Bad day at SA Post Office: Madonsela, Barnes expose mismanagement and financial crisis

Tuesday was a bad day all round for the Post Office. While Public Protector Thuli Madonsela found the Post Office needed to recoup some R22 million misspent on rented empty offices, Post Office CEO Mark Barnes told MPs that the entity was in R1 billion debt – and would need R2.5 billion-3.5 billion from government to solve its financial woes.

The Public Protector’s report, titled ‘Postponed Delivery’, found the Post Office’s 10-year lease at Eco Point Office Park, valued at R161 million, was “irregular”, “unlawful” and “tainted by procurement irregularities and corruption”. Aside from falsities in the business case for this office lease, there had been no fair bidding process ahead of the procurement process.

The report said the Post Office must recoup the R22 million it spent on empty offices - R2,372,050 per month for ten months from May 2010 – before the entity finally occupied the space in Centurion, Gauteng. The group CEO must take steps to ensure proper controls, and document management systems, are in place.

Other findings with regards to the lease include that evidence related to the Prevention and Combatting of Corrupt Activities Act must be submitted to the police, and that the recommendations of an independent forensic audit and of the Special Investigating Unit (SIU) must be implemented.

The office move coincided with cost-cutting at the financially-troubled entity and the outsourcing of core work through labour brokers as part of this drive.

The Public Protector report found the Post Office had “irregularly appointed and utilised” labour brokers between April 2002 and September 2012, which cost the entity some R2.7 billion over that period. The “inadequate meaningful consultation of employees on cost-cutting” was a concern, said the report, finding the CEO must ensure in future employees are “properly” consulted.

Implementing the public protector’s remedial action just added to Barnes’s heavily-loaded plate to haul the Post Office out of the red. The Post Office, which received a R4 billion state guarantee, is expected to post a R1 billion loss in the 2015/16 financial year. In the previous financial year losses amounted to R1.5 billion.

The presentation to MPs on Tuesday showed continuous irregular, fruitless and wasteful expenditure. It outlined how the auditor-general found the Post Office had regressed in three areas: fair and reliable financial statements, reliable and credible performance reports and legislative compliance.

Hit by leadership troubles, the Post Office paid out some R5 million in arbitration settlements with senior and top managers, according to a parliamentary reply by Telecommunications and Postal Services Minister Siyabonga Cwele in August 2015.

In 2014 the Post Office was hit by a four-month strike, largely triggered by unresolved casual work and labour broking disputes. The strike was settled in November that year, and the Post Office board resigned. Cwele appointed an administrator and announced a turn-around plan. In October 2015 the acting CEO Mlu Mathonsi, who had remained on also as chief operations officer, resigned for personal reasons. Subsequently Barnes was appointed CEO in December last year.

Speaking at Tuesday’s international co-operation, trade and security ministerial cluster briefing, Cwele said the required paperwork to start the process of setting up a post bank has been filed with the South African Reserve Bank in terms of Section 12 of the bank’s Act.

While the Post Office offers some limited financial services like savings, a post bank would be a fully-fledged bank able to offer a wide spectrum of services, including credit. For years government has touted the idea to give poor and rural communities, and small, medium and micro enterprises (SMMEs), access to financial services and credit by using the Post Office’s network of well over 2,000 outlets countrywide.

Cwele said the Reserve Bank was expected to make a decision by the end of February. Then the process to establish a company would commence in terms of the South African Reserve Bank Act. This would take about a year, he added. DM

Photo: Public Protector Thuli Madonsela (Greg Nicolson)