The Post Office’s business rescue practitioners said on Tuesday that many improvements need to be undertaken to make the company profitable again, although the plan will take as long as five years to implement.
Anoosh Rooplal and Juanito Damons, speaking in parliament, said capital expenditure must be “brought up to scratch”, with more money to be spent on automating mail processing and eliminating duplication. “There must also be investment in infrastructure – nothing has been spent on IT for the last 12 years, for instance,” they said.
They gave parliament’s portfolio committee on communications & digital technologies detailed information about their decision to place the insolvent Post Office into business rescue.
“What this plan has achieved is that by the end of March 2024, its creditors will be paid,” said Rooplal. However, it is a “compromise” for those creditors – only 12% of what’s owed to them will be paid out and, for some smaller companies, that is a “bitter pill to swallow”.
“A small truck business, for instance, that helped the Post Office with transport, will only be paid out 12c in the rand, and that’s going to place their business at risk.”
A planned R3.8-billion bailout, which communications minister Mondli Gungubele said his department has already expedited with submissions to treasury, will be used to pay out larger government entities such Postbank, the Post Office’s retirement fund, the South African Revenue Service and the company’s medical scheme.
The rescue practitioners conceded that it’s a “difficult” rescue but, guided by the Companies Act and the fact that by September 2023 the Post Office had R19-billion in accumulated losses, there were not many options available.
Staff costs
“There were limited cash resources, and expenses exceeded revenue by over 200%. Staff costs in particular were responsible for 150% of revenue, which also led to the difficult decision to reduce the staff component by 6 000 people.”
Of the 1 022 Post Office branches countrywide, many were inactive, for various reasons.
Read: Post Office will be saved – but thousands of jobs to go
“We could see most were in loss-making scenarios. There was no money to pay landlords, lights or water bills, and many had been vandalised, which also led to the decision to close a significant number of branches. Being profitable was not the only criterion. The location of branches is important as for many underserved and rural communities the Post Office serves an important function.” — © 2023 NewsCentral Media