/ 14 September 2023

Mondli Gungubele says Postbank mass resignation was to avoid accountability for unlawful contract

Press Conference By Ministers Held Hostage By War Veterans In South Africa
Mondli Gungubele, has removed the board of directors of the South African Postbank amid allegations of an unlawful contract worth R140 million. (Photo by PRESIDENCY OF SOUTH AFRICA/Anadolu Agency via Getty Images)

While some 100 000 social grant beneficiaries still await grant payouts after a “technical glitch” last week, the minister of communications and digital technologies, Mondli Gungubele, has removed the board of directors of the South African Postbank amid allegations of an unlawful contract worth R140 million. 

Gungubele and his counterpart at the department of social development, Lindiwe Zulu, on Thursday briefed the media about the system outage that affected nearly 600 000 beneficiaries of the older persons and disability grants. 

But the minister’s address was overshadowed by questions about the mass resignation of the Postbank’s board of directors and chairperson on Tuesday, including allegations of meddling by the minister. 

In a letter, dated 12 September and addressed to Gungubele, the non-executive directors and the chairperson of the Postbank board announced their resignation with immediate effect. 

“The severity and recurring nature of the bad and negative treatment and hostility that the board has suffered at [the] hands of the minister sought to undermine the very foundation and credibility of Postbank and our individual responsibility,” reads the letter. 

“We cannot, in good conscience, continue to be associated with an institution whose board continues to be undermined and disrespected.”

The minister refuted the claims in a statement Gungubele’s office released on Thursday morning. 

“The minister has no intention to engage on these [claims] as they are void and without substance and would detract him from his singular commitment to ensure that the Postbank becomes a quality state bank to promote financial inclusion ensuring that the unbanked and the underbanked masses of the people of South Africa have access to bank accounts, bank facilities as well as financial services of any kind.”

The resignations took place two days ahead of the Postbanks annual general meeting. Gungubele described the resignations as “pre-emptive”. 

During the media briefing, Gungubele said one of the fundamental problems with the board included the continuation of an illegal contract valued at “no less than R140 million”. He said the preemptive resignation of the board prevented them from taking responsibility for the matter. 

The board’s removal followed “damning allegations from a forensic investigation report by KPMG that the Postbank has continued to use service providers that have not been lawfully contracted”, according to the statement. “These service providers were being paid millions without valid contracts and proper procurement processes being followed.” 

The forensic report recommended that the department act against the board of directors. 

On Thursday, the day of the annual general meeting, Gungubele removed the board, which had already resigned, and the only remaining board director in line with section 71 of the Companies Act. 

The Mail & Guardian reported in November that irregular expenditure at Postbank rose by R118 million in the 2021-22 financial year. The state-owned entity also failed to reach its priority target of acquiring a banking licence. The inappropriate spending resulted from services that were procured without contracts and with non-adherence to procurement processes

On the matter of beneficiaries who received a monthly grant from the South African Social Security Agency, the Postbank’s chief executive officer, Ntomboxolo Nikki Mbengashe, said that by Thursday, nearly 90% of the 600 000 beneficiaries had received their payments. 

On 5 and 6 September, about 10% of the 5.3 million beneficiaries who received their grants through Postbank’s (Sassa) Gold Cards, were unable to withdraw their monthly payout. 

Gungubele said Postbank experienced intermittent system problems “as a result of a systems upgrade” the bank is introducing “to provide a better service”. He said Postbank had since implemented a manual process to reverse funds into the affected beneficiaries’ accounts. 

“We would like to reassure our social grants beneficiaries, the public and all stakeholders that the system challenges were as a matter of fact resolved on the morning of 6 September 2023,” said Gungubele. 

Sassa beneficiaries who are still encountering difficulties with getting their grant money and need support can contact the Postbank call centre on 0800 53 54 55 or send a Whatsapp text message to 073 806 1631 or email [email protected].