The door is still open for the SA Post Office to receive further financial support from the government, in the form of taxpayer-funded bailouts, to help the troubled state-owned enterprise (SOE) avoid the permanent closure of its operations.  

The SA Post Office, which is insolvent and under provisional liquidation, was allocated a bailout worth R2.4-billion by Finance Minister Enoch Godongwana in the 2023/24 budget — funds that would go towards paying the SOE’s smothering debt load.

Godongwana has inferred that the SA Post Office might be in line to receive more money, over and above the R2.4-billion.

In a written reply to a parliamentary question by DA MP Dianne Kohler Barnard, Godongwana said the 2023/24 Budget presented in February made no provisions for financially supporting the SA Post Office’s provisional liquidation or business rescue process.

“The government is responding through the judicial process, but various options are possible including reprioritisation of funds, within the approved fiscal framework,” wrote Godongwana, whose position on the SA Post Office’s dire financial situation has been aired for the first time.

By the time Godongwana presented the Budget in Parliament on 22 February, the SA Post Office had already been placed under provisional liquidation by the High Court in Pretoria, which issued its judgment on 9 February.

In this case, Bay City Trading 47 — a company that leases space to the SA Post Office for its branches and was owed outstanding rental payments (becoming a creditor) — successfully secured a court order to place the Post Office under provisional liquidation. 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 being used to pay liquidation expenses and the SOE’s creditors.

Read more in Daily Maverick: SA Post Office in sight of its final resting place after being placed under provisional liquidation 

On 28 March, another real estate company, Withinshaw Properties, was granted a provisional liquidation order by the High Court in Pretoria against the SA Post Office for rental payments due on its premises in Wynberg, Cape Town.

Opening the door for more bailouts to the SA Post Office is that Godongwana said the government might consider adjustments to the Appropriation Bill. The bill paves the way for money from the National Revenue Fund to be appropriated to bankroll the government’s spending priorities for 2023/24. The National Assembly adopted this bill in early June. 

“Any adjustments in terms of section 6 [of the bill] would need to be considered for the adjustments budget later this year in October,” said Godonwanga.

More than R10bn in bailouts

Essentially, he has hinted that the Budget he presented in February might be amended to free up more funds for the SA Post Office. More funds for the SA Post Office might be unveiled during Godongwana’s Medium-Term Budget Policy Statement, which is usually presented in October. Since 2014, the SA Post Office has enjoyed more than R10-billion in taxpayer-funded bailouts.

The SA Post Office’s financial situation has deteriorated since the February Budget, with the money it owes to creditors swelling to R5-billion. The SA Post Office cannot afford to pay this back as the SOE has been on a money-losing streak for 16 years, forcing its creditors to opt for the liquidation route.

But the government has applied to the High Court in Pretoria to have the SA Post Office placed in a business rescue process, which would provide it with the breathing room to be saved from collapse rather than a liquidation process that would portend its permanent closure.

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.

If the government’s court application, to be heard on 4 July, is successful, the SA Post Office will follow in the footsteps of SOEs including SAA, Mango Airlines and SA Express. SAA emerged out of a business rescue process, Mango is still in the throes of the process, while SA Express’s failed.

Read more in Daily Maverick: With R5bn owed to creditors, SA Post Office takes the business rescue route

In arguing for a business rescue process, the government, in its court application, said the SA Post Office cannot collapse because it offers “crucial” services, including distributing social grants to more than seven million beneficiaries every month. DM