Post Office’s R9bn SOS

Huge number of social grants in jeopardy as closeddoor parliamentary meeting hears Sapo plea for help

The government has had to step in to stop Telkom cutting off services to the South African Post Office (Sapo) — a move that would have left the state-owned postal service unable to pay social grants or renew vehicle registrations.

Two weeks ago, Telkom wrote to Sapo demanding that it settle its outstanding R269m bill or have its internet and communications services cut off. The office of communications & digital technologies minister Khumbudzo Ntshavheni confirmed this week that the department had pleaded with Telkom not to cut off Sapo.

“The department is aware of the financial situation at Sapo and the fact that it has outstanding creditors’ payments, including Telkom,” Ntshavheni’s spokesperson, Tlangelani Manganyi, said on Friday.

“We are assisting Sapo to raise funding and [are] now in consultation with the National Treasury to see how best we can help.”

Sapo pays out millions of rands in social grants each month, including the R350 Covid-19 social relief of distress grant. It is often the only financial services provider in deep rural areas, where many people live far from banks and supermarkets.

The disclosure comes in the same week that Post Office bosses told parliament they needed at least R9bn to keep their doors open.

Manganyi said acting communications director-general Nonkqubela Jordan-Dyani had appealed to Telkom not to cut Sapo off while they help raise money for the ailing company.

A Telkom official told the Sunday Times that they had had many conversations with Sapo about its debt, but it had breached its payment agreement.

“We have now entered into a new one that ends at the end of this month. They indicated that they intend to settle the debt by then. They owe us R269m,” the source said.

Sapo spokesperson Johan Kruger said it has paid its monthly bills in full to Telkom for the past 12 months, but there was historical debt “and the Post Office is in continuous discussions with Telkom to ensure an amicable solution to this”.

Kruger said Sapo is putting a programme in place to increase revenue and has identified a number of revenue-generating initiatives, some of which are now being implemented.

“The full impact of the strategy [will] be

realised when the implementation thereof has the required funding,” he said.

This week, Sapo told parliament it needs a R9.3bn bailout or it may be forced to close. The entity has already received R8bn in bailouts from the government.

In a presentation on its turnaround strategy presented behind closed doors to the portfolio committee on communications on Tuesday, Sapo said it has immediate cash flow requirements of R6.9bn and needs a further R2.4bn to settle its Postbank debts.

Of the R6.9bn, Sapo said it hopes to spend R4.3bn settling historical debt, R1.8bn on its cash flow deficit for the next nine months while the revised strategy is being implemented, R400m on capital expenditure and R400m to optimise staff costs.

“The funding requirements are crucial to prevent an imminent risk of a total shutdown of Sapo or the risk of Sapo being liquidated by the major creditors,” it said.

Ntshavheni was behind the committee’s decision to close the meeting to the media and the public, the Sunday Times has established. A legal opinion sought by the committee reveals that on March 9, Ntshavheni wrote to it asking that the meeting be held behind closed doors. “After further consultations to ascertain whether the whole presentation from Sapo needs to be closed or only part of it, the department of communications requested that the full briefing should be in a closed meeting,” reads the opinion from parliament’s chief legal adviser, advocate Zuraya Adhikarie.

The committee agreed to close the entire session dealing with Sapo’s turnaround strategy because, said chair Boyce Maneli, the commercial sensitivity and competitiveness of Sapo rely on the strategy.

“Ntshavheni said the Post Office is in financial distress and without a bailout it won’t be able to fulfil its mandate,” said a source who attended the meeting.

This is not the first time in the past year Sapo has approached the government for a bailout. After failing to convince the Treasury last year, insiders privy to discussions told the Sunday Times, it had hoped that finance minister Enoch Godongwana would make provision for it in last month’s budget.

Ntshavheni’s deputy, Philly Mapulane, told parliament’s standing committee on public accounts (Scopa) last November that Sapo made a submission to the department of communications and the Treasury asking for R8bn over the next three years.

The request was made before last October’s medium-term budget policy statement, but Godongwana said at the time that he was practising “tough love” on struggling state-owned enterprises and that he would be avoiding further bailouts because SOEs were identified as a huge risk to the sustainability of the public purse.

Factors that Sapo cited as contributing to the parlous state of its finances included customer attrition; limited capital investment and a lack of technology upgrades; leadership instability which led to the entity being placed under administration in 2015; Postbank divestment without equity compensation; a declining number of letters sent in the post in favour of e-mail which drove revenue down; and the effects of Covid-19.

“These factors and trends have over the years resulted in serious solvency and liquidity challenges which the entity is experiencing today,” said Mapulane in November.

This week, Scopa adopted an oversight report which found that Sapo did not have enough resources to build capacity to plan and implement its turnaround strategy and proper internal controls.

“Despite initial assurances provided by management that it was geared to roll out the implementation of the Sassa [South African Social Security Agency] contract, the Sassa payment solution is not cost-effective,” the Scopa report states.

“Failure to plan properly and the resultant poor internal controls were the root causes for the shortcomings on the Sassa payment solution, related transactions and balances.”

Scopa noted that the subsidy allocated by the government to Sapo was not sufficient to cover all the operational costs, and covered only salaries. “This no doubt impacts on Sapo delivering on its core mandate.”

Sassa spokesperson Paseka Letsatsi said Sassa expects Sapo to fulfil its contractual agreement, revealing that 500,000 of the more than 7-million beneficiaries who use the Sassa/Sapo card to access their funds do so at post office branches.

Sources familiar with Sassa operations told the Sunday Times if Telkom were to cut its network services to Sapo, social grant payments would be jeopardised because its systems are linked with those of Sassa.

“If you go to the post office with your ID and they don’t have internet, they won’t be able to even check if you are indeed a grant beneficiary,” said one.