Auditor-General Tsakani Maluleke has found that the South African Post Office is commercially insolvent, SABC News reported.
According to the report, Maluleke’s audit review of the Post Office Group’s annual results noted it had incurred losses of over R1.7 billion in the 2019/2020 financial year, with its liabilities exceeding assets by R1.5 billion.
The Auditor-General gave the group a disclaimer option for its latest annual report.
This was because she could not gather enough audit evidence to confirm the reasonableness of the management’s assessment of the group’s viability for the foreseeable future.
“I was unable to obtain sufficient appropriate audit evidence due to the poor status of the accounting records,” Maluleke stated.
According to the SABC, the Post Office had incurred irregular expenditure of more than R200 million in addition to fruitless and wasteful expenditure exceeding R26 million.
MyBroadband was unable to independently verify the veracity of the SABC’s report.
The office of the Auditor-General did not immediately respond to requests for comment via email or phone call.
Post Office Group CEO Nomkhita Mona acknowledged the Auditor-General’s pronouncements but did not comment on the issue of insolvency.
MyBroadband was also provided with a statement on the annual general meeting of the Post Office board, which was concluded on 31 March.
While it did not delve into specifics around its annual results, it acknowledged that revenue at the Post Office performed below target by 8% in the last financial year.
One of the major developments over the past year was the unbundling of Postbank from the Post Office.
The Post Office said the the Auditor-General’s audit review had noted this had a negative effect on the Post Office’s balance sheet.
In addition, the Post Office said it had taken steps to address its cost base by embarking on initiatives of staff reduction, achieved through natural attrition and voluntary severance packages.
As a result, its staff numbers had dropped by 1,871 during the year under review.
The report and statement come after a recent presentation at the Parliamentary Portfolio Committee on Communications revealed just how serious the Post Office’s financial mess is.
In three months, the service had posted a net loss of R429 million, while its year-to-date net loss increased to R1.354 billion.
In addition, creditors and accruals as of 30 September 2020 had increased to R1.774 billion.
“The year-to-date revenue recovery remains sluggish and insufficient to meet all operating costs,” the SAPO said.
“The revenue shortfall contributes to cash deficits to pay suppliers and service providers, including employee benefit contributions.”
As a result of these financial troubles, the Post Office has stopped paying rent at certain locations and had to close around 55 branches due to arrears.
In addition, employees’ pension fund and medical aid contributions – which are deducted from workers’ salaries – were not being paid over to the relevant institutions.
In her response to the Auditor-General’s pronouncements on its annual report, Mona said that the Post Office’s challenges in the recent past were well-documented.
“These have come about as a result of a number of factors – both exogenous and endogenous – including an obsolete business model. These were exacerbated by the advent of the COVID-19 pandemic.”
She said that the Post Office continued to engage its creditors to acknowledge its indebtedness and willingness to honour the commitments, while debt collection was a focus area.
Mona also stated that the Minister of Telecommunications and Digital Technologies Stella Ndabeni-Abrahams was in the process of appointing a team of experts to assist with the Post Office’s turnaround plan.
“In the long term, we are confident that we have the opportunity to build a world class, commercially viable postal service – with no heavy reliance on the national fiscus,” Mona said.
“However, in the short to medium term, we fully expect that the National government will support SAPO’s efforts in dealing with these legacy issues,” she added.