Postbank board members explain why Sassa grant recipients were affected

Postbank was effecting social grant payments on its own from September 1 after its migration to its own payment switch on August 20 was successfully completed.

However, there were problems occasioned by the migration, which were widely reported in the media.

This information was contained in a statement by Postbank board members on Monday, explaining why they were resigning en masse.

They outlined the history surrounding the payment of grants which Postbank took over from the Post Office (Sapo) in 2020. 

Postbank was established in 2017 to take over the Post Office's bank business. Sapo had concluded a master service agreement with the SA Social Security Agency (Sassa) in 2018 to develop a system for paying social grants. 

Sapo went out to tender for the grant payment system and concluded a software licensing agreement for the provision of an integrated grant payment system (IGPS) for the payment of social grants with FSS Technologies. 

For the IGPS to function, it required a financial payment switch to enable it to connect to the BankServ Africa platform and process the transactions. Sapo was to use the switching services of FSS Technologies for six months at no cost, from April 1 2018 to September 30 2018. 

The six-month period was to enable Sapo to find its own solution, but this never happened. FSS continued rendering the switching service beyond the six months without Sapo paying. 

Around January 2021, Sapo ceded its rights and obligations in terms of the licensing agreement to Postbank and in May the same year, FSS ceded its rights to Electronic Connect (EC). The board members said Postbank inherited both the service provider and the service, namely the payment switch, from Sapo.

“The payment switch service is akin to a key for a motor vehicle. The vehicle becomes useless without a key. In this case the motor vehicle would be the properly contracted IGPS while the key will be the payment switch service.” 

The board members said upon taking over the payment of the Sassa grants from Sapo, it was confronted with an ongoing dispute between Sapo and EC/FSS which resulted in the termination of the switch service for two hours on February 11 2021.

The termination disrupted grant payments to Sassa beneficiaries. The bank was, as a result of the glitch, fined R17m by Sassa. 

“If it was not halted, it would have resulted in grant payments being affected for considerable periods and massive damage to the reputations of Sassa, the bank and the government as well as fines running into hundreds of millions of rand being levied upon the bank by Sassa.” 

The board said on February 19 2021, in an attempt to avoid disruption of services, that negotiations ensued regarding the restoration of the switching services. The parties concluded heads of agreement in terms of which Postbank would seek condonation from the National Treasury to regularise the switching services offered by FSS and a proper contract concluded by the parties until the bank could find its own switching solution. 

In December 2022, Postbank and the FSS/EC concluded a settlement agreement in terms of which the bank agreed to pay FSS/EC the outstanding amount of R46.8m, with half payable within seven days.

In return, FSS/EC would not disconnect the switching services and would also help the bank with the migration of the IGPS into the bank’s system. 

FSS/EC subsequently instituted action proceedings for payment of the balance of R23m and despite the pending action,  FSS/EC threatened to terminate the switching services by July 31 this year.

Postbank then launched an urgent application to interdict FSS/EC from terminating the payment switch. The court granted Postbank's application.

The board members said that at all times when the board resolved to stop payment for the payment switch, it was confronted with the termination of the service. 

“The board continued with the payment arrangement while steps were being taken to get its own payment switch ready and to complete the migration.

“In an attempt by the bank to regularise, on August 20 2023, the migration of the payment was successfully completed and with effect from September 1 2023, the bank was effecting social grant payments, notwithstanding the challenges occasioned by the migration, which were [published] all over the media.”

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