Postbank Corporatisation – The journey to date November 2017

Overview of Postbank Postbank’s vision is to offer simple, affordable and convenient banking solutions for our communities, and in so doing, “become the bank of choice” for the lower end of the market Postbank obtained an interim section 13 banking licence on the 4th of July 2016 and applied for the section 16 final banking license on the 26th of June 2017 Postbank has 219 employees with 70 vacancies. Most staff are based at the Bloemfontein operations office. New structures to support banking licence requirements have been developed and implemented – IT, Risk, Compliance, Finance, Project Management etc. Postbank has 5.8 million accounts, of which around 4 million are active Only offer transactional and savings accounts. Will offer lending products after banking license is received. Key financials at 31 October2017: Deposits R 5.5 billion ($393 million)* Investments and Assets R 8.5 billion ($607 million) Net Equity R 3.0 billion ($214 million) YTD Operating profit (7 months) R 191 million ($14 million) * - Using Exchange Rate of $1 = R14

Government’s banking partner for financial inclusion Vision and Mission Vision Government’s banking partner for financial inclusion Mission Be the banking partner to government, enabling us to offer simple, affordable and convenient banking solutions for our communities Postbank is focused on ensuring Low Cost, Simple, Accessible and Affordable banking solutions for the underserved and underbanked communities

What does Corporatisation mean? Current: Division within SAPO Exempt from Banks Act Limited product range Limited accessibility – only branches and call centre Non-compliant IT platform Organisation structure aligned with deposit taking activities Sub-optimal processes Future: Stand-alone entity 100% owned by SAPO Under the Banks Act supervision Increased product range Introduce more channels Compliant IT platform Organisation structure aligned with Banks Act World class processes

The corporatisation plan PHASE 1 PHASE 2 PHASE 3 PHASE 4 POSTBANK READINESS MEANS: Provision of simple, accessible and affordable products and services for our communities Efficient and reliable IT systems Compliance with the regulatory and legislative framework (Banks Act and regulations etc) Recruitment of appropriate individuals Up-skilled and competent staff World-class scalable processes Enhanced MIS and regulatory reporting, resulting in: The award of a banking license

Time period required for award of banking license The Banking Licence application process is governed by the South African Banks Act and supporting Regulations There are key steps to be followed in obtaining the licence: Section 12 application to establish a bank. Postbank received permission from the SARB to Establish the Bank 2. Section 16 application to register a bank. Postbank submitted its section 16 Application to Register as a Bank on the 26th of June 2017 In terms of Section 16, there are 12 months available to demonstrate compliance in order to be awarded the banking licence (section 17). This 12 month period commenced on the 4th of July 2016 – date that Postbank was given approval by the SARB to establish the Bank. (The Postbank company was incorporated in this 12 month period and the license application was submitted).

Progress made to date Procurement partner appointed to 2010/11 2012/13 2014/15 2016 Procurement partner appointed to assist with the sourcing of a transaction advisor Postbank Act promulgated Draft Memorandum of Incorporation developed Obtained membership in the VISA card association Developed policies (lending, borrowing & investments) Transaction advisor on board from the 16th of January 2012 Phases 1, 2 and 3 completed Proposed process for the transfer of staff completed and approved by SAPO Board Obtained full membership in the Payments Association of South Africa (PASA) Amended Postbank Act promulgated Received funding from National Treasury Submitted section 12 Application to Establish a Bank Partial IT Disaster Recovery implemented New core banking system successfully implemented Appointed Chief Customer Officer and HR Executive Business to be transferred to Newco determined by the Minister Obtained Mastercard membership IT readiness initiated, i.e. Started EMV and Postillion (switch) Upgrades Implementation partner appointed Obtained s13 Authorisation to Establish a Bank (with conditions) Agreement reached with Group on transfer of IT resources i.e. people, software and hardware Head: Internal Audit and CIO appointed SARB designated 5 Postbank Board nominees as “fit and proper” and cleared all Postbank Executives Appointed 25 internal resources for implementation and compliance purposes

Progress made in 2017 Postbank Board appointed by the Minister of Telecommunications and Postal Services in March 2017 Postbank SOC Ltd company registered in April 2017 Implemented a number of banking critical IT systems: IT disaster recovery capability Anti Money Laundering system Fraud prevention and detection application Regulatory reporting system Section 16 application to register as a bank submitted to the SA Reserve Bank (SARB) on the 26th of June 2017 – Prior to the deadline of 3 July 2017 Received first batch of queries from the SARB and responded to them in November 2017

The way forward and what has to be done NO KEY ACTIVITY TIMELINE 1. Banks Act to be amended to allow for a State Owned Company to be registered as a Bank Q4 2017 2. Postbank Bank Controlling Company (BCC) to submit section 43 application to be registered as a BCC 3. Obtain Banking License from the SARB TBC by SARB 4. Postbank Board to fill critical Executive positions – MD, Chief Financial Officer, Chief Risk Officer and Company Secretary Q1 2018 5. SAPO and Postbank to implement interventions to retain critical skills within Postbank and engage organised labour 6. Minister to approve assets and liabilities to be transferred to the Postbank company Occurs after award of the banking license 7. Postbank SOC Ltd and SAPO SOC Ltd to enter into a Transfer Agreement and to sign a Cooperation Agreement 8. Transfer staff, operations and balance sheet to the Postbank Ltd

What are the key learnings? State Owned entities need to deal with legislative issues in addition to the standard requirements needed to operate as a Bank Need strong political support for the journey e.g. appoint Board, legislative amendments etc. Procurement processes can take longer than the actual implementation Operating a bank requires a different set of skills when compared to applying for a Banking License – Need external expertise and short term capacity support There are challenges in attracting talent in a State Owned Entity e.g, can’t offer shares, brand issues etc. – People are generally attracted by the learning opportunities, diversity of work and by the opportunity to grow.