The government may be reticent to pursue business rescue again, judging by the difficulties experienced in the Post Office revival.
The Post Office is the second state company to be taken to government rescue after SAA, which is still in the process five years later.
One of the questions for the government is about the control business rescue practitioners have over the business while in rescue. The government wants to still have a say, jointly or over the court-appointed rescuers, based on the fact that it has to account for public spending.
The other issue concerns the length and the cost of the experience.
Communications minister Solly Malatsi stated in a written answer to a parliamentary question that the process had cost R175m by the end of September.
Considering that the budget to rescue the entity was not provided by the National Treasury in the medium term budget policy statement, it's safe to assume that the process will run for some time.
Finance minister Enoch Godongwana meted out his philosophy of tough love to the Post Office, advising Malatsi and his colleagues to find funds from other programmes in the department.
How the government of national unity goes about doing this will be interesting
The rescuers scream “Day Zero” — effectively cashless and having to stop operations. Ultimately, the Post Office will need a private sector shareholder if it is to be rescued. Another point of contention regarding business rescue is the valuation of assets. This was controversial in the SAA process and will no doubt be an issue in the Post Office case.
How the government of national unity goes about doing this will be interesting. Malatsi, as a DA minister, will be watched hawkishly by his cabinet colleagues, especially those in the ANC, who make up the majority. Malatsi already has Mondli Gungubele, the former minister of communications, as his deputy. A year ago, the Post Office was placed in business rescue under Gungubele's stewardship of the department.
The Post Office is an irrelevant entity in the bigger scheme of state companies, but how the government struggles with this process is a sign of how difficult restructuring big companies is.
What is apparent from the two examples is that genuine restructuring would be a better option than the ruse of business rescue. Rescue comes about as the state faces liabilities and avoids company liquidation, as that costs too many jobs. Business rescue is seen as a better devil because it is better in saving some jobs, and the employee benefits are better than in a liquidation case.
The business rescue industry also needs to gain experience in dealing with the state. It has image problems of its own and, as consultants, long hours typically lead to more income.
A bolder government would have made a decision long ago about the Post Office: restructure it itself or shut it down. In ANC circles, the Post Office is believed to promote inclusivity because it allows people in remote areas to access banking and postal services. It's a tenuous argument. SAB reaches more far-flung people, and the state should own it if the ANC argument is worth entertaining.
Now that the communications department is under Malatsi, we get to see how the DA handles tough decisions. Will he find R4bn in his department to fund the restructuring? Ordinarily, the DA would scream bailouts, as it did when SAA needed R14bn to come out of business rescue. What kind of private sector participation will Malatsi seek, and to what extent? This may be one of the most defining moments in the GNU so far and much more important than other conflicts between the parties.
Speaking of consultants, The National Prosecuting Authority says McKinsey has agreed to pay back R1.1bn for its role in state capture.
Good start. The next question is prosecution. Obviously, McKinsey did not just get given contracts because of the beautiful smiles of its consultants. State capture happens because private companies find corruptible politicians and executives who give out dodgy contracts.
The fact that they are paying back the money should not be celebrated for long, as we need people behind bars for the heinous crime of state capture. It will be an absolute shame if no one is arrested for this and McKinsey gets away with payment, which is just peanuts in the context of its global business. The credibility of the NPA and the entire justice system may come under fire one day when high-flyers get away with state capture crimes by simply paying back some fee.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.