South Africa

South Africa

When The Postman doesn’t ring at all: Can Mark Barnes save SA post office from the iceberg?

When The Postman doesn’t ring at all: Can Mark Barnes save SA post office from the iceberg?

The day before new South African Post Office Group CEO Mark Barnes, only four months in the job, flew to Cape Town on Friday to motivate for a R2.7-billion bailout to members of the Portfolio Committee on Telecommunications and Postal Services, he received a Christmas card in the mail. The committee heard that in a decade, about R4-billion had been lost by the Post Office to wasteful expenditure, corruption and mismanagement. And if the Post Office didn’t get the money soon, it would collapse, said Barnes, ending a 500-year history since the first batch of letters were placed in a Milkwood tree in Mossel Bay. By MARIANNE THAMM.

If you had to create a sound cloud of the words or expressions that dominated Barnes and a team of South African Post Office executives’ presentation to the Portfolio Committee on Friday it would read thus: “Borrowed Time”, “Sinking Ship”, “No Plan B”, “Rock and a Hard Place”, “Game Over” and “Give Us Money Now!”

From the tone of his presentation, Barnes, a major shareholder in the Purple Group and who was appointed in January to head the ailing SOE, sounded like an optimistic Edward John Smith, captain of the Titanic, shortly before he spotted the iceberg. This time, if the Post Office sinks, there will be no band playing, just the tragic loss of 21,670 jobs.

If it goes down, it will take with it numerous creditors, private firms to which the Post Office owes millions for services rendered. It owes just Avis alone R50-million. Barnes also told the committee of the owners of one family business who had contracted their trucks to SAPO but had not been paid and, as a result, had been forced to sell some of their trucks and take their children out of school.

Unless we can pay our creditors in weeks, there will nothing to talk about,” Barnes told the committee on Friday.

He also said if SAPO did not manage to raise R2.7-billion – in two sets of R1.35-billion tranches, “we can’t leave the harbour. It will sink.”

Between 2012 and 2015 alone the South African Post Office engaged in an expensive game of musical chairs having had three CEOs, four CFOs, three COOs and three chairpersons of the Board. Since about 2006 this one-time behemoth has been reduced to a husk with about R3-billion to R4-billion “thrown away” due to corruption and gross mismanagement, and so far, no one has been held accountable.

However, Barnes hinted that future court action would be instituted as part of the recommendations of a SIU report, which has not been made public, and that will result in civil claims for negligence from former SAPO officials.

During his presentation to the committee of Friday Barnes said that efforts by SAPO to raise funds through the banks had proved fruitless as “the good old days of a government guarantee are over” and that instead SAPO had to make a case for the massive loans in order to prove that it could service the debt.

If banks are not prepared to lend against a government guarantee, we should not do business with them,” Barnes suggested before withdrawing the remark when DA Deputy Shadow Minister of Telecommunications and Postal Services, Cameron Mackenzie, pointed out it was “offensive”.

The problem is not tight financial controls. The problem is with your business,” said Mackenzie.

I agree my comment was offensive, banks are sacrosanct,” said Barnes, himself a former investment banker at Standard Corporate and Merchant Bank (SCMB) and former head of private equity giant Brait.

Barnes said that the state needed to become involved in unsecured lending and, talking up his pitch, added that the Post Office needed be be viewed “not as an expense but as an investment” and that postal services in other parts of the world including Germany and Australia had proved they could be profitable and a success.

We would not be here arguing about the past if we did not think about the future,” Barnes said.

SAPO owned properties that had been undervalued at R83-million but the real market value of these was R196-million. These properties should be seen as part of the value of the SOE. A case in point was the sale of the old Kalk Bay post office in Cape Town for only R1-million while its value was much higher. The same applied to property located at Heritage Square in Cape Town.

At present SAPO was haemorrhaging about R125-million a month despite a cash injection of R650-million promised by Finance Minister Pravin Gordhan in his budget speech. This hardly dented its liability of R800-million as of March this year.

And while Treasury had agreed to extend the term of Sapo’s existing R2.7-billion guarantee and it had managed to get loan commitments of R1.8-billion from banks (which was used to top up salaries), it needed an additional R900-million if it wanted to get out of its hole.

The entire R2.7-billion was required as it was not possible, said Barnes, “to get only partly out of a hole. And when you can’t fix a hole it gets bigger.”

Barnes, who is known as a man, according to journalist Marc Ashton, who could sell a vision “based on the strength of his vision, personality and conviction that what they are doing will ultimately produce results”, was finding the committee a little less easy to convince.

Barnes told the committee that Sapo expected to make a loss of R1.2-billion in the 2015-16 financial year, adding to last year’s R1.5-billion loss. A loss of R1.1-billion is forecast for 2016-17 financial year and a net profit in the following year, 2018. However, the SOE was three months behind its planned strategy to turn around its fortunes.

You have to start looking at us differently. The post office brand used to be powerful. And if it means we have to change our logo and to rebrand ourselves, then we must think of doing that,” said Barnes.

Mackenzie too remarked that he had received his Christmas card sent by Speaker Baleka Mbete only two weeks ago and that he personally would not be renewing his post box in Craighall after being forced to receive his bills electronically.

I am never going back to a paper-based bill again,” said MacKenzie.

The only upside of the decline of the post office, Barnes said, was the fact that people were no longer receiving traffic fines through the mail. SAPO had, however, recently done a deal with Johannesburg traffic to do so once again.

While SAPO’s competitors could make decisions in three to six minutes, SAPO took three to six months to do so. This organisational culture needed to change as well as SAPO’s operating model. Ways of doing this would be to offer services to Home Affairs, as the banks had now offered to do, as well as distributing social grants. SAPO had an enormous footprint in the country and was, at present, the only player left standing while banks had opted to move to e-commerce. This infrastructure could be put to diverse use.

But we must keep the money in the fiscus,” said Barnes.

The longer-term vision of SAPO was the delivery of postal, logistic and financial services.

SA Post Bank, which had deposits worth R7.3-billion, was isolated from risk, he reassured the committee.

The ANC’s Juli Kilian asked Barnes what the “tipping point” had been for SAPO; “was it corruption, was it neglect, was it the strike?” she asked, referring to the crippling 2014 strike from which SAPO has never recovered.

Barnes replied that it had been a series of events that began over a decade ago including the spending of R2.7-billion in labour broker costs between 2001 and 2014 and wastage and fraud “that resulted in about R3/4-billion being thrown away.” He admitted that SAPO had never recovered or “bounced back” from the protracted strike.

A report by Public Protector, Thuli Madonsela, titled “Postponed Delivery”, also found that a suspected 10-year head office leasing deal which saw SAPO move from its Pretoria offices to expensive new premises at Eco Park in Centurion, had contributed to SAPO’s financial meltdown.

Madonsela found that SAPO had been ripped off by about R70-million as it had been charged 30 percent above the market-related rental and had paid an additional R22-million it should not have paid for a vacant building. Barnes said SAPO was attempting to recuperate the R22-million – “we are issuing a summons this week” – but that it would currently be “too expensive” for SAPO to move out of the building.

Asked what he would do should he not receive the amount he was asking for, Barnes replied “we will keep fighting until we do” and added, “The Post Office cannot be allowed to fail.”

Barnes brought with him an unusual candour and energy so often lacking in those who lead SOEs and who have come with a rather large begging cap in hand. Whether his vision will be shared by those who hold the country’s purse strings still remains to be seen. In the meantime, the cheque, and everything else, is still in the mail. DM

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