The state-owned company on the verge of total collapse

The South African Post Office is desperate for cash to avoid collapsing, but how the embattled state-owned enterprise will raise this money is unclear.

The Post Office was placed into business rescue in July 2023 amid serious challenges, including higher employee costs, operational challenges and a simple inability to deliver goods.

In 2023, the Post Office’s liabilities had escalated to R12.5 billion, while its assets were only R4.5 billion. This meant that the organisation was technically insolvent.

As part of the business rescue, the Post Office received a R2.4 billion injection from the National Treasury. It used these funds to cover operations, settle debts, pay salaries and severance packages.

By September 2023, the Post Office said that nearly 5,000 people had been retrenched out of the 11,000 total staff members.

Moreover, 366 of its branches were closed. This left the nation with 657 branches nationwide, of which only 113 were profitable.

A plan put forward by the business rescue practitioners banked on a further bailout from the National Treasury of R3.8 billion, but senior government officials have been hesitant.

Another possible mode of funding the Post Office could come from the SA Connect programme, a national broadband policy approved by the Cabinet in 2013 aimed at bridging the digital divide.

As reported by MyBroadBand, the Department of Communications and Digital Technologies has asked the National Treasury to reallocate unused funds from the SA Connect programme to the Post Office.

This comes after warnings from the Department and the Communications Workers Union that the Post Office could close by the end of February.

The Union said that the Post Office’s business rescue practitioners told them that the government was hesitant about the promised R3.8 billion bailout, putting salaries and operations at risk.

What next

Plans for the Post Office remain in the air, and the now-cancelled 2025 Budget does not mention the struggling entity.

In an unprecedented move, South Africa’s 2025 Budget was delayed by a month over a controversial VAT increase.

However, the speech that Finance Minister Enoch Godongwana was supposed to read contains no mention of the South African Post Office at all.

This means that the National Treasury did not offer a bailout, and there was no mention of funds being redirected from the SA Connect fund.

This puts the future of the Post Office in doubt, as the entity is not receiving the billions it needs to survive.

BusinessTech contacted the Department of Communications to ask what would happen if neither funding solution were announced, but it received no response at the time of publication.

A possible relief for the SOE is that the National Budget for 2025 will undergo extreme revisions before it is announced on 12 March 2025, leaving the door open for a funding solution to be established.

Outside of immediate cash injections, Malatsi proposed an operational shift, as the department does not have the resources available to rescue the Post Office.

Malatsi’s proposal will see partial privatisation of the Post Office and has requested the National Treasury for support in creating a task team to pursue private financial and operational partners.

Although the government retains a majority stake in the Post Office, this ends its monopoly as a reserved postal service in South Africa.

The Minister also recently revealed that 388 Post Office branches are currently vacant. The Post Office owns 131 of these locations, and the government plans to sell or rent them out.

Outside of delivery services, the Post Office is undergoing a massive change amidst the changes at the PostBank.

While the Postbank has always offered minor banking services, President Cyril Ramaphosa’s signing of the Postbank Amendment Bill expands its offerings.

This will see the organisation offer transactional accounts, credit, and other banking services in addition to the existing savings subsidiary.

Malatsi recently invited nominations for the inaugural Board of the South African Postbank. Question marks remain if a new state-owned bank is necessary amidst South Africa’s high number of banks.