The South African Post Office is broke and may struggle to pay salaries – Report

A recent court case revealed that the South African Post Office is broke and it may struggle to pay salaries in September.

IOL reported that this is one of the points which emerged when the Post Office Retirement Fund unsuccessfully tried to force the Post Office to contribute to workers’ pension fund.

According to the report, the Post Office said only 55 of its 1,416 branches were profitable during the lockdown.

Its branches only generated revenue of R125 million – around half of the budgeted amount – while overall revenue was R744 million below budget.

The Post Office’s challenging financial situation should not come as a surprise. It recently requested R4.9 billion in support from the government to continue operating.

R2.7 billion was required for operations, R1.4 billion in liabilities owed to Postbank, R300 million for voluntary severance packages, and R525 million for other liabilities.

National Treasury said the Post Office is at a critical juncture, with its management structures in disarray and no accountability in respect of the poor implementation of its strategy.

It added that the Post Office Board is new to the entity and have not actively demonstrated their responsibility to “giving effect to the strategy of the entity and directing the CEO regarding the duties of SAPO”.

“If the shareholder department does not act to restructure and repurpose the entity, SAPO will collapse,” Treasury said.

“Government must decide whether SAPO has a role to play as a delivery arm to government. If not, then SAPO must be drastically restructured, as the entity will not be able to continue in its current form without yearly funding from the government to cover its losses.”

Big loss expected

It is not only the COVID-19 pandemic and lockdown which impacted the Post Office’s finances.

The SA Post Office was already expected to make a loss of about R1 billion for the financial year ending 31 March 2020.

This aligns with the previous two years’ results, which also saw the national postal service suffering losses of around R1 billion.

SAPO acting CEO Ivumile Nongogo said the major reasons for these losses include cash-in-transit and security costs.

SA Post Office Chairperson Colleen Makhubele added that the SA Post Office has not been using its strategic advantages optimally and needs to stem its continued loss of customers.

“Even in our obvious areas of growth – such as ecommerce – we have been slow to capitalise on our competitive advantage,” she said.

The new board – which took up its role in December 2019 – found that no new initiatives had been launched by the previous leadership, and that general performance was a major issue.

“The board realised that for us as a business to take advantage of the great opportunities facing us, we first needed to get our house in order.”

“The SA Post Office is an organisation that has been losing money for the last decade,” said Makhubele.

She highlighted that the SA Post Office has been revisiting all contracts to determine which need to be cancelled or renegotiated.

“Most contracts run for three years and over, and in such a long period a lot can change. SAPO is bleeding money through some of the contracts we have entered into,” said Makhubele.

She said major irregularities had also been found in some of these contracts.

This included partners being paid retainers without any work being done or scope being clarified.

No comment from the Post Office

MyBroadband asked the SA Post Office for comment, but it did not respond by the time of publication.

South African Post Office comments by National Treasury

Now read: How the SA Post Office has recovered after lockdown

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The South African Post Office is broke and may struggle to pay salaries – Report