Post Office on the brink of total failure

The South African Post Office’s (Sapo) delivery performance has dropped substantially from 89.3% at the end of March 2020 to 68.36% by March 2022.

Its future is also uncertain, with the South African Auditor-General saying it could not confirm whether it will remain in business for the foreseeable future.

The Independent Communications Authority of South Africa (Icasa) mandates delivery targets for the Post Office, which the state-owned company hasn’t come close to hitting since 2014.

Sapo’s delivery performance from 2012 to 2022 is summarised in the chart below.

The Post Office’s delivery targets dropped to its previous lowest level of 61.2% in 2016. This improved substantially by March 2020, when it successfully delivered 89.3% of mail.

Post Office delivery performance versus Icasa-mandated targets from March 2012 to 2022.

However, Sapo achieved a new low of 52.95% in 2021, which it attributed to challenges presented by the Covid-19 pandemic.

“The mail delivery performance was severely affected by the Covid-19 pandemic, disrupting the progress made during the previous financial year,” Sapo said in its annual report for 2022.

“The mail delivery performance stood at 89.3% by the end of March 2020, and this had regressed to 52.95% by the end of March 2021.”

The Post Office improved its delivery performance over the following financial year, successfully delivering 68.35% of mail.

However, the Post Office acknowledged that its delivery performance was significantly lower than Icasa’s 92% target.

“A clear sign of improvement, however, is that the performance picked up by 15.41% from the previous year to 68.36% in the current financial year — still below the target of 92%,” Sapo said.

Sapo’s uncertain future

The Auditor-General of South Africa (AG) said it could not confirm whether Sapo will remain a going concern for the foreseeable future — painting a picture of uncertainty for the state-owned company.

“Going concern” is an accounting term describing a business that can feasibly continue operating and generate enough money to sustain itself.

The AG issued its going concern warning with a disclaimer — the worst possible outcome — in the Post Office’s annual report with additional comments in a separate document tabled before Parliament.

“I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated and separate financial statements,” Auditor-General Tsakani Maluleke said.

“I was unable to confirm the going concern assessment by alternative means.”

One of the AG-flagged issues in Sapo’s financial statements include the R2.1 billion net loss during the financial year ending 31 March 2022 and the fact that the Post Office’s liabilities exceed its assets by R4 billion.

“The Post Office continues to battle going concern issues. The public entity has run into severe financial distress and has a history of losses with no sustainable income,” AG said in a report tabled before Parliament.

Several Post Office branches have closed permanently in the past few years due to unpaid bills.

Sapo’s ailing financial situation has been worsening for some time, with the state-owned company recently warning that its employees could be without medical cover if they don’t pay for it themselves.

The news came after the Post Office repeatedly failed to pay employee medical scheme contributions to Medipos.

According to an internal communique — seen by MyBroadband — sent to Post Office employees by the company’s human resources department, Sapo advised its employees to take out their own medical aid cover to avoid a lack of protection.

The Post Office reportedly owes Medipos over R700 million in medical aid contributions deducted from staff’s salaries but never paid to the scheme.

Sapo has also been struggling to pay rent and utilities at branches across the country, even putting several properties up for auction to raise funds.

However, with municipal and landlord debt around R305 million, the minimum proceeds from the auctions — R23.2 million — would cover only 8% of what it owes.

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Post Office on the brink of total failure