BUSINESS NEWS - It may come as no surprise to South Africans to hear that the South African Post Office is commercially insolvent as they watch the state entity going from bad to worse.
However, while noting the comments of the Auditor General (AG) that accompany its financial statements, the Post Office says it fulfills a critical role in servicing the needs of the indigent and a large section of the population as it has a footprint everywhere in the country.
The Auditor-General’s report to Parliament
The AG pointed out that according to the Post Office’s financial statements, the group incurred losses of nearly R1.8 billion , with its current liabilities exceeding its current assets by nearly R1.5 billion for the year ending 31 March 2020.
The group and company were therefore commercially insolvent because they were unable to pay their debts.
According to the AG, she was unable to confirm or dispel if it is appropriate to prepare the consolidated and separate financial statements using the going concern assumption. She wrote that the group did not adequately disclose all the principle events and conditions that may cast significant doubt on the group and company’s ability to continue as a going concern.
In addition, management’s evaluation of its significance and management plan to mitigate the effect of these events and significant judgments made by management as part of its assessment. The group had various initiatives intended to improve the financial standing of the group and company and the most important was to apply for Covid-19 relief funding from the government.
However, there was no confirmed funding in the subsequent revised budget and, consequently, the AG was therefore unable to confirm or dispel whether it is appropriate to prepare the consolidated and separate financial statements using the going concern assumption.
What the Post Office says
Nomkhita Mona, group CEO of Sapo, said in a statement that it had taken note of the pronouncements of the AG, as the challenges it faced in the past had been well documented. He blames the company’s position on a number of factors from outside and inside, including an obsolete business model that was exacerbated by the pandemic.
“When considering the future of SA Post Office, it is worth noting its critical role in servicing the multitude of citizens who otherwise would not have access to critical basic services. Most of these are based in far-flung, remote rural as well as the urban and peri-urban areas.
“The Post Office has a dual mandate to fulfilling the accessibility needs with a largely non-profit motive, while at the same time having to navigate the economic environment to ensure its own survival and sustainability.”
Mona said as last week was his first week as group CEO, which he largely spent engaging with the ministry, board, Exco and union representatives where he saw the massive opportunities that outweigh the challenges that the Post Office will be tapping into to turn its fortunes around.
“We continue to engage with the Post Office’s creditors to acknowledge our indebtedness and willingness to honour our commitments. Equally, debt collection is a focus area,” Mona said.
He explained that the minister is appointing a team of turnaround experts to work with the board and executive team in the development of a bankable turnaround plan, in line with the requirements of the post-Covid-19 economy.
“We welcome this process, as it will allow the various teams to ensure the basics are in place and improve on the matters flagged by the latest audit report. The Post Office’s opportunities include participating in the highly lucrative e-commerce space, digitisation of its processes, the courier space and activities which fall within the Post Office’s legal mandate, such as the distribution of parcels with a mass of up to 1kg.”
According to Mona the Post Office is confident that with the sense of urgency that now prevails in the organisation, it is in the process of building a postal service organisation everyone can be proud of.
“The Post Office is immensely proud of its role in nurturing the PostBank that is amassing great value and goodwill.”
In the long term, the Post Office is confident it has the opportunity to build a world-class, commercially viable postal service with no heavy reliance on the national fiscus.
“However, in the short to medium term, we fully expect the national government will support our efforts in dealing with these legacy issues,” Mona said.