ 1.9 trillion, an increase of 138% over the same period. Facebook’s market capitalization has risen 135% to $ 853 billion since the collapse of Covid in March 2020, and it is now the seventh most valuable company in the world.
Data is the ‘new oil’ and books like Life after Google by George Gilder and The era of surveillance capitalism by Shoshana Zuboff explains how these tech companies have become the richest companies in the world by collecting our personal data and selling it to advertisers and others.
Social grants as a profit opportunity
A new report from the research organization Open Secrets entitled “Digital Profiteers: Who Benefits from Social Grants?” explains how the Covid pandemic created new profit opportunities for technology companies as people migrated to an online world to shop, obtain information and health care services.
It’s not like South Africans haven’t been exposed to the ugliest side of data collection before.
In 2012, the South African Social Security Agency (Sassa) hired Cash Paymaster Services (CPS) to handle social welfare payments. Under the banner of ‘financial inclusion’, CPS embarked on a massive enrollment campaign, collecting data on 17 million recipients and opening bank accounts for 10 million grant recipients.
CPS ‘parent company, Net 1 UEPS Technologies, had unrestricted access to this database and used its subsidiaries to sell financial products to grant recipients.
He earned more from the sale of financial products than from the distribution of grants.
The Constitutional Court found Sassa’s contract illegal and ordered CPS to reimburse the illegal proceeds estimated at more than 500 million rand.
In April 2021, the ConCourt ordered CPS, which has been fighting the case, to open its books to independent scrutiny to determine how much it should return.
Here we go again?
Which brings us back to the latest campaign to enroll millions of South Africans in Covid grant relief, which began in April 2020.
It was at this point that Open Secrets began to question the digitization of the welfare state. His latest report focuses on GovChat, a relatively small South African tech company, albeit Sassa’s most visible partner in his digitization push.
In early 2020, GovChat offered its services for free to set up a WhatsApp platform for the Covid-19 Social Relief of Distress (SRD) grant application process.
An SRD grant was made available to alleviate poverty and unemployment, and was awarded to seven million people out of 12 million applicants between April 2020 and April 2021. The grant was reinstated in August 2021, and this time eight million people out of 13 million applicants were awarded.
“Globally, there has been inadequate scrutiny of how companies benefit from their access to personal data collected through government contracts under the auspices of public service delivery,” says Open Secrets.
Although no claim of wrongdoing is made by GovChat, Open Secrets says that a fully automated grant application process presents an extraordinary opportunity to build a database of about half the country’s population, considering all 18 million grants paid by Sassa to 11 million recipients, plus the 13 million SRD grant applicants.
“The digitization plan has opened the possibility that this data is available to a variety of public and private actors.
“Accessing the data of more than 30 million people would be the kind of big ‘data game’ that financial and technology companies dream of,” says Open Secrets.
Moneyweb asked the author of the report, Michael Marchant, if GovChat, which Open Secrets admits has not been convicted of any crime, is being ‘pre-criminal’, as in the movie Minority Report, where police use clairvoyants to detect crimes before that happen.
‘Potential for abuse’
“It is a valid question, but I think it is equally valid to draw attention to the potential for abuse and, hopefully, to start a debate on the ownership of our private data, which is protected by the Law on Protection of Personal Information. [Popia], who collects this information and how it is monetized. ”
Open Secrets says GovChat may have provided its services to Sassa for free in a time of need, but that puts it in an ideal position to benefit from future contracts tied to welfare distribution.
It says that “it is clear that GovChat has gained a significant advantage without the normal legal requirement of a competitive recruitment process and the public scrutiny that such a process provides.”
‘Hints and inferences’
Perhaps understandably, GovChat has taken offense at the association with Net 1 and CPS.
Eldrid Jordaan, CEO of Govchat.org, responds that any party that does business with the government should be subject to a reasonable level of scrutiny and should behave in accordance with all appropriate laws and regulations.
“Our objection was not the scrutiny, [as] we have nothing to hide and the Open Secrets report and its reporters have admitted that they have not found anything inappropriate on GovChat.
“Our objection lies in the innuendo and inferences the report makes with reference to Net 1 and CPS, entities and organizations that have been judicially determined to have acted inappropriately.”
GovChat received R20 million in equity funding for a 35% stake in JSE-listed fintech Capital Appreciation (Capprec), which in turn counts African Rainbow Capital among its shareholders.
Capprec, in turn, has three subsidiaries: Synthesis, African Resonance and Dashpay, all of them focused on the sale of technological solutions to financial and banking clients.
Another aspect of the case involves the Competition Court, which last month issued a March order prohibiting Facebook (the owner of WhatsApp) from expelling GovChat from the messaging app.
Facebook had argued that GovChat was violating its terms of service and could aggregate data without checks and balances, giving it an unfair advantage over other commercial solution providers.
GovChat argued that removing it from WhatsApp would materially harm its business.
Says Jordaan: “[Regarding] Decision of the Competition Court, is a decision that extends its previous determination and allows to complete the investigation of the Competition Commission on the anticompetitive conduct of WhatsApp. We hope that the Competition Commission will conclude that WhatsApp’s conduct is anti-competitive and refer the matter to [Competition] Court for full sentence “.
Open Secrets notes that Facebook has been found to violate user privacy and sell their data without consent; the most recent case earned him a fine of 4 billion rand by Irish authorities for violating EU data privacy laws. Facebook’s response to tougher regulatory scrutiny has been to throw money at lawmakers “and reject more effective regulation,” the report says.
Given this track record, regulators and civil society should closely monitor Facebook’s appetite for contracts with South African government departments and private sector players for more data. Open Secrets will certainly do it. ”