Liquidation ‘Day Zero’ for South African Post Office around the corner

The South African Post Office (SAPO) says that its ‘Day Zero’ is approaching fast in October 2024—the day when its cash reserves will run out and its business rescue practitioners (BRPs) may have to liquidate it.

In an update on the embattled postal group’s business rescue proceedings, it noted that it needed a R3.8 billion bailout from the government to meet its business rescue plan’s needs and to keep operating.

Between June 2023 and June 2024, the SAPO used a R2.4 billion injection to settle its debts and financial obligations to creditors, as well as to pay other settlements and retrenchment costs.

The money was also used to pay salaries and benefits to workers who remained, as well as to cover for its operational shortfall.

The group said that since entering business rescue, it has managed to turn from a net asset value (NAV) of -R7.9 billion in June 2023 to a positive NAV of R840 million at June 2024.

Before entering BR, total creditors amounted to R8.7 billion, which has been reduced to R440 million after deep compromises. Creditor dividends were paid at 12 cents.

The process has also seen thousands of workers retrenched and hundreds of SAPO branches shut down.

Prior to business rescue, the SAPO employed 11,083 workers and operated 1,023 branches. At June 2024, headcount had been reduced by 4,875, and 366 branches closed.

Despite the operational changes, the SAPO says an additional R3.8 billion from the state is needed to complete the rescue process.

This would be used to pay off additional creditors (at 18 cents) and the balance of Section 189 retrenchment packages for over 4,000 workers who were let go, it said.

However, the bulk of the financing (R2 billion) would be reinjected into the business to recapitalise it.

If the group does not get the bailout it needs, it warned that liquidation may well be the final outcome.

“Based on the latest financial projections, at the current run rate, and with no further capital injection by the fiscus, SAPO will only have cash reserves up to October 2024,” it said.

“With no additional funding, the BRPs will be legally obliged to place SAPO in liquidation as directed by the provision of section 141 of the Act.”

The SAPO said that the consequences of liquidation would be fatal for its Universal Service Obligation mandate.

The estate would be placed in the hands of the Master of the High Court, who will appoint a liquidator to wind up the estate.

The liquidator would then become the final authority of SAPO.

“All jobs will be lost; business operations will cease, save only for those operations necessary to wind up the company. Furthermore, all assets will be sold at forced sale value; any proceeds will be divided amongst creditors. SAPO’s mandate cannot be met,” it said.

To aggravate matters, the provisional liquidation order (issued prior to SAPO being placed in business rescue) remains in place, it warned.

“The attorneys for the provisional liquidators have been successful in extending the rule nisi on three separate occasions. We have a difference of opinion and have applied for a special motion court to fully ventilate our position. The matter is set for 18 November 2024.

“Our position will deteriorate if we do not have any cash reserves available to implement the business rescue plan as adopted,” it said.

Aside from the funding issue, the business rescue process faces other challenges, it said.

This includes the non-renewal or withdrawal of the SAPO’s exclusive licence to deliver packages under 1 kilogram, the lack of support from other government entities, risks associated with digital rollout (including insufficient infrastructure upgrades), criminal syndicates and disruptions from retrenched employees.

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