Business Maverick

MAIL IN THE COFFIN?

SA Post Office in sight of its final resting place after being placed under provisional liquidation

SA Post Office in sight of its final resting place after being placed under provisional liquidation
People wait outside Sharpeville Post Office on 14 January 2021 in Sharpeville, South Africa. (Photo: Gallo Images / Fani Mahuntsi)

The SA Post Office’s financial situation is essentially beyond redemption. It owes creditors at least R4.4bn. A creditor of the SA Post Office has emerged successful in its high court bid to have the state-owned entity placed under provisional liquidation.

Over the past 15 years, the SA Post Office has sailed close to the wind as the state-owned enterprise (SOE) recorded consecutive financial losses and continued to operate without paying its bills.  

Being delinquent on its bills worsened in recent years, with the SA Post Office defaulting on rental payments to landlords for its nearly 1,300 branches, and owing the SA Revenue Service millions of rands for taxes relating to salary payments. It also could not afford to pay statutory contributions on behalf of its more than 10,000 workers, including medical aid, pension savings and Unemployment Insurance Fund benefits.  

And now the SA Post Office’s future hangs in the balance as it has been placed under provisional liquidation, a process that might lead to its doors permanently closing after operating for more than 30 years.  

A property company called Bay City Trading 457, which leases properties to the SA Post Office, grew tired of the SOE not paying rent and approached the Pretoria High Court to have it provisionally liquidated. It is unclear how much Bay City Trading 457 is owed by the SA Post Office. But the SOE owed creditors R4.4-billion as of 31 March 2022 and its total liabilities at group level exceeded total assets by R4-billion, rendering it technically insolvent.   

On 9 February 2023, the court ruled in Bay City Trading 457’s favour and placed the SA Post Office under provisional liquidation.  

Arguably beyond redemption

That Bay City Trading 457 chose the provisional liquidation route instead of a process to rehabilitate the SA Post Office such as businesses rescue (less draconian), indicates that the SOE is arguably beyond redemption. Liquidation usually is the last resort and follows after a failed business rescue process.  

A provisional liquidation portends a process of winding up the SA Post Office, which involves its assets being sold, and the proceeds from this sale used to pay liquidation expenses and the SOE’s creditors. It is usually hard for companies to be rehabilitated and resume trading at this juncture.  

The high court placed the SA Post Office under provisional and not final liquidation because it wants all affected parties — including the SOE’s management, workers, and creditors — to put forward their reasons why the court should not order the final liquidation of the SOE. This process is set to play out in court on 1 June. 

A final liquidation is a worst-case scenario as it will result in the SA Post Office’s operations closing permanently and workers permanently losing their jobs. Final liquidation of the SA Post Office would also be detrimental to SA’s social grant system as the SOE distributes social grants to more than seven million beneficiaries every month.

In the interim, the Pretoria High Court has appointed Anton Shaban and Hlamalane Jerry Musi as provisional liquidators. The appointment of Shaban and Musi was confirmed by the court on 30 March. Their job will involve safeguarding the SA Post Office’s assets, contacting the SOE’s creditors to establish what they are owed, ranking them in terms of seniority, and trying to collect outstanding debt. Payments to creditors are also halted.

Shaban and Musi will be required to meet the SA Post Office’s management following the court-ordered provisional liquidation. 

In a media statement released on Wednesday, Shaban said: “We are currently in the process of engaging with the SA Post office management and their appointed attorneys and all relevant stakeholders.” 

The SA Post Office has been mum about the provisional liquidation, saying it would issue a media statement later in the week. 

The writing has been on the wall regarding the SA Post Office’s decline.

The SA Post Office reported a financial loss of R2.2-billion for the year to the end of March 2022. The company has been reporting financial losses for 15 consecutive years. To cut costs, the SA Post Office recently embarked on a process to shed up to 6,000 jobs (later reduced to 3,000) through a retrenchment process. 

Read more in Daily Maverick: SA Post Office planning to retrench thousands more workers, claims union  

Postal companies globally are struggling to reinvent their operations for a world in which consumers rely far more on electronic methods of communication than they do on mail. People are also opting for faster, more efficient parcel delivery services run by private-sector companies. 

The SA Post Office is painfully aware of this major shift in consumer patterns, exacerbated by the company not being able to fulfil its basic function of delivering mail on time and to the right address. 

For instance, the SA Post Office’s mail delivery performance reached 75% in 2017. It fell to 68.3% in 2022. The SA Post Office has missed a self-imposed target of an 80% mail delivery performance for many years. 

Recent requests for taxpayer-funded bailouts by the SA Post Office have failed, with the company’s numerous attempts for help recently rejected. But Finance Minister Enoch Godongwana granted the SA Post Office a bailout worth R2.4-billion in the February Budget to recapitalise its balance sheet. 

Read more in Daily Maverick: State-owned enterprises get financial support from Godongwana despite ‘tough love’ approach DM/BM

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  • William Stucke says:

    Way back in 2009-2014 when I was an ICASA Councillor, I spent some time with SAPO’s senior management. They had a detailed mathematical system model which I examined closely. Despite being an excellent model, it was quite clear, even then, that they were headed for disaster. I made a long list of recommendations on how they could improve their business model. AFAIK, they ignored everything I said. Remember, in the ANC’s view, reducing headcount is anathema. (However, they were overheard to be amazed at how much I knew about their business. Simple, really. I can read, and I prepared in advance 😉)

    Later, our beloved ANC Government did one sensible thing. They appointed Mark Barnes as CEO in 2015. However, they equally did something very stupid. After coming up with the concept of a Post Office Bank, which might have offered some synergy with SAPO’s mail business, as well as provided a much-needed income stream, they then decided to split this off from SAPO. Mr Barnes was no fool and resigned in protest at this idiocy.

    The rest, as they say, is history. The whole thing could have been avoided. There are successful and viable Post Offices. For example, the UK Post Office made a profit of £726 million last year. But then, they use a sensible model for small villages – a local cafe owner is the Post Mistress, who earns a margin on any stamps sold, etc. No fancy premises required. No rents to pay. No six+ employees needed. Just 1/4 of a little old lady does the job just fine.

    • M P says:

      When I lived in London, Barclays said that they would send my new bank card via Royal Mail (i.e the post office)… I was shocked and thought it wouldn’t appear. It arrived 2 days later, unharmed, to my surpise! The UK has a functioning post office. We in on the other hand have no functioning SOEs. They are places for cadre deployment and siphoning off of money. Transnet, SAA, Denel, Eskom – the list goes on and on.

      RSA is a failed state. Plain and simple. The cANCer have destroyed this beautiful country and we are better off immigrating to Australia/Mauritius (the UK’s weather is miserable!).

      • Rusi Kathoke says:

        As a former Londoner, currently living in SA I couldn’t agree more. A few years ago I met with the ego of the current CEO of SA Post Office. What has transpired was entirely predictable. Despite all the evidence of failure it is staggering that political loyalty always trumps competence in the appointment of public officials in SA.

      • Rory Short says:

        ” The cANCer have destroyed this beautiful country”

        Absolutely. It is heart breaking. As an opponent of Apartheid since 1948, when I was 9 years old, it has become clear to me that just because somebody opposes something that you do it does not mean that they will automatically be better than your shared enemy.

    • D'Esprit Dan says:

      The ANC is incapable of thinking in terms of a modern, efficient, 21st Century state and the complexity that this entails: large swathes of the ANC still hark back to the days of the great socialist revolution and leftist writers keep banging on about the ultimate demise of capitalism, which for them is justification for flogging a horse that died decades ago, and spectacularly destroyed the world’s largest contiguous empire from within in 1990. The ANC and its allies in the SACP and unions are simply incapable of thinking beyond The State as the centre of everything – and when you add into the mix deploying cadres and their toxic combination of being functionally illiterate for the posts they hold and corrupt to boot, you’ve got a recipe for disaster. As we’ve seen, repeatedly, for 25 years, at almost every major SOE they’ve run and ruined.

    • Dennis Bailey says:

      It must be gratifying to be able to say I told you so and get paid for it. Your warnings were, very obviously, not loud enough, say the AQNC voting millions who must queue at some other door for meagre payouts. Viva, ANC, Viva. Never fails; to disgust.

  • Bryan Macpherson says:

    Another fine institution brought to its knees by the corrupt, dishonest and incompetent ANC cadres put in place to run it.

  • Katharine Ambrose says:

    The post office used to offer a fine international parcel service which cost about 20% of any courier and delivered within 3 to 10 days. The price was low because all the other national post offices also offered cheap quick service at the other end. When they stopped taking “art work” many small businesses found exporting carvings paintings etc was no longer viable. All those jobs pensions etc lost.. And the fat cats get money for not lifting a finger.

  • David Pennington says:

    And another one bites the dust

  • Daniel van Dalen says:

    And the unions now wailing for government assistance when they themselves had a hand in the demise. Being on Mark Barnes’ case when he was in charge (was probably the best opportunity to have turned SAPO around), arguing against performance measurements and my ultimate, when confronted with video footage (few years back) of an employee sitting on pile of post and blatantly opening, checking and pocketing valuables, the union cried foal, as the employees had not been warned of this surveillance and no case was brought.

  • Cedric de Beer says:

    Another essential public service corporatised and turned to dust. These public entities, which pretend to be commercial operations can run up debts to cover their incompetence and inability to provide the services expected. I know its a hard argument to make when public governance is so poor, but these services would be better off, and the finances better controlled by treasury, if they existed as line functions within government. Railways, roads, post offices, water supply and universal health care should not be seen as sources of profit, but a sources of social value, paid for by government.
    The post office is publicly owned in the UK and the USA, so this is hardly a radical argument.

  • Ian Gray says:

    Let’s not forget that the unions destroyed the P.O. in 2014 when they took their members out on a 4-month strike. What they thought would happen to the clients only they can know!
    It was also the time when I left my cell phone in a hotel in Europe. I asked the hotel to send it back by courier but instead they sent it registered mail. Of course, someone at the Kempton Park sorting office stole it!!
    However, compliments are also in order. Last month, I received 2 Xmas cards, a letter posted from England in November and 2 statements from Sanral dated October!

  • Confucious Says says:

    The anc is simply an interjected cost layer! They cannot add any value to anything. They simply insert themselves and drain any possible profits. Then it’s off the the rubbish tip!

  • Eric de Spot says:

    Come on, Post office is a very reliable institution, before Covid, I ordered some goods from China, it took less than a week to arrive to Benoni and three months from Benoni to Kempton Park (30 Km). In January 2022, I sent a parcel via SAPO to my son in Europe, two weeks ago he informed me that the parcel just arrived ( 15 Moths ….. not bad!!).

  • Carlo Fourie says:

    Chickens coming home to roost. It would’ve been more satisfying had it not been for the fact that 7 million people’s grants and 10000 jobs depend on this institution.

  • mark.ed.henley says:

    Very predictable demise. A simple lesson that the world of technology does not wait for anyone. Adapt or die! Thank the Unions and a weak leadership of SAPO and Government. Total failure in NOT leading the staff and SAPO to become future fit and relevant.

  • Caroline de Braganza says:

    My first thought was how are Sassa grant recipients whose cards are expiring going to get their new cards? Many of those whose cards expired end March area battling to find a post office that has stock of cards and can process – if there even is an operational post office nearby. And where will the 7-million people who collect their grants at the post office have to go once the SAPO branches close? Postbank may be a separate company but they operate on SAPO premises.

    Thank heavens my husband and I who rely on the Older Persons Grant only have to renew our cards in July 2027 – but getting our new gold cards five years ago was a nightmare – only the fourth SAPO branch we visited could action, despite Sassa’s informing people they could to “any post office”.

    Sadly, the poor suffer the most when it comes to the ANC’s ineptitude and incompetence.

    • John Smythe says:

      I really feel for you and those millions who will be affected by this tragedy. And it’s sad that despite this incredible display of thieving, thuggery, incompetence, union complicit action and plain stupidity, the rest of the sheep will still vote for cANCer in 2024 because they can’t see beyond the liberation that Nelson Mandela gave them (not the ANC).

  • Peter Creer says:

    As someone who loves this country and would prefer to stay, this is so depressing. Will this dreadful parasite ever be stopped….

  • camilla singh says:

    When private company management neglect to pay over staff salary deductions such as PAYE and pension fund contributions and medical aid contributions they are charged with fraud and/or theft. Who will be so charged at the Post Office?

  • Ian Gwilt says:

    back in the day I bought various items on ebay and Amazon and they were delivered via the post office.
    You could see the decline, longer delivery times.
    Then no delivery at all , despite proof items had reached SA
    Then the helpful old lady at the local post office retired. The replacement was rude, surly and totally unhelpful.
    I stopped using them. That branch is now closed.
    Good riddance, but pity those who need to collect grants.
    Mark Barnes gave a proposal last year , to take it over. I guarantee squirrel did not read it but will be “shocked” at developments. I also bet that the CEO and her incompetent cronies are being paid along with their tax, medical aid and pension contributions being met.

  • Philip Machanick says:

    I was talking today to someone who works all over South Africa and in some neighbouring states. He said Zimbabwe’s Post Office is more functional than ours. So sad. A postal service is something everyone can use. If it goes, the poor will be hit hardest as courier services start at a much higher price point than basic mail. And what about paying out social grants?

    Not that long ago (a few years before covid) I sent an insured parcel to the US. Tracking showed it got there just fine, then it bounced between depots apparently not quite clearing customs (there should’ve been no duty on it). Only when my local post office started setting an insurance claim in motion did the US Postal Service get their act together. It was sort of a proud moment that it wasn’t our guys who screwed up.

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