Without a restructure, the SA Post Office could 'collapse', says Treasury

Post Office
Post Office
  • Both the SA Post Office and the SABC have requested financial support from Treasury, given the impact of Covid-19.
  • The Post Office is at risk of collapse if it is not restructured and repurposed, says Treasury.
  • The Department of Communications and Digital Technologies may have to place the Post Office under administration.

The SA Post office is in dire need of restructuring and repurposing, or it risks "collapse", according to National Treasury.

Treasury officials on Tuesday briefed the Standing Committee on Appropriations on the first quarter expenditure report. They also gave a brief overview on state-owned enterprises, including Eskom, Denel, the SABC and the Post Office, among others.

Both the SABC and the SA Post Office (SAPO) have requested additional financial support of R1.5 billion and R4.9 billion respectively, due to the impact of Covid-19. Airports Company South Africa has asked for a three-year R3.5 billion guarantee and has also applied for a R3.5 billion equity injection for 2020/21.

Treasury's chief director of sector oversight, Ravesh Rajlal, noted that the Post Office had not achieved its financial sustainability targets for the first quarter – as a result of the national lockdown due to the Covid-19 pandemic. A net loss of R2.1 billion is projected for the year, compared to the initial budget's projected loss of R177 million.

Of the R4.9 billion requested for Covid-19 support, R2.7 billion is needed for operations, R1.4 billion is for the liabilities owed to Postbank and R300 million for voluntary severance packages and the remaining R525 million is for other liabilities.

"SAPO is at a critical juncture. If the shareholder department does act to restructure and repurpose the entity, SAPO will collapse," Treasury's presentation read.

"Government must decide whether SAPO has a role to play as a delivery arm to government; if not, then SAPO must be drastically restructured, as the entity will not be able to continue in its current form without yearly funding from government to cover its losses."

Treasury also said the Department of Communications and Digital Technologies has not done enough to repurpose the Post Office. "The draft SAPO Bill has still not been passed. This Bill deals with a revised mandate for SAPO and solidifies its strategic intent as a citizens post office," Treasury's presentation read.

Treasury said that the department may have to place the SAPO into administration to restructure it.

Rajlal noted that the SAPO's management is in "disarray", with the main executive positions – COO, CFO and CEO – all acting positions. "There has been no accountability in respect of the poor implementation of its strategy."

As for the SABC, the national broadcaster has R1.7 billion remaining from the R3.2 billion recapitalisation it had been allocated in 2019/20.

The SABC anticipates a revenue loss of R1.5 billion for the 2020/21 financial year due to Covid-19 and the displacement costs for public service announcements. The SABC has had to provide additional coverage of current events, which led to the displacement of its content line up, and a loss in advertising revenue. It has also had to provide educational content on its platforms, according to Treasury.

The SABC has requested R1.5 billion in financial support. It has said it would prioritise and fast track a number of  revenue-enhancing initiatives. This includes restructuring its sales teams, adding new revenue lines, partnerships and moving to digital platforms to distribute its content.

According to Treasury, the SABC is also aiming to claw back some of the costs paid for sports rights, for event which were cancelled due to Covid-19.

Treasury said that the SABC will need to reduce its staff to be sustainable and the department will have to review its mandate which is "too wide and unclear".

The broadcaster reported a preliminary loss of R489 million for the year ended March 2020. Its full year loss is budgeted at R1.22 billion.

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