Kimi Makwetu paints bleak picture of Post Office liquidity
The auditor-general is uncertain whether company has ability to continue as a going concern
Auditor-general Kimi Makwetu has raised doubt about whether the SA Post Office (Sapo) can return to profitability in the near future after it unveiled another loss of more than R900m.
Sapo, which continues to rely on government bailouts to stay afloat, along with other state-owned entities such as Eskom and SAA, posted a loss of R908m for the year to March 2018. Though this was a marginal improvement on the previous financial year, when it lost R987m, Makwetu painted a bleak picture of Sapo’s financial situation.
"The Post Office Group did not generate sufficient revenues to finance its high cost base. These conditions, along with other matters … indicate that a material uncertainty exists on the Post Office Group and [the] company’s ability to continue as a going concern," Makwetu said in Sapo’s annual report tabled in parliament at the weekend.
The report suggests the entity will continue to be a drain on the fiscus.
Under former president Jacob Zuma, state-owned entities were plagued by poor governance and financial mismanagement. Government guarantees to state companies amount to more than R450bn. Credit-ratings agencies view the dependance of these companies on state guarantees as among the greatest risks to SA’s economy. Cleaning them up is one of the greatest challenges faced by President Cyril Ramaphosa.
Sapo received a R3.7bn capital injection from the Treasury in October 2017 and used it to pay creditors and pay down debt. It requires more money.
Though Sapo had an unqualified audit, Makwetu found that effective and appropriate steps were not taken to avert irregular expenditure of just more than R109m. The majority of the irregular expenditure was caused by splitting of orders and not following procurement processes by deviating as a result of poor planning. Effective steps were not taken to avert fruitless and wasteful expenditure of nearly R13.5m.
"Effective and appropriate steps were not taken to collect all revenue due as required by the … Public Finance Management Act … this was mainly relating to irrecoverable long outstanding receivables as a result of disputes regarding delivery of service."
Some goods, works or services were not procured through a process that was fair, equitable, transparent and competitive as required by the act, Makwetu said. In some cases, disciplinary steps were not taken against officials who had incurred and/or permitted irregular expenditure in the prior year as required by the act.
In the report, Sapo CEO Mark Barnes said the Post Office remained solvent with a healthy net asset value of more than R3.5bn on March 31 2018.
"The Post Office’s liquidity position does however remain a challenge, primarily due to declining revenue streams and market share. Lack of investment in infrastructure and technology has allowed competitors into our core business, notwithstanding the regulatory protection which should apply."
The core business of the Post Office until fairly recently had been the provision of postal services. It also hoped that its deal with the SA Social Security Agency to distribute social grants would be key in "creating state assets and capacity to replace private-sector dependence and retain economies of government within the fiscus".