SOE SOS
It’s now up to government to decide on R3.8bn bailout for SA Post Office
A majority of SA Post Office creditors voted in favour of implementing a rescue plan to restructure the affairs of the beleaguered company and give it a fighting chance. The plan requires a government bailout of almost R4-billion.
A majority of businesses that are owed billions of rands by the SA Post Office have approved a plan that will drastically restructure the affairs of the state-owned enterprise (SOE), paving the way for 6,000 jobs to be cut, 600 branches across the country to be shut, and for the government to throw even more taxpayers’ money at it.
At a meeting on Thursday, 7 December, a group of SA Post Office creditors – owed more than R3-billion by the SOE – voted in favour of a business rescue plan which would be implemented over the next two to five years.
A spokesperson for the SA Post Office’s joint business rescue practitioners, Anoosh Rooplal and Juanito Damons, told Daily Maverick that the plan received support from more than 75% of independent creditors who voted at the meeting.
This was a crucial step because if the creditors had rejected the plan, the SA Post Office would have faced liquidation and the permanent closure of its doors.
However, for the plan to be implemented, the SA Post Office will need a R3.8-billion bailout from the government, which, through Cabinet, has agreed (in principle) to provide more money to the SOE.
Over the past nine years, the government has given the Post Office cash bailouts worth R10.3-billion — a futile exercise that has failed to return the SOE to operational and financial sustainability.
It will now be up to Finance Minister Enoch Godongwana to confirm additional money or the mechanism of support for the SA Post Office, a decision that might be unveiled in 2024 during February’s Budget.
How the potential bailout will be spent
The additional funding from the government is required to pay for aspects of the business rescue plan and its implementation while the SA Post Office’s operations are kept going.
The SA Post Office will have to fund retrenchment packages to the tune of R600-million as job cuts are a key aspect of the business rescue plan to reduce the SOE’s cost base.
The plan proposes retrenching 6,000 of the SA Post Office’s workforce of 11,000.
According to the business rescue practitioners, the biggest contributor to the Post Office’s financial challenges (accumulated financial losses of R19-billion since 2014) is its payroll.
The practitioners estimate that the SA Post Office’s worker cost base accounts for 150% of revenue, meaning that it pays workers R1,50 for every rand of revenue generated.
Once retrenchments are completed, it is forecasted that the worker cost base will reduce from 150% to 62% of revenue.
Another portion of the government funding would go towards paying the Post Office’s creditors. The SOE owes R4.5-billion, which excludes the R3.93-billion it owes to Postbank.
The business rescue plan would grant a dividend award of 12 cents in the rand to all pre-commencement creditors, amounting to R1-billion.
A further top-up dividend of 18 cents in the rand would be paid to statutory creditors, amounting to R125-million.
A top-up dividend of 18 cents in the rand would also be paid to payroll creditors, amounting to R367-million.
All of these payouts hinge on whether Godongwana agrees to throw yet another lifeline to the Post Office – this time for R3.8-billion.
The bailout would also go towards restructuring the SOE’s operations.
The business rescue plan sees the SA Post Office halving the number of its branches to around 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”, reads the business rescue plan.
The branches would also have a renewed focus on motor vehicle licensing services, the Post Office’s logistics depot network across SA being positioned as a partner to retailers in the e-commerce space, and partnering with private sector players in the mail and parcel goods delivery industry.
“The Post Office fulfils an important social mandate intended to provide key basic communications services to all households, including the rural areas, where access to wifi, smartphones and printers are not a given,” said Rooplal in a statement after the vote by creditors.
“A restructured Post Office can do this affordably and conveniently, given certain regulatory pricing and the geographic reach of the branch network.”
The SA Post Office will also shift the function of paying social grant beneficiaries to Postbank.
Read more in Daily Maverick: SA Post Office set to relinquish social grants paymaster role
“Customer centricity and supplying the correct tools of the trade to the staff will be a key and ongoing initiative to provide excellent service, win back market share and gain traction with new products,” said Damons. DM
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While they are handing out all this money, maybe they should give Ndileka Mandela (Nelson Mandela’s granddaughter) some as well as she is demanding reparations be paid to Africa by the British government for its years of colonizing the continent. I think she needs a new Chanel Diamond Forever handbag and as we all know they are going for $261 000.
Anyone with a brain knows that the corrupt ANC government will bail out the post office and ever other SOE that they keep running into the ground!! The corrupt ANC government is nothing but gangsters and thugs looking for their next looting opportunity and that will be the NHI. We are all going to die by the hands of the corrupt ANC government.
Its a shame for south african tax payers,their saving companies that dont produce production but keep on asking for more money to be misallocated in order to increase their wages and bonuses.
9 years they have been bailing the Post Office out and they still want to try again ? Are they crazy if in 9 years they havent been able to make any profit then shut it down, its another white elephant not going anywhere all its doing is paying people for not doing their jobs and sorry charity has to stop sometime.
I am supposing that the branches being closed with mostly be in the Metros and larger towns, where there is access to WiFi, printers and the like…but conversely, that’s where deliveries of mail etc can be stepped up.
….but how does a separate Postbank improve matters?
This article makes no mention of the estimated R2 bil that the Post Office owes its own Pension Fund and medical aid scheme for working members. These are contributions that the PO deducted from its employees salary but failed to pay to the funds. This is actually theft but will anybody be prosecuted? Another big chunk of money is owed to SARS for the same reason. better research is called for before you publish Ray Mahlaka and DM.
Posted a letter in the Fish Hoek P.O. just over six weeks ago. Arrived in Newlands yesterday! Don’t know how it works, but the postal service! Sjoe! It’s amazing!
The cost of greed and incompetence.
And, the only reason the creditors agreed to this is the fact that a government bailout (complete misnomer as they’ve not managed to bail anything out to date) is their only chance of seeing any of their dues.
And WTF are the Comrade thieves going to get 3800 Million??
Yes, folks there’s a thousand million in a Beelyon. Do they know?
Just print more money. Even me.. FFS..
There was once a great king. His name was Midas. Then he started to think he was the bees’ knees, so when the tooth fairy gave him a wish, he asked that everything he touched would turn to gold. And so it happened. Even his daughter and his food.
And then there was a government that didn’t exactly wish for, but everything it touched turned to ephukile. First it was Denel (thank God, another arms company selling death and destruction), then it was SAA, Eskom… and now finally the post office. Is there another country in the whole world where you can’t post a letter?
I’d be careful if I was you, President Ramaphosa. Make sure you don’t touch your wife or daughter, and only eat with a knife and fork. You never know what might happen if you touch them. Actually all of South Africa knows…
It is just another excuse to steal our money. Wait for the national health feeding trough. That will feed them for a few years before there will be no tax basr left.