R12.5 billion debt headache for South Africa Post’s business rescue practitioners

by MMC
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Joint Business Rescue Practitioners (BRPs) at the South African Post Office (Sapo) are concerned about the entity’s liabilities reportedly totaling R12.5 billion as of the end of July, saying it raises questions about the viability of the business rescue process.

BRP joint members Anoosh Rooplal and Juanito Damons on Friday issued an update on the rescue of the ailing public entity after beginning the process in July. In the statement, Rooplal and Damons noted that the Post Office will need to improve its revenues and achieve an efficient cost structure for the entity to achieve a turnaround.

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“We have worked with management to address declining revenues, generate additional revenue streams, reduce costs, make key structural changes to Sapo’s business model and consider key investments in technology and infrastructure to improve performance,” Rooplal said.

“The success of Sapo Business Rescue hinges on the need to stop the hemorrhaging of cash while allocating capital to enable the business to effectively serve its customers.”

Some progress

During their two months at the helm of Sapo, the BRPs noted that they had managed to resume contributions to medical schemes, clear the backlog of disciplinary cases and restore electricity supply to the Sapo branch. Newcastle – with operations expected to resume next week.

Staff salary payments have remained stable so far, but they cautioned that Sapo’s ability to continue paying salaries will depend on the entity’s cash flow and receipt of additional funds from the Department of Communications and Digital Technologies and National Treasury.

Regarding Medical Aid Scheme payments, BRPs say they are in arrears on their contributions from July and are committed to remaining consistent in payments so that all employees can access benefits.

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Reopening more key agencies remains a key priority for practitioners, but this will need to be balanced with costs against available funds.

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“Paying to have electricity reconnected and operational at the Newcastle branch is an important step and demonstrates our commitment to negotiating with municipalities and, where necessary, landlords for the reopening of major post offices which were closed prior to our appointment ” Damons said. .

The BRPs added that reviewing the Post Office’s branch structure and network continues to be a key focus going forward, with key evaluation criteria including profitability, geographic reach of customers and mandatory universal services, among others, for each agency.

“It is difficult to find a single solution to determine which branches should be reopened and which should be closed. Postal services include universal service obligations in rural areas and therefore a simple profitability or cost center measure would be trivial,” Rooplal said.

“However, the aim of the practitioners is to restructure the company into a solvent entity, capable of paying its debt as and when it falls due,” Rooplal added.

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