South African state-owned bank losing deposits – even before it has launched

At the end of March, the Postbank had R7.56 billion in deposits, down R503 million from the same time in 2023. It struggles to stem the losses as it gears up to launch as a full-service commercial bank in the coming year. 

The Reserve Bank revealed this in its Quarterly Bulletin, which included data about deposits held with the country’s commercial banks, mutual banks, and Postbank. 

The Postbank has been operational in South Africa for several years under the South African Post Office but is being transformed into the state’s first fully-fledged commercial bank. 

South Africa’s ruling ANC has long aspired to create a state-owned bank to drive transformation in the financial sector. 

However, the cost of setting up such a bank is prohibitive. As a result, the government plans to separate the Postbank from the Post Office and make it a financial services provider. 

President Ramaphosa signed the Postbank Amendment Bill into law in September last year, formally transferring the Postbank’s shareholding from the Post Office to the government. 

While Postbank has always offered minor banking services through the Post Office, it was strictly a savings subsidiary, unable to offer transactional accounts, credit, and other banking services.

With the Act now in effect, it can apply for a new banking licence from the Reserve Bank’s Prudential Authority. The Postbank said it will resubmit its Section 16 application for the current financial year.

Postbank’s primary objective will be to offer affordable financial services to communities not catered to by traditional retail banking, SMEs, and the public sector.

However, it is already under financial pressure, with its deposits declining sharply in the past 12 months. 

The Reserve Bank’s data showed that at the end of March 2024, it had R7.56 billion in deposits compared to R8.06 billion a year earlier. This is a decline of R503 million in less than a year.

Uphill battle

Bank Zero chairman Michael Jordaan

The ‘new’ Postbank will enter a highly competitive field already dominated by the largest banks on the continent. 

While this does provide opportunities for disruption, given the banking sector is so highly concentrated, it also makes it difficult to compete due to the scale of the established banks. 

Bank Zero chairman and former FNB CEO Michael Jordaan told Daily Investor that there are already alternatives in the South African market to the Big Five of Standard Bank, FirstRand, Absa, Nedbank, and Capitec. 

The Postbank will find it hard to compete against these alternatives due to the complexity of commercial banking and the lack of banking experience among its executives. 

“These skills are not readily available – not just in South Africa but globally,” he said. “For example, technology decisions have a profound impact on the bank’s operating cost (which determines customer pricing).”

“Features and innovations are important, like the Bank Zero card patent, which to date has not had any card skimming fraud. Poor technology choices can be detrimental and very expensive.”

Jordaan said state-owned banks can work well, as seen in countries like India, especially when there is healthy competition between the private sector. 

He explained that one of South Africa’s many challenges is that bank fees are prohibitive, and access is a problem in deep rural areas.

This is something low-cost banks can fix, and the Postbank will do best if it focuses on areas that are neglected by other commercial banks rather than competing head-on.

In addition, Jordaan said he recommends that Postbank refrain from offering credit as there is an oversupply in the market, and some segments are already over-indebted. 

“Also, important controls are needed to prevent credit misuse and corruption,” he added. 

“Globally, credit risk is the main reason for bank failures, so Postbank would be well advised to stick to transactional banking.”


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