Philemon Rakgogong, 72, from Randfontein doesn’t have enough food to last the month. He plans to return to the Post Office tomorrow to ask after his R2,080 monthly pension, the only income he and his grandchildren receive.
Rakgogong is one of the 600,000 social grant recipients left high and dry for more than a week by Postbank’s toxic mix of mismanagement, failure to pay service providers, and an allegedly “rushed” decision to appoint a new contractor.
On Thursday, Postbank confirmed completing more than 500,000 payments with about 100,000 beneficiaries still to receive their grants.
Rakgogong said he had to borrow R500 this week for food.
“The R500 couldn't get me enough food to last me the entire month. As I speak to you, I have very limited food that won't last,” he said.
Before Rakgogong’s wife died five months ago, they would put their pensions together to ensure their family did not go to bed on empty stomachs.
“I went to the Post Office on Monday. They took my number and promised to send me a text message which is what I am still waiting for,” he said, adding that he felt “frustrated and in big trouble”.
“I have a bit of maize meal but I couldn't buy enough food to last me the entire month and that has given me problems.”
I have a bit of maize meal but I couldn't buy enough food to last me the entire month and that has given me problems
— Randfontein pensioner Philemon Rakgogong
Postbank insiders blamed the situation on a “rushed” decision by the bank to appoint a new contractor to provide a payment switch service that carries out about 20-million transactions a month.
Insiders told the Sunday Times that the new payment system was tested on only 1,000 accounts and was not equipped to deal with the large volumes.
“On September 5, on grant day, that thing crashed. That switch [software] couldn’t take the load. Every two minutes it was failing. That is the heart of the issue, the reason we are here now and why the beneficiaries don’t have their money,” said one.
On Friday afternoon, Pat Zungu, 80, from Mamelodi east had not received his state pension. He said he was desperate to feed his sickly 73-year-old wife who needs to eat three times a day before drinking her chronic medication.
“I have no plan; I have to endure the agonising wait [and] do not know when it will end. The minister said on the news we will get the grants ‘soon’ but I do not know what that means — next week or next month?” he said.
Zungu eventually received his grant yesterday.
Tish Pereira, 58, from Boksburg had to borrow R1,000 for her mother Ada de Bonis, 90, who also didn’t receive her pension, which covers her chronic medication and pays for her caretaker.
“Since last week Tuesday, we've been trying to get the pension ... we've been to the ATM; it keeps saying 'no balance'. Even today, just 20 minutes ago, it showed 'no balance',” she said, adding that calling the Sassa helpline had not helped.
Postbank entered into an agreement with Electronic Funds Technology Corporation South Africa (EFT Corp) recently to run its switch payment software, a tool that helps service providers communicate with each other, verifies accounts and approves or rejects transactions. Postbank’s switch allows it to process transactions through its Integrated Grant Payment System (IGPS).
The contract with EFT Corp followed a lengthy battle between Postbank and its previous service providers, FSS and Electronic Connect (EC), over a R46m debt Postbank owes them. The two companies, appointed in 2018 to build and deliver the grant payment system, found themselves also providing the payment switch software service — for free. This was because the switch that the Post Office and Postbank were supposed to provide was “not yet ready and available” when the contract to pay the 6.3-million grant beneficiaries who receive their payments through this system began in 2018.
A Postbank insider close to the board, which resigned en masse this week after a fallout with communications minister Mondli Gungubele, claimed he exerted too much pressure on the bank’s executives to terminate the FSS/EC payment switch service because Treasury deemed the agreement, and payment arrangements, to be irregular.
The insider said while there were issues with the EC switch, the “contract was subjected to an independent forensic investigation which found nothing untoward” about it.
“All this was communicated to the minister ... Needless to say that when the EC Switch was being used to pay the grants, things were stable until the minister started to hound the entity, exert external interference, pressure and undue influence and going directly to management.”
The insider, who asked to remain unnamed, fearing victimisation, said Postbank rushed to change the switch systems from EC to EFT Corp with no backup option — and “that’s when the system glitches started as the EFT Corp switch had no capacity to manage the Sassa grant payment loads”.
During a press briefing after the board resigned, Gungubele charged that the directors avoided accountability over the continuation of an illegal contract valued at “no less than R140m”.
Gungubele’s spokesperson Nonceba Mhlauli told the Sunday Times he does not get involved with operational decisions and the decision to migrate the bank’s IT systems was taken long before he was appointed in March. She said there were serious flaws found with EC’s systems which led to criminal syndicates siphoning money from the bank and that the bank needed to comply with the auditor-general and KPMG’s findings.
“Various individuals have been implicated with some employees of the Postbank being taken through disciplinary processes while others have instantly resigned before action was taken against them.
"However, this does not stop the criminal investigation from continuing. The outcome of the forensic investigation by the KPMG show that the [EC] system has limitations that do not offer reliability and security. The system has exposed the Postbank to criminality and these concerns have been confirmed by adverse findings that the AGSA has made over three consecutive years,” said Mhlauli.
She said Gungubele was justified in holding the board accountable and that the technical glitch was resolved by September 6.
The Sunday Times understands that EC pulled its payment switch services on August 20.
EFT Corp director Carlin Harry Wicomb declined to comment, saying the company had a nondisclosure agreement with Postbank.
Documents the Sunday Times obtained show that in July EC gave Postbank an ultimatum to settle its bill and its continued use of its payment switch software.
In a letter to Postbank on July 23, EC wrote: “EC has supported Postbank beyond the call of duty and scope by providing solution design services on the security and integration architecture to ensure a successful migration of [Sassa] from IGPS to EFT Corp as per Postbank’s requirements.
“EC has also provided first and second line technical support to Postbank, a service that we provided to ensure Postbank can meet its obligation to pay Sassa social grants despite Postbank's incapacity to do so.
“Unfortunately, EC will immediately suspend the provision of technical support and project implementation resources until the IGPS contract is finalised,” it wrote.
Postbank then went to court seeking an interdict preventing EC from switching off its payment switch. This was granted. The high court in Johannesburg also ordered Postbank to pay EC, and bring a review application seeking to regularise the payment agreements to resolve the problems the Treasury raised.
Board member Gcobani Mancotywa said in his resignation letter to Gungubele that they had asked the Treasury to condone and regularise the payment for EC but were declined.
“There would have been massive disruption to the livelihoods of millions of Sassa grant recipients and Postbank would have incurred the wrath, both legally and financially, of Sassa for having breached the terms of the [service agreement],” he wrote.
“The pay run of September 2023 evidenced the company’s inability to pay Sassa grants without the services of EC Connect at this point. Against this background, the board of Postbank believes that it acted honestly and prudently, and with the requisite care and diligence expected of a board. Postbank did not suffer any financial loss as a result. In fact, it gained financially through transaction fees earned — from using the switch service and paying for it,” said Mangcotywa.
EC declined to respond, saying only that it had “suspended all its legal action against Postbank relating to the dispute for payment of outstanding switching fees” and that Postbank would submit a review application of its contract in the high court, based on a “just and equitable settlement”.
Treasury spokesperson Cleo Mosana confirmed that the Treasury had advised Postbank to “deal with the irregular expenditure of the contract”.
“The application requesting condonation from Postbank did not comply with the provisions of the irregular expenditure framework, in that there was no evidence of consequence management applied and no evidence of internal control measures implemented by the bank to prevent the reoccurrence of a similar transgression.”
Mosana said Postbank said it could not institute disciplinary measures against the responsible officials because they had left the bank — but no evidence of this was provided.
Sassa spokesperson Paseka Letsatsi said: “Sassa expects a service provider to perform based on the service level agreement and in case that fails, a penalty clause will apply. We have been given an assurance that such will not happen again.”
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