Dark clouds gather over South Africa’s oldest state-owned company

The South African Post Office (SAPO) is heading for liquidation, with its business rescue process looking increasingly unsuccessful amid a lack of funding from the state. 

Minister for Communications and Digital Technologies Solly Malatsi explained to Parliament that this process was premised upon receiving two tranches of funding from the National Treasury. 

Malatsi said the business rescue plan adopted on 7 December 2023 was based on SAPO receiving R2.4 billion and R3.8 billion in two funding allocations from the state. 

While the R2.4 billion was transferred to SAPO upon the commencement of business rescue proceedings, it has not received the additional R3.8 billion. 

“National Treasury has cited fiscal constraints and that there was no formal commitment to allocate the said amount to SAPO,” Malatsi said in response to questions. 

Despite efforts at a turnaround, including the rationalisation of the branch network and cutting thousands of jobs, Malatsi revealed the Post Office is still cash-flow negative.

The reliance on handouts from the state is a far cry from the Post Office of old, which was one of the country’s most important institutions. 

Founded in 1792 with a small office in Cape Town, the Post Office spearheaded South Africa’s connection with the wider world by implementing mail boat services and a local logistics network. 

These capabilities were steadily enhanced by the adoption of new technologies and a rapid expansion of the Post Office’s footprint across South Africa. 

After South Africa’s first democratic election in 1994, the institution continued to thrive after it was readmitted into the Universal Postal Union. 

SAPO introduced South Africa’s first Track and Trace system in 1994, which gave each letter and parcel a unique bar-coded label enabling it to be tracked throughout its system. 

The Post Office’s innovation would continue, with it launching its Paymaster to the Nation project in the early 2000s.

This enables social grant recipients to open a Postbank account. The project received international awards for its innovation and campaign to promote ethical conduct. 

The Post Office became entrenched in the lives of South Africans, with it having a presence in nearly every community in the country to provide an array of services. 

However, all the while, financial trouble was brewing below the surface, with the Post Office not being self-sufficient and requiring regular cash transfers from the central government. 

Its financial troubles were laid bare after three years of protracted employee strikes in 2014, with it posting a R1.5 billion loss. The Post Office was placed under administration.

The bailouts begin

With the Auditor-General raising questions around the Post Office’s status as a going concern, it was clear that drastic action was required.

The government placed businessman Mark Barnes in charge of the organisation, who estimated that the Post Office needed up to R3.5 billion to fund a turnaround plan. 

This soon ballooned to a cumulative R5.92 billion worth of bailouts in the form of government guarantees on Post Office debt. 

These bailouts paid off under Barnes, with the entity’s debt declining and equity position improving to a positive R16 billion. 

Barnes had plans to continue driving the transformation of the Post Office into a modern eCommerce and banking powerhouse. 

Leveraging its network of branches and Postbank’s control of much of the country’s social grant payments, Barnes planned to make the Post Office the primary entry point for millions of South Africans into the digital economy.

However, this never happened as Barnes resigned in 2019 after a fallout with the government concerning the structure of the Post Office and Postbank.

After Barnes left, the Post Office’s equity plunged, falling to R4.5 billion within three years as its liabilities surged to R12.4 billion. 

In short, the entity became technically insolvent as its liabilities were greater than its assets.

At the beginning of 2023, this caught up with the Post Office. The institution was placed into provisional liquidation after failing to pay a service provider. 

Within a few months, the Post Office was placed into business rescue by the Department of Communications and Digital Technologies. 

Anoosh Rooplal and Juanito Damons were appointed as joint business rescue practitioners (BRPs) and charged with turning the Post Office around. 

This is a tall order, with the two BRPs still struggling to find a viable turnaround plan for the entity three years later. 

As with other attempts to save the Post Office, the first request was for more money, to the tune of over R6 billion to fund any turnaround plan. 

R3.8 billion does not arrive

The placement of the Post Office into business rescue was based on the assumption that it would receive around R6.2 billion to fund the BRPs’ turnaround plan. 

This turnaround plan included cutting branches and headcount across the board, while creditors received 12 cents for every rand they were owed. 

Receiving R2.4 billion, the BRPs were able to execute the first part of their turnaround plan, which proved relatively successful. 

However, three years later, Minister Malatsi has confirmed to Parliament that the next tranche of R3.8 billion in state funding is unlikely to ever hit the Post Office’s bank accounts. 

“The Department made several submissions to the National Treasury for funding allocations to SAPO. Several engagements supplemented the submissions. These efforts have not been successful,” Malatsi said. 

He explained that R700 million was given to the department to address the funding pressures of entities that report to it. This includes the SAPO, the SABC, and Sentech. 

Under this transfer, the department allocated R150 million to the Post Office to ensure it can remain operational through 2025. 

Despite this, the Post Office is planning for the future, with a new board being appointed to ensure the institution has a leadership team ready to take over when the BRPs exit the entity.

This confidence is based on a Corporate Plan for the period from 2026 to 2029, which accounts for the lack of R3.8 billion in additional funding.

Malatsi said the Post Office will engage in public-private partnerships to keep itself afloat and ensure it can maintain an adequate level of service delivery. 

“These initiatives focus on the repurposing of some of SAPO’s properties and leveraging them to be able to generate revenue in the short to medium term,” the Minister said. 

“Some of these initiatives will require time before tangible results can be realised, particularly due to the dilapidated state of portions of SAPO’s infrastructure that require refurbishment.”

So far, these initiatives and cost-cutting have had a positive impact on the SAPO’s finances, with historical debt falling to R440 million from around R9 billion. 

Coupled with the job cuts and branch rationalisation, the BRPs believe the Post Office is able to operate on a commercially solvent basis. 

However, without the R3.8 billion, the Post Office has been unable to pay its statutory creditors 18 cents on the rand. This failure has resulted in creditors trying to force the entity to meet its obligations.

The R3.8 billion is also earmarked to invest in upgrading SAPO’s infrastructure, IT systems, and property, along with providing adequate working capital. 

Despite all the progress, Malatsi said that in January 2026, the BRPs asked for urgent bridge financing from the department to keep the Post Office open for business. 

This financing has only delayed the seemingly inevitable outcome, with the Post Office still operating with negative cash flow.