Your checks and balances are not in the mail

29 Sep 2022

Of all of SA’s failed state-owned enterprises, the most heartbreaking is the Post Office. And at the heart of the heartbreak is a very hard lesson.

The Post Office this week told its employees to seek external medical aid because it was in financial distress and could no longer afford to pay its medical aid provider, Medipos. This problem has been going on for a year; there was a court case in which the Post Office was told to resume payments, because, after all, it deducts medical aid costs from its employees’ salaries. Apparently, the organisation did so for a while, but then stopped again.

Think about this for a moment. Surely pulling a stunt like this is not only contractually illegal, but criminally actionable? Can you as an organisation make deductions from wages and then just keep them because you are in a tight financial spot? Apparently, according to insiders, the Post Office is pulling the same stunt with UIF and PAYE.

There are obviously legal technicalities here, but as I understand it, there are provisions for companies in distress, but they require a formal declaration of entering business rescue.

That an institution of the state is grabbing its own employees’ healthcare and unemployment contributions is, to me, an act of such grotesque mismanagement it ought to result in instant dismissal for the entire management team. There are many things state employees have to put up with, but having your organisation steal part of your salary ought not to be one of them.

But, horrible as this may be, this is not the heartbreaking part. The heartbreaking bit is that the Post Office was close to being fixed.

Now, I need to make a disclosure here: I’m mates with former Post Office CEO Mark Barnes (he might dispute that!) But honestly, he has told me very little about what happened at the Post Office since he left in 2019, basically because he doesn’t want to think about it. But anyway, a pinch of salt maybe.

What Barnes has told me — and everybody else — is why he left and the circumstances in which he left, both then and more recently. Barnes, a merchant banker with a fascinating history and track record, was appointed CEO of the Post Office in 2015, partly as an act of desperation by the government. The organisation was in massive disarray, but Barnes clearly loved it. He actually visited actual post offices, where actual long-time employees told him they had never in their lives been in the physical company of an actual Post Office executive.

Barnes is instantly likeable. He may be occasionally, as he describes it, "a tongue in cheek chauvinist, but generally, he’s a joy to be around. He is smart, fast, funny, loud, insightful and broadly sensible. That acumen has been part of his success as a founder and shareholder of Purple Capital, the organisation behind EasyEquities.

He gradually built up a respectable team at the Post Office, and although it wasn’t profitable, it was heading in the right direction. There were several big capital injections by the government, but those were used to pay down past debt. The incessant Post Office strikes stopped and postal logjams pulled back. On one occasion, he called for volunteers to clear the imported post backlog at OR Tambo airport over the weekend. Let me say that again: over the weekend. Hundreds of Post Office workers responded, and the huge backlog was cleared.

Barnes’ strategy, however, did not revolve around moving parcels, but around that very neglected savings institution, the Post Office bank. Around the world, postal services survive on their banking facilities, leveraging their wide networks and the financial security for customers of being part of a state institution. In fact, Barnes goes further and says the important part of the Post Office is its huge database, which could easily be utilised with customer consent to manage a whole range of personal and professional services.

The Post Office bank is an odd beast; its licensed by exception and therefore falls outside normal banking regulation, mainly because the Treasury has guaranteed deposits. It was in Barnes’ time merely a division of the Post Office; it could operate as a bank without being part of the national payments system because one thing the bank does not do, generally speaking, is lend money.

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At this point, Barnes got lucky, although as golfer Gary Player used to say, the more you practise the luckier you get. There was that whole court battle with Net1, the provider of social pensions, which eventually lost the right to distribute SA’s huge cash payout system because … the usual.

At this point, Barnes made a bid to the Cabinet to take over the administration of the payouts, which amount to around R200-billion a year. The idea was attractive to the government since it would save enormous amounts of money, allowing it to increase social pensions without bearing the cost. In fact, the government took some of the savings for itself too.

If there were doubts that the Post Office could manage the task, they were allayed by Barnes’ presence, and particularly his knowledge and experience as a banker. The government grabbed the opportunity, and Barnes delivered. Not a single payment was missed, and we are talking about 16 million payments a month.

But, with government businesses, success is as risky as failure. It’s so rare that it’s a threat. It was clear at this point that the Post Office was on the road not only to breaking even, but when you are delivering that kind of volume of cash, actual success was staring the organisation in the face.

Enter the then minister of postal services, Stella Ndabeni-Abrahams, who looked at all this and apparently decided that the Post Office bank could become the much discussed and lamented “black bank”, providing loans to township businesses and, you know, politicians. It was just fantastical and illustrates the kind of ministerial naïveté we have become used to.

To turn the Post Office bank into a national banking institution with a big lending book would mean huge competitive and legislative changes. It would require billions, as Discovery is finding out. Barnes asked Ndabeni-Abrahams whether the government was going to go ahead with that plan; she said yes, and he resigned — something he now regrets. Now here is the odd thing: it still hasn’t happened. After all this time, no lending bank. It was all for naught.

From there, the organisation went into fast decline. The gossip is that Ndabeni-Abrahams appointed a new board chair at the time with the instruction to replace everyone. The appointed hit-person started with Barnes’ appointed chief operating officer, who was suspended, but then later reappointed when the fake story didn’t stand up at the disciplinary hearing. She then left. The hit-person was then herself ousted. And Ndabeni-Abrahams was caught partying during the Covid lockdown and was demoted to the Small Business Development ministry.

Financially, the Post Office did improve for a while, but then deteriorated quickly. After heroically achieving a “financially unqualified” finding by the Auditor-General in 2018, both 2020 and 2021 had big disclaimers, with the 2021 report declaring the organisation bankrupt. Revenue rose a bit over the period and then dived, and now the organisation is just another state-owned company with a begging bowl.

Barnes, because he’s just incapable of quietly going off into the sunset, offered earlier this year to buy the Post Office, which was, to be honest, a bit of a stunt. But the astounding thing was Communications and Digital Technologies Minister Khumbudzo Ntshavheni’s snide and dishonest reasoning for turning him down. She said: “I start to wonder whether he did not cripple Sapo (the SA Post Office) so he could later come back and want to buy Sapo.”

What? Are you kidding me? You can agree with Barnes or disagree, but the history of what actually happened reveals this little piece of stylised contempt to be what it is: a flagrant lie.

But, you know, karma’s a bitch. Ntshavheni now has to deal with an organisation that is losing cash hand over fist and stealing money from its own employees. That’s bound to be popular — not. And this is the organisation charged with handing out social pensions to the elderly and the needy in SA by the million. If something goes wrong with that, the ANC is instantly an ex-government. I hope she knows that. DM/BM

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