Post Office in a R7.9-billion hole — with billions more in losses expected

The South African Post Office (SAPO) is currently running at a R2 billion loss for the current financial year and is expecting to post a R1.7 billion loss for the next year as its operating costs have skyrocketed.

This is feedback from the Minister of Communications Mondli Gungubele, who told Newzroom Afrika that the next major challenge for the Post Office is implementing its business rescue plan.

The business rescue plan by joint business rescue practitioners Anoosh Rooplal and Juanito Damons was approved by the majority of creditors earlier this month.

It laid out significant cost-cutting measures, particularly a reduction in the size of the Post Office’s branch network to only 600 branches and a reduction of employees to 5,000.

Cutting its staff complement by around 7,000 would reduce its wage bill by an estimated R1.3 billion.

The Post Office has run at a loss every year since 2013 and has failed to compete with private couriers. It has since recorded over R19 billion in losses.

As its finances deteriorated, it prioritised paying the employees the cash component of their salaries from 2020.

The entity was simply not making enough money to cover other employment costs, including medical aid and pension funds.

Earlier this year, it was reported that the business rescue plan entailed cutting the Post Office’s workforce in half to cut its wage bill by R1.3 billion.

Post Office in Baviaanskloof. Photo: Grobler du Preez / Shutterstock.com

Gungubele said the Post Office could not be allowed to continue to operate in this fashion, and if it did, it would have to be closed down.

“We are going on a net loss of R2 billion plus, and we are projecting a R1.7 billion loss next year,” he said.

Shockingly, Gungubele revealed that the Post Office’s operational costs are around 185% of its entire revenue and are projected to reach as high as 200%.

Employee costs alone are 150% of the company’s revenue.

“If you listen to what I have said, if it continues, then it means we must close the South African Post Office,” Gungubele said.

If the Post Office is shut down, businesses reliant on its services will collapse, and millions of South Africans who rely on it will be stranded, Gungubele warned.


This article was first published by Daily Investor and is reproduced with permission.

Now read: SA Post Office in a massive hole — R7.9 billion deep

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Post Office in a R7.9-billion hole — with billions more in losses expected