Business Maverick


Business rescue paves way for R6.2bn bailout of SA Post Office — and axing of 7,000 workers

Business rescue paves way for R6.2bn bailout of SA Post Office — and axing of 7,000 workers
(Photo: Gallo Images / Sharon Seretlo)

The Cabinet has agreed to bankroll restructuring and rehabilitation of the state-owned enterprise’s operations, but the rescue plan includes laying off 7,000 workers — almost half of the staff.

The government is set to sink more taxpayer funds into another basket case state-owned enterprise (SOE), this time the SA Post Office.

The SA Post Office was put into business rescue this week and the Cabinet has agreed to give it additional funding of R6.2-billion to restructure and rehabilitate its operations. This is on top of the R10.39-billion the entity has received over the past nine years — money wasted, as it is insolvent and cannot fulfil its basic function of delivering mail and parcels on time.

The R6.2-billion will be paid in two tranches: R2.4-billion from the 2023/24 Budget and an extra R3.8-billion to fund the business rescue process.

The latter amount was part of a Pretoria High Court application by Communications Minister Mondli Gungubele to have the Post Office placed in business rescue. That application was successful, averting the SOE from being forced to close its doors permanently.

Gungubele, who oversees the SA Post Office, told the court the government was prepared to inject more taxpayer money into it under business rescue, which is less draconian than liquidation. Business rescue tries 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.

Judge Elmarie van der Schyff, who delivered the high court judgment, said  although a successful 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 “weighs heavily in support” of business rescue.

Giving the SA Post Office money arguably goes against Finance Minister Enoch Godongwana’s promise to show SOEs “tough love” and reverse the entrenched culture of them depending on taxpayer funds for survival. Daily Maverick sent the Treasury a list of questions, which it acknowledged but had not responded to by the time of publication.

In reply to a parliamentary question by DA MP Dianne Kohler Barnard, Godongwana implied that the SA Post Office might get more money, even though the 2023/24 Budget made no provision for supporting business rescue. Godongwana said: “Various [funding] options are possible, including reprioritisation of funds, within the approved fiscal framework.”

Godongwana said the government might consider adjustments to the Appropriation Bill, which allows for National Revenue Fund money to bankroll further spending in 2023/24. The National Assembly adopted this bill in June.

Too big to fail?

Many people in the government (including Gungubele) believe the SA Post Office is too big to fail — because of the services it is meant to provide.

The SA Post Office is mainly responsible for mail delivery and for distributing social grants to more than 7 million beneficiaries every month. It also provides free transit of postal items to countries that are members of the Universal Postal Convention.

Despite R10.39-billion being spent since 2014, it has failed to modernise. It has spectacularly failed to respond to structural market changes, with fewer people relying on mail and most turning to mobile and digital offerings. The SA Post Office struggles to compete with private sector couriers, and corruption and underinvestment in infrastructure hobble mail delivery.

It has an annual performance target of 60% for timeous delivery of mail across South Africa. For years, the delivery rate has languished at 50% — far below the 92% target set by the regulator, the Independent Communications Authority of SA.

The SA Post Office last generated profits 16 years ago and is now a debt defaulter, owing R9.4-billion to creditors, including the SA Revenue Service, medical aids, unemployment insurance and landlords.

The rescue plan promises to cut costs, including by shedding 7,000 jobs from a workforce of 14,460 to save more than R1.3-billion in annual salaries.

The SA Post Office also wants to expand its mandate beyond postal services to include offering logistics and e-commerce services. Gungubele wants it to be a “digital hub for businesses and communities”. To do this, a Post Office Amendment Bill has to be enacted.

SA Post Office creditors will not get back all the money they are owed. With business rescue, creditors will probably only be paid 10 cents for every rand they are owed. One of the creditors is Postbank, a small bank affiliated with the SA Post Office that holds just over R8-billion in deposits from poor people in rural areas where there are no big banks. Postbank also has R3.5-billion in assets.

Postbank provided the SA Post Office with a loan of R1-billion in the early days of it becoming the social grants paymaster, growing the amount it is owed by the SOE to R3.9-billion. Postbank is likely to receive about R400-million in the business rescue process. This has led to concerns that Postbank will not have the capital reserves required to qualify as a fully fledged state-owned bank and calls into question its ability to pay out deposits belonging to its customers as and when they require them. Postbank didn’t respond to Daily Maverick’s questions on this.

Deposits held by Postbank or any other bank in South Africa have no protection in law; the government does not guarantee deposits. DM


Comments - Please in order to comment.

  • Francois Smith says:

    Surely some investigations by the SAPS can assist in rooting out the corruption. Will Daily Maverick please ask minister Cele what is being done about this corruption? It can also not be only corruption that caused the decline in SAPO. It is acknowledged that SAPS most probably gave the previous white South Africa, if one may call it such, a far better service than that of black South Africa. In 1987 I could mail a letter from the Cape to Pretoria and it would be delivered within two days. Now, it takes 6 months for me to get mail from Pretoria to Cape Town.
    Also, how many government documents and parcels are to sent every day? Surely the SAPO should be able to deliver lab samples from Kuruman to Pretoria in the same van?
    If SAPO is to be used for only distributing of grants, use the mobile phone companies and transfer the money onto the people’s phones, or government should really get their heads out of the sand and solve the problems. In essence, the bail out money is not government money, it is taxpayer money and should be spent for the betterment of South Africa. Rescuing the SAPO on a continuous basis is not for the betterment of South Africa. (SBTW, this goes for SAA and Alexkor and ,and ,too)

    • Jane Crankshaw says:

      It’s not up to DM to ask political appointees anything – they merely report what is happening. It is up to you and me and the citizens of South Africa to ask, nay, demand that the politicians of this country do the job they are paid to do.
      When and how we do this is the problem. Without a cohesive and united push – divided by racist BEE policies and inequality, this government holds the power to do, say and act as it pleases. In my opinion, the only way to get the attention of the ruling party is for the 20% that contribute 80% of the taxes to turn off the taps! Voting just ain’t going to do it – the uneducated masses still live in hope of the empty promises made every election season. Only money talks…. If there’s nothing to steal then perhaps we can start all over again and make this country strong, proud and fair. Worth a try!

  • Patrice Lasserre says:

    Since 2015, SAPO has made a great job of making itself irrelevant thanks to ill-advised restructuring and lack of vision. What purpose does it serve today? P.

  • Jane Crankshaw says:

    Can we set the record straight please…taxpayers R10b was not wasted over the last 9 years – it was stolen! Please let’s not beat about the bush and just call a spade a spade!

  • David Pennington says:

    Another ANC success story

  • Dennis Bailey says:

    What a waste. Viva, ANC, Viva. No doubt the 7000 will vote for the ANC in 24! There are none so blinds as …..

  • Wayne Gabb says:

    Ideology and corruption kills anothe SOE !!

  • Chris Powell Powell says:

    And yet Mark Barnes left the PO debt free and also offered a proposal some time ago to take it over without any redundancies at a zero cost to the fiscus. But of course the arrogant morons in the ANC shunned his proposal, insulted him and decided they know best. Ideology trums logic every time!

  • D'Esprit Dan says:

    Does anyone know how much money in totality has been poured down the drain of cadre deployment to keep crippled SOEs like the Post Office, Eskom, SAA, Transnet and all the others afloat, simply for the political dividend? R1 trillion? More? The total lost opportunity of having useless, corrupt, cadre-driven SOEs emptying SA’s fiscus would surely have provided housing, education, healthcare, security and proper jobs for everyone in this country if the ANC hadn’t decided to wreck it with its slavish adherence to luddite policies and puerile populism.

  • Johan Buys says:

    This time, instead of third party business rescue practitioners, can Treasury, Auditor General and Attorney General not rather second a team of six people to run this business rescue? It is not as if they know anything more about turnarounds of a post office than the lawyers that will be paid hundreds of millions to business rescue the post office for the next 6 years?

  • Hilary Morris says:

    It never bloody ends, does it? I agree with Jane Crankshaw in theory, but less sure of how it could be done in practice. Also likely to have dire consequences? Perhaps less posturing by political parties and more work in rural areas might be of value…. The ANC has to implode, preferably sooner rather than later. A falling out among the thieves.

  • Mark K says:

    Given massive changes in technology that undermine traditional business models, enterprises need to be agile in adapting to new circumstances. The SA Post Office has been about as nimble as an elephant drunk on marula.

  • Robert Vos Vos says:

    The SAPO, like almost all state owned enterprises, was used after 1994 as an employment vehicle with the aim of providing jobs for ANC cadres. And this at a time when the postal system became the victim of declining business through increased use of electronic document transmission – as has happened in almost all countries across the globe. A large reduction in staff in SAPO has been on the cards for many years, but our geniuses in the ANC have chosen to ignore a prudent business model in favour of outdated ideology that creates employment where it is least able to afford it.
    State owned enterprises should be run using sound business principles, not used as a form of patronage to bolster the declining popularity of a useless liberation movement.

  • Jan Rabie says:

    The key problem in many SOE’s is that they are State Owned Employment Agencies. There is just not enough managerial and leadership capacity in SOE’s. Senior execs get parachuted in with little understanding of the business. No decisions and wrong decisions are common. Our experience of SOE’s is woeful. Boards and Execs keep themselves busy with planning and strategising while completely lacking in the execution of the company’s daily business.

  • Jeff Robinson says:

    Absolute waste of money. Sell the assets and move on. Nobody uses nor trusts the post office.

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