South African Post Office expecting almost R2 billion loss for 2024 – as costs triple revenue

 ·22 Dec 2023

The South African Post Office (SAPO) is currently running at a loss of R2 billion for the current financial year, and it is expected to post a loss of R1.7 billion for the next year due to skyrocketing operating costs.

This is feedback from the Minister of Communications Mondli Gungubele, who told Newzroom Afrika that the next major challenge for the Post Office is implementing its business rescue plan.

Earlier this month, the majority of creditors approved a business rescue plan presented by joint business rescue practitioners Anoosh Rooplal and Juanito Damons.

The plan includes significant cost-cutting measures, such as reducing the Post Office’s branch network to only 600 branches and downsizing its workforce to 5,000 employees. This reduction in staff by around 7,000 would help cut down the wage bill by an estimated R1.3 billion.

The Post Office has been operating at a loss every year since 2013 and has been struggling to compete with private couriers. Its losses have now exceeded R19 billion. Despite its financial difficulties, the Post Office has prioritized paying its employees in cash since 2020.

The company was not generating enough revenue to cover additional employment expenses such as medical benefits and pension funds and, therefore, it was reported earlier this year that the business rescue plan involved reducing the Post Office’s workforce by half to save R1.3 billion in wages.

Gungubele stated that the Post Office could not continue to operate in this manner and that if it did, it would have to be shut down.

We are going on a net loss of R2 billion plus, and we are projecting a R1.7 billion loss next year,” he said.

Shockingly, Gungubele revealed that the Post Office’s operational costs are around 185% of its entire revenue and are projected to reach as high as 200%.

Employee costs alone are 150% of the company’s revenue.

“If you listen to what I have said, if it continues, then it means we must close the South African Post Office,” Gungubele said.

Despite this, the government is adamant that the SAPO is an essential service that provides vital services throughout the country, especially in remote areas where the SAPO is often the main link between people in South Africa.

If the Post Office is shut down, businesses reliant on its services will collapse, and millions of South Africans who rely on it will be stranded, Gungubele warned.

As a result, the government budgeted a R2.4 billion bailout for SAPO and has pledged an additional R3.8 billion.

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