The SA Post Office (Sapo), a technically insolvent parastatal, will collapse without a new cash injection from the government, its parent ministry warned on Tuesday.
Briefing parliament’s finance watchdog the standing committee on public accounts (Scopa) on some of the challenges afflicting Sapo, communications and digital technologies deputy minister Philly Mapulane said the ministry was hoping the Treasury would allocate the entity an R8bn bailout in the medium-term budget policy statement (MTBPS).
“We were hoping to receive an allocation from the Treasury during MTBPS. It did not come through … we were listening to the [finance] minister saying this is tough love,” Mapulane said.
Sapo, the national postal service that is meant to be a key medium of communication, especially in rural and remote areas, is on a long list of state-owned entities relying on government bailouts to stay afloat. It has been hamstrung by acute management and financial problems in recent years, which have left it on the brink of collapse.
It received R2.9bn from the Treasury in 2019 to settle loans and pay critical suppliers. Cumulative allocations from the government amount to R8.6bn since 1991.
Sapo now requires an additional R8bn, but finance minister Enoch Godongwana made it clear in his MTBPS last week that state-owned entities will not be allocated any additional funding over the medium term as the government pushes to cut back public spending.
Sapo has not been profitable in recent years, except in 2006, when a profit of R276m was recorded, which excluded the subsidy received from the government. From 2001 to 2012, the subsidy amounted to R300m a year. It was temporarily halted in 2012/2013, which, along with a four-month-long wage strike in 2014, contributed to losses of more than R800m.
Mapulane said Sapo was experiencing serious liquidity problems, which has also resulted in the company’s delaying the tabling of the annual report for the 2020/2021 financial year as its going-concern status was not clear and dependent on a government bailout. The annual report was due to be submitted by the end of September, but Sapo has requested an extension to February, though it hopes it will be finalised before then.
“Sapo has been going through serious financial challenges over a period of time. Over the last couple of years, the core revenue of Sapo has been declining. For example, in the 2015 financial year Sapo’s revenue was R3.4bn. The revenue has been declining year on year and it is now sitting at R1.5bn,” the deputy minister said.
He said the turnaround strategy document that had been prepared by Sapo attributed its decline to a number of factors, which included customer attrition, limited investment and lack of technology upgrades, leadership instability, the Post Bank divestment without equity compensation, and the rise of digital platforms, which has led to a reduced demand for physical letter mail.
“All these factors have over the years resulted in the solvency and liquidity crisis at Sapo. This is why the minister [of communications] asked the board to develop a turnaround strategy. However, I must say without capital injection from national fiscus, I do not see the post office surviving these financial challenges going forward,” Mapulane said.
He said Sapo and the ministry would meet as a matter of urgency to identify areas that required urgent intervention so that a new proposal could be tabled to the Treasury, to consider reprioritisation pending the finalisation of the budget to be tabled in February.
Sapo executives have highlighted unsustainable costs at the company, with salaries and perks consuming more than 70% of its revenue. Sapo employs about 19,000 people and operates more than 2,400 postal branches around the country. But staff numbers dropped by almost 2,000 in 2020 as management moved to slash the wage bill and put the company on a sustainable path.
Sapo CEO Nomkhita Mona said the company was struggling to keep up with its payment obligations, including employer contributions to pension and medical scheme funds and payments to the SA Revenue Service. As at the end of June, it owed Sars about R600m, and a similar amount for medical scheme contributions.
“We are in discussions in terms of how we can pay back and negotiate terms,” Mona said.
She said Sapo had a universal mandate, in that it had to have a presence throughout the country, even in areas that were not profitable, “therefore it is not unreasonable to request taxpayer assistance”.
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