The SA Post Office (Sapo) needs funding of R1bn before end-March 2023 to meet its cash flow deficit and R2.4bn more to roll out its new strategy, says the department of communication & digital technologies.
Without this cash injection the technically insolvent company, which is on its knees and closing branches, will sink further into the red and be unable to fund its turnaround strategy. Its liabilities total R8.2bn, and the auditor-general doubts it can stay afloat.
Despite parliament’s communication and digital technologies committee’s expectations that Sapo would get a bailout in the medium-term budget policy statement in October, this did not occur, leaving it in crisis. Only Denel, Transnet and Sanral got bailouts totalling R33bn.
In a presentation at a joint meeting of parliament’s finance and communication & digital technologies committees on Wednesday the department’s deputy director-general of state-owned enterprise oversight, Omega Shelembe, said Sapo’s financial position would be worsened by the withdrawal of Postbank and its establishment as a fully fledged bank as provided for in the SA Postbank Ltd Amendment Bill. Taking Postbank, which is sufficiently capitalised, from the Post Office’s control will deprive it of a crucial revenue stream.
The joint meeting was held to hear the finance committee’s input on the bill though finance committee chair Joe Maswanganyi said it is the communications committee’s responsibility to process the bill.
Shelembe said Sapo had total liabilities of R8.2bn on September 30 and a further R3.2bn owed to Postbank.
Operating model
“Before the separation of the Postbank from Sapo, the entity was already experiencing severe challenges. The effect of the separation has added to the deepening challenges. The Post Office of Tomorrow Strategy has thus been developed cognisant of the urgent need to reposition the Sapo to become relevant in the digital era and find a resolution to its deepening financial challenges,” said Shelembe.
The strategy involves restructuring Sapo’s operating model, but Shelembe said that “it is vital that the implementation of the strategy is supported by funding”.
“There have been ongoing engagements between the department, National Treasury and Sapo on the requirement for funding assistance — including the meetings between the ministers. These engagements created a reasonable expectation that the funding will be availed to Sapo,” he said.
Shelembe said the Treasury acknowledged the financial risk associated with funding the Sapo restructuring process and indicated that its costing will need to be fed into the medium-term expenditure budget process “considering the effect of the unbundling on the solvency of Sapo”.
Communications & digital technologies portfolio committee chair Boyce Maneli has urged the government to allocate funds to the struggling Sapo, saying not doing so could be “catastrophic” to service delivery. The expectation that this allocation would be made in the budget policy statement was not realised, creating a crisis for Sapo.
In its most recent annual report tabled in parliament in October, the Post Office said it incurred losses of at least R2.2bn (down from about R3bn the year before), and its liabilities exceeded assets by more than R4bn. It could not pay debts when they fell due.
The auditor-general issued a disclaimer, the worst possible audit outcome, and raised doubt about its ability to stay afloat due to crippling losses. Unions have warned of looming retrenchments at the entity, which employs about 16,000 people, with up to 40% of these jobs said to be on the line.
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