NEWS & ANALYSIS

Postbank responds to recent media articles on SASSA grants

Board exercises its ‘fiduciary duties in accordance with best practice governance prescripts’

Postbank responds to recent media articles on SASSA grants

5 March 2020

Following recent articles in the media relating to the system used by Postbank for the payment of SASSA grants, allegations against the Chairperson of the Postbank Board, Ms Phumzo Noxaka and the Board, and the precautionary suspension of three Executives, Postbank would like to issue the following statement to provide clarity to the matters.

Social Grant Disbursement system

The Postbank Board has not embarked on a general review of all contracts related to the disbursement of social grants. Postbank however is investigating the consolidation of the SASSA accounts into its core banking platform to achieve economies of scale and to eliminate duplication by operating a payment system originally acquired for the sole purpose of grant disbursement (on the basis of a BOT model) which is expected to yield cost savings in the long term. This process is still in concept phase and taking into account the magnitude, sensitivity and impact that such a change will have, further engagement between relevant stakeholders which include SASSA and SAPO is necessary and it is not possible to provide any specific detail in this regard.

Update on Postbank licence

Contrary to recent media reports, the Postbank Board hereby provides its assurance that the banking licence has not been placed at any risk.

Postbank’s application for a banking licence has been delayed due to legislative changes that were required in the Postbank Act in terms of the finalisation of the Bank Controlling Company (BCC) structure and the Banks Act of 1990 to allow for qualifying state-owned companies to apply for banking licenses.

The required changes to the Banks Act were assented to by the State President on 25 May 2019. The changes to the Postbank Act are at an advanced stage and it is expected that the parliamentary processes to approve the amendments will commence in March 2020.

Given the two-year period that has passed since Postbank submitted its original Section 16 Application file, the application file will be updated and resubmitted to coincide with the Postbank Act amendments.
Expansion of Postbank product portfolio.

Lending is indeed a critical element of Postbank’s mandate and strategy and the Postbank Board in collaboration with Management, in whom the Board has full confidence in terms of their experience and competency, has set targets aimed at creating the necessary capacity, systems, governance structures and resources in the Bank in preparation for lending. The commencement of lending is however dependent on registration as a credit provider with the National Credit Regulator, obtaining the approval of the National Treasury and providing assurance to the South African Reserve Bank that the required systems and credit governance structures are appropriate for the business activities the Postbank is to undertake.

Recruitment of executives

The mandate of the Postbank is primarily that of financial inclusion and in particular the provision of accessible and affordable financial services, including responsible lending, to the un- and under serviced communities of South Africa. The Postbank Board is currently recruiting for an experienced Chief Executive Officer that would assist the bank in meeting these strategic objectives. The position of CEO will be advertised internally and externally during March 2020 and is expected to be completed in 4 – 5 months.

Suspension of Executives

The Postbank confirms the suspension of Messrs Adam and Kandeh and Ms Chonco, the former Acting MD, CIO and former Acting CFO respectively. The reasons for placing the executives and manager on precautionary suspension were communicated to them and in order to protect the integrity and confidentiality of the processes it would not be appropriate to divulge the details thereof. The suspensions were necessary to afford the Postbank time to conduct investigations into the allegations against the officials to ensure there was no direct nor indirect interference in the ongoing investigations. Ms Chonco has since tendered her resignation. The Postbank has concluded the investigation into the allegations against Messrs Adam and Kandeh and internal processes are currently underway.

Postbank Board

Following the resignation of the Mr Barnes, former Group CEO of SAPO who was a member of the Postbank Board by virtue of his position as SAPO Group CEO, it is correct that the Postbank Board currently has four non-executive Board members versus five as stipulated in the Postbank Act for the inaugural Board. The current Post Bank founding documents confirms that the Board remains quorate.
The allegations of “Postbank Board interference in operational matters and therefore putting Postbank’s projected profit of R350 million and application for a banking licence at risk” is speculative and void of any truth. Postbank has been profitable for many years and its profitability is not at risk in any way. The Postbank Board comprises of experienced banking professionals with extensive board experience whose appointments have all been through a fit & proper vetting process by the SARB similar to the board appointments of all Banks in SA. The Board exercises its fiduciary duties in respect of the Postbank in accordance with best practice governance prescripts and makes decisions as a collective.

Issued by Department of Telecommunications and Postal Services, 5 March 2020