Post Office seeks Postbank compensation
• Communications minister tells MPs the government is committed to paying for investment in subsidiary
The state-owned, loss-making SA Post Office wants the government to compensate it for its investment in its subsidiary, Postbank, when the bank is hived off to become a separate entity. Communications minister Stella Ndabeni-Abrahams told MPs during a meeting of parliament’s communications committee on Wednesday night that she recognised the need for compensation and said her department was in discussions with the Treasury about this. She said the government was committed to compensation because the Post Office had spent money establishing the bank.
The state-owned, loss-making SA Post Office wants the government to compensate it for its investment in subsidiary Postbank when the bank is hived off to become a separate entity.
Postbank could become the core of the proposed state bank in terms of options the Treasury plans to submit to cabinet.
Communications minister Stella Ndabeni-Abrahams told MPs during a meeting of parliament’s communications committee on Wednesday night that she recognised the need for compensation and said her department was in discussions with the Treasury about this.
Ndabeni-Abrahams said the government was committed to compensation because the Post Office had spent money establishing the bank.
She did not say how much the compensation should be.
Postbank operated as a division of the Post Office before being incorporated as a separate legal entity in April 2019, but its corporatisation and separation have not yet been completed. It has also not yet obtained a banking licence to operate as a fully fledged bank.
The separation of Postbank was one of the reasons former Post Office CEO Mark Barnes resigned from the position after three-and-a-half years at the helm. Barnes believed Postbank should be integrated into the Post Office so that the unified company could offer the full range of services, including financial services. He also objected to what he said was government interference.
Newly appointed Post Office CEO Nomkhita Mona said it would be an anomaly “for a group or company to create value in a subsidiary but then when separation happens there is no compensation”.
The lack of compensation also affected the capital injection that the Post Office required to build a sustainable, alternative revenue-generating capacity.
MPs were told that the separation of the finances of the Post Office and Postbank had proved to be more complicated than expected, given the resource constraints.
The Post Office received a government bailout of R2.9bn in 2019, which it used to settle loans and pay critical suppliers.
It reduced its headcount by 1,871 in 2019/2020 to 16,488, with 730 employees opting for voluntary severance packages.
The minister gave details of the government-funded investigation that she had ordered into the Post Office, saying it would examine the reasons for the lack of progress in the numerous turnaround plans that had been drawn up for the organisation and for the root causes of its non-performance.
It will also review the repositioning of the Post Office in the digital era.
INSTABILITY
The Post Office has been racked by instability both at board and executive management level and numerous turnaround plans have been formulated to reshape its fortunes. It has had a new permanent board for the past seven months and Mona started as CEO on April 1.
The board is working towards the stabilisation of the company, MPs were told.
GM Lenny Govender said the Post Office was projecting to generate revenue of R4.8bn in 2021/2022, R5.7bn in 2022/ 2023 and R6.3bn in 2023/2024.
A projected loss of R2.5bn is forecast for the 2020/2021 year on revenue of R3.3bn, a R969m decline from the previous year.
Mona said the company had lost 50% of its traditional revenue due to the Covid-19 pandemic and technological developments.
“Expenses have continued to exceed revenue, resulting in continued losses, which is not sustainable,” MPs were told.
The net loss is forecast to be reduced by R1bn to R1.5bn in the 2021/2022 year and fall to R561m and R139m in the two years after as revenue is increased and costs are reduced.
Govender said the aim was to increase revenue through the Post Office’s courier and parcel services, financial services and digital and property revenue.
MP Cameron Mackenzie (DA) was sceptical about these projections, describing them as a “thumbsuck”, adding that the organisation was insolvent and trading recklessly and should be placed in business rescue.
Mackenzie also doubted whether it could survive once Postbank was removed from it.
Business Day reported in March that the Post Office was unable to pay rent on some of its premises and to repay debts owed to service providers. It was reported to have unpaid invoices of R638m.
THE SEPARATION OF POSTBANK WAS ONE OF THE REASONS FORMER POST OFFICE CEO MARK BARNES RESIGNED FROM THE POSITION
IT WOULD BE AN ANOMALY TO CREATE VALUE IN A SUBSIDIARY BUT THEN WHEN SEPARATION HAPPENS THERE IS NO COMPENSATION