South African Post Office can shut its doors next month

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South African Post Office can shut its doors next month

The South African Post Office (SAPO) is on the brink of shutting down, with its business rescue practitioners (BRPs) warning it faces liquidation if the government does not pump billions into the state-owned company.
This was revealed in a presentation by the Post Office and its BRPs to Parliament’s Portfolio Committee on Communications and Digital Technologies.
The presentation gave an update on a years-long business rescue process and laid bare the financial difficulty of the Post Office.
Significant progress has been made in turning the Post Office around, with its net asset value swinging into positive territory for the first time in three years.
This has brought the company closer to solvency, and it has been able to pay back some of the creditors.
There have also been operational improvements, with the Post Office completing its data centre migration and the backlog at its mail centre being reduced.
However, despite these improvements, the BRPs said the Post Office still needs a R3.8 billion bailout form the government to keep its doors open.
The Post Office has long been calling for these additional funds, even after receving R2.4 billion in the 2023 Budget.
Former Communications Minister Mondli Gungubele warned last year already that the Post Office would collapse without the extra R3.8 billion.
“If you listen to what I have said, if it continues, then it means we must close the South African Post Office,” Gungubele said.
“The R3.8 billion is one of the things that was analysed as going to be necessary to do that turnaround,” Gungubele said.
“If you want to rescue SAPO, that is the only way it can go forward.”
The Post Office has since sent a proposal to Cabinet for the additional funds but was seemingly rejected as it received no additional funding in the 2024 Budget.

Day Zero is coming
The BRPs echoed this warning to Parliament on Wednesday, saying the Post Office only has cash reserve until October 2024.
With no further cash injected from the state, the South African Post Office will have to close its doors.
To try to extend this runway, the BRPs have reviewed current expenditures and implemented tighter controls, with potentially further cost-cutting measures being initiated.
As the Post Office’s ‘Day Zero’ looms large, the BRPs said they are obliged to consider legislation that requires them to inform stakeholders that there may no longer be reasonable prospects for rescuing the company.
“Based on the aforesaid, with no additional funding, the BRPs will be legally obliged to place the SAPO in liquidation as directed by section 141 of the Companies Act,” the presentation said.
“The consequences of liquidation are fatal for the SAPO. The estate will be placed in the hands of the Master of the High Court, who will appoint a liquidator to wind up the estate.”
In this scenario, the BRPs said all jobs would be lost, and all business operations would cease.
The request for additional funding from the state, effectively means that taxpayers will have to bailout the Post Office once again.
The Post Office has run at a loss every year since 2013 and has failed to compete with private couriers. It has since recorded over R19 billion in losses.
As a result, it has already received over R10 billion in bailouts since 2014. The Cabinet has said that additional funding would be provided only if the Post Office proves it will avoid liquidation.
Additional funding would be conditional and used to pay off the Post Office’s debts, fund its cash-flow deficit, develop a turnaround strategy, and create a staff reduction plan.

source:https://dailyinvestor.com/south-africa/62870/south-african-post-office-can-shut-its-doors-next-month/

Natalie