Post Office grilled over turnaround plan

The Post Office is under financial strain. (Duncan Alfreds, Fin24)
The Post Office is under financial strain. (Duncan Alfreds, Fin24)

Cape Town - A parliamentary portfolio committee has posed tough questions to the embattled South African Post Office (Sapo) about its turnaround strategy.

On Tuesday, department of posts and telecommunications officials presented Sapo's new board and leadership to the committee.

The officials also outlined plans to implement a turnaround strategy that urged Treasury support for the struggling organisation.

But the state-owned company was grilled by committee members.

Committee chair Mmamoloko Tryphosa Kubayi pointed to inconsistencies regarding a cost reduction target of R100.9m.

Sapo also told the committee that in August it had paid R150m to creditors resulting in a backlog of R480.6m. However, because of financial constraints, the organisation had incurred additional debt of R1.25bn from private banks with a government guarantee.

The DA's Cameron MacKenzie questioned whether Sapo was viable with continued operational losses.

"If the Post Office is losing R100m a month and the Post Office owes R480m to its creditors, and it raises R1.2bn in overdraft funding, it tells me that by Christmas time, you're not going have any money."

Mathonsi said that the organisation suffered costs escalating faster than revenue from 2012, challenging Sapo management to come up with strategies to save the enterprise from collapse.

"We are making solid progress in terms of cost containment in the organisation. A lot of time has been spent in how we can make Sapo a lot leaner," he argued.

He said that 40% of managers had held more than one position as the organisation moved to cut costs and the implementation of right-sizing would save R60m a month in salaries.

However, incoming chair Dr Simo Lushaba who is the former administrator of the organisation warned that without funding of R370m to implement right-sizing, the bill became a moving target.

Executive jobs

On Tuesday Sapo also announced that it had reached agreement with former CEO Christopher Hlekane, but Lushaba insisted that the organisation took a dim view of departing executives' packages.

"We've agreed that there're not going to be any handshakes - gold or silver or platinum."

Sapo has been pushing to employ executives over the last three months to move the organisation forward and told the committee that three out of nine candidates have accepted employment offers and two have commenced work.

The bill for the turnaround plan is calculated at R1.1bn if all conditions are met, the organisation said.

- Follow Duncan on Twitter

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