South Africa’s Post Office left in tatters

 ·19 Apr 2023

The minister of communications and digital technologies, Mondli Gungubele, has called for calm from clients, creditors, employees and users of the South African Post Office (SAPO) which has been placed under provisional liquidation.

Gungubele said that he continues to be engaged with critical stakeholders in dealing with the placement of SAPO on provisional liquidation.

The struggling state-owned entity has been in dire economic straits for years and has now reached a new low in its financial woes.

Since 2013, the SAPO has been losing millions in taxpayer money every year, and these losses have been steadily increasing. As a result, has been forced to cut its workforce and shut down branches.

Despite its challenges, Gungubele said that the SAPO has developed a bankable strategy to transform the entity and make it profitable for business once again – a new strategy suited to this age and time.

He said that if the entity was given an opportunity and the necessary support, the Post Office could safely navigate the situation it finds itself in and renew itself as a digital services platform.

MyBroadBand reports that in the company’s latest financial statements for the period ending March 2022 showed that its debt was R4 billion more than its assets, and it owed over R4.4 billion to its creditors.

On top of this, according to Bloomberg, the entity is struggling to pay employees benefits and has announced laying off staff to cut wage costs.

SAPO was placed in provisional liquidation this month following a creditor approaching the Pretoria High Court to recover back rent. Legal experts from Barnard Inc Attorneys noted that the company is technically insolvent. However, a final liquidation order has not yet been issued.

Management and creditors have until 1 June 2023 to argue their case, said the legal experts. During provisional liquidation, a company’s assets are temporarily frozen – allowing for investigations into its financial status.

SAPO has appointed provisional liquidators to manage its assets, verify creditors’ claims, and collect debts. Private companies are now competing with the failing entity as the legacy institution struggles to adjust to new consumer demands and awaits another bailout.

The group received a bailout earlier this year from the National Treasury amounting to R2.4 billion; however, this was not enough.

The company has been a consistent drain on the economy and is another example of mismanagement at a state-owned entity. Some have argued that its liquidation would be more beneficial to the country than trying to get it to run profitably.

Opposition party, the Democratic Alliance (DA), said that it has been calling for the institution to be liquidated for years.

“While the liquidators seek a pay-out for their client, we equally hope that not only are personal debts covered for those who rented properties for Post Office branches, which were then surreptitiously closed, leaving behind massive debts.”

The political party added that they would like to see current employees and retired workers’ medical aid, UIF and pension contributions be paid out after they were criminally mismanaged over a number of years.

“This liquidation may indeed be the final straw for one of the most mismanaged entities within the Communications department,” said the DA. The group added that the Post Office is “one of many bottomless pit state-owned entities”.

Big dreams

Although the company is struggling massively, the government still has big plans for the state-owned mailer.

On 1 March, the Department of Communications and Digital Technologies gazetted its intent to table the South African Post Office Amendment Bill (2022) before the National Assembly.

The bill, if enacted into law, would alter the core mandate of the Post Office, allowing it to expand services and offering into the e-commerce and courier space.

It will further allow for the compact to adjust its business model on a whim to bring itself in line with technological and industry developments.

President Cyril Ramaphosa has also been a fan of repurposing the failing company with the Postbank Ltd Amendment Bill also being processed through Parliament.

According to Ramaphosa, this bill aims to open up the SAPO to providing financial services as a more affordable alternative to traditional commercial banks.

He said that the bank would aim to offer a cost-effective option to traditional banks, which often reject individuals due to their inability to provide collateral.

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