The Postbank’s IT systems overhaul is expected to be completed by the end of April, as the financial institution hits the ground running to become a fully-licensed state bank.
This is according to communications and digital technologies minister Khumbudzo Ntshavheni, providing an update on the establishment of the Postbank, as an official state bank that will play a crucial role the economic transformation of SA.
Ntshavheni was speaking at the recent Postbank activation programme held in Bloemfontein, Free State, to attract more clients.
Currently only operating as a deposit-taking institution under the South African Post Office (SAPO), the banking institution does not yet offer mainstream banking products as it not yet a registered bank, and a process is underway to ensure that it fully complies with the licencing requirements of the South African Reserve Bank (SARB).
The mission of Postbank is to be the trusted partner of government in boosting financial inclusion and access to finance for citizens, government and SMMEs, while offering simple and affordable channels, particularly for the underserved communities, explained Ntshavheni.
“The Postbank has been operating using all the technologies of the post office, but it does not have systems which are suitable to run a state bank. The audits submitted to the Auditor-General from the last four years show non-compliance of certain requirements of the Banking Act,” she explained.
“The reserve bank has given us until December 2023 to resolve the technology environment and all other banking responsibilities that we have. In terms of our IT systems, our target is that by April the technology environment requirements should be sorted. We are confident that everything that relates to the Postbank’s technology environment should be in order by that time.”
Disconnecting from SAPO
Last May, the Department of Communications and Digital Technologies tabled the South African Postbank Amendment Bill to the National Assembly, bringing the government’s plans to transition the Postbank into a full-service bank one step closer.
The bill, tabled by Ntshavheni, aims to add and amend definitions in the South African Postbank Act, to allow the Postbank to function as a separate entity to the SAPO.
The bill would pave a way for the setting up of a Bank Controlling Company, which would serve as a holding company for the bank, and the shareholding of Postbank to be transferred from the SAPO to the government.
According to the department, Postbank did not meet all regulatory requirements set out by SARB to qualify for a full-service banking licence in terms of the Banks Act – there were key regulatory hurdles which prevent the institution from being a fully licenced state owned bank.
These are:
- IT systems upgrade that will enable Postbank to comply with the regulatory requirements of a fully-fledged bank as stipulated by SARB.
- The legislative conflict which prevented state-owned entities from being eligible to apply for registration with the SARB as banks.
- The SAPO Group not meeting the operating requirements to become a Bank Controlling Company.
Last year the Democratic Alliance called for a feasibility study to be conducted on Postbank, given the government’s poor track record of running SOEs such as Eskom, Transnet and South African Airways, among others – which have been catalysed by corruption and deteriorating financial health, thus increasing the financial burden on tax payers.
Questions have also been raised by public critics and watchdogs on how the government would be able to efficiently run a state bank, given SAPO is currently in dire financial straits, marred by system failures and security breaches.
Responding to these concerns during a radio interview with Radio Sonder Grense (SABC), Ntshavheni explained that the department has been working with SARB, through the Prudential Authority, to upgrade its IT systems to meet regulatory requirements.
This includes beefing up the safety of the clearing system, the bank payment system and other payments systems, she pointed out.
Postbank suffered a cyber-attack incident in the last quarter of 2021, resulting in a financial loss of approximately R77 million, according to reports.
“We acknowledge that we have challenges in the post office and we are working to resolve them, and while we have made significant progress it will not take us less than three years to resolve these issues.
“In terms of modernising the Postbank systems, we appreciate that the reserve bank has extended the deadline to 31 December 2023, to upgrade the technology environment and all other banking responsibilities that we have. The Reserve Bank has acknowledged the progress we have made this far to make the post bank compliant and to modernise the systems. We are confident that we will be able to move out of the variation notice quicker than the deadline that we have been given.”
Once the systems upgrade has been completed, the only remaining compliance challenge will relate to the Bank Controlling Company structure, which is being addressed through the current proposed amendments to the South African Postbank Act, notes the department.
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