/ 15 November 2022

Postbank’s irregular spending rises by R118 million

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Irregular expenditure at Postbank rose by R118 million in the 2021-22 financial year

Irregular expenditure at Postbank rose by R118 million in the 2021-22 financial year and the state-owned entity failed to reach its priority target of acquiring a banking licence.

The inappropriate spending resulted from services that were procured without contracts in place and non-adherence to procurement processes, Joyce Nkonyane, a senior manager at the Auditor General of South Africa (AGSA) told parliament’s portfolio committee on communication on Tuesday.

“Also, what we have noted is that failure of having enough consequence management efforts and no internal process established to deal with consequence management causes the escalation of irregular expenditures,” she said.

One of the irregularities was that Postbank failed to maintain an effective internal system  to safeguard the issuing of bank cards for its client, the South African Social Security Agency

This led to a financial loss of nearly R68.8 million in cards that were unaccounted for. Postbank’s failure to implement effective controls on card management and the Sassa beneficiary payment process led to stolen Sassa cards being used to commit fraud amounting to almost R13.6 million.

“Post Bank, Post Office and department of home affairs are the role players in the flow of funds and what we have noted is that there is a large set of internal control weaknesses that are making it possible for invalid beneficiaries to find themselves within the system, even beneficiaries that are not alive,” Nkonyana said.

The chairperson of the entity’s board, Thabile Wonci, told the parliament committee: “We, as the board, have said that this age of irresponsibility must end.”

In defence of Postbank, deputy communication minister Philly Mapulane said the auditor general’s report unfairly painted a bad story about the institution and leadership instability:  

“I am happy to report that the leadership instability that was pointed out by the AGSA  which existed at the time, is no longer there, as we have a fully capacitated board,” Mapulane said.

Acting chief executive Lucas Ndala said Postbank had developed a strategy for the 2022-23 financial year, including acquiring a banking licence and achieving financial stability by selling new products to new and existing clients.

The third strategy is to implement information technology modernisation projects, after the bank suffered a series of cyber attacks resulting in the loss of funds.

“Our IT system does not mirror that of a bank,” said Wonci.

The fourth priority for the bank is to improve corporate governance capabilities to strengthen accountability at all levels of the organisation.