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- The North Gauteng High Court in Pretoria on Monday granted an application to place the struggling SA Post Office into business rescue, offering protection from creditors.
- The state has been pushing business rescue to avoid a messy liquidation and has made this a condition for providing further bailouts.
- The government has agreed to inject R2.4 billion to help with a turnaround, and may provide more, but its plan would also see significant job cuts.
- For more financial news, go to the News24 Business front page.
The North Gauteng High Court in Pretoria has granted the government's application to place the South African Post Office (SAPO) in business rescue, putting a halt to ongoing liquidation proceedings and paving the way for a R2.4 billion taxpayer bailout.
SAPO was placed in provisional liquidation in February due to its failure to pay rent and other liabilities, but its provisional liquidators did not oppose the application.
The judgment, delivered by Judge Elmarie van der Schyff following an urgent hearing in Pretoria, confirmed the appointment of Anoosh Rooplal and Juanito Martins Damons as joint interim rescue practitioners. Roolpal has been overseeing the liquidation of VBS Mutual Bank since 2018 and will now also help guide the process of looking to prevent SAPO from being wound up and its assets sold off.
The appointment of the business rescue practitioners must be ratified by a meeting of the majority of SAPO's creditors.
Judge Van Der Schyff said placing the state-owned utility in business rescue would allow the government to inject the much-needed R2.4 billion in funding it has committed to providing.
"It is gleaned from the minister's papers, and no objective reason exists to doubt the correctness of the evidence provided under oath, that Cabinet has not only pledged to provide SAPO with the initially earmarked R2.4 billion, but also indicated its intention to support SAPO's application for an additional R3.8 billion in the October budget," she wrote in the judgment.
In addition to the already announced cash bailout, "there is a further possibility of continued government funding to see SAPO through the business rescue process," the state's application reads.
READ | State pins hopes on VBS liquidator to save ailing Post Office from financial ruin
The SAPO's provision liquidation came after a case brought by property company Withinshaw. It also owes hundreds of millions of rands in unpaid salaries to its staff, retirement and medical funds, the SA Revenue Service, landlords, and other suppliers.
Turnaround hopes
Mondli Gungubele, the communications minister, is pinning his hopes that the business rescue process - which offers temporary protection against creditors - will save as many jobs as possible.
"The purpose of this application is to avoid the destruction of the SAPO by placing it under business rescue," said Gungubele in the court application. "This will give SAPO the space and time it needs to restructure its affairs and implement a turnaround plan under the supervision and direction of the business rescue practitioner. There is a reasonable prospect of SAPO being rescued."
SAPO has been making annual losses of more than R2 billion the past three years. Of its 1 266 branches, fewer than a quarter were profitable, its 2022 annual report reads.
To return SAPO into an operational state and solvency, the minister's plan approved by Cabinet and filed as part of the court application, seeks to reduce about R1.33 billion in employee costs. This would cut 7 000 jobs in SAPO, leaving just under 5 000 employed by the postal services company. SAPO's current workforce is just under 12 000 employees.
"The harsh reality is that the facts point to it that SAPO's workforce needs to be extensively curtailed for SAPO to survive, but business rescue proceedings are prone to have a less severe impact on the workforce than final liquidation," wrote Judge Van Der Schyff.
This remedy will be robustly opposed by the trade unions that represent employees at SAPO. The Democratic Postal and Communications Union (Depacu), which was represented in the court proceedings, said it would resist any attempt to cut jobs at the utility. The union's secretary general, Livy Zwane, said Depacu is the majority union representing about 63% of the SAPO employees.
The funding committed by the government could be increased as the government has already indicated its support for increased funding should the entity be placed in business rescue, said Gungubele in the court application. No state funding, however, would be available should SAPO be liquidated.
"In addition, placing SAPO in business rescue would achieve a better return for creditors and other affected parties than would result from immediate liquidation," said Gungubele. The court agreed with this view.
