Funding shortfall jeopardises SA Post Office's business rescue plan
No further progress can be made in implementing the Business Rescue Plan without additional funding from the Department of Communications and Digital Technologies (DCDT), Messrs. Anoosh Rooplal and Juanito Damons, the business rescue practitioner (BRPs) of the SA Post Office (Sapo) said on Monday in an update.
Because of this, the BRPs are consulting with their legal advisors regarding the company's potential exit from business rescue and the subsequent return of the company to its shareholder, the DCDT, along with a new appointed board.
Sapo was placed under business rescue on July 10, 2023 to avoid liquidation. They said in an affidavit that they would award funding to the process, which would encompass funding of a first tranche of R2.4 billion (which was received and used for retrenchments packages) and then a second tranche of R3.8bn, which was going to be used for the infrastructure upgrade and digitilisation process.
The BRPS were expecting to to get funding in March 2024 but nothing has materialised to finalise the plan and no funding was allocated to the Sapo per the medium-term budget speech.
Of note, Communications and Digital Technologies Minister Solly Malatsi announced this week that Sapo will receive R1.8bn over the Medium-Term Expenditure Framework (MTEF), but this is not funding for the business rescue, it is a universal service obligation (USO).
Due to this, a freeze has been implemented on all capital expenditure of Sapo and austerity measures were put in place last year.
The BRPs said the freeze on capital expenditure included modernizing Sapo's office hardware infrastructure; building infrastructure upgrades; and IT upgrades. Only critical operational expenses are being incurred.
The BRPs are continuing to engage with DCDT in relation to other possible alternatives in the interim. They said they were engaging with DCDT on the constituted Joint Sapo, DCDT and National Treasury Strategic Partners/Investment Task Team, however, the Joint Task Team is yet to convene.
However, it got temporary relief of R150 million in funds.
"The BRPs were informed at a meeting on 21 February 2025 of a possible virement (the process of transferring items from one financial account to another) of funds of R150m from the DCDT for working capital requirements. National Treasury has since approved the virement and the funds were received in March 2025," the BRPs said.
"Although this may provide temporary relief for Sapo until the end of April 2025, the funds are not sufficient to substantially implement the Business Rescue Plan and remove the entity from Business Rescue."
Additionally, R381m was allocated from the Temporary Employee-Employer Relief Scheme (TERS) in April 2025 to cover salary costs for a period of six months. A further R1.8bn has been allocated for the Post Office to fulfil its Universal Services Obligation (USO). The USO is a policy that ensures basic services, like telecommunications, are available toeveryone, regardless of their location or ability to pay.
There is a shortfall to funds required. The BRPs said R3.8bn is still required to pay the remaining dividends to statutory creditors, provide enough working capital to the business, and to invest in certain infrastructure upgrades in order to sufficiently implement its turnaround strategy.
Due to this funding uncertainty, the BRPs said they were aggressively focusing on collecting all outstanding debtors and increasing revenues where possible.
Meanwhile, an extensive amount of work has gone into preparing a detailed strategy and financial model, and which are considered by the BRPs to be important supporting documents to the business rescue plan. The detailed strategy and financial model set out the turnaround plan and deals with the 'future proofing' component of the business rescue plan.
These documents were presented to the DCDT, National Treasury and the Parliamentary Portfolio Committee on Communications and Digital Technologies. The BRPs said they have implemented the Business Rescue Plan to the extent possible despite the funding constraints.
"The business rescue plan can only be fully implemented once we receive the funding or part of the funding that was committed by the government," they said.
As regards creditor claims and payments, a total of 99.6% of creditor dividends of 12 cents amounting to R1 015bn have been paid on August 31, 2024. The remaining 0.4% of creditors is a combination of disputed claims and unverified landlord queries.
Meanwhile, the top-up dividend of 18 cents to statutory and payroll creditors, including SA Revenue Service, the relevant medical aid schemes and the Post Office retirement fund remains outstanding and payment is conditional upon the receipt of the R3.8bn funding from the National Treasury unlessnew conditions are negotiated with these creditors. These creditors need to be paid.
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