Government crosses fingers over important Sapo ruling

Cape Town - Communications and and Digital Technologies Minister Mondli Gungubele on Tuesday said their focus was on the merits of the South African Post Office (Sapo) business rescue application and being geared to respond to the two court cases that were under way.

“What is key now is that we want to focus our energy answering questions you raised for the judge to be persuaded.

“We believe there are a number of options to turn around the Post Office and all we are crossing is our fingers that the court responds to our prayer favourably,” Gungubele said.

He made the statement while responding to questions from MPs during the meeting of the communications and digital technologies portfolio committee.

Gungubele was briefing the committee on the provisional liquidation of Sapo and broadcast digital migration.

The Gauteng High Court, Pretoria, granted the provisional liquidation in February after two creditors lodged an application. Gungubele said the cabinet had agreed on the business rescue approach for Sapo, and work had been done on how to respond to it.

Director-general Nonkqubela Jordan-Dyan said the severity of the financial challenges at Sapo meant its expenses exceeded the revenue it generated. As at the end of March, staff costs stood at R3.6 billion, an equivalent 70% of total expenditure of Sapo.

Revenue stood at R2.6bn, non-operational expenses totalled R452 million and expenditure was at R5.1bn during the same period.

Jordan-Dyan noted that when the provisional liquidation was granted in February, the shareholder was not cited as an interested party. She said it sought legal advice and also looked at four options that included final liquidation, business rescue, compromise of creditors and full payment of creditors.

“The government had to review these options. These were based on the view that Sapo is a state-owned company with a mandate to achieve government priority in providing universal access and affordable postal and financial services in all areas, including rural areas and small towns.”

Jordan-Dyan also said business rescue was preferred as it held the prospect of saving Sapo. A presentation to the committee said the business rescue would afford the entity the time required to stabilise the business, implement revenue improvement measures, costs optimisation actions, modernisation and implementation of the Sapo of Tomorrow Strategy.

“This requires a commitment of funding on the part of the government – an equitable payment of creditors, operating costs for Sapo during business rescue and implementation of the turn-around plan.”

The business rescue application was lodged on May 30.

The liquidators of Sapo the following day instituted an application requesting the date for provisional liquidation order be extended to November 1 in order to determine the feasibility of various options still available to be investigated instead of placing the institution immediately into final liquidation.

Jordan-Dyan said unless the court issued a directive for a different date, the application for business rescue would be heard on July 4.

“We do consider instituted as a strategic partner in terms of service delivery. We see it as a viable entity going into the future still playing a role in the digital economy,” she said. “We believe the Post Office of Tomorrow strategy outlines key areas of repositioning in the digital or e-commerce era.” She noted that Sapo management had initiated a right sizing of the entity.

She noted that Sapo management had initiated a right sizing of the entity and that the salary expenses would be reduced from R3.48bn to R2.82bn due to increased voluntary severance package uptake.

ANC MP Alice Mthembu commended the department for the “good work” in trying to save Sapo.

“We notice that the department and the minister keep on making sure that Sapo is coming back again and doing good work for the people,” Mthembu said.

DA MP Natasha Mazzone said she was not enthused by the briefing on Sapo. She noted that the government had instituted an urgent business rescue application while it was fighting off the provisional liquidation application.

Her colleague Tsholofelo Bodlani said the government was delaying the inevitable.

“Sapo cannot be salvaged without some sort of public-private partnership,” Bodlani said.

Cape Times