HOW is this for a scary fact: the Postbank’s balance sheet is intermingled with the Post Office’s. That means that there is no formal legal barrier between the R4.5-billion of depositor funds it holds and the general operations of the Post Office. This is a weird historical legacy with roots in its 103-year-old founding.

The Postbank exists through its own act of Parliament rather than the legislation that governs other banks, the Banks Act. That means it doesn’t have the burdensome regulations other banks must comply with, particularly strict rules over what you may use depositor funds for and the capital you must hold — or the strict supervision of the Reserve Bank.

Here’s another scary fact. The Post Office is currently facing a debilitating strike. This has effectively shut it down for the past 11 weeks. It has said in Parliament it is unsure whether it will be able to pay salaries this month. It is also subject to a probe by the Special Investigating Unit into allegations of corruption regarding, among other things, tenders.

In its last published annual report, for the 2013 financial year, the auditors noted "material uncertainty" that the Post Office could continue as a going concern. The 2014 report is overdue, though the Sunday Times reported on a leaked copy in which internal auditors raised concerns about nonadherence to policies and procedures.

It sounds like things have gotten worse. The fact that the report has not been tabled is apparently because the external auditors are not happy to sign it off. Let us be clear what this means. An entity that is accepting deposits from the public is facing a major cash-flow crisis amid serious allegations of fraud and mismanagement, and doing so without the trusty oversight of the Reserve Bank. Were this any other bank, its depositors would be charging for the door. The fact that they aren’t  is because its depositors are largely rural and poor, with little alternative.

An examination of the 2013 report provides a little comfort. The balance sheet holds "investments" worth almost as much as the deposit base. These seem to be largely money market instruments, so they should be low risk, though one never knows just who it is investing into. It also had R3-billion in cash. That meant its balance sheet was liquid and had the assets to cover depositors’ funds. But within the broader context of the farcical management of the business — the fact that those figures are now more than 18 months old and new figures are being delayed amid a standoff with auditors — the comfort is fleeting.

The Postbank exists through its own act of Parliament rather than the legislation that governs other banks, the Banks Act. That means it doesn’t have the burdensome regulations other banks must comply with.

This bizarre aberration in our banking system has not gone unnoticed. The Reserve Bank became rather animated about the risk it presented about a decade ago. It convinced the government to do something about it and in 2010 a new act was passed that required the Post Office to separate the bank from the rest of its operations into a new entity and apply for a banking licence.

In the last quarter of 2013 it did so, about two years later than initially planned. An application doesn’t mean much — it has to be successful. Given the high standard of risk management and internal controls the Reserve Bank insists on and the views of the Postbank’s auditors, approval of a licence could be a long way off. In its 2014 annual report the Reserve Bank’s bank supervision department said it was "considering" the application.

One can imagine that a well-run Postbank would be useful in the broader financial services sector. Its 1 400 branches are often in rural areas that the mainstream banks avoid. It could play a key role in many government-provided financial services such as social grants (it lost a contract to distribute grants in 2012). Frequent calls from ANC quarters for a state-owned bank could be satisfied with a well-run Postbank.

But a well-run Postbank can surely only emerge from a well-run Post Office. As the current strike and delays over the publishing of the Post Office annual report make clear, we are very far from that. I doubt the Post Office would still exist if it didn’t have a protected monopoly. It is the only organisation allowed to deliver packages to post boxes. Couriers are only allowed to hand over objects directly to people, rather than leaving them unattended. While the ANC likes to rail against evil monopolies and oligopolies, it is ironic that this one is quietly legally protected, despite the obvious management failures.

It is also an obvious eyesore in an otherwise well-run banking system. While the government is battling with its state-owned enterprises on various fronts, let’s not forget that this one also needs urgent attention.

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