The South African Post Office’s (SAPO) liabilities exceed its assets by R7.9 billion, meaning it is hopelessly insolvent and will need tremendous assistance to survive.
Last week, the SAPO Business Rescue Practitioners (BRPs), Anoosh Rooplal and Juanito Damons, revealed that SAPO’s liabilities reached R12.5 billion.
With only R4.5 billion in assets, the Post Office is technically insolvent with negative equity of R7.9 billion.
The BRPs said turning the company around and returning it to a solvent position will require a revenue increase and creating an effective and efficient cost structure.
The Post Office missed its revenue target by a country mile for the past financial year. It generated R3.033 billion against a target of R4.812 billion.
It blamed many factors, including its customers’ migration to digital alternatives and not paying its suppliers, who stopped providing services.
Joint BRP Anoosh Rooplal said they have been working with management to address the decline in revenue.
It also aims to reduce costs, effect critical structural changes in the business model and consider key investments in technology and infrastructure to drive performance.
“The success of the business rescue is predicated on stopping the cash flow bleed whilst allocating capital to facilitate the company to service clients effectively,” Rooplal said.
One of the focus areas is the Post Office’s branch network, which is the cornerstone of its business.
They looked at the profitability, geographical reach, universal service obligations (USOs), services like motor vehicle licencing, financial services, and SASSA grant payouts at individual branches.
“The Post Office services include the USOs in rural areas, and so a mere profitability metric or cost centre metric would be trite,” Rooplal said.
Another focus area is staff salaries, which are monitored and reviewed and depend on cashflows and government funding.
For almost two decades, the Post Office’s financial position continued to decline, and in the last few years, expenses outstripped earnings by a wide margin.
As this situation persisted, it prioritised paying the employees the cash component of their salaries from 2020.
The entity was simply not making enough money to cover other employment costs, including medical aid and pension funds.
Technically, no money was deducted from employees. However, it was shown on their payslips as they were not paid that portion.
This also meant that the Post Office did not pay its own obligation of two-thirds of the medical aid contributions.
The idea was that these contributions would have been paid to the medical aid once the organisation was stabilised.