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- North Gauteng High Court in Pretoria on Monday granted an application to put the struggling South Australian Post office into a business bailout, offering protection from creditors.
- The state was paying for business bailouts to avoid a chaotic liquidation and made this a condition for further bailouts being offered.
- The government has agreed to inject 2.4 billion rand to help with a transition, and it may provide more, but its plan would also see big job cuts.
- For more financial news, go to News24 Business front page.
The North Gauteng High Court in Pretoria has granted the government’s request to put the South African Post Office (SAPO) into a business bailout, halting the ongoing liquidation proceedings and paving the way for a R2.4 billion taxpayer bailout.
Sabo was placed into temporary liquidation in February due to its failure to pay rent and other liabilities, but its temporary liquidators did not contest the application.
The ruling, handed down by Judge Elmarie van der Schiff following an expedited hearing in Pretoria, confirmed the appointment of Anoosh Roblal and Juanito Martins Damones as joint interim salvage practitioners. Roolpal has been overseeing the liquidation of VBS Mutual Bank since 2018 and will now also help direct the search to prevent the termination of SAPO and the sale of its assets.
The appointment of the business salvage practitioners must be ratified by a meeting of the majority of the company’s creditors.
Placing a state-owned facility in the business bailout would allow the government to inject a much-needed R2.4 billion into the financing it has committed to provide, Judge van der Schiff said.
“It has been drawn from the Minister’s papers, and there is no objective reason to doubt the veracity of the evidence given under oath, that the Cabinet not only undertook to supply SAPO with the sum initially appropriated, but also indicated its intention to support SAPO’s request for an additional R3.8 billion in October budget.
In addition to the already announced cash bailout, “there is another possibility for continued government funding to see SAPO through a business bailout,” the state request states.
Read | The state pins on VBS liquidators hoping to save the ailing Post Office from financial ruin
The liquidation of Sabu’s estate came after a lawsuit brought by the Wythenshaw real estate company. It also owes hundreds of millions in unpaid wages to its employees, pension and drug funds, the South African Revenue Service, landlords and other suppliers.
Transformation hopes
Mondeli Jongobili, the communications minister, is pinning his hopes that the business bailout – which provides temporary protection against creditors – will create as many jobs as possible.
“The purpose of this application is to avoid the destruction of SAPO by placing it under commercial bailout,” Gungubele said in the court application. “This will give Sabu the necessary space and time to restructure its affairs and implement a turnaround plan under the supervision and guidance of a salvaging business practitioner. There is a reasonable possibility that Sabu will be rescued.”
Sabu has incurred annual losses of more than R2 billion in the past three years. Of the 1,266 branches, less than a quarter were profitable, according to its 2022 annual report.
To restore SAPO to an operational and solvent state, the Minister’s Plan, approved by the Cabinet and introduced as part of the Court’s application, seeks to reduce personnel costs by approximately R1.33 billion. This would cut 7,000 jobs at SAPO, leaving just under 5,000 employees at the postal service company. Sabu’s current workforce is just under 12,000 employees.
“The hard truth is that the facts indicate that SAPO’s workforce needs to be massively reduced in order for SAPO to survive, but business rescue measures are liable to have a less severe impact on the workforce than eventual liquidation,” Justice Van der Schiff wrote. .
This treatment would be strongly opposed by the labor unions representing employees at SAPO. The Democratic Postal and Telecommunications Union (Depaco), which appeared in the court proceedings, said it would resist any attempt to cut jobs at the facility. The union’s general secretary, Levi Zwane, said that Dipaco is the majority union representing about 63% of SAPO employees.
In the court application, Gungubele said that the funding the government has committed to could be increased as the government has already indicated its support for increased funding if the entity is placed on a business bailout. However, there will be no government funding available in the event of SAPO’s liquidation.
“In addition, putting SAPO into a business bailout will yield a better return for creditors and other affected parties than would result from immediate liquidation,” Gungubele said. The court agreed with this opinion.