Major concerns as Post Office liquidation moves ahead

In news that has shocked no one, the South African Post Office (SAPO) confirmed at the beginning of April that it would be placed under provisional liquidation by its major shareholders, the Kaap Vaal Trust.

The Trust is one of the many shareholders that have tried to place SAPO into liquidation. The SAPO recently received R2.4 billion in the form of a bailout from Government. Despite this, it has continuously battled to pay its creditors.

Looking past organisation mismanagement, which must be significant if creditors are waiting for their cash while the SAPO sits on R2.4 billion, the operational model of any postal service is a clear case of a company being placed into financial distress because of the external environment. Technology and digitalisation have been threatening the postal service model for several years.

The Post Office of Tomorrow

The first signs of the SAPO being in trouble came in June 2022 when the acting Deputy Chairperson of the Board of the SAPO, Sipho Majombozi, told National Assembly that the SOE was still in ICU and needed financial support to implement its turnaround plan which it dubbed The Post Office of Tomorrow.

The Post Office of Tomorrow would have focused on six strategic objectives. The first would have been efficient systems and processes, which would have focused on improving the effectiveness of the Post Office’s business processes and operational environment supported by the required enabling IT systems. The second strategic objective would have been asset and infrastructure optimisation, which would have focused on effectively using the SAPOs assets and infrastructure to create new revenue streams.

The third strategic objective would have been diversifying the SAPO’s funding and revenue. This objective would deal directly with the threat that emails and door-to-door courier companies pose to the company. In keeping with this theme, the fourth strategic objective would have been developing new products and services, making the post office relevant in a digitised world.

Strategic objectives five and six focused on putting the customer first and creating a culture of excellence within the SAPO.

Focusing on these strategic objectives would have helped the SAPO refocus its business model to develop a solution that would have ensured its relevance in a world of rapid change.

What happens now

The provisional liquidation allows for the provisional liquidator to recover debt or monies owed to Sapo without any payments to creditors, the liquidators said on Wednesday.

The Moneyweb article points out that the process is aimed at ascertaining, maintaining and protecting the assets and integrity of the Post Office until the appointments of liquidators is made final.

“We are currently in the process of engaging with the Post Office management and [its] appointed attorneys and all relevant stakeholders,” says Shaban.

Dr Eric Levenstein, head of business rescue at Werksmans Attorneys, said in an SAfm Market Update with Moneyweb interview that while it remains to be seen whether a further bailout will come, the move may alleviate the liquidity pressures on SAPO’s books and potentially be used stop the liquidation by the June deadline set out by the court.

While elephants fight, it is the grass that suffers

There is a famous African proverb which says: when elephants fight, it is the grass that suffers.

Unfortunately, companies need to keep creditors happy. The bailout that the SAPO received from Government should have been split between keeping creditors happy and funding this turnaround plan. But was the turnaround plan doomed from the start? Creditors would rather see a company return to profitability than enter into business rescue or liquidation, where they will only get a specific value for every Rand owed to them. It once again highlights the very significant possibility that there was some form of mismanagement.

While it is undeniable that creditors are perfectly within their rights to recover monies that is owed to them. There is no doubt that this will probably end up in court, and in that case, the true victims in this fight will be SAPO employees and the public.

The SAPO was not only a place where you could collect post and renew your vehicle’s licence; the post office facilitated the payment of social grants to over 18 million people. This service is not commercially available to many of the most vulnerable members of sociaty, particularly those in rural areas where there is one shop, a petrol station and a post office.

This alone should be motivation enough to try and find a solution for the post office to remain operational and would have been a very enticing carrot that the SAPO could dangle in from of creditors. However, some things just cannot be ignored. I alluded to mismanagement earlier, and one can only assume that the culture of mismanagement is such that it would always be a treat to creditors as long as the SAPO was operational. Eventually, you have to stop throwing good money after bad; it is just unfortunate that innocents get caught in the crossfire.