South Africa a step closer to new ‘full service’ state-owned bank

The Department of Communications and Postal Services has 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 was tabled by communications minister Khumbudzo Ntshavheni on Tuesday (17 May) and aims to insert and change definitions in the South African Postbank Limited Act to allow it to function as a separate entity to the South African Post Office.

It would allow for the shareholding of Postbank to be transferred from the South African Post Office (SAPO) to the government and allow for the setting up of a Bank Controlling Company (BCC) – a holding company for the bank.

The Postbank is currently a subsidiary of the Post Office (SAPO) and only offers transactional and savings accounts. As a state-owned company, until recently it has been prohibited from engaging in full-service banking due to several policies and regulations.

According to the department, Postbank currently meets all regulatory requirements set out by the South African Reserve Bank to qualify for a full-service banking licence in terms of the Banks Act; however, it hit two hurdles:

  • The legislative conflict which prevented state-owned entities from being eligible to apply for registration with the SARB as either banks or BCCs; and
  • The SAPO Group not meeting BCC structure requirements.

“The first challenge has been addressed through the amendment to the Banks Act, as contained in the Financial Matters Amendment Act, 2019 (Act No. 18 of 2019). The Banks Act is currently applicable to national state-owned companies as well.

“The only remaining challenge relates to the BCC structure which is being addressed through the current proposed amendments to the Act,” the department said.

The BCC’s function is to step in to recapitalise and support its subsidiary bank if it runs into financial difficulties. However, the South African Post Office is not profitable, and not in a position to perform this function.

Through the amendment bill, a solution to this problem is to remove ownership of Postbank from SAPO entirely, making the minister of communications and digital technologies the sole owner and shareholder of Postbank and its BCC.

“The option selected was the most viable and cost-effective to mitigate against the risk that the government would be obliged to provide ongoing support to SAPO in order to maintain the structure of the SAPO group as the result of the ownership of Postbank,” the department said.

The department added that Postbank is not being established from scratch as a bank, but it has been an existing division with SAPO from the onset and was later incorporated as a 100% subsidiary of SAPO.

The removal of Postbank from SAPO also has direct financial implications on the Post Office, it said.

Apart from the implied decline in the net asset value of SAPO brought about by the separation of the Postbank subsidiary, there is also an implied restructuring of the SAPO business. The department and National Treasury have been working on finding a solution to compensate SAPO, it said.

State-owned bank – not state bank

While the new Postbank will be state-owned, this process is separate from a recent push by the ANC to introduce a state bank.

In 2020, president Cyril Ramaphosa said that the government was considering the establishment of a state bank as part of its efforts to extend access to financial services; however, more recently, the government has cooled off on the proposal for the time being.

In March 2022, finance minister Enoch Godongwana said there would be no new state bank as the country lacked the necessary money to back its creation.

The submission of the section 43 application to the SARB is the final step in the Postbank’s banking licence application for it to be considered having complied fully with all the requirements as stipulated in the Banks Act.

Read: 5 reasons why South Africa’s economy is struggling right now

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South Africa a step closer to new ‘full service’ state-owned bank