The legality of Khayalethu Ngema’s appointment as Postbank’s administrator has come under scrutiny, but Communications and Digital Technologies Minister Mondli Gungubele says he ticked all the boxes.
Gungubele appointed Ngema with immediate effect on Thursday, saying he was firing the board. However, five of the seven non-executive members had already served him with resignation letters on Wednesday. The sixth board member stepped down on Thursday morning ahead of the state-owned entity’s annual general meeting (AGM) later in the day.
Those who resigned were board chairperson Thabile Wonci, Gcobani Mancotywa, Vuyelwa Matsiliza, Martin Mahosi, and Dr Leigh Hefer-Hendrikse, followed by Ashley Latchu. Yesterday, Sunday World saw a record that one of the board members, Letlhogonolo Noge-Tungamirai, demanded written reasons for her removal as a director.
Gungubele said the decision was in line with Section 71 of the Companies Act. The provision empowers shareholders to remove an incumbent director by way of an ordinary resolution adopted at a shareholders’ meeting, but the legality of Thursday’s AGM was also questioned since the majority of the board members had resigned.
Speaking to Sunday World on Friday en route to New York, Gungubele maintained his decision was above board and promised his office would, in his absence, provide further clarity.
Yesterday, the department’s spokesperson Nonceba Mhlauli said: “The minister followed all legal and procedural prescripts required to make changes to the board. Please be assured that the AGM was fully compliant with the law.”
But section 25 of the amended Act also outlines a process that Gungubele should follow before appointing Ngema, including that he must issue a directive stating the nature of the deficiency, the steps to be taken, and a reasonable period for those steps. Once the company fails, the administration clause is triggered, but Sunday World learnt no such process was followed.
According to Gungubele’s office on Thursday, the outgoing board faced incriminating allegations from a forensic investigation report by KPMG.
The report alleges Postbank continued to use unlawfully contracted service providers, namely FSS Technologies South Africa, which later ceded the contract to Electronic Connect (EC). But the matter predated the outgoing board, according to a leaked internal Postbank statement.
In summary, Sassa and Cash Paymaster Services signed a services agreement in 2018 to handle social grant funds. South African Post Office (Sapo), was instructed to develop a method for paying social grants after a legal battle between the two companies.
Sapo and FSS then signed a software licensing deal for the Integrated Grant Payment System (IGPS) to improve the national payment system. The IGPS needed a financial payment switch to connect to the BankServ Africa platform.
Sapo and FSS provided moving services for banking for six months, but FSS allegedly continued providing services without receiving payment.
In February 2021, Sapo ceded its rights under the licensing agreement to the bank.
FSS suspended switching services for two hours, affecting 160 000 social grant recipients. The bank applied for condonation and regularisation of the switching service heads of agreement. In January 2022, the bank’s new CEO renegotiated the price, but the National Treasury declined the application. The bank continued the arrangement with FSS/EC to avoid disruption.
In December 2022, the bank agreed to pay FSS/EC the outstanding amount of R47-million. This was in exchange for FSS/EC not disconnecting the switching services and assisting the bank with the migration of the IGPS into the bank’s system.
The last time FSS/EC threatened to terminate switching services was on July 31.
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