Minister Gungubele wants ex-Postbank directors criminally charged

Five out of Postbank’s eight directors resigned, earlier this month citing “hostile” treatment by South Africa’s Communications Minister, Mondli Gungubele, as their reason for stepping down.

Now, Gungubele, has unleashed a barrage of accusations against them, suggesting they could be criminally charged.

The trigger for this disruption was software glitches during September payouts that deprived hundreds of thousands of vulnerable citizens of their crucial grants.

According to a News24 report, Gungubele, who oversees Postbank as part of his portfolio, did not mince his words when he declared he was in a full-fledged battle with the bank’s former board.

He has accused them of violating public finance laws by allegedly making an illicit payment of R140 million to a software provider.

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He alleged this sum was purportedly disbursed without following the proper legal procedures, raising serious concerns about transparency and accountability within the organisation.

Although Gungubele refrained from disclosing the identity of the technology firm implicated in his allegations, he affirmed the board had been summarily removed in response to the ongoing scandal.

“Some [of the directors] are respectable, but not all of them,” he told the media agents.

Exodus

The former directors walked away from their jobs just as Members of Parliament’s Portfolio Committee on Social Development were informed that the “system glitch” responsible for the grant payment debacle was linked to the bank’s software.

The roots of this crisis trace back to 2018 when Postbank entered into a contract with a company called FSS Technologies for an Integrated Grant Payment System (IGPS) intended for South African Social Security Agency (Sassa) grants.

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Initially, FSS Technologies provided Postbank with its switch system for free for a six-month trial period, during which Postbank was expected to develop its own solution. Regrettably, Postbank failed to do so, leading to a protracted dispute over usage and payments.

The situation worsened in 2021 when FSS Technologies temporarily shut down the payment system for two hours, affecting 160,000 grant recipients and resulting in a hefty R17 million fine imposed on Postbank by Sassa.

Switch system

In May 2021, the licensing of IGPS to Postbank was transferred to Electronic Connection. An agreement was reached for Postbank to pay R46 million for past usage of the switch system, with the second tranche pending the outcome of an ongoing investigation by financial services firm KPMG.

Notably, Electronic Connection has threatened to suspend its services due to unpaid invoices, further adding to Postbank’s woes.

In response, former board members contended the bank was coerced into paying both technology companies to ensure the continued payment of grants to millions of South Africans and to avoid hefty fees payable to Sassa for disruptions in grant disbursements.

Despite these challenges, Postbank launched its own payment system in September.

Nevertheless, numerous complaints have arisen regarding the non-payment of grants to beneficiaries. The former board members, who claim innocence in their dealings with FSS Technologies and Electronic Connection, assert they inherited these issues from previous leadership groups. They commissioned KPMG to investigate in February 2022, insisting no conflicts of interest or malfeasance were found in the KPMG report.

ALSO READ: Sassa pensions: Ministers must tackle systemic flaws at Postbank

Consequence management

In response to the board’s departure, Gungubele characterised it as “consequence management”, asserting the initial KPMG investigation had exposed a litany of irregularities. He condemned the board members for their involvement in an allegedly illegal contract, even after its unlawfulness had been brought to their attention.

The former board members countered by stating they had valid contracts in place with both technology companies, emphasising the importance of maintaining grant payments to avoid penalties from Sassa.

They expressed their frustration at the minister’s decision to dismiss them, claiming numerous attempts had been made to clarify the bank’s position regarding FSS Technologies and Electronic Connection.