South Africa’s oldest company to exit business rescue after closing 366 branches and laying off over 4,000 employees

The South African Post Office (SAPO) is set to exit business rescue proceedings after around two years.

On Friday, 12 June, the SAPO’s business rescue practitioners (BRPs), Anoosh Rooplal and Juanito Damons, launched an application in the Pretoria High Court to bring the business rescue proceedings to an end.

They have also authorised the filing of a notice of substantial implementation of the adopted business rescue plan, a step to formally conclude SAPO’s business rescue process.

The BRPs are now awaiting a court date to have the application heard and receive an order to terminate the proceedings.

“The business rescue process has stabilised SAPO’s balance sheet and significantly improved its operational position,” Rooplal and Damons said. 

“The entity is currently paying its liabilities in the ordinary course of business.”

The SAPO has been in business rescue for two years following years of financial struggles, with the Post Office having run at a loss every year since 2013.

This is despite having received billions of rands in bailouts from the state, totalling around R10 billion.

According to the SAPO’s BRPs, the Post Office is now on a much more solid financial footing, with revenue up R2 million to R1.54 billion and its net loss reduced to R71 million, down from R514 million the year prior.

“This is the lowest net loss recorded over the past several years and reflects the positive impact of the business rescue process,” they said.

“Although challenges remain and SAPO is not yet fully out of difficulty, the organisation is operating from a more stable foundation.”

“The next phase, to grow and modernise the entity, requires shareholder-led intervention, injection of capital, and permanent governance structures.” 

They said a High Care Leadership Team has been established to coordinate, oversee, and drive the SAPO’s transition to normal operations.

A painful journey

The SAPO’s business rescue has been a painful process, with the state-owned enterprise having required a substantial intervention.

Through business rescue proceedings, the SAPO has reduced its creditor debt from around R8.7 billion to R440 million. 

More than 99% of the approved 12 cents in the rand distribution, amounting to approximately R1.015 billion, was paid to creditors by August 2024. 

The BRPs said this compares favourably to the estimated liquidation return of 4.08 cents in the rand.

However, this did not come without pain. The SAPO had to institute a section 189A process, which resulted in a reduction of 4,342 employees, completed by April 2024.

This saw the Post Office’s monthly staff costs reduce from R211.9 million to R115 million, generating annual savings of around R1.2 billion.

In addition, it closed down 366 branches, with 657 remaining.

However, the BRPs said this and other interventions have materially improved the SAPO’s balance sheet.

The Post Office’s balance sheet has moved to a positive R840 million, a major turnaround from a negative net asset value of R7.9 billion previously. This rendered the organisation technically solvent. 

The BRPs also said the number of Auditor-General audit findings regarding the SAPO has been decreasing as a result of the governance and internal control improvements implemented.

Despite these victories, the BRPs said certain components of the turnaround strategy remain incomplete due to funding constraints.

For example, the SAPO received an initial government allocation of R2.4 billion, used to support creditor distributions, retrenchment costs, and operational cash flow.

However, this was to be followed by a second R3.8 billion funding tranche, required for capital investment and growth initiatives, which never materialised.

“As a result, several modernisation initiatives, including IT upgrades, digital services and broadband capabilities, will now fall within the responsibility of the shareholder and the new board, who have been appointed by the Minister,” the BRPs said.