South Africa’s bottomless money pit

The South African Post Office’s (Sapo) 13 months of business rescue cost the country over R175 million.

This is according to a parliamentary question posed to communications and digital technologies minister Solly Malatsi.

According to Malatsi, a senior business rescue practitioner (BRP), taking on a large company may charge R1,739.13 per hour, excluding VAT as per the Companies Act.

He said these fees totalled R175.7 million by the end of 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.

Malatsi noted that R6.73 million had been paid to Rooplal and Damons, while R144 million was spent on a team of consultants. Both amounts do not include VAT.

“The BRPs are accompanied by a team of legal professionals, consultants and specialist advisers who charge an hourly tariff based on their professional tariffs and level of seniority,” Malatsi told Parliament.

“The BRPs have assured the department they are mindful of the financial constraints of Sapo and have ensured the business rescue fees are within a strict budget.”

“They will continue to benchmark their fees against other business rescues conducted in the country,” he continued.

The minister was also questioned about the financial “zero-day” the BRPs said Sapo would reach at the end of October if it did not receive a R3.8 billion bailout from the national fiscus.

Rooplal and Damons said Sapo needed the money to pay creditors, upgrade its infrastructure, and ensure that its cash reserves did not run dry.

However, Malatsi said that the BRPs are bootstrapping Sapo and cutting all expenditures.

“Given that no funding was allocated to Sapo as per the medium-term budget speech, the BRPs have delayed all capital expenditure for expansion and to maintain the business,” he noted.

“In addition, austerity measures have been implemented to preserve cash flow while expenditure is limited to essential services only.”

The business rescue plan

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.

Damons and Rooplal then formulated a business rescue plan that was adopted in December of that year.

Sapo’s debt to secured creditors was reduced by 88% to R842 million. By the end of July, it had paid 98.6% of this.

However, Sapo needs the R3.8 billion to pay statutory and payroll creditors, who will receive an additional 18 cents per rand dividends.

Rooplal and Damons also reduced the state entity’s liabilities from R8.7 billion upon entering business rescue to R440 million by the end of June this year through deep compromises.

So far, the plan has resulted in 4,875 people being retrenched out of the 11,083 staff 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, so 366 were closed. This left 657 branches nationwide, of which 232 offered motor vehicle licence renewals.

The Post Office recently shuttered its online car licence disc renewal system.

Rooplal and Damons said they evaluated which branches to shut down while considering the Post Office’s universal service obligation mandate 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.