Anti-tax abuse lobbyists have called on the government to either disband the SA Post Office or semi-privatise it as the state has shown itself to be incompetent to run its own enterprises efficiently.
ANTI-tax abuse lobbyists have called on the government to either disband the SA Post Office (Sapo) or semi-privatise it as the state has shown itself to be incompetent to run its own enterprises efficiently.
The call came from the Organisation Undoing Tax Abuse (Outa) and the SA Institute of Taxation (SAIT).
Outa chief executive Wayne Duvenage said the money spent on bailing out the now insolvent Sapo could be put to good use.
“You can semi-privatise it and shut down its many elements that are inefficient and save taxpayers lots of money,” Duvenage said.
As a result of poor financial management, Sapo was placed under business rescue after Communications and Digital Technologies Minister Mondli Gungubele’s successful application for this at the North Gauteng High Court in Pretoria on July 10.
Sapo business rescuers Anooshkumar Rooplal and Juanito Martin Damons have expressed optimism that the entity can still continue operating despite its financial upheavals.
They said this could be achieved through the disposal of the redundant assets and rebuilding of Sapo’s asset base by investing in the information technologies (IT) infrastructure and plant and equipment needs to be considered, “especially to catch up with the industry’s move in the logistics, courier, and parcel and digital business”.
“The branch network is being reviewed, such that certain branches are reopened, some are closed and some are refurbished. Sapo should service its clients through a smaller network of branches that are strategically located so as to be profitable.
“The operation division needs to be optimised, such that costs are reduced and efficiencies are introduced into the system, (and) Sapo mail operations need to be modernised and digitised,” the rescuers said.
The business rescuers said detailed proposals for the business would be included in the business rescue plan that would be issued on or before November 30.
They said Sapo was still essential as it was still providing traditional postal delivery services to rural people who lacked the latest technology.
“Sapo is responsible for distributing social grants at its branches, acting as one of Postbank’s paying agents; it delivers medication to those in need; and it facilitates convenient renewal of motor vehicle registration,” they said.
However, Sapo has been hogging the news headlines over many years for the wrong reasons, such as failing to service its multibillion-rand debts.
It has also been accused of deducting funds for medical aids from its employees but failing to transfer the money to the schemes.
As a result of its failure to transfer medical aid funds to medical schemes, Medipos, which only caters for Sapo’s employees, was also placed under provisional curatorship.
Among about 2,400 other creditors owed by Sapo were Postbank, the Post Office Retirement Fund, the South African Revenue Service, and other medical aid schemes.
Duvenage said: “The government is inept when it comes to sensible business for state-owned entities. You have seen it in Denel, SAA, Eskom and Transnet.
“The Post Office is another casualty of the poor government’s meddling in the affairs of a business that should be left alone to be run by professionals. They don’t know how to do this, they are out of touch with reality,” he said.
According to the Daily Maverick, Sapo owes creditors around R5 billion as of March 31, while mybroadband.co.za reported in May that the entity owed the Post Office Retirement Fund R1bn.
“Sapo’s statutory debt obligations total R2.4bn, including R1.1bn due to the Post Office Retirement Fund, R539 million to the SA Revenue Service, R596m to Medipos and R108m to the UIF. Sapo’s creditors amounted to R5bn as of March 2023,” reported the news website.
But in a recent joint response to the Sunday Independent, Sapo’s business rescuers and its chief executive, Nomkhita Mona, said the situation had escalated.
“Sapo is technically insolvent with liabilities exceeding assets by approximately R7.9bn as of 31 July 2023,” they said.
They said in terms of the provision of the 2008 Companies Act, Sapo was financially distressed “in scenarios of definition of financial distress”.
“The South African Post Office had total assets of approximately R4.5bn as of 31 July 2023, while total liabilities amounted to approximately R12.5bn.
“Sapo reported losses of R2.1bn in the 2022/23 financial year and R2.2bn for the 2021/2022 financial year,” they said.
The state has pledged to make R8.2bn available as a bailout for Sapo, with R2.4bn to be allocated from the 2023/24 financial year budget, while R3.8bn has been reportedly allocated to pay for the business rescue expenses.
The 2022 annual report stated that out of 1,266 of the total entity’s branches across the country, only 303 were making a profit, while 963 others proved to be unprofitable at the end of March 2022.
“The 2021/22 FY (financial year) ended with 303 branches being profitable compared to the 171 branches during the 2020/21 FY, a marked improvement.
“A total of 146 branches were officially closed during the 2021/22 FY. Of these, 55 were amalgamations,” read the report.
In the report, Noma admitted that Sapo had been surpassed by digital development, such as letters being largely replaced by digital alternatives, while “small parcels and a growing e-commerce market caters to the needs of customers across the globe”.
“The SA Post Office’s traditional financial sustainability model is no longer fit for purpose, compounded by the cost of operating the postal network, which has continued to rise – with staff costs remaining the highest cost driver.
“Low levels of investment have also resulted in outdated technologies, buildings falling into disrepair and continuous IT infrastructure failures,” read Mona’s statement.
SAIT has called on the state to get rid of some of its financially struggling state-owned enterprises (SOEs) such as the SAPO.
Talking to Kaya FM presenter Gugulethu Mfuphi recently, SAIT chief executive officer Keith Engel specifically mentioned Sapo as a SOE that does not make business sense to keep operating.
“Like the Post Office, do we really need to keep that going? Does that make sense? That’s costing us a lot of money?” said Engel.
He said for the state to be able to continue paying social grants for the benefit of the poor members of the society, it should eliminate some of the wasteful state-owned enterprises.
“That’s the best way if you are going to fund the social grants. But again, that will be at a political cost internally, and people are unwilling to bear that political cost,” said Engel.
