The Post Office collapsed into the arms of business rescue practitioners on Monday, a form of bankruptcy protection, with a plan that puts 7,000 jobs on the line to save more than R1.3bn in annual salaries.
The Post Office joins a string of state-owned entities such as SAA, Mango and SA Express tumbling into business rescue — a court-ordered process that halts payments while turn- around specialists structure the business to save it before usually paying creditors a small percentage of what they are owed.
The Post Office had already received more than R7.3bn in government bailouts by 2019 and has run at a loss every year since 2013, highlighting its struggles with high costs, outdated technology and competition from private couriers.
Communications minister Mondli Gungubele said in court the entity needs to be saved as it plays an essential role in providing grants and services in rural areas, which have limited access to financial services. He also said SA is a signatory to international treaties that require it to have postal services.
The government announced in February that it had agreed to provide R2.4bn to the Post Office, and since then has said R3.8bn is earmarked to be provided in the medium-term budget policy statement in October.
The interim business rescue practitioners are Anooshkumar Rooplal and Juanito Martin Damons, subject to a vote by creditors and approval by the financial services regulator.
The judgment also acknowledged that the Post Office, which owes creditors more than R9bn, is in financial difficulties due to structural issues.
Job cuts
“The harsh reality is that the facts point to the SA Post Office’s workforce needing to be extensively curtailed for the Post Office to survive, but business rescue proceedings are prone to have a less severe impact on the workforce than final liquidation,” presiding judge Elmarie van der Schyff of the high court in Pretoria said.
It is estimated the Post Office employs more than 12,000 people, though the Communications Workers Union disputes this, saying it is not known how many are employed.
The Post Office was placed in provisional liquidation in February by Bay City Trading, a company to which it owed millions in rent, as a means to be repaid. Another creditor applied to the court for provisional liquidation.
This forced the government to investigate placing the state-owned entity in business rescue to avoid final liquidation.
Initially, the two provisional liquidators, Anton Shaban and Jerry Musi, suggested a compromise under section 155 of the Companies Act, with creditors rather than a full-blown business rescue, which was initially supported by Postbank and ensured Postbank would get the full R3.9bn owed to it.
With business rescue, Postbank is likely to receive about R400m, leading to concerns that it will not have the reserves required to qualify as a fully fledged, state-owned bank.
But in court papers the provisional liquidators acknowledged the government’s lack of support for this option, and agreed to abide by the court’s decision on business rescue.
The government said it would give R2.4bn already allocated to the entity in February’s budget if business rescue went ahead — which the judge said appeared to be a means to try to force the court’s hand.
“An aspect I initially found somewhat disturbing is the government’s unwavering stance, as communicated through the [communication] minister’s affidavits, that it is willing to provide capital to the Post Office if placed in business rescue.
“While emphasising the dire effect that final liquidation will ... have on the nation’s international responsibilities and the role the SA Post Office plays in the country’s socioeconomic structure, it seems as if the government wants to force the court’s decision.”
The judge acknowledged the role that the provisional liquidators had played.
“Their recognition of the undesirability to finally liquidate the Post Office is commendable, and their efforts to keep it operational despite it being placed under provisional liquidation are indicative of the exercise of a fiduciary responsibility.”
International role
The judge found the Post Office has an international role to play, noting that liquidating it could affect the whole economy.
“To hold a view that the taxpayers’ losses must be cut and that SA Post Office must be finally liquidated is simplistic and does not account for the intricate relationships and responsibilities that exist.
“SA Post Office, a vital government service platform, among others, renders an essential service, particularly in rural and remote areas. In the international context, the interruption of the Post Office’s obligations might have dire consequences for all South Africans who use the postal services of other countries.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.