The South African Post Office (SAPO) is currently facing significant financial difficulties, with losses amounting to R2 billion for the current financial year. These losses are expected to increase to R1.7 billion in the next year as operating costs continue to rise.
The Minister of Communications, Mondli Gungubele, recently highlighted the urgent need for the Post Office to implement its business rescue plan to address these challenges.
The business rescue plan, developed by joint business rescue practitioners Anoosh Rooplal and Juanito Damons, was approved by the majority of creditors earlier this month.
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The plan includes crucial cost-cutting measures, such as reducing the size of the Post Office’s branch network to only 600 branches and downsizing the workforce to 5,000 employees.
By reducing the staff complement by approximately 7,000, the Post Office aims to reduce its wage bill by an estimated R1.3 billion. The Post Office has been operating at a loss every year since 2013 and has struggled to compete with private couriers.
To make matters worse, it has accumulated over R19 billion in losses. As its financial situation deteriorated, the Post Office prioritized paying employees the cash component of their salaries from 2020.
However, it has been unable to cover other employment costs, including medical aid and pension funds. Earlier this year, reports indicated that the business rescue plan involved cutting the Post Office’s workforce in half to reduce the wage bill by R1.3 billion.
Minister Gungubele emphasized that the current state of affairs cannot continue, and if the Post Office fails to improve, it may be forced to close down. The projected net loss of R2 billion, along with the estimated R1.7 billion loss for the next year, is simply unsustainable.
Shockingly, operational costs for the Post Office currently amount to approximately 185% of its revenue and are projected to rise even higher, potentially reaching 200%. Employee costs alone account for 150% of the company’s revenue.
Minister Gungubele warned that if these trends persist, the South African Post Office will have no choice but to cease operations. The closure of the Post Office would have severe consequences for businesses that rely on its services, potentially leading to their collapse.
Furthermore, millions of South Africans who depend on the Post Office for various services would be left stranded.
The Post Office must take immediate action to address its financial challenges and implement the approved business rescue plan to ensure its survival and continued provision of essential services to the public.
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