The South African Post Office (SAPO) destroyed R9.2 billion in shareholder value in three years and is now facing bankruptcy.
Former SAPO CEO Mark Barnes said there had been a significant decline in the value of the entity over the last three years.
Before Barnes left the SAPO in 2019, the enterprise had total assets of R16.07 billion and total liabilities of R10.88 billion.
It means the company’s total assets exceeded total liabilities by R5.19 billion. In the prior year, total assets exceeded total liabilities by R3.4 billion.
It means the SAPO, under Barnes, increased equity which should be music to any shareholder’s ears.
Fast forward three years and the situation changed completely. The SAPO is now technically insolvent, with total liabilities exceeding total assets by R4.08 billion.
Simply put, the SAPO destroyed R9.28 billion in value between 2019 and 2022 and is nothing more than another dysfunctional and bankrupt state-owned enterprise.
“The organisation is bankrupt, and I would argue that it has been technically insolvent for some time,” Barnes said.
The SAPO was placed under provisional liquidation earlier this year for failing to settle its enormous debt.
The enterprise is technically insolvent and has lost money since 2013. It has been forced to close branches across the country for years and has had to cut thousands of jobs.
The chart below shows the SAPO’s equity, also known as net worth, between 2017 and 2022.
Barnes said he is sad about the destruction of value at the SAPO but remains confident that it can be saved.
“We cannot have a country without a post office. We cannot let the private sector assume the responsibility for the roles performed by the SA Post Office,” he said.
He said the private sector would only serve around 5% of the population because they focus on profits rather than offering social services.
Barnes and an unnamed consortium offered to buy a majority stake – between 60% and 75% – in SAPO in 2021 to save the struggling enterprise.
His offer was dismissed, and in February 2022, Barnes released the proposal he submitted to the Communications and Digital Technologies Minister at the time, Khumbudzo Ntshavheni.
His “proposal for turning the post office into a national treasure” involved an independent body determining the group’s net asset value at the time of purchase.
The body would also determine the present value of the forecast losses. Barnes’ purchase price would be the difference between the two.
Barnes said this offer is now worth R2.4 billion less than when he made it because the government bailout would not have been needed if his proposal was accepted.
Despite SAPO’s current state of insolvency, he said the original offer to take over the enterprise still stands.
Terms and Conditions
Barnes said three conditions must be met to turn the enterprise around.
- There must be an agreed strategy going forward.
- SAPO needs an estimated R8 billion in capital to settle its liabilities and put it in a steady state going forward.
- The post office needs leadership, specifically a management team with a three-year mandate to deliver a competent, functional organisation.
“If those conditions are met, then you end up saving a commercially irreplaceable infrastructure, a fabulous channel between the government and the people of South Africa and a whole bunch of jobs and precious data the state could use for the virtue of our people,” he said.
However, if the post office is not saved, all its current services and revenue will go into the private sector.
“The private sector has a very simple motivation, which is to make a profit. I don’t believe that if the private sector took over all the functions, it would serve more than 5% of the population.”
Barnes has said that SAPO has “commercially irreplaceable infrastructure” and privatising the enterprise would be “fundamentally wrong and inappropriate”.
He specified that his offer only stands if it is overseen with proper due diligence by the Auditor-General and he is given three months to come up with the capital.
This article was first published by Daily Investor and is republished with permission.