The SA Post Office, which was put in provisional liquidation in February, is applying to the courts to be placed in business rescue, enabling it to avoid further lawsuits by unpaid creditors and perhaps escape liquidation.
Being placed in business rescue lets a company pause debt repayments while experts restructure it and negotiate with creditors to avoid going out of business permanently.
Post Office spokesperson Suzie Khumalo said on Friday that a formal application was made for business rescue. The court hearing is set down for July 4. This comes after communications and digital technologies minister Mondli Gungubele told the state-owned group’s provisional liquidators by letter in May that the cabinet supports the move. He urged them not to make any “precipitous decisions” that might lead to the Post Office going under.
The letter, which formed part of court documents, also said that should the business rescue process proceed, the R2.4bn bailout announced by the Treasury in February would be made available to the Post Office, possibly along with additional funds, which will require parliament’s approval.
However, fear has been raised that going into business rescue could lead to the demise of Postbank, which is owed R4bn. Provisional liquidator Anton Shaban said in papers filed with the court that business rescue and final liquidation could mean Postbank would not receive most of what it is owed.
Once a company goes into business rescue, creditors are usually paid only a few cents for every rand owed.
Shaban said that if Postbank is not paid the R4bn in full, this “will in turn affect PostBank’s status as a going concern” and it will need to be placed in curatorship.
However, even if Postbank does not get repaid and eventually fails, the National Treasury guarantees depositors’ funds, according to a parliamentary briefing by department of communication officials.
Postbank helps pay SA Social Security Agency grants and provides banking services in remote parts of the country.
The Post Office’s latest woes began when one of its many creditors, landlord Bay City Trading, asked the courts to place it in provisional liquidation due to unpaid rent. The provisional application was granted on February 9 with a return date of June 1, by which time Bay City had been paid. However, in the meantime more creditors came forward with similar applications, making it difficult to remove the Post Office from provisional liquidation.
‘Distribution systems’
Shaban argued in court against the Post Office being placed in final liquidation.
“It provides an essential service to SA citizens in respect of distribution systems, including the delivery of parcels and postal services, and is the address at which grants are paid to citizens. It would be devastating for South Africans should the services cease,” Shaban said.
The Post Office is technically insolvent and its debt far exceeds the value of its assets, according to court papers and its 2022 financial statements. It has run at a loss every year since 2013, and received billions in state bailouts, the latest being R2.9bn in 2019.
Its employee medical scheme, Medipos, was placed in provisional curatorship in February with the Post Office owing it almost R700m in contributions it should have made on behalf of employees.
The Pretoria high court ruled on Thursday that the provisional liquidators must remain in control of the Post Office as caretakers until July 4, when the application for business rescue will be heard. The Post Office is operating as usual, though Shaban stated in court that it is not in a position to pay all its creditors, service providers and employees.
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