Sapo failures drain funds
R908m in losses over the year caused by high cost base and lack of income generation
NECESSARY steps were not taken by the South African Post Office to prevent the ailing entity from incurring over R908 million in total losses during the past financial year.
This is according to Auditor-General Kimi Makwetu, who noted that the loss was attributed to the entity’s failure to generate revenue to finance its high cost base, lack of funding for capital projects and defaults on suppliers’ agreements.
Makwetu said the cash-strapped state-owned entity failed to take adequate steps to prevent irregular expenditure of more than R109m, and fruitless and wasteful expenditure of nearly R13.5m.
“Effective and appropriate steps were not taken to collect all revenue due, as required by section 51 of the PFMA (Public Finance Management Act), This was mainly relating to irrecoverable, long outstanding receivables as a result of disputes regarding the delivery of service,” said Makwetu.
The auditor-general also found that the entity contravened a number of laws, including the Companies Act, when it provided loans without approval by the shareholders per special resolution, and without considering the solvency or liquidity of the company.
He found that procurement processes were flouted, with goods and services procured through a procurement process which was not fair, equitable, transparent and competitive, as required by the PFMA.
“Some of the contracts and quotations were awarded to bidders based on preference points that were not allocated or calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and its regulations.
“Some of the contracts and quotations were awarded to bidders based on pre-qualification criteria that were not stipulated, and/or differed from those stipulated in the original invitation for bidding and quotations, in contravention of the 2017 preferential procurement regulations,” said Makwetu.
The report also revealed that disciplinary steps were not taken against officials who had incurred and/or permitted irregular expenditure in the prior year, as required by the PFMA.
There are also concerns as to whether the state-owned enterprise will be able to continue operating as a going concern.
The entity’s board said the SA Social Security Agency (Sassa) contract had a significant impact on the sustainability of the SA Post Office in the long term, with a net revenue of R2.7billion expected from this project over the next five years.
“This also means that the investment which will be acquired through Sassa projects will yield maximum benefits for the Post Office, because these assets will forever remain the assets of the Post Office, thereby continuously earning returns for the company,” said the board.