Broke SA Post Office begs for R1 billion to pay social grants

The SA Post Office is begging Postbank for R1 billion so that it will be able to fund 13 million social grants for October 2020, the City Press reports.

Following the corporate separation of the two SA Post Office and Postbank, the former has needed to source pre-funding for social grants itself, with the Postbank operating independently under stricter banking regulations.

On Monday 21 September, SA Post Office acting chief financial officer reportedly sent a memo to the board highlighting the lack of funds necessary to pay for the 13 million SA Social Security Agency (SASSA) grants, which are due to be paid on 5 October.

This resulted in the Post Office writing a letter to Postbank requesting pre-funding of R1 billion to help pay for the social grants.

The SA Post Office said it would be committed to paying back the R1 billion, which it hoped would be provided to it on a date agreed by the Post Office acting CEO and the managing director of Postbank.

Despite sending a letter requesting R1 billion from Postbank for social grants pre-funding, the SA Post Office said the payment of social grants would continue as normal and would not be affected by the financial situation at the struggling state-owned enterprise.

“The SA Post Office would like to assure recipients of social grants that the payment of social grants will continue as normal and will not be affected by the current financial restraints experienced by the Post Office,” the Post office said in a statement.

“The funds for social grants come from National Treasury through the Department of Social Development and are not funded from the revenue of the SA Post Office.”

“The SA Post Office experienced a dramatic reduction in revenue during the lockdown period and is currently looking at ways to improve cash flows,” it said.

The report added that earlier this year, the Post Office asked Grindrod bank for R700 million to continue paying SASSA grants.

This agreement has reportedly yet to be approved by Communications Minister Stella Ndabeni-Abrahams, however.

SA Post Office is broke

A recent court case revealed that the SA Post Office is broke and may struggle to pay salaries for September 2020.

The Post Office stated in court that only 55 of its 1,416 branches were profitable during the national COVID-19 lockdown, and in total it had generated only R125 million in revenue from its physical branches.

This is half of the amount it had budgeted, and its overall revenue was also R744 million below budget.

The struggling state-owned enterprise has also asked for a bailout from the national government, stating that it needs R4.9 billion 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.

The amount owed to Postbank may increase if its request for R1 billion to pay SASSA grants is granted by the company.

Facing collapse

National Treasury has 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,” it said.

Prior to the COVID-19 lockdown, the SA Post Office was already expected to make a loss of about R1 billion for the financial year ended 31 March 2020.

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

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Broke SA Post Office begs for R1 billion to pay social grants