Billions injected into South African state communications companies

The South African government has provided over R3 billion in financial assistance to state-owned entities in the Communications and Digital Technologies portfolio in the past five financial years.

This is according to Communication and Digital Technologies Minister Solly Malatsi. Responding to a Parliamentary question, Malatsi said that these were neither bailouts nor guarantees, but cash injections.

The minister said that only state signal distributor Sentech and the South African Post Office have received financial support from the government since the 2020/21 financial year.

While the Post Office received the most money, R2.55 billion, Sentech required consistent cash injections from the state, amounting to R787 million.

The signal distributor received R58 million in the 2020/21 FY, followed by R61 million in 2021/22, and R70 million in 2022/23.

These cash injections then sharply increased in 2023/24 when Sentech received R197 million, followed by R348 million the following year.

The company’s financial statements also reflect this, as it reported a R308 million net profit after tax in 2021, followed by R110 million in profit in 2022.

However, things changed dramatically in the following two years, with Sentech reporting a loss of  R136 million in 2023 and R146 million in 2024.

Sentech CFO Rudzani Rasikhinya told the Parliamentary Committee on Economic Development and Trade in late 2024 that this can be attributed to the company struggling to collect its debt.

“The financial position of Sentech has mostly been affected by non-payment from customers, resulting in the cash balances reducing significantly year on year,” Sentech’s presentation noted.

As of 25 November 2024, the SABC owed Sentech R1.12 billion, of which R1.05 billion dated back to the beginning of 2023.

Rasikhinya highlighted that 94% of Sentech’s revenue is generated from its media broadcasting business, as it was established to be a signal distributor.

However, Sentech hopes to diversify its revenue and decrease its reliance on media to 45%, increase broadband revenue to 30%, towers to 8%, and add data centres and other offerings by 2030.

Malatsi noted in his reply that no CEOs or accounting officers belonging to entities within his portfolio that recorded a financial loss in the reporting period received bonuses.

Post Office business rescue

While the Post Office may not have received any cash injections from 2020/21 to 2022/23, it received R2.4 billion in 2023/24 and R150 million in 2024/25.

This financial assistance was provided to support the entity after it entered business rescue at the end of 2023.

Business rescue practitioners Anoosh Rooplal and Juanito Damons were appointed to formulate a plan adopted in December of that year.

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

In early September 2024, the Post Office reported that 4,875 of its 11,083 staff had been retrenched. Of its 1,023 branches, only 113 were profitable and 366 were closed. This left 657 branches nationwide.

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

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.

Statutory and payroll creditors will be paid an additional 18 cents per rand on their debt when the Post Office receives the next R3.8 billion from Treasury.

Damons and Rooplal previously warned that the Post Office would reach day zero on 30 October 2024 should it not receive the R3.8 billion.

That was the same day Finance Minister Enoch Gondongwana delivered his medium-term budget policy statement, vowing that the Post Office would not receive further bailouts.

Neither the bailout nor the day zero came. Instead, the entity’s CEO reported to Parliament that the BRPs had helped it achieve a positive net asset value of R1 billion.

She said this was the first time the state-owned entity had achieved this since 2012, thanks to its business rescue practitioners writing off R7.4 billion of its debt.