{"id":512278,"date":"2023-10-23T11:02:39","date_gmt":"2023-10-23T09:02:39","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=512278"},"modified":"2023-10-23T11:05:48","modified_gmt":"2023-10-23T09:05:48","slug":"post-office-collapse","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/512278-post-office-collapse.html","title":{"rendered":"Post Office collapse"},"content":{"rendered":"

The South African Post Office (SAPO) swung from a strong balance sheet to hopelessly insolvent within four years after former CEO Mark Barnes left.<\/p>\n

Last month, the SAPO Business Rescue Practitioners (BRPs), Anoosh Rooplal and Juanito Damons, revealed that SAPO\u2019s liabilities reached R12.5 billion.<\/p>\n

With only R4.5 billion in assets, the Post Office is technically insolvent with negative equity of R7.9 billion. Simply put, it does not have enough money to pay its debts.<\/p>\n

The BRPs said turning the company around and returning it to a solvent position will require a significant revenue increase and creating an effective and efficient cost structure.<\/p>\n

The Post Office missed its revenue target by a country mile for the past financial year. It generated R3.033 billion against a target of R4.812 billion.<\/p>\n

It blamed many factors, including its customers\u2019 migration to digital alternatives and not paying its suppliers, who stopped providing services.<\/p>\n

However, the Post Office was not always in such a poor state. It saw a consistent increase in equity during former CEO Mark Barnes\u2019 three-and-a-half-year stint at the top.<\/p>\n

Barnes joined the Post Office as chief executive at the beginning of 2016, when the organisation had equity of R10 billion.<\/p>\n

Under his leadership, the enterprise significantly strengthened its balance sheet and increased its equity to R16 billion.<\/p>\n

However, Barnes\u2019 strategy of modernising the Post Office, making it an e-commerce powerhouse, and turning it into a banking powerhouse was cut short.<\/p>\n

He resigned as CEO on 1 August 2019, citing differences in the strategy concerning the structure of the South African Post Office group, especially the Postbank.<\/p>\n

The Post Office thanked Barnes for his \u201cenormous service\u201d, saying he has led the stabilisation of the organisation.<\/p>\n

Post Office performance analysed<\/h2>\n

Between 2016 and 2019, when Barnes served as the Post Office\u2019s chief executive, the institution\u2019s assets were on the rise.<\/p>\n

Under Barnes, the institution\u2019s assets increased from R10.12 billion to R16.07 billion \u2014 a 59% increase in three years.<\/p>\n

After he left, things deteriorated quickly. Assets declined from R16.07 billion to R4.5 billion in three years.<\/p>\n

The rapid decline in assets points to discontinued operations and significant disposals of group assets.<\/p>\n

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Despite these significant asset disposals from 2019, the Post Office has not been able to lower its liabilities in any way.<\/p>\n

In fact, its total liabilities have increased in the past five years, reaching a six-year high of R12.4 billion this year.<\/p>\n

The net effect of the diminished asset based on an ever-growing liability burden can be seen in the Post Office\u2019s total equity.<\/p>\n

A negative equity figure shows that the group would no longer be able to repay its liabilities if it were to liquidate all its assets and repay all of its debt.<\/p>\n

From 2016 to 2019, when Barnes was CEO, the SAPO\u2019s equity was on the rise, indicating an improvement in the group\u2019s solvency.<\/p>\n

However, since then, the equity figure has been on a downward spiral. The SAPO\u2019s liabilities currently dwarf its assets by just under R8 billion, meaning it is technically insolvent.<\/p>\n

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Offer to buy the South African Post Office<\/h2>\n

The Post Office\u2019s growing debt burden, declining revenue, and the need for constant government bailouts show it is unsustainable.<\/p>\n

Many argue that it is completely insolvent and should be liquidated and closed to prevent it sucking up more taxpayer money.<\/p>\n

However,\u00a0Barnes has a different view<\/strong><\/a>. He said the Post Office delivers important services to poor and rural communities.<\/p>\n

If the Post Office is not saved, all its current services and revenue will go into the private sector.<\/p>\n

\u201cThe private sector has a very simple motivation \u2014 make a profit. I don\u2019t believe that if the private sector took over all the functions, it would serve more than 5% of the population.\u201d<\/p>\n

He said the Post Office has commercially irreplaceable infrastructure, and privatising the enterprise would be fundamentally wrong and inappropriate.<\/p>\n

Barnes, in partnership with an unnamed consortium, offered to buy a majority stake \u2014 between 60% and 75% \u2014 in SAPO in 2021 to save the struggling enterprise. His offer was dismissed.<\/p>\n

However, earlier this year, he said his proposal to save the now-bankrupt state-owned enterprise and turn it into a national treasure still stands.<\/p>\n

Barnes laid out three conditions that have to be met to turn the enterprise around.<\/p>\n