Government responds to Post Office being forced into business rescue

 ·11 Jul 2023

The Department of Communications and Digital Technologies says that the country’s courts forcing the South African Post Office (SAPO) into business rescue was an indication that the service is still seen as essential and worth sparing from liquidation.

The North Gauteng High Court on Monday ruled that the business rescue proceedings are to commence with immediate effect.

SAPO’s push into business rescue follows the company owing rent to Bay City Trading and being placed under provisional liquidation.

FAfter being placed under liquidation, the government approached the court to oppose the final liquidation of the post office, instead arguing for it to be put into business rescue.

SAPO has historically been bailed out with billions of rands. Judge Elmarie van der Schyff, in her ruling, said that the government budgeted an R2.4 billion bailout for SAPO and has pledged an additional R3.8 billion.

Business rescue proceedings are expected to occur subject to approval by the Registrar of Financial Services and ratification by the majority of SAPO’s creditors.

The court ruling highlighted the importance of SAPO as a strategic government asset that provides vital services throughout the country, especially in remote areas where the SAPO is often the main link between people in South Africa.

“It further uses its countrywide footprint to render such services as the distribution of social grants at its branches, distribution of the medication to those in need, various national and international postal services, etc,” said Enoch Godongwana, the acting minister of communications and digital technologies.

“This decision will give SAPO the much-needed time and space to restructure its affairs under supervision and implement the turnaround plan to fundamentally change its business model into a solvent and viable business with broad revenue streams that leads to modern services.”

SAPO has been consistently losing taxpayer money since 2013, leading to job cuts and branch closures.

Its liabilities exceed assets by R4 billion, with a debt of R8 billion. To address its financial challenges, the SAPO received an R2.6 billion bailout from the government in the 2023 Budget.

Moreover, around 6,000 employees, accounting for 40% of the workforce, have been retrenched due to financial constraints. The SAPO’s high wage bill and competition from private courier companies have made its business unsustainable.

SAPO’s business rescue proceedings are now set to put 7,000 jobs at risk as the embattled state-owned entity planning to save R1.3 billion in annual salaries.

Read: South Africa’s millionaire politicians: how much ministers, MPs and party leaders will be paid this year

Show comments
Subscribe to our daily newsletter