Blow to the South African Post Office

The South African Post Office (SAPO) has suffered another blow after the National Treasury rejected its request for a R3.8 billion bailout. 

Recently, the state-owned entity (SOE) applied again for the Unemployment Insurance Fund’s Temporary Employer/Employee Relief Scheme after the Treasury rejected a request for a R3.8 billion bailout.

SAPO has faced a difficult few years, with billions in losses and a mounting debt pile, pushing the SOE to the brink of liquidation.

As a result, the entity entered into business rescue proceedings two years ago as a condition for additional government funding. 

While they have made operational improvements and brought the company closer to solvency, the Business Rescue Practitioners, (‘BRP’s’) warned earlier this year that the Post Office still needs a R3.8 billion bailout from the government to keep its doors open.

Even though SAPO received R2.4 billion in the 2023 Budget, they have kept calling for additional funding.

Communications Department spokesperson Kwena Molotoe explained on Newzroom Afrika that even though the Post Office has struggled financially over the last decade, it still plays a fundamental role in the lives of many South Africans. 

Molotoe said that since Solly Malatsi took over as Minister of Communications and Digital Technologies of South Africa, “he’s been clear that we do need a workable solution to turn the post office around.”

The Relief Scheme SAPO applied for was originally meant to help businesses struggling during the COVID-19 pandemic, which “perfectly describes the dire situation that the SAPO currently finds itself in.”

The Post Office remains a critical business for many South Africans, offering important services like communication and the delivery of SASSA grants.

It is especially important for South Africans in rural areas and those who otherwise would not have access to those services.

“It plays a critical role in ensuring that so many of our rural communities aren’t left behind,” he said. “We need to ensure that we get it up and running so they’re not forgotten.”

“As the post office has been going under the business rescue process, some gains have been made,” Molotoe explained.

Specifically, this progress relates to closing branches and entering into public-private partnerships.

For example, in February, the joint BRPs, Anoosh Rooplal and Juanito Damons, announced that they signed a contract with Ethiopian Airlines to provide airmail services to additional international destinations.

This followed the partnership with Swiss Air and the consequent reinstatement of international mail service to Europe and Japan with Swiss Air in October 2023. 

“We’re making inroads into trying to turn around the South African post office in that financial situation, but it is going to be an uphill battle for this administration,” Molotoe said.

The business rescue proceeding has included several cost-cutting measures, including thousands of employees being retrenched. 

Progress has been made in improving the liquidity of the SOE, however, many jobs still remain on the line.

“The minister has made it clear that as much as possible we want to ensure that we can keep the workforce that we currently have, but one needs to look at the financial sustainability of the SAPO.”

According to Molotoe, the Post Office will only be able to develop a financial model for estimating the number of retrenchments it will make going forward once it finds a private partner. 

He explained that although the Treasury’s rejection of the bailout is unfortunate, they are also aware of the fact that the South African fiscus as a whole is struggling. 

“Regarding our SOEs, we must look into private-public partnerships to make them sustainable. The South African people cannot continuously bail out these entities,” he said.

Public-private partnerships have had success in turning around other SOEs, such as Telkom which has since become a valuable investment. 

Similarly, the Post Office is still “an asset that can offer great value to the people of South Africa and to a potential private partner.”

Despite the fact that the SOE has been closing branches, it still has over 600 locations left in the country.

“There’s no other institution that has that same geographical reach and that’s one major selling point of the SAPO. We can’t continue with a cycle of perpetual bailouts for SOEs,” Molotoe said.

For that reason, he added the goal is to find a solution that will see the Post Office transform from a crippled SOE that requires solely government bailouts into a player that can go toe-to-toe with the bigger players inside the space.