Business Maverick


SA Post Office goes the business rescue route, high court orders

SA Post Office goes the business rescue route, high court orders
Illustrative image | Sources: A box belonging to the South African Post Office, 27 May 2021. (Photo: Gallo Images / ER Lombard) | Rawpixel

The government’s plans to provide more taxpayer-funded bailouts to the SA Post Office prompted the high court to yank the state-owned enterprise (SOE) out of provisional liquidation proceedings and into business rescue. The SA Post Office becomes the fourth SOE to go the business rescue route.

The High Court in Pretoria has ordered that the SA Post Office be immediately placed under business rescue to avoid the worst-case scenario of the state-owned enterprise (SOE) being forced to close its doors permanently. 

The court ruled in favour of the government, which launched a court application for the SA Post Office to take the business rescue route instead of provisional liquidation.

The ruling, delivered on Monday, 10 July, means that the SA Post Office’s provisional liquidation proceedings, which were ongoing, will be immediately stopped. This paves the way for business rescue proceedings to begin.

Business rescue, 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. 

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

The SA Post Office owes creditors more than R5-billion that it cannot afford to pay back. Two companies that lease properties to the SA Post Office and are owed rental payments, were successful in their court applications to place the SOE under provisional liquidation.  

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

The SA Post Office becomes the fourth SOE to take the business rescue route, following in the footsteps of SAA, Mango Airlines and SA Express.

During an urgent court hearing last week, Communications and Digital Technologies Minister Mondli Gungubele, the shareholder representative of the SA Post Office, argued that the SOE had a strong chance of being successfully restructured under a business rescue process. This is because the government was prepared to give the SA Post Office a bailout of R3.8-billion — over and above the R2.4-billion that the National Treasury allocated to the SOE in the February Budget.

The High Court in Pretoria placed the SA Post Office under business rescue mainly because the government was prepared to inject more money into the enterprise and fund its restructuring process.   

Judge Elmarie van der Schyff, who delivered the judgment, said although the rescue of the SA Post Office depends “mainly on the political will to bring about a turnaround”, the government’s commitment to providing more money to the SOE “weighs heavily in support” of a business rescue process.  

The court confirmed the appointment of Anoosh Rooplal and Juanito Martins Damons as joint interim business rescue practitioners. Rooplal, who was nominated by the government to be the SA Post Office business rescue practitioner, is no stranger to restructuring efforts. Since 2018, he has been overseeing the liquidation of VBS Mutual Bank. The appointment of Rooplal and Damons still has to be confirmed by creditors of the SA Post Office through a meeting.

More reasons for business rescue

Judge van der Schyff ordered the SA Post Office’s business rescue process because the government had already taken steps to restructure the SOE’s operations.  

These steps include a probe by Finance Minister Enoch Godongwana on why previous SA Post Office turnaround plans were not implemented; the introduction of the South African Post Office Amendment Bill that will allow the SOE to expand its mandate beyond postal services to include offering e-commerce services; and cutting the SOE’s operational costs by embarking on retrenchments. The SA Post Office wants to reduce its headcount by 7,000 people, which if achieved in the SOE’s current financial year, could help it reduce costs by up to R1.4-billion.

Judge van der Schyff said these steps “might prove invaluable” to the business rescue practitioners when they devise a turnaround plan for the SA Post Office.  

She recognised that the SA Post Office offers crucial services such as postal services and the distribution of social grants, “particularly in rural and remote areas, that impacts the socioeconomic wellbeing of the inhabitants of such areas”. The SOE also provides free transit of postal items to other countries that are members of the Universal Postal Convention, to which South Africa is a signatory.

These services would be scuppered if the SA Post Office was liquidated. 

“The effects of liquidating a state-owned company are not limited to the insolvent company’s and its creditors’ private interests. It has a domino effect, and the economy as a whole may suffer. To hold a view that the taxpayer’s losses must be cut and that SAPO [SA Post Office] must be finally liquidated is simplistic and does not account for the intricate relationships and responsibilities that exist,” Judge van der Schyff wrote in her judgment.

Under a business rescue process, creditors (owed more than R5-billion) could recoup some of the amounts they are owed. The government expects creditors to be paid 10 cents in every rand they are owed under a business rescue process. A bigger loss under liquidation is expected as creditors stand to receive 4c in every rand owed, the government argued. DM


Comments - Please in order to comment.

  • . . says:

    How about a judgement that the politicians are complicit in the demise and can be held personally liable?

    It is not inevitable that SOE’s fail and require bailouts, it is a direct result of political meddling and decisions! The judge has condemned tax payers to funding this what about our rights to have our monies spent responsibly?

  • cathy.wardle says:

    How is it that there is always money (R3.8Billion over and above the R2.3Billion given in Feb) to bailout failing SOE’s yet no money to fix the health system, water and roads infrastructure and hosting of food banks ?

  • Craig A says:

    I’d like to contribute to the bailout. My cheque is in the post.

  • Gregory Michael Van Der Krol says:

    SAA also went the business rescue route and they are still going after a Tax Payer bailout. What is the point of putting SOE’s into business rescue? The ANC just uses Tax Payer money to bail them out anyway.

  • Vas K says:

    I think the Court inadvertently created a new source of easy money for the government mafiosos.

  • Bayford Cox says:

    Congratulations ANC government!! Four down another 690 to go. Don’t think they will be happy until they have destroyed everything there is to destroy.

  • Jane Crankshaw says:

    Yet another opportunity to rob the tax payers of this country!
    Any bets on whose pocket this ends up lining?
    And will the service levels in the “new and improved PostOffices” imagined by this government be any difference from the service levels of old? Not as long as BEE policies exist!
    Once again, we will be throwing good money after bad just to satisfy a select few who are politically connected and have the opportunity to plunder knowing there will be no consequences.

  • Bruce Anderson says:

    I tried, I honestly tried, to use the Cape Town service of the Post Office. While they did eventually deliver, it took 2,5 months to get my car licence delivered to a metropolitian area less than 20 km out of central Cape Town. I will not deal with the PO .

  • William Dryden says:

    As I have mentioned before, if the government’s child support was limited to the first 2 children born as per the UK, then there would be plenty left over for bail outs and other services.

  • William Stucke says:

    Mark Barnes resigned, correctly, because the ANC government insisted on splitting out the Post Office Bank from SAPO. They threw away the obvious synergies of using SAPO’s premises for another revenue stream in favour of creating yet another SOE for their cadres to be deployed to.

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