Post Office needs R3.8bn bailout to modernise, say rescue practitioners

Though the SA Post Office (Sapo) has lost R19bn over the years, the entity’s business rescue practitioners (BRPs) are confident a bailout of R3.8bn could give it a fighting chance.

The multibillion-rand cash injection, however, would not save 6,000 employees from being retrenched.

Business rescuers Anoosh Rooplal and Juanito Damons, in their plan to save the Post Office, said it had lost R19bn due to operating outdated business models and failing to adopt digital developments.

“Sapo incurred operating losses for many years, resulting in accumulated losses of about R19bn as at September 30. Sapo is not customer-focused and has been unable to adapt to changing market conditions. The total operating cost base exceeds 200% of revenue,” the rescue document reads.

The practitioners said the Post Office’s lack of investment in its infrastructure has resulted in a decline in its operational efficiency and customer service capabilities.

“The company’s ageing IT infrastructure and data centre infrastructure [last updated in 2012], inefficient mail processing equipment which is past its use of life, and unreliable logistics fleet are hindering its ability to meet the needs of its customers in a timely and qualitative manner.”

According to the Post Office, it last made a profit in 2004 and the decline in revenue started in 2006. The entity has not been profitable for 17 years. 

With R3.8bn, the Post Office intends to:

• pay for retrenchment cost;
• pay the creditors dividend; and
• use investment capital to repair and modernise assets.

“The biggest contributor to Sapo’s office’s financial challenges is its employee cost base which accounts for 150% of revenue. A total reduction of approximately 6,000 employees is required to right-size Sapo.”

The Post Office would need R600m for retrenchments. 

The business rescuers said the R2.4bn the National Treasury allocated to the entity would not be enough to avoid closure.

“To ensure the effective turnaround of Sapo, this business rescue plan hinges on a further allocation of R3.8bn to serve as a capital buffer to restore confidence in the South African Post Office and to continue trading on a solvent basis.”

They said they expect approval for the allocation of R3.8bn would be finalised in 2024. According to the Post Office’s 2022 annual report, the entity had a debt of R4.4bn last March.

The DA has over the years protested against more bailouts for the Post Office and wants it to be closed down.

DA MP Dianne Kohler Barnard said: “This liquidation may indeed be the final straw for one of the most mismanaged entities in the communications department.

“We stand firm in our belief that the Post Office, being one of the many bottomless pit state-owned entities battling operational issues, is beyond repair and should be liquidated.”

The business rescue plan has not been approved and will be voted for by creditors on December 7.

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