Post Office loses R100m a month, Parliament told

CAPE TOWN — The South African Post Office (Sapo) is bleeding cash to the tune of about R100m a month and it made a net loss of R285m in the first three months of the current financial year, MPs were told this week.

The struggling state-owned organisation received government approval to increase its borrowing limit by R1.3bn just over a month ago and has started negotiations with a number of banks to secure the release of long-term funding. The borrowing facility will be backed by the state guarantee of R1.67bn, which was issued to Sapo in December.

Sapo acting CEO Mlu Mathonsi said in a briefing to members of the telecommunications and postal services portfolio committee that he did not have a good story to tell but that this was not due to a lack of effort in implementing the long-term turnaround plan.

Progress had been made but it had been slow and more work was still required. In the months of April, May and June, Sapo’s year-on-year revenue showed an “alarming” decline of R186m as a result of a fall-off in volumes.

Private sector customers who contribute 65% of revenue had ditched Sapo in favour of other delivery options.

Most of the improvements cited were in containing costs rather than in growing revenue.

The lack of long-term funding had constrained Sapo’s ability to seek new revenue opportunities.

Revenue over the three months amounted to R1.2bn compared with the previous year’s R1.4bn, while expenses amounted to R1.5bn (and R1.7bn the previous year).

Bulk mail volumes had declined in the period by 54-million items, while revenue from freight and speed services slumped 45% and 50%, respectively.

Even though costs were higher than revenue and had left the organisation with a monthly cash shortfall of about R100m, they had been slashed year on year by R173m as a result of cost containment measures.

Another acting Sapo executive described the cash shortfall as “extremely scary”, saying the organisation had been using creditors to fund its expenses. Sapo owes creditors R893m while its subsidiary, the Courier Freight Group, owes R179m.

Sapo had also been affected by a long strike by its employees.

“The impact of the strike was devastating as customers found alternatives. The Sapo brand has to be rebuilt in the market place to restore customer confidence,” Mr Mathonsi said.

Sapo has targeted a cut in its net annual loss to R102m for the 2015-16 financial year from R1.37bn of 2014-15. It is still under the supervision of administrators appointed by government who will remain until a new board has been appointed.

The effect of the strike was devastating as customers have found alternatives. The Sapo brand has to be rebuilt in the market place