R2.8 billion in taxpayer money helped save South Africa’s oldest company

Employment and Labour Minister Nomakhosazana Meth has celebrated her department’s role in helping the South African Post Office (SAPO) exit business rescue proceedings successfully.

She said the R381 million in public funds her department invested provided critical financial support to preserve jobs and sustain operations.

The SAPO had also received a government allocation of R2.4 billion when it first entered business rescue, which allowed it to pay back creditors, cover retrenchment costs, and ensure operational cash flow.

Prior to entering business rescue proceedings, the SAPO had also received almost R10 billion in government bailouts as its financial health deteriorated.

Meth’s comments come after the Post Office’s business rescue practitioners (BRPs) announced that the SAPO is set to exit business rescue proceedings after around two years.

The BRPs, Anoosh Rooplal and Juanito Damons, made this announcement on 12 June, saying the business rescue process has stabilised the SAPO’s balance sheet and significantly improved its operational position.

They said SAPO has reduced its creditor debt from around R8.7 billion to R440 million, and approximately R1.02 billion has been paid to creditors.

In a statement on Thursday, 18 June, Meth welcomed this success, saying it marks a critical and encouraging milestone in the journey towards restoring the SAPO’s stability, credibility, and long-term sustainability.

She said the Department of Employment and Labour played a pivotal role in supporting the SAPO during this difficult period. 

This support came in the form of a R381 million investment in the Temporary Employer/Employee Relief Scheme (TERS) and the Unemployment Insurance Fund (UIF) over a six-month period.

Through this investment, Meth said the department provided critical financial support to preserve jobs and sustain operations. 

“This intervention provided immediate financial relief to 5,956 employees while enabling SAPO to implement a sustainable turnaround strategy,” she said.

“This intervention demonstrates that public funds, when deployed with purpose and urgency, can meaningfully contribute to both job preservation and business continuity.” 

“The progress achieved to date signals renewed potential to reposition the Post Office as a viable, service-oriented public entity that meets the needs of South Africans while safeguarding jobs.”

The power of public funds

Meth’s celebration of the R381 million her department invested to support the Post Office comes after the SAPO has been a significant burden on South Africa’s fiscus over the past decade.

The SAPO had been in business rescue for just over two years following years of financial struggles, with the state-owned enterprise (SOE) having run at a loss every year since 2013.

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

During its business rescue proceedings, the SAPO received a government allocation of R2.4 billion, which was used to support creditor distributions, retrenchment costs, and operational cash flow.

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

According to SAPO’s BRPs, the initial government funding and the business rescue plan have put the SOE on a far more stable financial footing.

They said SAPO’s balance sheet has moved to a positive R840 million, a major turnaround from a previously negative net asset value of R7.9 billion. In other words, the SOE is now technically solvent.

This process did not come without some pain. In order to successfully exit business rescue and become more financially stable, the SAPO had to institute a section 189A process, which resulted in a reduction of 4,342 employees.

In addition, the Post Office closed 366 branches, leaving 657 locations in SAPO’s network.

While much progress has been made in restoring the SAPO’s financial health, the BRPs said more work is still needed to ensure its sustainability.

“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.