President Cyril Ramaphosa signed the South African Post Office (Sapo) SOC Ltd Amendment Bill into law on December 18 last year, while we were all on holiday. Maybe we wouldn’t notice or care anyway, but something’s wrong. Maybe we’ve just given up on Sapo, as some say I should. I will, but only after the truth is told. There are just too many big, unexplained numbers in so many entities where things have gone wrong. We can’t just let it go.
The bill expands the mandate of Sapo “so as to provide diversified and expanded services and exploit the infrastructure capacity to extract value and forge partnerships with other stakeholders”.
In the main, the bill must be welcomed, although the ideas and objects it embraces are not new. These were the foundation of the forward strategy I presented on September 23 2015, entitled “Transforming Sapo”, when I was looking to get the job of CEO.
The bill encourages government institutions (at all levels) to “utilise Sapo infrastructure in the delivery of their services”. In fact, it suggests that certain services be set aside specifically for Sapo, to generate revenue that would relieve the funding burden on the government. A great idea, but only if it is done competitively, at the right price.
The bill also covers various governance matters in the appointment of boards. It obliges the minister to appoint two suitable persons nominated by trade unions, but nonetheless gives the minister the right to direct the board to take specific actions, and to replace the board if it doesn’t, or even appoint an administrator to take over. No mention is made of business rescue practitioners (BRPs) but Sapo is a state-owned company governed by the Companies Act, which covers that eventuality.
A memorandum with the bill highlights that “the need to have banking business skills to be appointed as a board member” is now removed, even though a definition of financial services is inserted as part of the amendments. It was always the intention (which I regarded as core) that Sapo, through Postbank, has access to the national payments system to efficiently execute its potential functions. This has proven to be a cornerstone for the commercial sustainability of post offices all over the world, no matter the economic, demographic, political or social circumstances in which they operate.
An amendment to section 9 of Act 22 of 2011, inserting a paragraph requiring Sapo to “enter into an agreement and negotiate payment arrangements with its creditors” must surely be seen as an after-the-event condonation.
Postbank, as a stand-alone institution in its present financial state, cannot satisfy the conditions of solvency, technical competence, credit expertise and liquidity (among others) required by the Reserve Bank to obtain a banking licence.
Besides, the provision of funding to the non-banked, at rates cheaper than or on terms more lenient than those already available from the established, licensed banks, will require the government to accept a lower return on riskier assets. This is fundamentally flawed logic and the Bank may well find itself having to provide subsidies or support not available for any other banks overseen by its Prudential Authority.
Any such exception would raise questions about the Bank’s integrity and independence. The National Treasury seems nonetheless committed to “the launch of a state bank through Postbank … with the bank’s aim to provide cheaper financial services to poor and unbanked South Africans”. A better form of subsidy (which this is) could be promoted at an SME rather than individual level.
It gets worse. An amendment to section 9 of Act 22 of 2011, inserting a paragraph requiring Sapo to “enter into an agreement and negotiate payment arrangements with its creditors” must surely be seen as an after-the-event condonation, given the update on the Sapo BRP process issued on September 3 2024, more than three months earlier, which stated that “secured creditors supported the write-off of 88% of the amounts owed to them” and “the BRPs have decreased the liabilities of the Post Office to R440m by June 30 2024 from R8.7bn on July 10 2023”. Let there be no confusion, the BRPs simply cancelled the debt, by the stroke of a pen. Furthermore, it appears that the South African Revenue Service and the Sapo Retirement Fund and Medical Aid Schemes did not escape this creditor compromise. That would be a criminal offence.
While it may be legal for the government, albeit as part of a business rescue and within a SOC, to enter into a compromise with its creditors, it will be very damaging to its reputation, and bring into question the very concept of our sovereign guarantee, implicit or explicit if, having done it, it is retrospectively condoned, let alone required by law.
The government simply cannot renege on its obligations to creditors. All providers of goods and services to the government should be entitled to do business with any state institution in good faith, expecting to be paid in full, on time, always.
Surely we cannot embark on any “revised duties” and expanded mandates and “value-added services to expand on its revenue generating stream” for Sapo (ICT policy paper 2016), or turn it into “a strategic platform through which citizens and businesses can access … government services”, until we have fully and truthfully understood how its demise came about. We need to know what happened and be sure that those under whose authority it happened are no longer around.
The public, taxpayers, employees and all stakeholders in Sapo need to know:
- how the post office moved from a debt-free, audited, positive NAV of R5.19bn in 2019 to a position where debt reportedly exceeded assets by R12.5bn in 2023 (this is not explained by operating losses for that period), all the way through to the receipt of R2.4bn from the Treasury at the start of its business rescue in July 2023, and then, finally, to the writedown of the R8.7bn as set out in the BRP update on September 3;
- what Postbank did with the money it held on deposit (included in the R5.32bn of “total other financial assets”, required by the Treasury to be held as a condition of its licence), and furthermore what loans it made to Sapo (which would have been illegal if Sapo was technically insolvent);
- a full explanation of the R175.7m reportedly spent on the BRPs (including R144m on consultants), which must have by now increased even further; and what cost-cutting measures (other than simply retrenching 4,875 people) or revenue opportunities they have implemented; and
- justification (in terms of fair market value transactions) for sales or other impairments of Sapo’s infrastructure (including and beyond the 396 branches reportedly closed since 2020) upon which the relaunched post office of the future will depend.
Only once full discovery and disclosure of these developments is made public and fully accounted for can we hope to restore the trust that will be fundamental to any person or business using the post office again. For the sake of the 10,768 people who have been retrenched or taken voluntary severance packages since 2019, the facts need to be exposed.
Without that we cannot restore the functionality and faith required to partner Sapo in its future ambitions.
• Barnes is the former CEO of Sapo
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