BUSINESS MAVERICK 

Why Lindiwe Kwele was suspended by the SA Post Office

By Ray Mahlaka 11 February 2020

Lindiwe Kwele, suspended acting CEO of the SA Post Office. (Photo: Freddy Mavunda / Financial Mail)

The Post Office has charged acting CEO Lindiwe Kwele with misconduct relating to her management of the state-owned entity over four months. Her lawyer believes the suspension is politically motivated.

The acting CEO of the SA Post Office, Lindiwe Kwele, was placed under suspension because she faces two charges of misconduct relating to how she managed the state-owned entity (SOE) over four months. 

Kwele, who initially joined the Post Office three years ago as a COO, but stepped into an acting CEO role in August 2019 after Mark Barnes abruptly resigned, was served with a charge sheet by the SOE’s board on 20 November 2019, which details misconduct charges she faces.

Business Maverick has seen the one-page charge sheet, which indicates that Kwele faces two charges: “prejudicial conduct” relating to how she managed the Post Office as acting CEO and flouting the SOE’s procurement processes.

In the first charge, Kwele has been accused of not maintaining “good order and the smooth running of the Post Office” regarding her “decision-making on the restructuring of the organisation and treatment of staff”.

The Post Office is another loss-making SOE that relies on government bailouts to stay afloat. To remedy this, Kwele implemented a restructuring strategy that included cutting the Post Office’s operating costs, which have historically been higher than its revenue, and reviewing whether workers should receive salary increases of up to 6% in 2019.

The Post Office recorded a R1.1-billion loss at a group level during its 2019 financial year, which was R95.4-million more than in 2018, with the SOE blaming the loss on the high costs associated with distributing monthly social grants to about 7.7-million beneficiaries – a function it had taken over from Cash Paymaster Services since September 2018.

The Post Office’s financial position is so dire that in 2019, the government provided it with a R4.4-billion bailout to extinguish its entire debt, which was on top of the R3.7-billion it received in the 2017/18 financial year to settle maturing debt. 

The second charge accuses Kwele of mismanagement in the procurement of goods and services through the Post Office’s supply chain business unit. The Post Office said Kwele failed to meet various “standards and procedures” in the procurement of goods and services when the company was searching for service providers that would be responsible for mobile money payments to social grant beneficiaries, crisis communications after University of Cape Town student Uyinene Mrwetyana was murdered at a Post Office outlet in Cape Town and the purchase of laptops that are used by the SOE to distribute social grants. 

The suspension of Kwele, along with the Post Office’s head of the supply chain management division, Mothusi Motjale, has thrown the Post Office into a leadership crisis. It follows Barnes’ resignation in August 2019 over a difference of opinion with the board and government about the strategic direction of Post Bank, a subsidiary of the Post Office, that included separating it from the group to become a standalone bank. 

The Post Office and its designated board spokesperson, Charles Nwaila, didn’t respond to Business Maverick’s request for comment at the time of publishing. Kwele, who is challenging her suspension through an arbitration process, was also not available to comment. 

Kwele fights back

However, Kwele’s lawyer, Eric Mabuza, called the charges against her “frivolous”. Mabuza said although Kwele was suspended in November 2019, the Post Office’s board has delayed the start of the arbitration process. 

He also questioned the motives of the suspension, as a new Post Office board was appointed on 1 November 2019 by Stella Ndabeni-Abrahams, the Minister of Communications and Digital Technologies, and resolved to suspend Kwele two weeks later (20 November).

“How could the new board have familiarised themselves with matters at the Post Office within just two weeks? They are attempting to remove a competent person so no one can hold them to account as she was just implementing decisions by the previous board. She is in the middle of politics playing out at the SOE,” said Mabuza.

Composition of board

The composition of the board of the Post Office raises questions about the criteria that are used in the appointment of SOE board members.

A board’s role, according to the Institute of Directors, is, among other things, to oversee the implementation of the business strategy while keeping it under prudent control; and to be sufficiently knowledgeable about the workings of the company to be answerable for its actions, yet able to stand back from the day-to-day management of the company and retain an objective, longer-term view. If one accepts that this is the role of the board, what skills would the Post Office be looking for? 

According to Barnes, the Post Office is well on the way to transforming itself from a traditional post office to a modern, technology-based, centre of exchange.

“Its integrated model of mail, e-commerce, financial services and logistics is the established gold standard for successful postal operations around the world,” he wrote in the 2019 annual report.

Thus, surely people with a good grasp of technology, e-commerce, finance and logistics are essential if this board is to ensure the Post Office moves into the next, more ambitious phase of its turnaround? Some legal skills could be useful too.

But these are, with some exceptions, not the skills that the Post Office board possesses.

Instead, the board is comprised of a lawyer, an advocate, a doctor of literature, a property and procurement expert and the acting CEO of an arts, culture and sports foundation. 

In its favour, it also has a finance specialist whose expertise lies in helping public sector organisations improve revenue assurance processes and reduce audit findings; a corporate finance boffin and an IT and multimedia professional.

Is this the most effective board for the Post Office at this point? While this raises questions, it is not enough on its own to cast aspersions on the board’s ability to be effective.

What is of concern, however, is when a board, not even two weeks into the job, starts to make major changes – in this case removing senior leadership. It means one of two things:

That the problems to be dealt with are acute, well ventilated and the new board has to hit the ground running. 

The Tongaat board comes to mind. Following allegations of financial engineering and the departure of the CEO in 2018, the board had to make new appointments and implement a forensic audit very fast. 

This was not the case at the Post Office. The board inherited a functioning organisation, with a clean set of books and an operating strategy that required some finessing. In fact, the previous board, which had been in place since 2015, helped to turn around an organisation in financial crisis: it was debt-ridden and could hardly pay its creditors and employee salaries. With the management team, they supervised a turnaround process that left the Post Office debt-free, with no National Treasury loan guarantees or loans from private banks.

The second assumption is that the new board was determined to impose its will over the executive team, regardless of the fact that it is relatively inexperienced. Why the board really felt the need to act so fast remains to be answered. BM

Additional reporting by Sasha Planting.

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