SA Post Office in sight of its final resting place after being placed under provisional liquidation

12 Apr 2023

The SA Post Office’s financial situation is essentially beyond redemption. It owes creditors at least R4.4bn. A creditor of the SA Post Office has emerged successful in its high court bid to have the state-owned entity placed under provisional liquidation.

Over the past 15 years, the SA Post Office has sailed close to the wind as the state-owned enterprise (SOE) recorded consecutive financial losses and continued to operate without paying its bills.

Being delinquent on its bills worsened in recent years, with the SA Post Office defaulting on rental payments to landlords for its nearly 1,300 branches, and owing the SA Revenue Service millions of rands for taxes relating to salary payments. It also could not afford to pay statutory contributions on behalf of its more than 10,000 workers, including medical aid, pension savings and Unemployment Insurance Fund benefits.

And now the SA Post Office’s future hangs in the balance as it has been placed under provisional liquidation, a process that might lead to its doors permanently closing after operating for more than 30 years.

A property company called Bay City Trading 457, which leases properties to the SA Post Office, grew tired of the SOE not paying rent and approached the Pretoria High Court to have it provisionally liquidated. It is unclear how much Bay City Trading 457 is owed by the SA Post Office. But the SOE owed creditors R4.4-billion as of 31 March 2022 and its total liabilities at group level exceeded total assets by R4-billion, rendering it technically insolvent.

On 9 February 2023, the court ruled in Bay City Trading 457’s favour and placed the SA Post Office under provisional liquidation.

Arguably beyond redemption

That Bay City Trading 457 chose the provisional liquidation route instead of a process to rehabilitate the SA Post Office such as businesses rescue (less draconian), indicates that the SOE is arguably beyond redemption. Liquidation usually is the last resort and follows after a failed business rescue process.

A provisional liquidation portends a process of winding up the SA Post Office, which involves its assets being sold, and the proceeds from this sale used to pay liquidation expenses and the SOE’s creditors. It is usually hard for companies to be rehabilitated and resume trading at this juncture.

The high court placed the SA Post Office under provisional and not final liquidation because it wants all affected parties — including the SOE’s management, workers, and creditors — to put forward their reasons why the court should not order the final liquidation of the SOE. This process is set to play out in court on 1 June.

A final liquidation is a worst-case scenario as it will result in the SA Post Office’s operations closing permanently and workers permanently losing their jobs. Final liquidation of the SA Post Office would also be detrimental to SA’s social grant system as the SOE distributes social grants to more than seven million beneficiaries every month.

In the interim, the Pretoria High Court has appointed Anton Shaban and Hlamalane Jerry Musi as provisional liquidators. The appointment of Shaban and Musi was confirmed by the court on 30 March. Their job will involve safeguarding the SA Post Office’s assets, contacting the SOE’s creditors to establish what they are owed, ranking them in terms of seniority, and trying to collect outstanding debt. Payments to creditors are also halted.

Shaban and Musi will be required to meet the SA Post Office’s management following the court-ordered provisional liquidation.

In a media statement released on Wednesday, Shaban said: “We are currently in the process of engaging with the SA Post office management and their appointed attorneys and all relevant stakeholders.”

The SA Post Office has been mum about the provisional liquidation, saying it would issue a media statement later in the week.

The writing has been on the wall regarding the SA Post Office’s decline.

The SA Post Office reported a financial loss of R2.2-billion for the year to the end of March 2022. The company has been reporting financial losses for 15 consecutive years. To cut costs, the SA Post Office recently embarked on a process to shed up to 6,000 jobs (later reduced to 3,000) through a retrenchment process.

Read more in Daily Maverick: SA Post Office planning to retrench thousands more workers, claims union

Postal companies globally are struggling to reinvent their operations for a world in which consumers rely far more on electronic methods of communication than they do on mail. People are also opting for faster, more efficient parcel delivery services run by private-sector companies.

The SA Post Office is painfully aware of this major shift in consumer patterns, exacerbated by the company not being able to fulfil its basic function of delivering mail on time and to the right address.

For instance, the SA Post Office’s mail delivery performance reached 75% in 2017. It fell to 68.3% in 2022. The SA Post Office has missed a self-imposed target of an 80% mail delivery performance for many years.

Recent requests for taxpayer-funded bailouts by the SA Post Office have failed, with the company’s numerous attempts for help recently rejected. But Finance Minister Enoch Godongwana granted the SA Post Office a bailout worth R2.4-billion in the February Budget to recapitalise its balance sheet.

Read more in Daily Maverick: State-owned enterprises get financial support from Godongwana despite ‘tough love’ approach DM/BM

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Arguably beyond redemption