Can Postbank survive as SAPO liquidation closes in? 

As the South African Post Office (SAPO) drifts towards the cliff-edge of liquidation, the obvious fear is that Postbank – long treated as a piece of the same creaking state machinery – will be dragged down with it.

That fear is not irrational. Postbank was born inside SAPO, inherited systems that were never designed to run a modern retail bank, and for years relied on the Post Office’s branch footprint as a physical front door to “the rural and lower-income markets”. Then there’s the small matter of the inexplicable R4.2bn exposure Postbank has to the Post Office.

Yet Postbank’s official position now is that operational dependency on SAPO has been engineered out of the system. In a written response to questions from Currency, Postbank CEO Nikki Mbengashe says it processes payments for “just over 3-million grant beneficiaries” and that “almost 100% of these payments are made through retail partners and ATMs”. She adds that social grants via Post Office branches were “officially discontinued on March 31 2024”, meaning its grant-payment model “no longer depends on SAPO branch infrastructure”.

If that is accurate, Post Office liquidation is less likely to cause a day-one “no cash, no grants” disaster – at least for beneficiaries already migrated onto retail and ATM rails.

Banking pipe dream

But “no systemic payment disruption” is not the same thing as “no disruption”, and it leaves open the question of whether the bank can ever achieve the initial aim of becoming a fully functional bank as was proposed by the government when it was split out of the Post Office nearly seven years ago. And this is particularly so if its mandate is financial inclusion, not merely “grant distribution via a different queue”.

When the South African Postbank Limited Amendment Bill was signed into law, the then minister of communications, Mondli Gungubele, said the move “has the capacity to change the entire financial sector in South Africa as we know it”. The plan was to create a “developmental state-owned commercial bank in the interest of the people of South Africa”. The bank would apply for a banking licence “soon”, he said.

Still, the tumultuous history of the bank since being split out from the Post Office, its current finances, and a crevasse of unanswered questions suggest without a huge cash injection it needs, this is probably a pipe dream.

Financial black hole

The problem with Postbank’s R4.2bn exposure to SAPO is that the business rescue outcome means only 12c in the rand is recoverable, forcing a major write-off that has “materially reduced” its equity base.

This despite posting its first profit as an independent entity in the 2024/25 financial year, of R107m (off total equity and liabilities of just under R1bn), a huge turnaround from the previous year when it lost R1.3bn.

Former Post Office CEO Mark Barnes says the write-off is still “difficult to reconcile”, given SAPO’s audited position when he left the entity in 2019 (when Postbank was still a consolidated division of SAPO).

“At that time, Postbank had R5.15bn of deposits from the public, which were required to be held in certain prescribed assets (like money market deposits with registered banks) in support of the government guarantee that Postbank depositors got from government,” says Barnes.

Back then, the consolidated balance sheet of SAPO reflected cash and cash equivalent assets of R6.19bn, as well as “other financial assets” of R4.47bn.
“How that very healthy financial position changed to a material write-off in Postbank remains to be explained,” says Barnes.

Bailout blues

And it is precisely because of this write-off that Postbank has applied to the Treasury – repeatedly – for a boost to its capital. The extent of the boost – which it is adamant is not a “bailout” – has not been specified, but Treasury has consistently resisted the request.

Understandably, there are all kinds of uncomfortable questions. For starters, Postbank is only in the banking business courtesy of a full government guarantee of Postbank deposits. This government guarantee was approved only on the basis that Postbank would be a savings bank only, and consequently it is not permitted to issue loans. And from the bank’s point of view, those savings must vest only in very secure investments, like money market bonds. 

So how is it possible that the Postbank somehow became a debtor to the Post Office, which until the split was its holding company?

Postbank says it isn’t a straightforward “loan”, describing it instead as “historical balances from when it operated inside SAPO, including revenue owed to Postbank and funds transferred to SAPO for branch cash withdrawals that were ‘not fully utilised’ and ‘not transferred back’”.

But even if this is true, there is still an open question: why would either of the entities involved in the split owe the other anything, let alone almost 50% of their assets? And, even if it wasn’t formally a “loan”, the consequence is the same: capital was burnt.

Which leads straight to the uncomfortable point Postbank’s own annual report makes explicit: despite being solvent, it is badly capital constrained. Postbank reports a capital adequacy ratio of 2.9% as at March 31 2025, “well below that of fellow banks”, and says it has initiated a recapitalisation process to fund “future regulatory demands” and “build the bank” expenditure. Its capital adequacy would be unthinkable for a private sector bank and is well below the regulatory minimum for fully licensed institutions.

Impossible targets

And without a capital injection from the government, it is impossible to get to a roughly R1bn capital adequacy level off an annual profit of about R100m.

The annual report itself also lists weaknesses highlighted by the auditor-general: procurement problems, IT control gaps and compliance weaknesses, plus ongoing work on “four reported material irregularities”.

Those include the disastrous move to issue a defunct ATM card, which required the bank to scrap its existing cards in their entirety and then write off the cost, which explains the campaign to move grant recipients from South African Social Security Agency (Sassa) cards to black Postbank cards. The fiasco resulted in the departure of the entire board and executives in 2023.

Postbank serves about 3.5-million Sassa beneficiaries. But the math of social grant disbursement is increasingly hostile. The bank recently lost 1.5-million customers as Sassa “rationalised” its beneficiary base. While Postbank claims this was an external factor, it resulted in a massive decline in transaction fee income.

And in the event that the Post Office’s infrastructure disappears, Postbank will have to prove to retail partners that digital channels can substitute for branches — not just for cash, but for onboarding, problem resolution and trust-building among people who often choose cash precisely because formal systems have failed them before.

SAPO liquidation may not break Postbank’s pipes — but it will intensify scrutiny of whether it can become a real bank, on real bank terms, with real bank controls, and real bank capital. And right now, its own reporting suggests the transition is still more “under construction” than “open for business”.

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