Up to 6 000 Post Office jobs on the line

24th November 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor


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The business rescue plan for the South African Post Office, published by the joint business rescue practitioners (BRPs) Anoosh Rooplal and Juanito Damons, is aimed at stabilising the company, restoring it to solvency and enabling it to operate sustainably as a going concern without total reliance on government funding in the future.

The Post Office's financial sustainability is a critical concern that demands attention. Its costs have consistently exceeded its revenue by 200% since its 2022 financial year. Employee costs accounted for 150% of this, and the organisation has inadequate investment into information technology systems, fleet management, mail processing centres, depots and its branch network.

“Our approach in the plan is to rationalise costs, which are currently unsustainable, and to assist in restructuring the Post Office into an efficient and future-proofed business,” said Rooplal.

After an extensive analysis of its employee base, the business rescue plan proposes to rightsize the business through the retrenchment of about 6 000 of the 11 083 total employee base. This will reduce the yearly employee cost by about R1.2-billion.

“However, the organisation lacks skills and leadership, management and technical expertise across the business. Skills need to be appropriately strengthened and developed and are necessary to drive a culture change towards a high-performance organisation,” he said.

Revenue streams that have continuously failed to produce value will be phased out. These include over-the-counter payment services, which include the South African Social Security Agency and cash pay points payments.

The Post Office's business rescue plan anticipates a possible sale of certain South African Post Office branches to the Postbank, which will enable the Postbank to expand its banking network and allow Post Office to focus on more sustainable business segments.

The Post Office’s revenue segments include postal services revenue, financial services revenue and property rentals as the main sources of revenue forecasted for the 2024 financial year onwards.

Certain revenue segments will be given priority focus, including bulk mail, which contributes 42% of the revenue base. The plan proposes investment into dedicated sales and business development teams to revitalise this segment.

Additionally, hybrid mail, including the processing of road traffic infringement notices will also be prioritised. The Post Office has entered a service-level agreement with the Road Traffic Infringement Agency, where it will print and deliver the infringement notices through its postal and branch network.

Further focus of revenue generation would also be on motor vehicle licensing (MVL), with the aim of reopening of high-performing MVL branches, the BRPs said.

Additionally, the branch network rationalisation will yield further cost reductions. This rationalisation will retain an anticipated 600 branches, which will facilitate the Post Offices’ activities, as mandated by the Universal Service Obligations and international mail centre requirements.

All of the 427 Post office-owned properties experienced severe maintenance backlogs, however, many properties are in good locations and could be of interest to property developers.

Meanwhile, strategic partnerships will be part of the Post Office’s strategy to bolster capabilities and resources in logistics, operations and information technology.

An example was the large depot network that was strategically located throughout South Africa. With additional investment, the network would be attractive to strategic partners, such as retailers in the e-commerce space, and freight and logistics businesses, the BRPs said.

“We are of the opinion that a large accessible market exists and that implementing the plan could reposition the Post Office to reclaim a space in the logistics services sector,” Rooplal said.

However, a further R3.8-billion allocation by government was required, as investment capital to repair and modernise the Post Office to support this turnaround strategy, he noted.

The BRPs said the plan would achieve a better return for creditors than liquidation and a better outcome for all other affected persons.

Liquidation would result in the loss of all jobs. In a liquidation scenario, and as per the calculation of an independent consultant, a possible liquidation dividend payable to concurrent creditors would be 4.08c in the rand.

With the current recapitalisation allocation of R2.4-billion from the Department of Communications and Digital Technology, the plan proposes a dividend award of 12c in the rand, or around R1-billion, to all pre-commencement concurrent creditors.

“The compromise with creditors will restore the Post Office to a solvent position. We believe that with the continued support of the joint BRPs during the implementation period and through renewed endeavours to institute strong governance and ethical policies, the business can trade as a going concern,” concluded Damons.

Creditors will be asked to vote on the Post Office's business rescue plan on December 7, and a 75% majority vote in favour of the plan is required for it to be adopted.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online





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