Over the past two years, the government has spent an average R10m a month on business rescue practitioners in a bid to save the embattled South African Post Office (Sapo), which requires a further R3.8bn to complete its turnaround strategy.
Joint business rescue practitioners Anoosh Rooplal and Juanito Damons — appointed in July 2023 — received initial funding of R2.4bn, with R1bn being paid to creditors.
A second tranche of R3.8bn is now required to complete the business rescue process, which has resulted in more than 4,300 employees retrenched and 360 branches closed.
Department of communications & digital technologies spokesperson Nomawethu Solwandle said R3.8bn was needed to “fully implement” the rescue process and turnaround.
The plan was to pursue additional funding opportunities through strategic partnerships, while continuing to grow the business. Though the funds were not yet available, “the R3.8bn was committed”, Solwandle said.
The business rescue practitioners (BRPs) have been paid R239.4m in fees and expenses since July 2023.
“The implementation of the business rescue plan has been substantially achieved at 75% and this is sufficient to file for successful termination of the business rescue process in terms of the Companies Act,” Solwandle said.
The initial funding of R2.4bn helped to stabilise operations, she said. “This included effecting the payment of the creditors as per the approved rescue plan; the first tranche of the section 189 severance packages; and to keep the operations going.”
Solwandle said the Post Office had also applied for the temporary employee-employer relief scheme (Ters). This was approved for an amount of R381m for six months. “This amount is only used for the compensation of relevant employees and is paid on a monthly basis by the UIF.”
Parliament's communications & digital technologies portfolio committee chair Khusela Diko said she was concerned about the high cost of the business rescue. “To date, we have not seen any demonstration that there is a plan to turn the Post Office around ... we have repeatedly asked to be given an indication of what the partnership agreements look like,” she said.
Sapo remains critical in the postal, courier, logistics and financial services business. [It] provides universal services to everyone in the country regardless of physical location and at affordable and regulated tariffs
— Nomawethu Solwandle, department of communications & digital technologies spokesperson
Diko said it was the committee's impression “that the BRPs have aggregated upon themselves the responsibility of the shareholder”.
The BRPs had turned down what seemed to be “lucrative partnerships” for reasons the the committee did not understand. “As far as we are concerned, this business rescue process — outside having assisted us to clear the debt and inflicting serious harm in terms of employee numbers and cutting down the branches — we don't know what it has delivered.”
Diko said she hoped the business rescue process was completed soon, and the Post Office returned to solvency.
The Post Office was placed under provisional liquidation between February and July in 2023, while experiencing severe financial difficulties with skyrocketing debt after a decade without posting a profit.
Solwandle said the second tranche should not be called a “bailout” as it was meant to ensure the Post Office fulfilled its obligations.
She said milestones achieved through the business rescue process included an agreement in which creditors accepted 12 cents for every R1 owed, which saw R7.4bn written back to the income statement.
Staff costs at the Post Office had amounted to between 60% and 70% of total expenses, she said. “This resulted in Sapo not being able to invest in capital expenditure to improve business.”
She said the business rescue practitioners had initiated strategic private and public sector partnerships and this was starting to show positive results.
The Post Office was now operating “as a going concern”, and a financial injection was required to bolster the turnaround plan.
“Sapo remains critical in the postal, courier, logistics and financial services business. [It] provides universal services to everyone in the country regardless of physical location and at affordable and regulated tariffs.”
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