MAIL IN THE COFFIN?
With R5bn owed to creditors, SA Post Office takes the business rescue route
The government’s move to place the SA Post Office under business rescue is designed to buy the state-owned company some time from having to immediately pay back creditors and shield it from lawsuits from parties demanding payments running into billions of rands.
The SA Post Office is on track to be the fourth state-owned enterprise (SOE) to be placed under business rescue in nearly four years, as the struggling company attempts to avoid the worst-case scenario of having to permanently close its doors.
The Department Of Communications and Digital Technologies, which oversees the SA Post Office, has applied to the high court in Pretoria to have the SOE placed in a business rescue process, which would provide it with the breathing room to be saved from collapse.
If the court application, to be heard on 4 July, is successful, the Post Office will follow in the footsteps of SOEs including SAA, Mango Airlines and SA Express.
SAA was placed under business rescue in December 2019 and emerged from the process in April 2021. The airline has resumed flights as a smaller entity. Mango Airlines is still under business rescue while SA Express’ process has failed and the airline has shut down ahead of liquidation.
The government’s move to place the SA Post Office under business rescue is designed to buy the SOE some time from having to immediately pay back creditors and shield it from lawsuits from parties that have demanded payments.
As of 31 March 2023, the Post Office owed creditors R5-billion. It cannot afford to pay this back as the SOE has been on a money-losing streak for 16 years.
Business rescue, which is provided for by the Companies Act, is an attempt to rehabilitate financially distressed companies by restructuring their affairs. The objective is to enable a company to continue operating while being restructured, temporarily suspending payments to creditors and saving some jobs in the process.
The SA Post Office has already been placed under provisional liquidation by its creditor, who has successfully secured a court order. Two real estate companies, which lease premises to the Post Office, successfully secured court orders to have the SOE provisionally liquidated.
A provisional liquidation portends a process of winding up the SA Post Office, which involves selling its assets. The proceeds from this sale would be used to pay liquidation expenses and the SOE’s creditors.
On 28 March 2023, a real estate company called Withinshaw Properties was granted a provisional liquidation order by the high court in Pretoria against the Post Office for rental payments due on its premises in Wynberg, Cape Town.
And on 9 February 2023, the high court granted a provisional liquidation order to another real estate company called Bay City Trading 457, also for rental payments owed by the Post Office.
In both cases, the high court placed the Post Office under provisional and not final liquidation because it wants all affected parties to return to court and put forward their reasons why the court should not order the final liquidation of the SOE.
In the Withinshaw Properties provisional liquidation order, parties are set to return to court on 6 July to argue against a final liquidation order, while the matter involving Bay City Trading 457 was heard on 1 June. During this hearing, the Department Of Communications and Digital Technologies told the court it believes business rescue would be the best remedy for the SA Post Office.
The department told the court that the government cannot allow the Post Office to collapse because it offers “crucial” services, including distributing social grants to more than 7 million beneficiaries every month.
The department’s minister, Mondli Gungubele, believes that the National Treasury bailout of R2.4-billion given to the Post Office in the February budget might solve some of the SOE’s problems. And placing the Post Office under final liquidation might jeopardise this government bailout, spelling disaster for the SOE.
Gungubele urged the court not to make any “precipitous decisions” that might lead to the Post Office permanently closing its doors.
In weighing up its decision on whether to place the Post Office under business rescue or final liquidation, the courts have to consider whether the SOE has reasonable prospects of success.
The Post Office made a loss of R2.1-billion for the 12 months ending 31 March 2023. The SOE has been recording losses for 16 consecutive years.
The Post Office owes the SA Revenue Service R539-million for taxes relating to salary payments; R1.1-billion is due to the Post Office Retirement Fund; R596-million is owed to Medipos (a medical aid scheme for workers) and R108-million to the Unemployment Insurance Fund.
The Post Office deducts the salaries of its more than 10,000 workers for medical aid, SA Revenue Service income tax, retirement funds and UIF contributions, but fails to hand over these statutory payments to the relevant institutions.
With such a dire financial picture, some analysts believe that not even a business rescue process can save the SA Post Office. DM
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Very Sad – tried to find a Post Office in Kensington/Bez Valley/Doornfontein last week – all 4 I tried were shuttered closed. The poor staff who had served me for 20 years in Darras and become buddies – no one knows where they have gone. So who is doing post now – no one?
A cynical move considering that SAPO is beyond redemption.
The one good upside to this story is it may make those many, many crooked tenderpreneuers think twice about targeting SOEs for easy pickings, if there is no guarantee of being paid anymore.
An attempt to put off the inevitable.
SAPO is taking advantage of the business rescue process, as do other business scallywags. The offers of settlement will still make the creditors take the big fall financially, which is unfair. The scallywags run their companies into the ground intentionally, taking advantage to force a settlement with the creditors and hence preventing the taking of responsibility for the ate of affairs thet they have caused. They escape with a restructured business, scott free and with the creditors and their industry taking the hit. What happened to the laws regarding reckless trading and the statements every company must make on a regular basis to prove that they are not trading recklessly.? While the end goal of saving the business and some jobs is admirable, the whole process is unfair to the creditors, it prevents competent competition from taking over the sales and building a better industry. The scallywags mostly get off with limited consequences, while they have stashed the money they bled out of the business, where it is hard to fine. What immoral swine they are!!!
Mark Barnes had this under control when he took over the running of the Post Office. Unfortunately when he showed the entity would start raking in money under his leadership the ANC smelled the money and decided to make his position untenable. Wonder why? The lure of a quick buck? After he left and the re-collapse commenced, he sent a message to Stella Ndabeni-Abrahams to inform her that he was prepared to inject billions into the Post Office to re-finance its operation. Guess what. She never bothered to reply so once again, Barnes walked away. The ANC of course continues to plunder and loot unabated at the expense of the destitute who so desperately need a post office in rural areas.
NET1 handled the Gov grant payments seamlessly until the ANC decided to step in and handle payments ( and the opportunity to steal) to themselves – the outcome is evident for all to see with this liquidation. Turkeys!!!!
There is nothing left to rescue except for some rented premises and old furniture bought in the last century. The only solution to stop the bleeding is euthanasia.
So, just like SA Airways, the Government intend propping up the Post Office. Will they ever learn? The Post Office has been hopeless for years, with less and less people sending letters, cards or parcels. This is because things such as Birthday or Christmas cards rarely get to their destination. Parcels also never got there. They were stolen, and the Monitors which were placed in the sorting offices showed that things were stolen regularly.
As well as that, the Internet has meant that we can so easily keep in touch with family and friends, and one can even send ecards, or use a courier to send gifts. So why would anybody, ever again, trust the Post Office?
Besides, I thought that social grants could be paid out at local Shoprite’s.
The Post Office seem to owe too many millions of rands already, not even being able to pay rental, so the Post Office, sadly should be liquidated. Again, its a question of the Government letting things go on too long, and not caring about the SOE’s until they are run into the ground. Whatever happened to responsibility?
Once again taxpayers have to bail out the inadequacies of the ANC – a condition of this should be the complete eradication of BEE policies that are both racist and inefficient!