SA Post Office cut off

South Africa’s finance minister, Enoch Godongwana, said that the South African Post Office (Sapo) will not receive any more government bailouts should it escape business rescue.

This was announced during the Minister’s medium-term budget policy statement, delivered on Wednesday.

In September, the Post Office’s business rescue practitioners (BRPs) said that the company would reach day zero on 30 October — the day of the speech — should it not receive a R3.8 billion bailout from the National Treasury.

However, if it were to receive this bailout, the finance minister has made it clear that it will be tough love from here on out regarding financial assistance from the fiscus.

“By the way, they told us D-day for the post office is today. But there’s no money in the adjustment as we speak,” Godongwana said in a press conference following the speech.

“We are hoping that the Department of Communications and Digital Technologies (DCDT) will find ways of reorganising and reprioritising their budget to deal with that question.”

Godongwana highlighted that the government’s medium-term strategy remains focused on fiscal sustainability and supporting economic growth.

Because of this, it will be limiting its financial support to state-owned enterprises.

The only exception is the resolution of Eskom and the South African National Roads Agency Limited’s (Sanral) debt obligations.

This follows the government spending R520 billion on state-owned enterprise bailouts since the 2008/09 financial year.

The policy statement pointed out that most state-owned enterprises have been unable to fund their operations and debt obligations or optimally invest in infrastructure.

The Post Office is no exception. It was found to have incurred R651 million in fruitless and wasteful expenditure over the past five years — the most of any other state-owned enterprise.

It was also found that irregular expenditures of R1.5 billion were incurred over the same period.

To get it back on track, the DCDT is considering partly privatising Sapo to modernise its operations and increase its competitiveness.

Minister Solly Malatsi says the department has asked the National Treasury for support in forming a task team to “pursue private financial and operational partners” for the Post Office.

“This will enable serious consideration of privatisation scenarios as a preferential option to further funding from the fiscus,” he said.

“It is with the goal of an innovative and competitive Post Office that it would be strategic to look into its current exclusive license on reserved postal services.”

Malatsi said the Post Office must build public trust without forcing the use of its services.

“This comes at a time when postal services are transitioning away from monopolies,” he said.

“The preferred outcome is for Sapo to get back on its feet by regaining the public’s trust, including public entities, not through compulsory use of its services.”

This will be a difficult task as Sapo’s gap in the market has been filled by the private sector.

South Africans now have access to several courier companies, which has led to increased competition and, thus, innovation.

For instance, Pep Stores has used its extensive network of 2,600 shops nationwide to offer a store-to-store delivery service where customers can send packages of up to 10 kilograms.

For reference, before Sapo entered business rescue, it had 1,023 branches located across the country.

However, unlike Pep, these branches are positioned with Sapo’s service mandate in mind, an obligation the private sector is not subjected to.

“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,” BRP Anoosh Rooplal said.

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