Post Office set to report another R1bn loss

The SA Post Office (Sapo), which recently suspended its acting CEO, is projecting a repeat performance in this financial year of the previous two years, with a loss of over R1bn expected for the period to end March 2020.

This continues the loss-making trajectory which has seen Sapo losing money for nearly 10 years. This is despite it having received a total of R8bn in government bailouts since 2016, which was not used for new revenue generating projects as intended.

The Post Office is one of several state-owned entities that has had to rely on government bailouts to stay afloat.

Acting CEO Lindiwe Kwele was suspended after just four months in the role, after Sapo received a whistle-blower’s report containing allegations against her including conflicts of interest and irregular extensions of contracts.

Kwele had taken over from Mark Barnes, who resigned in August after clashing with the board and the government over their decision to hive off Postbank, the financial services arm of the Post Office, with ambitions to become a fully fledged bank.

The projected loss was disclosed at a media briefing on Thursday by Sapo chair Colleen Makhubele, who said the sustainability of the organisation beyond the financial year was in question as its costs exceeded its revenue. She itemised a number of projects aimed at enhancing revenue.

Acting CEO Ivumile Nongogo said the projected loss for the year was not due to losses on the SA Social Security Agency (Sassa) project, which involves Sapo disbursing social grants to millions of beneficiaries of the body.

Nongogo said the Sapo corporate plan was intended to address the losses quite aggressively so that the loss in the 2020/2021 financial year would be lower.

He noted that Sapo had not actively begun discussions on retrenchments and this might not be necessary if it were able to increase its revenue. He conceded, however, that the organisation was perhaps “inappropriately” staffed and reskilling would be necessary to ensure that staff were productively employed. Staff costs represent more than 70% of revenue.

Nongogo said Sapo was in a position to pay its suppliers and other monthly bills.

Makhubele said a project was under way to review current contracts and to implement other cost-containment measures such as using technology to drive down security costs at branch level. Auditor-general Kimi Makwetu has identified serious irregularities in some of Sapo's contracts.

Makhubele outlined the growth strategy for the business to serve as a service platform offering digital services, and for its distribution network, warehouses and retail platform to be used by other businesses. Apart from Sassa, the National Lottery is also using Post Office branches for its sales, and government departments for their various services such as the delivery of schoolbooks and medicines and the payment of vehicle licences.

Sapo is inviting businesses to make proposals about how they could use its underutilised infrastructure. It will also launch an e-commerce platform soon.

Makhubele noted that fraud had been reduced drastically from R50m in the past financial year.

Deputy chair Tia van der Sandt said the investigation into the suspension of Kwele and head of the supply chain management division Mothusi Motjale, was advanced and was due to be completed by the end of March.

Kwele’s lawyer Eric Mabuza, has said his client is challenging the suspension, maintaining that it is unlawful.

The present board was appointed in October 2019 and undertook an evaluation of strategic risks and its failure to take advantage of its competitive advantages.

ensorl@businesslive.co.za