SAPO’s R120 million-a-month losses put it on road to ruin
5 October 2016
The SA Post Office (SAPO) Annual Report for year-end March 2016 represents another milestone on its road to ruin, with the entity receiving a warning from the Auditor-General (A-G) for the third year in a row on its ability to operate as a going concern. The introduction of public-private partnerships is crucial to making this entity profitable and ensuring continuity in essential services for the poor and those living in rural areas.
While the latest Annual Report reveals group losses are down to approximately R1.15 billion from 2015’s record loss of R1.5 billion, the outdated postal business model continues to drain scarce resources. Unless urgent steps are taken to introduce profitable public-private partnerships that include the Postbank, the courier and parcels business, it won't be too long before funds run out and the SAPO turns to government for more bailouts.
In addition to a government bailout of R650 million, the SAPO has borrowed its way out of trouble for this financial year thanks to a government guarantee of R2.7 billion.
Yet the entity continues to lose on average more than R120 million a month. With current borrowings in excess of R3 billion, and in the face of declining revenues, the ability of the SAPO to repay these loans must be called into question.
By the end of this year, around R1 billion of this borrowing will have been used to fund the monthly shortfall between income and expenditure. When adding the interest cost of borrowing, it is clear the SAPO is dangerously close to running out of other people's money.
Corrective measures taken this far amount to little more than plugging holes in a sinking ship. Having absorbed the bankrupt Courier Freight Group into the SAPO, there is no indication how this entity can be better managed as a division to generate a profit. Instead, it merely adds to the cost base of the SAPO and a further drain on its scarce resources.
The statement by CEO Mark Barnes that the SAPO is depending on government for new business as well as regaining customers lost as a result of the disastrous strike action of 2014 - the longest in the SAPO's history - is even more alarming.
If the SAPO wants government business, it will need to compete fairly and transparently in the open market, where it is outclassed by a nimble and highly competitive private sector. Any alternative to this is nothing less than a hidden subsidy of another inefficient state-owned enterprise.
Pre-strike SAPO customers have also gone for good, using alternatives to the unreliable SAPO service. To bank on this for a return to profitability is naive and irresponsible.
Issued by Cameron MacKenzie, DA Shadow Deputy Minister of Telecommunications and Postal Services, 5 October 2016
