“The Post Office received the full R2.4 billion funding allocation from the National Treasury in 2023, which is supporting the current operations and payment of the dividends due to relevant affected parties of the company. To fully implement the approved BR Plan, the Post Office requires a further R3.8 billion in funding from the National Treasury, as was stated in the application to the high court to place the Post Office into business rescue. A formal application for this funding allocation has been submitted.” Source Business rescue practitioner Anoosh Roopal.
1. The SA Post Office (SAPO) has delivered an uninterrupted service to its clients for centuries. The story of Post Office operations began in a small office in Cape Town in 1792. A mail boat service was introduced between England and the Cape in 1815. The first steamships were commissioned in 1925 and covered the distance between England and the Cape in 58 days. Mail was transported by motor car for the first time in 1911. The first overseas airmail service was introduced in 1932. The first mail-sorting machine was installed in Pretoria in 1967. During 2018, the SA Post Office began a partnership with the SASSA for the onboarding of new social grant recipients, and the issuing of new bank cards to beneficiaries.
The users of the Post Office for services include the South African Police, Hospitals, the High Courts, the lower magistrate courts, lawyers, the various state departments such as Education, health, the Chapter nine institution under the Constitution, the office of the Public Protector and each government institution that sends mail.
We compared several metrics in the Postal services of some countries. According to Union Postal Services (UAL)2023 report. In their report they state the number of employees of SAPO for 2023 was 10,962 now whittled down to less than 5,000), that of Egypt at the same period was 48,293, Brazil 84,618, and our two major economies, the USA 525,496 and that of China 731,996.
Union Postal Services (UAL) 2023 report research points to a significant drop in the percentage of Posts’ revenue generated from letter-post services – from over 50% in 2005 to 34% in 2021. Forecasts suggest a further decline, reaching approximately 29% by 2025. With the acceleration of digitalization and shifts in communication methods, the declining trend of letter-post volumes is undeniable. Given their network effects, postal services amplify their direct economic impact by a factor of at least seven.”
2. Background to the South African Post Office Business Rescue.
On 10 July 2023, the Minister of Communications and Digital Technologies placed the SA Post Office into Business Rescue, as its financial stability had been undermined by unsustainable costs, operational inefficiencies, and its failure to modernise. Specifically, the Post Office faced:
- Declining demand for traditional postal services due to technological advancements, and the Post Office’s failure to adapt to these developments.
- Its slow pace of modernisation and resultant inability to meet financial obligations.
- Failure to adjust its operational costs in response to declining sales volumes or update its business capabilities to align with market trends.
- An unsustainable cost structure. The Post Office’s costs have consistently been more than 200% of its revenue since FY22. Employee costs accounted for 150% of revenue, with inadequate investment in IT systems, fleet management, mail processing centres, depots, and the branch network.
- Operational inefficiencies: poor cash management, and inadequate infrastructure.
- Reduced asset security, leading to an increased incidence of robberies at depots, mail centres, and branches, which worsened the entity’s financial position.
- Restrictions on borrowing under the Public Finance Management Act (PFMA).
- Difficulties arose from the SASSA contract, which was a loss leader.
- Overdue payments to landlords and suppliers resulted in various legal applications being instituted.
Union Postal Services (UAL believes that by embracing technological advances within a framework of enhanced collaboration and global unity, the sector has the potential to weave a postal tapestry that is stronger, more equitable, and future-ready. With the latest Trump decrees and other geopolitics issues, global unity seems less likely.
3. Post Bank spun out of Post Office
Post Bank has been split off from Post Office via the Amendment of section 2 of Act 9 of 2010 ‘‘The object of this Act is to provide for the incorporation of the Post Bank Division of the Post Office as a [legal person] Company and bank controlling company, with the aim of the Company—’’; rendering [transactional] financial and banking services and lending facilities through, amongst others, [existing] the infrastructure of the Post Office and any other means of delivery the Company may deem appropriate for its operational need.
However, the government has placed the footprint where the bank must operate (Post Office buildings), in business rescue to buy time due to the liquidation calls from creditors. On their website, they claim that there is a Post Bank situated inside every Post Office nationwide. At the same time, each operating bank building is under business rescue as it belongs to Post Office, unfortunately, the Minister at the time, Mondli Gungubele could not realise the implications and consequences of the split.
A bank is built on Trust from customers, not from ideological reasoning alone as sound in principle as it may be. To serve the unbanked and to make access to finance available to a wider audience could be counterproductive to the social grant system. Debt is no one’s friend. In a recent article in Independent News, Sipho Tshabalala quoted Omphile Maotwe, stating that the EFF has called for a state-owned bank.
Tshabalala states: “A state-owned bank could be a game-changer, providing affordable financial services and funding businesses that would otherwise be locked out of the economy. Yet, the resistance to such an institution is fierce. “The reality is that we did have VBS Bank, African Bank, the Post Bank and the Landbank and the bank that does not apply for its licence Ithala Bank.
4. The queue for money from the National Treasury.
Whilst the Post Office requires the Treasury to bail them out once again it is not the only such issue the Treasury faces. “Although Ithala SOC Limited (Ithala) is colloquially referred to as a bank, it is not a bank. Rather, Ithala has operated under several exemption notices granted in terms of section 1(1)(cc) of the Banks Act 94 of 1990 (Banks Act) since it was established. The last of these exemption notices (Final Exemption Notice) was issued in July 2022 and lapsed on December 15, 2023” Source Prudential Authority.
They further state that: “The Banks Act does not allow provincially owned state-owned entities to be registered as banks. The Banks Act requires a bank to be a public company incorporated or registered as a national state-owned company under the Companies Act 71 of 2008 (Companies Act).”
Ithala has launched at least six litigation matters challenging the Prudential Authority's implementation of its mandate. This must be a world first, and it is not clear how our government continues to allow these outrageous actions to continue wasting taxpayers’ money. Is the left hand suing the right hand? Yet Ithala has failed to comply with the requirement for them to apply for a Banking license since 2008. That makes it seventeen years of procrastination. This entity, its previous boards, and senior managers do not deserve any further capital injection from taxpayers. The same goes for the Post Office.
South Africa desperately needs a Department of Government Efficiency (Doge). Somewhere there is another Elon Musk within our borders. Cut inefficiency and become a state that seeks and demands excellence in all its operations. We need to dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure government SOEs and other departments. The Auditor General will be an incredibly happy person and so will the taxpayers and the rest of the citizens.
* Views expressed in this article do not necessarily reflect the views of Independent Newspapers.
** Kruger is an independent analyst.
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