South Africans kiss R5.5 billion goodbye

The South African Post Office (Sapo), SABC, Postbank, and Denel have spent R5.5 billion on irregular, fruitless and wasteful expenditures over the past five years.

This is according to the Auditor General’s findings, which were presented to the Parliament’s Standing Committee on Appropriations this week.

The report found that R123.56 billion had been spent on irregular, fruitless, and wasteful expenditures by South Africa’s national departments and state-owned entities.

National Treasury defines fruitless and wasteful expenditure (FWE) as “expenditure which was made in vain and would have been avoided had reasonable care been exercised.”

The Auditor General’s report lists the Post Office as the state-owned enterprise with the highest FWE figure, at R650.86 million. Most of this — R243 million — was spent during the 2021/22 financial year.

The SABC is number two on the list, spending R299.8 million on fruitless and wasteful activities. The lion’s share was spent during the 2018/19 financial year, at R224 million.

SABC was followed by South African Airways (SAA) Technical (R168 million), Airport Company’s South Africa (Acsa) (R167 million), and Transnet (R164 million).

The top five SOEs incurred R1.449 billion in fruitless and wasteful expenditure.

Denel and Postbank were next, with FWEs of R163 million and R138 million, respectively.

The Auditor General also listed the government departments guilty of FWE, with the Department of Forestry, Fisheries and the Environment topping the list with R292 million spent over the past five years.

While the Department of Communications and Digital Technologies (DCDT) did not incur any FWE, it did incur R233 million in irregular expenditure.

The DCDT incurred R215.4 million irregular expenditure in the 2020/21 financial year, with nothing in the previous two years.

The Public Finance Management Act defines irregular expenditure as “expenditure that was not incurred in the manner prescribed by legislation.”

Sapo and Denel also racked up over a billion in irregular expenditures, spending R1.5 billion each. The SABC spent R936 million, while Postbank spent R372 million.

The table below shows the Auditor General’s summary of state-owned enterprises’ irregular, fruitless, and wasteful expenditures.

Post Office facing liquidation

Sapo’s business rescue practitioners have said the state-owned mail carrier will need another R3.8 billion before month-end to implement their business rescue plan fully.

They warned that unless the Post Office urgently receives a cash injection, its reserves will run out this month and may need to be liquidated.

The business rescue practitioners gave the warning in a presentation to the Portfolio Committee on Communications on Tuesday, 3 September 2024.

Sapo was placed into business rescue in July 2023, and business rescue practitioners Anoosh Rooplal and Juanito Damons were appointed to formulate a plan, which was adopted in December of that year.

As part of being placed into business rescue, Sapo received a R2.4 billion injection from National Treasury, which it used to cover operations, settle debts, and pay salaries and severance packages.

The Post Office has applied for additional funding from the Treasury to see out its business rescue plan.

The plan has so far resulted in 4,875 people being retrenched out of the 11,083 staff that were employed at the ailing entity.

Two of the three retrenchment package payouts have already been made, with the third scheduled for November this year.

Of its 1,023 branches, only 113 were profitable. To cut costs, 366 were closed. This left 657 branches nationwide, of which 232 offer motor vehicle licence renewals.

Rooplal and Damons made this decision while keeping the Post Office’s universal service obligation mandate in mind, and not treating the entity as a purely commercial enterprise.

“An important reminder is that the reason and efforts made to restructure this business are based on the fact that the Post Office has a social mandate that requires it to serve all South Africans,” Rooplal said.

“While city dwellers have the means to pay for and access communication networks, South Africans living in rural areas have fewer choices.”

He said that although urban hubs won’t be excluded from the restructuring, an emphasis will be placed on providing Wi-Fi, printing, scanning, and training to local townships and rural areas.