SA Post Office disaster

Former South African Post Office (Sapo) CEO Mark Barnes left the company in August 2019, and its financial situation has only worsened since, with it being declared insolvent in July 2023.

The state-owned company’s losses and liabilities have escalated significantly since Barnes’ departure. At the same time, its assets and revenue have plummeted.

While the Post Office wasn’t profitable during the former CEO’s final two full years at the company, with it reporting losses of R1.2 billion on both occasions, its losses increased significantly in 2019.

It should be noted that Barnes served four months during the 2019/20 financial year (FY) when Sapo reported a loss of R5.3 billion.

The state-owned company reported losses of R2.4 billion for the 2020/21 FY, R2.2 billion for the 2021/22 FY, and R2.2 billion for the 2022/23 FY. This is shown in the chart below.

*Barnes served four months in 2019

Sapo’s annual revenue also declined rapidly following Barnes’ departure. In his final two full years as CEO, the company reported revenue figures of R4.5 billion and R5.3 billion, respectively.

The Post Office saw a sharp decline in revenue during the 2019/20 FY, dropping to R4.1 billion — a R1.2 billion decrease.

This was followed by a R1.1 billion drop to R3 billion in the year between 1 April 2020 and 31 March 2021.

The company reported revenue figures of R3 billion and R2.3 billion in its annual reports for the 2021/22 and 2022/23 financial years, respectively.

The chart below shows Sapo’s revenue decline in the years that followed Barnes’ departure.

*Barnes served four months in 2019

Under Barnes, the Post Office’s assets increased from R13.4 billion to R16.1 billion between 2017 and 2019.

However, things swung significantly the following year, with its assets declining to R11.1 billion. This decline continued in the following years, with Sapo’s asset value dropping to R4.5 billion in 2023.

The same trend is seen in the company’s equity figures. They climbed from R1 billion in 2017 to R5.2 billion in 2019.

However, its liabilities increased significantly in 2020, which saw its equity drop to R3.7 billion. Its liabilities have exceeded its assets in the years since.

Sapo’s rescue plan

The Post Office was declared insolvent by joint Business Rescue Practitioners Anoosh Rooplal and Juanito Damons in July 2023.

They also revealed that Sapo’s liabilities had increased to R12.5 billion.

“The Sapo asset base is dwarfed by its total liabilities of approximately R12.5 billion as of 31 July 2023,” they said.

They added that the company must improve revenue and implement an effective and efficient cost structure to become factually solvent.

To achieve this, Rooplal and Damons devised a Business Rescue Plan, which Sapo’s creditors approved in December 2023.

The plan involves restructuring the Post Office to ensure it can provide its mandated services to all households in South Africa.

“The Post Office fulfils an important social mandate intended to provide key basic communications services to all households, including the rural areas, where access to Wi-Fi, smartphones and printers are not a given,” said Rooplal.

“A restructured Post Office can do this affordably and conveniently, given certain regulatory pricing and geographic reach of the branch network.”

This includes cutting thousands of jobs during the plan’s first phase, with the goal of reducing Sapo’s headcount to around 5,000 employees.

The business rescue practitioners said Sapo had 11,048 staff in an update in November 2023, so this means around 6,000 job cuts.

The second phase will see the launch of the “Post Office of Tomorrow” strategy, which hopes to achieve the outcomes defined in the Postal Amendment Bill.

This includes offering diversified and expanded services through hybrid mail extensions, new vehicle licence disc renewal solutions, and creating a digital hub.