Post Office seeks R2.7bn in funds
Despite capital shortfalls, the parastatal’s boss is aiming for a two-year turnaround, writes Xolani Mbanjwa
New SA Post Office (Sapo) boss Mark Barnes is knocking on the doors of banks for R2.7 billion in funding to try to turn around the lossmaking parastatal. He is undeterred that Finance Minister Pravin Gordhan announced an injection of only R650 million in capital during his budget speech. Sapo had requested a recapitalisation of just more than R3 billion. “We are in discussions with banks to raise R2.7 billion, in addition to the R650 million. That capital would be raised against existing but unutilised government guarantees we have. In two years’ time, we are expecting to be trading profitably,” said Barnes, who was previously an investment banker and the former head of private equity firm Brait.
Sapo has state guarantees of R4.4 billion, and government has helped the entity raise R1.3 billion against the issued guarantees to fund its operations and turnaround.
Barnes also confirmed that the ailing state-owned entity will post losses of more than R1 billion when it announces its 2015/16 annual results this year.
He has set his sights on bringing to book those identified by Public Protector Thuli Madonsela as responsible for the R22 million in irregular rental payments made for an empty building.
Barnes has been at the helm since January 15 and has vowed that no wasteful expenditure will be tolerated from Sapo staff.
While Barnes expects Sapo to make further losses next year, he wants to kick-start reforms by heeding the recommendations made by Madonsela in her five-year investigation into a complaint, lodged in 2011, by the Communication Workers’ Union (CWU) against Sapo.
“The Public Protector will get full support and we will offer full disclosure to take action as directed by her. The law would have to take its course because we want to put the era of wasteful, irregular and fruitless expenditure behind us,” said Barnes.
“We will work with any other regulatory body to do what needs to be done to get back to basics. We will not entertain any improprieties; it won’t ever happen again.”
Madonsela released her report, titled Postponed Delivery, this week, which found a slew of irregularities relating to a R161 million lease for Sapo’s new head offices in Centurion.
Barnes is adamant Sapo will not be privatised despite years of run-ins with workers, who have downed tools on countless occasions since 2014, as well as unstable leadership and finances.
“Sapo is not dysfunctional. It is operational, but we have had challenges, including problems with creditors, suppliers, labour and finances. That is essentially what struck down the whole system.
“We have positive things on our side, such as having the most registered clientele. Once we have restored trust with all our clients and have shown what we can do for people, we will be on our feet again,” said Barnes.
He is convinced that if government includes banking services for the “unbanked”, this could turn Sapo into a thriving business.
“We can offer banking services at most of our buildings. That service is unutilised because we would have to go through a lot of regulatory approval. We could also offer balanced financial products.
“We could offer other services, such as savings and pensions, and could become a centre for social grants distribution and any set of financial transactions,” he said.
“We have big ambitions also in the e-commerce space, where companies like Amazon are only now realising that they have to have infrastructure to deliver the goods available online. Those companies are looking for the best ways to service clients and we believe our bricks and mortar infrastructure can offer a delivery service that is on time. “We have the capacity for all these offerings we are thinking about, but we have been hamstrung by diminishing revenues,” said Barnes. The fact that Sapo was recently unable to pay salaries means labour costs are high.
“There is no doubt the employee costs are high when you look at the percentage of revenue. Our preferred route is to immediately increase revenue.
“We are contemplating starting a delivery service for chronic medication and education materials. The post office could become a socioeconomic centre with better utilisation.
“These offerings are not here currently. We would need a technology upgrade, and there is legal and regulatory compliance we would need to go through. We already have the infrastructure. The case for all this is compelling,” said Barnes.
He is unabashedly confident that staff, who brought Sapo to its knees in a series of strikes that left mail piling up at its branches, are up to the task of helping the postal service become profitable again.
“The problem is not with the staff. They have the enthusiasm, but it has been tough. All of us are looking at putting in a good day’s work and getting back to fixing the basics,” said Barnes.
“Get that right, including discipline and sound management, and we will be a good example of how to turn things around.”
The CWU said it felt vindicated by Madonsela’s findings and cautiously gave Barnes their blessing in turning Sapo around.
Velaphi Zulu, the CWU’s Gauteng chairperson, said while they supported Barnes’ plans to turn around Sapo, they would keep watch on whether he implemented Madonsela’s recommendations.
“We will give them time to act against those who are corrupt, and if they do not, we will lodge criminal cases against those individuals ourselves. Barnes is an established individual, but the current situation regarding finances in that company may make things difficult for him. All we want is for him to consult us first before making any labour-related decisions – just as Madonsela has recommended – and just like he has promised,” said Zulu.