The SA Post Office has suspended its CEO, Lindiwe Kwele, after just four months into the job as the state-owned entity struggles to pull itself out of a crisis that saw it lose more than R1bn in the last financial year.
The Post Office is one of several state-owned entities that has had to rely on government bailouts to stay afloat.
Business Day could not establish the reasons for Kwele’s suspension, which comes barely months after taking over from Mark Barnes, who resigned in August after clashing with the board and the government over their decision to hive off Postbank, the financial services arm of the Post Office, with ambitions to become a fully fledged bank.
Kwele and the head of the supply chain management division, Mothusi Motjale, were placed on suspension on December 4. The Post Office confirmed the suspension of the duo, saying it would allow for an independent investigation into unspecified matters.
Kwele’s lawyer, Eric Mabuza, said his client had already taken urgent steps to challenge the suspension. “We maintain that her suspension was unlawful. We are very confident that this suspension will be set aside by an independent panel as unlawful,” he said.
Ivumile Nongogo, an executive in the Post Office’s governance and regulatory affairs department, has been appointed acting group CEO.
The Post Office is in a worse position since taking over paying a portion of social grants and urgently needs a turnaround plan to keep it functional by April 1, according to a separate submission made to the board and seen by Business Day.
The involvement of the Post Office in the distribution of grants was originally seen as a lifeline, with executives telling parliament in November that it would go a long way towards putting it on a sound financial footing.
The Post Office said that, based on forecasts at the time,
gross revenue expected from the project was R1.9bn a year.
This does not seem to be the case, according to the submission made to the board by group chief information officer Refilwe Kekana.
In its annual report for the 2018/2019 financial year, the Post Office recorded a R1.1bn loss, which was R95m more than the prior year, citing costs required for the implementation of social grants payments.
Kekana states in the submission dated December 30 2019 that the third-party contracts entered into for the payment of social grants have put the Post Office in the position it is in now and need to be reviewed.
He said there was “less than desirable contracting that the previous management and board had entered into and a lack of proper contract management” by the Post Office.
The postal service, which took over the social grants distribution contract from Cash Paymaster Services after a court ruling that the tender process to acquire the service was unlawful, should consider using Ithuba, the national lottery operator, to distribute welfare payments, Kekana suggested to the board.
He said Ithuba already had its technology deployed in Post Office branches, which would cut costs and fast-track the grant payment system.
The Post Office would not comment on whether the board had received and accepted the submission.
A person involved in the process and with in-depth knowledge of the problems between the SA Social Security Agency (Sassa) and the Post Office told Business Day that the latter was not adhering to the service-level agreement contract signed in 2018, stating that the relationship was “just not working”.
The person said the majority of the social grant beneficiaries were receiving their money directly into their bank accounts. “Only a small amount of beneficiaries were getting their money from cash pay points, which was costly and would eventually be phased out.”
This would mean that the Post Office’s involvement was not necessary for the distribution of social grants.
Post Office spokesperson Bongani Diako said it was making a loss from operations but it had reduced the negative net cash flow from operations through the rollout of cost-containment measures and revenue growth initiatives.
Complaints have been lodged with the office of the public protector against Sassa for allegedly failing to properly implement the new grant system regulated by the Post Office, which had resulted in undue delays or failure to pay social grants.
Public protector spokesperson Oupa Segalwe said there were two investigations into two separate complaints. The complaints were received in September 2018 and July 2019. The investigation was ongoing, he said.
Sassa spokesperson Paseka Letsatsi said all 11-million grants were paid through direct deposits through Bankserv, the largest automated payments clearing house in Africa.
He said approximately 3-million beneficiaries choose to use their own bank accounts to receive their grants, while the balance all had Postbank accounts.
The contract with the Post Office was for the distribution of the grants which were deposited into Postbank accounts opened and managed in accordance with the contract between Sassa and the Post Office.
About 200,000 beneficiaries accessed their grants at cash pay points, but this number fluctuated monthly, Letsatsi said.
Diako said the Post Office distributed social grants to 8.1-million beneficiaries whose grants were deposited into Postbank accounts.