Business Maverick

SOE SOS

SA Post Office set to relinquish social grants paymaster role

SA Post Office set to relinquish social grants paymaster role
(Image: Shelley Christians | Rawpixel | Wikimedia)

The dysfunction of SA Post Office branches, whose systems are often offline and unreliable, has meant that social grant beneficiaries have relied more on grocery retailers and ATMs of commercial banks to withdraw their social grant payments. The SA Postbank is primed as the new paymaster.

A restructured SA Post Office will no longer be responsible for paying social grants to millions of beneficiaries after doing so since 2018 at a major financial loss and will cede this function to the SA Postbank. 

This is one of many proposals contained in a plan to restructure the financial and operational affairs of the SA Post Office under a business rescue process — a plan yet to be approved by the creditors of the state-owned entity (SOE) and the government. 

The SA Post Office has been under business rescue since July, a process that is an attempt to rehabilitate financially distressed companies by restructuring their affairs. The objective is to enable the company to continue operating while being restructured, saving some jobs in the process. 

Since November 2018, social grant beneficiaries under the SA Social Security Agency (Sassa) have received their grant payments at SA Post Office branches throughout South Africa.  

However, the dysfunction of SA Post Office branches, whose systems are often offline and unreliable, has meant that Sassa beneficiaries have relied more on grocery retailers and ATMs of commercial banks to withdraw their social grant payments, paying more in banking and withdrawal fees.  

The SA Post Office’s function of paying social grants became a money-spinner for it in the early days of taking over the contract from Cash Paymaster Services (a subsidiary of the private sector technology player formerly known as Net1) in 2018, whose contractual arrangement with Sassa was declared invalid by the Constitutional Court.

Read more in Daily Maverick: Sassa social grants distribution doomsday and behind the scenes move to save 17-million grants 

After taking over the social grant payments function from Cash Paymaster Services, the SA Post Office generated revenue of R798-million from disbursing social grants from its branches. By 2023, this revenue was reduced to R318-million because SA Post Office branches became unreliable for social grant beneficiaries — money that is forecast to further reduce to R48-million during the first six months of 2024.

Because grant beneficiaries are now withdrawing their grant payments from other channels such as retailers and ATMs of commercial banks, the money withdrawal volumes (see below) and fees earned by the SA Post Office have dropped dramatically. 

sa post office

(Graph sourced from SA Post Office business rescue plan.)

The Sassa over-the-counter payments are being handled by the SA Post Office at an estimated loss of more than R200-million per annum. And because of the decline, the joint business rescue practitioners of the SA Post Office, Anoosh Rooplal and Juanito Damons, have proposed that Postbank fully takes over the social grant payment function. Postbank, also a state-owned entity, was a subsidiary of the SA Post Office but has now been separated by the government from its operations to create a standalone state-owned bank.

The Sassa contract was ceded to Postbank in October 2022 with the SA Post Office still providing Sassa support services as an agent of Postbank.

“SA Post Office’s failure to maintain a safe work environment has put its employees at risk and made it more difficult to obtain affordable insurance coverage [for whatever monies are lost through theft],” the duo said.  

The plan by Rooplal and Damons also involves migrating or selling certain SA Post Office branches to Postbank, which would allow Postbank to expand its banking network and accommodate the SA Post Office’s remaining Sassa grant payment clients. 

“This strategic move would enable the SA Post Office to focus on its core competencies and enhance its overall financial position.

“By divesting the OTC [over-the-counter Sassa grant distribution] payment services and transferring certain branches to Postbank, SA Post Office can reduce its financial burden and focus on a more profitable business segment, improve customer satisfaction and attract new clients for its other products and services; and position itself for sustainable growth and long-term success,” the 85-page plan reads.

The recovery plan also sees the SA Post Office closing 600 branches, reducing its branch network across the country to about 600, with a dedicated sales and business development team to revitalise its mail delivery business. This team would be tasked with “attracting new clients, increasing volumes from existing clients, and implementing strategies to enhance the overall efficiency and effectiveness of SA Post Office’s bulk mail operations”.

The branches would also have a renewed focus on motor vehicle licensing services, the SA Post Office logistics depot network across SA being positioned as an attractive partner to retailers in the e-commerce space, and partnering with private sector players in the mail and parcel goods delivery industry.

However, a big part of the plan is premised on cutting costs — such as shedding 6,000 jobs at the SA Post Office — and getting a R3.8-billion bailout from the government.

Read more in Daily Maverick: Government department budgets may have to be cut to fund yet another SA Post Office bailout

The business rescue plan would grant a dividend award of 12 cents in the rand to all pre-commencement creditors, amounting to R1-billion. While this is not much, it’s better than a liquidation scenario. Were the state-owned entity to be wound up or liquidated, Rooplal and Damons said creditors would get only around 4c in the rand.

Creditors of the SA Post Office are set to vote on the business rescue plan on 7 December. DM

Gallery

Comments - Please in order to comment.

  • Zed Buchler says:

    And so the saga continues, another SOE ripe for plucking. Another bailout, some more much needed funds denied to SAPS, Dept. of education, the SANDF and especially the Dept of Health. So let the game of corruption and looting start once again at the newest get rich quick SOE!

    • Johannes b says:

      SAPS does not need a single cent extra (that has proven to show no effect). They need decent management and accountability – and cops that pass a fitness test

    • Willem Boshoff says:

      Do yourself a favor and go read the headline article on the SAPo on Moneyweb. The business rescue plan reveals an organization that made losses every year the last 16 years! Whose losses are 4x their asset value; they spend R1.50 for every R1 generated and they have huge debts to both SARS and their own employees for non-payment of tax and retirement fund contributions. Their entire executive and board should be held criminally liable.

  • Craig A says:

    A few years ago, i bought a small item from England. It took about 10 days to get to the main depot in Germiston and 3 months to get to Randburg. I could have walked there in a few days. I assume it has gotten worse since then.
    I had to go to the local Post Office to renew my car license last week. The place looks dilapidated. The grass outside is uncut, the interior has outdated posters on the walls and the place just looks dirty and unwelcoming. I feel sorry for the staff working there as its not their fault, but they will be the ones who lose their jobs!

  • Pierre Rossouw says:

    So we can assume that the “separated” Postbank will operate from the same SAPO premises, country-wide.
    So much for “restructuring.”

  • harrietkwinda.harriet says:

    Why not deploy IA to manage most of Post office Issues and make it smaller as most of the work is repetitive we can do better as a country

  • William H says:

    This government is good at one thing: stealing. No wait, two things; add mismanagement. Pathetic. The ANC does nothing to steer the stereotype of corrupt and useless African governments in another direction.

  • Dr Kerryn Krige says:

    There is such a positive in this story – that ATMs and retailers are proving to be a convenient and reliable place for grants to be disbursed. Fees should be waived (I am assuming there is already a model for this, as the Post Office also earns a transaction fee, which is not charged to the recipient?).

  • Grumpy Old Man says:

    I would be very interested in Mark Barnes perspective –
    When Mark took over he made it abundantly clear that the days of a traditional Post Office were over & that it needed to reinvent itself. He saw numerous opportunities leveraging off of the entities infrastructure & community reach.
    One of the problems he had was with the affiliate Union (normal stuff – excessive wage increase demands from a cash strapped entity) but also a lack of Govt support for his turnaround plan.
    5 or so years further on down the road & the appointed Rescue Practitioners have asked to table some kind of turnaround plan of their own. This situation would be a joke if it were not a tragedy for the thousands of jobs that are going to be needlessly lost.

  • Dragon Slayer says:

    same pig – different lipstick!

  • Leslie van Minnen says:

    SAPO and the Postbank are both useless and should be closed down. Will this happen?
    No it wont as this leaves two less SOE’s to steal from. This country has no chance of going forward. No doubt the hordes of the illiterate and unemployable will still vote for the thieves and crooks next year. They will pay the price for this. Shacks, poor education, bad policing and the theft of taxpayers money will just continue. Please do not come and ask for bread at my front door after you caste your vote.

  • Roelf Pretorius says:

    I wonder what the SA Post Office workers who started to strike about 9 years ago say now. Since the beginning of that strike, the post office was never the same again, and now it is basically non-existent. That is what happens when workers think they are safe in their work. Now 6000 of them are about to lose their jobs (or all of them, if the deal does not go through).

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