The South African Post Office (SAPO) is preparing to exit business rescue after its practitioners asked the High Court to terminate the proceedings.
However, its long-delayed digital modernisation now rests on the shareholder and newly-appointed board after government failed to provide R3.8 billion earmarked for IT upgrades, broadband capabilities and digital services.
This has emerged as SAPO’s joint business rescue practitioners (BRPs), Anoosh Rooplal and Juanito Damons, confirmed a court application to end the SAPO rescue proceedings has been launched, bringing their work to a close.
One of the 11 state-owned entities under the Department of Communications and Digital Technologies portfolio, SAPO was placed under supervision and business rescue in 2023, because of its dire financial status and to avert final liquidation.
The state-owned entity’s liabilities totalled approximately R12.5 billion as of 31 July 2023.
The business rescue plan was to stabilise the company, restore it to solvency and enable SAPO to operate sustainably as a going concern without total reliance on government funding in the future.
The plan also sought to provide a better outcome for creditors than would be the case in the event of liquidation.
The practitioners indicated a further R3.8 billion allocation by government was required, as investment capital to repair and modernise SAPO to support the turnaround strategy.
According to the practitioners, their court application follows “substantial implementation” of the business rescue plan within their powers to execute.
“The business rescue process has stabilised SAPO’s balance sheet and significantly improved its operational position. The entity is currently paying its liabilities in the ordinary course of business,” say Rooplal and Damons.
The BRPs state that over the past two years, SAPO has made measurable progress and reported encouraging financial results for the 12 months ending 31 March.
Additionally, revenue increased by R2 million to R1.54 billion, while the net loss reduced significantly to R71 million, compared to a net loss of R514 million in the previous financial year. This is the lowest net loss recorded over the past several years and reflects the positive impact of the business rescue process.
“The next phase, to grow and modernise the entity, requires shareholder-led intervention, injection of capital and permanent governance structures. We have, therefore, asked the court to declare the business rescue substantially implemented, so SAPO can transition back to normal governance under its shareholder, leadership team and new board,” say the BRPs.
The new board’s tenure will start on 22 June. “We congratulate the new board and wish them every success as they take SAPO to new heights following the stabilisation of the SAPO business rescue,” they say.
Troubled history
In the 2024 Medium-Term Budget Policy Statement (MTBPS), National Treasury documents revealed that bailouts had cost government R520 billion from the 2008/9 financial year, to date.
SAPO is among several entities that have received billions of rands in bailouts from the state.
Once considered a key institution, the post office had been brought to its knees due to poor governance controls, mismanagement, staff retrenchments and inadequate investment in IT systems. Additionally, the state-owned entity’s once wide branch network significantly shrunk over the years.
While the entity received a R2.4 billon funding allocation from National Treasury in 2023, the post office was shown “tough love” that resulted in no funding allocation in the 2024 MTBPS.
According to Rooplal and Damons, while SAPO challenges remain and the entity is not yet fully out of difficulty, it is operating from a more stable foundation.
Under business rescue, the practitioners say SAPO reduced creditor debt from approximately R8.7 billion to R440 million. More than 99% of the approved 12 cents in the rand distribution, amounting to approximately R1.015 billion, was paid to creditors by August 2024.
In terms of workforce restructuring, the section 189A process resulted in a reduction of 4 342 employees, with all retrenchment obligations fully settled by November 2024.
Monthly staff costs reduced from R211.9 million to R115 million, generating annual savings of approximately R1.2 billion.
Moving to branch rationalisation, a total of 366 branches were permanently closed, while 657 branches remain, including strategically retained sites to serve rural communities.
“SAPO’s balance sheet improved materially, moving to a positive R840 million, from a negative net asset value of R7.9 billion, rendering the organisation technically solvent.”
The practitioners add that they continued with the independent external audits performed by the Auditor-General (AG) since the inception of the business rescue process.
“The number of AG audit findings have been reducing since inception, as a result of the governance and internal control improvements that were implemented.”
While certain parts of the turnaround strategy remain incomplete due to funding constraints, the practitioners believe coming out of the business rescue is a positive step.
“SAPO can and should play a critical role to all South Africans, especially those people living in the rural areas. The BRP team will provide detailed transition documentation and targeted support to the high care leadership team to ensure operational continuity.”
Meanwhile, employment and labour minister Nomakhosazana Meth welcomed the application for SAPO to exit business rescue, saying it marks a critical milestone in the journey towards restoring the institution’s stability, credibility and long-term sustainability.
Through a R381 million investment in the Temporary Employer/Employee Relief Scheme and the Unemployment Insurance Fund, over a six-month period, the Department of Employment and Labour provided financial support to preserve jobs and sustain operations.
This intervention provided financial relief to 5 956 employees, while enabling SAPO to implement a sustainable turnaround strategy.
Says Meth: “This intervention demonstrates that public funds, when deployed with purpose and urgency, can meaningfully contribute to both job preservation and business continuity.
“The progress achieved to date signals renewed potential to reposition the post office as a viable, service-oriented public entity that meets the needs of South Africans while safeguarding jobs.”
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