SA Postbank Limited Amendment Bill; ICASA councillor performance management

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Communications and Digital Technologies

08 November 2022
Chairperson: Mr B Maneli (ANC)
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Meeting Summary

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The Committee met virtually with the Department of Communications and Digital Technologies (DCDT) to receive a prepared statement on the feasibility study that the Committee had requested on the Postbank Amendment Bill, its separation from the Post Office and if the Postbank as a stand-alone entity was viable. The Department statement indicated that a feasibility study on the Postbank's separation from SAPO was not a legal requirement of the legislative process; thus, it was unnecessary. This was confirmed by the State Law Advisor and Parliamentary Legal Services.

This came as a result of Members who believed that a feasibility study was needed on how the bank will operate. However, the Department indicated that the Bill does not establish a new bank but ensures that the Postbank is compliant with existing regulations. Postbank can only complete its banking licence application after the Bill is enacted when it will be removed from the Post Office. Its modus operandi and other details that Members seek to obtain assurance from the feasibility study were operational in nature and the Postbank could be invited to brief the Committee on those.

Members were concerned that so many Post Office branches had been closed, especially in marginalised areas, that without a feasibility study, the Postbank might end up being a burden to the state like other state-owned enterprises. Members lamented that the Post Office does not meet the financial requirements to be appointed as a bank-controlling company. If SAPO could be financially viable, Postbank could obtain its banking licence. There were suggestions to lobby Parliament, National Treasury, and the Standing Committees on Finance and Appropriations for an appropriation to rescue SAPO.
The Department outlined its responses to questions raised by Parliamentary Legal Services and others on the ICASA Performance Management System. Thereafter, the Committee Report on the ICASA PMS was considered and adopted.

The Committee finalised the allocation of its membership to the subcommittees responsible for shortlisting, interviewing and recommending candidates to fill the ICASA and MDDA board vacancies. The Chairperson noted that the State Security Agency was left with only four SABC Board candidates to vet. As soon as that was completed, the Committee could make its SABC Board recommendations.

Meeting report

Feasibility Study on Postbank Limited Amendment Bill
Mr Omega Shelembe, DCDT DDG: SOE Oversight, read the Department's prepared statement about the Committee's request for a feasibility study. The statement was clear that the feasibility study was not necessary as it was not a legal requirement. The Department had consulted on this and legal advice confirmed its position.

Deputy Minister Philly Mapulane explained that DCDT had thorough engagements with its legal services. The feasibility study was unnecessary because the Postbank is in operation and was established some time ago. DCDT is seeking to finalise its corporatisation to conclude its licencing with the Prudential Authority. This process would finalise the separation process.

Discussion
Mr T Gumbu (ANC) supported the Department that there is no need for a feasibility study as it was unprecedented. He proposed that the Bill be elevated to the next level so the Committee can proceed with its work and finalise the process.

Ms D Kohler-Barnard (DA) said that the creation of a standalone bank offering full banking services is different from the existing small savings bank. They are completely different. To suggest they are the same is not acceptable. There is no indication if this bank will run from Post Office premises or if buildings will have to be built. Many Post Office branches have been shut down and it looks like more will be shut down. There is no indication of the budget. This is an enormous financial entity piggybacking on the Post Office that is yet to have a clean audit. The feasibility study would attempt to answer these questions. We cannot launch this without the facts being on the table.

There is also no indication of where the bank branches will be and the study would show this. We need to know if the public would use the already established banks rather than go to the Postbank – this is something we need to know. To suggest that the study is not needed is wrong because we are talking about taxpayers’ money here. Thus every detail must be considered and this Bill is being processed by a Committee with zero financial expertise as opposed to the Finance Standing Committee.

Mr L Molala (ANC) welcomed the Department statement and agreed it was time to take the process forward. Ms Kohler-Barnard has not read the document that she is contesting. This process is not establishing a new bank, the bank is already in existence. This process is merely separating the two entities for the other to have its own board. Secondly, the discussion in this meeting should be about the Bill. The feasibility study has nothing to do with the Bill. Stakeholders have supported this Bill; thus it is not fair to delay and stall this process due to a feasibility study. The public has confirmed its support for this Bill. It would be disappointing for Parliament to stagger this process because of a feasibility study.

The Chairperson read Ms T Bodlani’s (DA) remarks on the Zoom chat platform who asked if the Committee could get a legal opinion on the DCDT view that the feasibility study is unnecessary.

Mr V Pambo (EFF) said that Mr Molala was being disingenuous in his comments. This Bill creates a situation where the state almost has a bank of its own. The fact that a board is being constituted, it is a new bank. Thus we need to understand the shape and size of this bank, its direction, its capacity, the extent of its operations and how it will operate. The reason this Bill is here is that there is no appetite to revive SAPO and SAPO does not have the capacity.

It is not clear what this bank will look like. When colleagues are asking if this Bank will be using SAPO premises, will it pay rent on those SAPO premises? These matters are what Members want to understand. If we can make SAPO financially viable, there would not be a need for this Bill. We are not at a stage where we are just passing a law. Deliberations are still underway.

Mr Molala said information has been gathered from the public and we should now be consolidating what the stakeholders have said and finalising the process. It seems as if people are playing delaying tactics. Most of the stakeholders are pushing the Committee to expedite this process.

Deputy Minister Mapulane said that legally there is no requirement for a feasibility study on the Postbank Amendment Bill. The state law advisor was also engaged by the Department on this. If there was such a requirement, the Department would have complied with that. The Department would welcome the consultation of the Parliamentary Legal Services on this matter, but he was confident that even the Parliamentary legal services would come to the same conclusion.

He clarified the relationship between SAPO and Postbank and said that when the Postbank was established, that is when the separation between the two entities took place. Previously, when the Postbank was established that is when the separation took place. The Bill finalises the issues that the Prudential Authority was raising about the Bank’s controlling company and how that controlling company should be established and the processes that must be followed. Some of the elements that the Department is seeking to introduce are technical amendments to the original Postbank Act, which will fully comply with the requirements of having a bank. We do have a bank, and there is a board and management – the bank is functioning, but it does not fully comply with the requirements of the Prudential Authority, hence this Bill. This is not a Bill that establishes a new bank, but the objective is to amend some aspects of the legislation for compliance.

Some of the issues raised by Members are heard but they are operational in nature. These are not the subject of legislation. However, the points are noted.

Mr Shelembe suggested that the Committee is at liberty to call on the Postbank board and management to present its corporate plan, which will detail how it will navigate the closure of some of the Post Office branches. This would assist Members with some of the operational concerns that they have raised. The assertion that the Postbank would require an injection of huge capital to get it off the ground is not true. As far as things stand now is that the capital adequacy of the Postbank is sufficient for the Postbank to apply for a licence and apply for a full banking licence.

He was uncertain what legal question would be answered by consulting legal services. This process is not establishing a new bank. If a feasibility study were to be conducted, it would be conducted on an existing bank. The Post Office and the Postbank will continue to be enjoined but legally separated. It will utilise the infrastructure of the Post Office.

Ms Thiloshini Gangen, Parliamentary Legal Advisor, the feasibility study, she advised that the Bill seeks to amend existing legislation. The Postbank was not established from scratch as a bank, it exists and has been relying on SAPO but what is required is the complete removal and separation of the two entities. This process is the Committee’s process and she agreed with the Deputy Minister and what has been said by the Department regarding the current state and the way forward.

Ms Yolande Van Aswegen, State Law Advisor agreed with the DCDT that it was unnecessary to conduct a feasibility study, though it is at the Committee’s discretion there is no legal requirement as such.

Ms T Xego (ANC) also did not agree with the feasibility study. This new approach was not necessary, and she seconded the Members who proposed processing the Bill considering all the recommendations by stakeholders and comments by Legal Services.

Ms T Bodlani (DA) appreciated the process and said COSATU came to the Committee and supported the establishment of the Postbank, but it cautioned from where the money was going to come to licence the bank. This is exactly what the Committee is also saying. The implications of from where the money will come might end up being a burden to the State. The biggest concerns are affordability, target market and from where the Postbank is going to be operating. Members are asking if this will be sustainable. The Bill has passed muster, but we are asking about the modalities for the establishment of this Bank. The feasibility study will seek to answer questions about those modalities, if there is an appetite from the public; if the bank is going to be sustainable and if it is going to be self-sufficient. We all know that most SOEs end up becoming a burden to the State. Members appreciate how far the process has come but she pleaded with the Committee not to rush this process but to be thorough. It has to have an understanding of how this bank will look, walk like and sound like.

Ms Kohler-Barnard said the Committee should invite the Postbank to indicate what it would entail because passing a bill without knowing the financial implications is an impossibility. To suggest that there will be no financial implications is wrong. Secondly, an enormous amount of financial expertise will be required and we cannot pass something of this magnitude willy-nilly. The state does not have the money and this Bank will require financial assistance. We need to focus on specific areas that will speak to the operation of this bank. There is no reason to rush this process. It must be done properly. We need to assess the areas that need attention and there are many issues that must be attended to.

Dr M Basopu (ANC) shared the concerns raised by Members. It is important to move with certainty that this process will yield results that will benefit our people. However, with his limited understanding of project management, the feasibility study is meant for a new project, and this is not a new project but a continuation. Perhaps the concerns raised could be noted by the Department and considered going forward but it must not stall this process. Different views must be noted and not dismissed because they are also valid in the process.

Mr Pambo said that he agreed with a lot of what has been said about the process but the reason we are here is that SAPO is not financially viable. The Committee could lobby for financial rescue or assistance for the Post Office. If this can be done successfully, this process would be unnecessary. The only thing that holds Postbank back from being a fully-fledged bank is that SAPO cannot be the bank controlling company as it is currently not financially viable. SAPO could be a controlling company – and have Postbank as a fully licensed bank – if we propose an appropriation of resources to rescue SAPO. That could solve the problem because there would be a controlling company that is financially viable, which would help Postbank to be a fully licensed bank.

Ms N Kubheka (ANC) said the Department has completed its task and legal advice was consulted as well. Stakeholders have also supported the Bill. She agreed with the continuation of the process. This is not a new bank, thus there is no reason for a feasibility study.

Mr Molala noted that there was a consensus to move forward with the process. The Committee could engage the Postbank board to obtain more information on the matters Members have raised. If SAPO was not in a financial mess, there would not be a necessity for this separation or this Bill.

Mr Shelembe said that the Department has been on a long journey with National Treasury on seeking financial assistance for SAPO. Perhaps, the Committee could intervene and assist with this. However, this should not stop this process. The Post Office has indicated that it would take three years to turn itself around and start making a profit and the Postbank process cannot wait for that.

The Chairperson said he had communicated with the chairperson of the Standing Committee on Finance to have a joint meeting with it. This morning there had not yet been a response. This is the Committee that the Bill has been referred to. At some point, the Committee would have to make the call if the Finance Committee should be part of this. However, that Committee also has its own programme. As per the Committee programme, this matter should be finalised sooner than later and it should consider what the stakeholders have raised.

There is overwhelming support that a state bank is needed, and the Postbank would become that. There is also an appreciation that the reason the matter is being discussed is that the Committee has been presented before with what the Postbank would be like in terms of the infrastructure that would be used. There was an understanding of the relationship between SAPO and the Postbank even under conditions of separation. An MOU could be entered into between the Postbank and Post Office. It is correct that we must look at an intervention for SAPO but this is not linked to the legislation that the Committee is dealing with. These two matters should be separated. From previous engagements, it is understood that we need a functional SAPO. As we move to the next level of the Bill, the Committee must officially write to the Standing Committees on Finance and Appropriations for a financial intervention for the Post Office.

The reason the Committee discussion on the Post Office turnaround strategy was delayed until after the Medium Term Budget Policy Statement (MTBPS) was due to the hope of a financial injection announcement for SAPO, but there was no such announcement. The crisis is far from over and it was deepening. The crisis of the Post Office may not wait for a deferral. In the turnaround strategy SAPO presented to this Committee, it indicated that break-even and profitability may be in three years’ time. There is historical debt that must be serviced, and money would also be spent on the implementation of the turnaround strategy. This is a process of its own. It is important that this is understood so that the Committee does not miss an opportunity to make an intervention on behalf of SAPO.

There is also a suggestion that we may need to look at inviting the Postbank to present its corporate plan – this is welcomed, and it demonstrates that it is already operating as a separate entity. This has come before the Committee.

If there is no intervention at SAPO, COSATU indicated that it may not be operational for a few months. If that happens, the risk is that it may be one of those entities that go private, and this would constitute a betrayal of our people because it is an entry point for services in areas that are marginalised. This should be a concrete resolution of the Committee to intervene for an appropriation for SAPO. Members should consider lobbying for this in their political parties as well.

Ms Kohler-Barnard asked if the invitation to the Postbank and the engagement with the Finance Committee should be done after the process.

The Chairperson said that there is support for the Bill from different stakeholders. DCDT has agreed to present the Postbank corporate plan and there was a suggestion to include its annual report. Arrangements will be made with the Department for this, but this is an operational matter and the legislation does not speak to that. The Bill will still be considered clause by clause and this may be done in the presence of the Postbank. However, due to the predetermined programme of the Committee, this would have to be factored in.

If we do not do the clause by clause deliberation now, it would give the Finance Committee some time to respond about the Bill. With overwhelming support, this process could proceed but the Committee could give these Standing Committees time to make their submissions, and this would assist Members to enrich their understanding.

There is an understanding that the Post Office needs intervention. There was a proposal about that and this will be factored in the way forward.

ICASA Performance Management System
Mr Shelembe said the Department has presented the ICASA performance management system on several occasions. A full presentation was submitted today. He would focus on the legal matters raised by Legal Services. [see document].

Committee Report on ICASA Performance Management System
Mr Mbo Maleka, Committee Content Advisor, said that the team consulted with the Office on Institutions Supporting Democracy (OISD) and the Office of the Speaker to ensure that there is concurrence across the board. It was unfortunate that there was no template for such a report. Therefore team went with the standard template used to compile reports to the National Assembly.

The Office of the Speaker indicated that they did not necessarily need to have input in the process if concurrence with Parliamentary Legal Services had been sought.

The Committee Report was adopted without amendment.

ICASA and MDDA board recommendations
Dr Jacob Medupe, Committee Content Advisor, said that a draft programme had been compiled by the Committee secretariat for subcommittees to shortlist, interview and recommend candidates for the vacant positions on the MDDA Board and the ICASA Council. The programme would be circulated to the subcommittees and it would be adopted in that space.

The Committee then allocated Members to the two subcommittees.

SABC Board recommendations
The Chairperson said that there were still four people that need to be vetted. The State Security Agency (SSA) indicated that it was delayed by SAPS reporting back on the fingerprints, but it would follow up today. There are only four candidates outstanding for the vetting. Once this is concluded, a special meeting will be convened. The Committee has kept the public informed on the status of the process. The Committee has done all it could, but it must be patient in getting the SSA report and then it will be able to conclude and recommend the names. Hopefully SAPS and the SSA would revert to the Committee soon but the Committee would also follow up.

Minutes dated 1 November 2022 were considered and adopted.

The meeting was adjourned.

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