Debt-ridden Post Office asks Treasury for cash injection to help fund turnaround
by Linda Ensor, 23 February 2016, 11:43
THE South African Post Office (Sapo) has debt of nearly R1bn and has asked the Treasury for a cash injection of between R2.5bn and R3.5bn to fund its turnaround, newly appointed CEO Mark Barnes told MPs Tuesday.
Mr Barnes met Treasury officials on Monday to present his case for a cash injection and said in a briefing to Parliament’s postal services and telecommunications portfolio committee that Sapo’s turnaround plan had been well-received.
Meetings have also been held with banks in a bid to secure interim bridging finance pending a cash injection. Sapo is currently supported by a R4bn state guarantee and will need more financial aid if its 2015-16 financial statements are to be finalised on a going concern basis.
Mr Barnes painted a bleak picture of the financial position of Sapo, which he said was due to make a loss of more than R1bn in the 2015-16 financial year, similar to the "disastrous" result of the previous year when it declared a loss of R1.5bn. In the first 10 months of the current financial year, an unaudited loss of R1bn was recorded.
Mr Barnes said the backlog of creditors was "critical". The lack of cash translated to operational paralysis and the loss of clients because of Sapo’s failure to deliver.
Acting chief financial officer Nichola Dewar told MPs that delivery standards within Sapo were quite poor at the moment because there was no cash to invest in the business. She said R1bn had been raised against the R4bn state guarantee, but that this had been used to finance ongoing operations.
Despite the current malaise, Mr Barnes was very optimistic about future prospects and believed that the organisation could return to profit in 2018 and be a financially independent enterprise, provided it received a cash injection. He said Sapo also needed to get a subsidy of about R400m a year from the government to fulfil its commercially unprofitable universal service obligation to deliver postal services in remote rural areas.
Mr Barnes said the plan was for Sapo to broaden its services into other financial services. The first step would be to corporatise and get a licence for Postbank. Sapo should also be the vehicle for the government’s distribution of social grants and old-age pensions.
The Special Investigating Unit and the public protector have both investigated Sapo and, according to Mr Barnes, has uncovered fraud. The wasteful and irregular expenditure accumulated over the last decade amounted to a considerable sum, he said.
Negotiations were under way with trade unions in a bid to settle the pay dispute related to the conversion of casual employees to permanent staff. Mr Barnes stressed that Sapo would not survive another strike. The 2014-15 strike had had a devastating effect on the business, wiping off 30% of revenue, which had not been recovered.
