SA Post office was placed under business rescue 

Estimated read time 6 min read

Due to its inability to meet obligations, SA Post office was placed under business rescue in July, last year. At the time it had about 12 000 employees, with more than  R12.5 billion in total liabilities. The major issues cited by the management at the time, was that the operational challenges were mostly a consequence of; load-shedding, aging equipment and operational inefficiencies. Business rescue implies that the business will not be obliged to immediately pay what it owes, thereby getting a chance to restructure. According to the calculation by the business rescue practitioners, if the organisation were to immediately be placed in liquidation, trade creditors would get 4 cents for every Rand, which the company owes them, or even less, since liquidation could drag for 5- 10 years, with the business incurring more costs and liabilities along the way. Now that it is in business rescue, the organization will be restructured so that it can be able to pay its creditors more than 4 cents for each Rand owed and it should be able to keep at least half of its workers. This also means that it will continue to contribute to Treasury through taxes, especially when it begins to make a profit, which has been estimated to be around the year 2026, or soon after. If it had gone into liquidation, the negative impact would have been felt by employees, creditors and the overall economy. 

Additional proposals

Part of the planned restructuring of SAPO, involves its entrance into the logistics business. Since the aim is to realize profits quickly,  it is advisable that it partners with government and becomes the preferred service provider for the government’s transportation needs. Serving as a substitute or complementary service to Transnet Freight Rail will also see it taking off quicker and establishing itself earlier. If Transnet fails to pick up a client’s order, the SAPO vehicle fleet should be available to offset the absence of the rail operator.  

Providing errand services such as school drop-offs for scholars, dry cleaning drop and pick up, among others, may also provide solutions to existing societal challenges which the market is prepared to pay for. The authentic brand of SAPO (which is government-owned) implies that it will be easier for clients to trust them in this market segment, when compared to unknown private participants. There is also a possibility for the post office to enter the ride-hailing business where it transports  passengers and acts as a competition to Uber, Bolt, etc. 

Instead of exiting the SASSA grant payments side of the business, SAPO should find creative methods to ensure that they restore their lost market share and retain profitability. Much revenue can be made from the provision innovative financial services. Firstly, the company may need to strictly offer authenticated payment vouchers (tickets), instead of cash, which can be redeemed at several banks or supermarkets by the recipients of the grants. This should help to reduce robberies and thefts which had increased on account of the availability of large sums of cash at the branches. They should also lobby the authorities and target to be the exclusive distributor of grants, nationwide, since they have the physical presence to sufficiently perform the role.

Moreover, SA Post Office may need to provide a digital app, which can be used by anyone to upload funds for further use at retail stores or onward transfers to other people or entities. Citizens still have gaps in their payment requirements to governments service providers (including utilities), for the payment of transportation (bus, taxi or train tickets), retail service needs, mobile transfers to individuals and so forth, which can be provided for by this Post Office digital payments app. In order to differentiate this from a bank account, it can have a R10 000 limit on cash which individuals can upload (deposit). This means that, instead of being hesitant of cash, the post office may need to further entrench its involvement with it, until it can justify fitting investments in security and impeccable control measures around it. This is mostly necessitated by the fact that, physical mail will continue to lose relevance through the years. Thus, instead of making mail the main revenue model, the business must grow towards digital finance and other innovative and timely market requirements. 

The business rescue practitioners may also need to integrate SAPO into the government’s digital transformation process, as another option for generating revenue. From 2022, the Department of Home Affairs started-off on a quest to transform 340 million paper-based records (IDs, birth certificates, etc), into digital format. Since this project involves significant expenditures and human resource requirements, the Department of Home Affairs would have made a more effective use of its budget (for the project) through engaging SAPO. Additionally, in the future, all digital public documents  (marriage certificates, university transcripts, drivers’ licenses, company registration, etc), should ideally be available via the post office’s digital services (digital signatures, document authentication) side of the business. Also, self-service machines for the processing of national ID documents, passports, birth and death certificates, which have been distributed by the Department of Home Affairs in an experimental phase, should also be placed next to post office branches around the country. A small commission fee can be requested for each application, which is to be assigned for the services of post office personnel who can be expected to assist the public whenever they need guidance with the self-service process. Positioning the self-service machines at SAPO branches will also draw more traffic (customers) to SAPO, implying greater revenues for the business. Moreover, the government data centres which will accommodate the country’s various public records (hospital, court records, etc) may also be managed from SAPO. Consolidating the government’s digital processes with SAPO’s activities will ensure that it (SAPO) will generate more revenue and become profitable, sooner than the initial business rescue plan predicts. 

Eventually, the business rescue plan has to make SAPO profitable for the long term. It would be regrettable if, after all the capital injections by the state, the company goes on to be liquidated. By 2019, it was reported that it had received R3 billion in recapitalisation funding from government, since 2016 only. Currently, the rescue plan suggests that it will once more need an overall R6.2 billion for its resuscitation. If the funding is approved, this would mean that in just 8 years (2016- 2024), SAPO would have failed to prudently use R9.2 billion meant for its turn around. Thus, all that needs to be done to ensure that profitability is realized, should indeed be done. 

Kevin Tutani is a political economy analyst.

You May Also Like

More From Author

+ There are no comments

Add yours