‘Postbank can’t do it’ – Analysts weigh in on having a state bank

Postbank’s recent failure, leaving Sassa grants recipients and pensioners stranded without funds, highlights its unsuitability as a state bank.

The government blamed “a glitch” from system migration, but this excuse does not help pensioners who solely rely on this money for survival.

State banks offer commercial banking services but are not involved in monetary policy, according to Investopedia.

Jannie Rossouw, a visiting professor at the Wits Business School, said if anyone was still thinking government could turn the Postbank into a successful state bank, then they had the answer now.

“Turning the Postbank into a state bank will be a fiasco. We still do not know what government wants to do with a state bank and why,” he says.

ALSO READ: Government does not have the capacity to run a state bank

Bank for women, youth and people with disabilities?

Asked about Minister of Women, Youth and Persons with disabilities, Nkosazana Dlamini-Zuma’s, plan for a bank for women, youth and people with disabilities, Rossouw just laughed it off.

Dlamini-Zuma has already appointed a management committee, chaired by Dr Thandeka Ellenson, to start the process in cooperation with other stakeholders.

She told parliament the bank was needed because women, the youth and people with disabilities often battle to get financing from existing financial institutions.

Ellenson said the bank would be established by January and set to operate by June next year.

She said it had met the minimum requirements, with more than R100 000 in capital and more than 200 members. The qualification figures for the application is 200 members and R100 000 minimum.

“To date, SAIFS has 429 active members, and the bank balance is R257, 400. 00 cash deposits (this exceeds the minimum requirement),” Ellenson told the committee 

When Khumbudzo Ntshavheni, minister in the presidency, was still minister of communications and digital technologies, she said in January that the Postbank was ready to take up the role of a state bank and that the ANC proposes for government employees to be paid from this state bank.

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Previous problems at Postbank

The Postbank has not been without problems before the latest ‘glitch’. Ntshavheni said in her last budget vote her department was aware of the challenges of system weaknesses facing the Postbank and was working with the board to resolve them, including holding those liable accountable.

However, nobody is being held accountable for the ‘glitch’ that caused so much misery for pensioners, who had to pay extra banking costs for declined transactions and borrow money, often from loan sharks and at 50% interest, to survive.

In addition, irregular expenditure at the Postbank increased by R118 million in the 2021/2022 financial year, while it did not reach its priority target of even acquiring a banking licence.

According to the Auditor General of South Africa (AGSA), the irregular spending was due to services obtained without contracts in place and non-adherence to procurement processes.

The AGSA also noted insufficient consequence management efforts and no internal processes were established to deal with consequence management. One of the irregularities was that Postbank failed to maintain an effective internal system to safeguard the issuing of bank cards for the South African Social Security Agency, which caused a financial loss of nearly R68.8 million in cards unaccounted for.

It seems almost a year later, the department has still not instituted any consequence management measures.

Pensioners were also left without any money in December last year when Postbank suspended ATM withdrawals for Sassa beneficiaries which Postbank said, “was necessary only for the month to curb fraud”.

Not implementing effective controls on card management and the Sassa beneficiary payment process caused fraud with stolen Sassa cards amounting to almost R13.6 million.

ALSO READ: Plan to turn Postbank into state bank will simply result in ‘another Eskom’

Not everybody wants a state bank

Thankfully, president Cyril Ramaphosa did not make an announcement regarding the Postbank becoming a state bank in his State of the Nation Address in February as Ntshavheni promised.

Ntshavheni talked about a state bank despite finance minister Enoch Godongwana saying last year the creation of a new state bank was not possible as the country lacked the money to back it.

Independent economist, Bonke Dumisa, also warned starting a state bank would end up serving only the interests of a select few.

“The establishment of the Postbank as the new state bank will simply be for the own agendas of politicians, exploiting the sentiments of the Radical Economic Transformation section. It is certainly not based on sound financial management.”