The South African Post Office (Sapo) is bleeding cash to the tune of about R100-million a month and it made a net loss of R285-million in the first three months of the current financial year, MPs were told this week.
The struggling state-owned organisation received government approval to increase its borrowing limit by R1,3-billion just over a month ago and has started negotiations with a number of banks to secure the release of long-term funding. The borrowing facility will be backed by the state guarantee of R1,67-billion, which was issued to Sapo in December.
Sapo acting CEO Mlu Mathonsi said in a briefing to members of the telecommunications and postal services portfolio committee that he did not have a good story to tell but that this was not due to a lack of effort in implementing the long-term turnaround plan.
Progress had been made but it had been slow and more work was still required. In the months of April, May and June, Sapo’s yearonyear revenue showed an “alarming” decline of R186-million as a result of a falloff in volumes.
Private sector customers who contribute 65% of revenue had ditched Sapo in favour of other delivery options.
Most of the improvements cited were in containing costs rather than in growing revenue.
The lack of long-term funding had constrained Sapo’s ability to seek new revenue opportunities.
Revenue over the three months amounted to R1.2bn compared with the previous year’s R1.4bn while expenses amounted to R1,5-billion (and R1,7-bn the previous year).
Bulk mail volumes had declined in the period by 54million items, while revenue from freight and speed services slumped 45% and 50%, respectively.
Even though costs were higher than revenue and had left the organisation with a monthly cash shortfall of about R100-million, they had been slashed year-on-year by R173-million as a result of cost containment measures.
Another acting Sapo executive described the cash shortfall as “extremely scary”, saying the organisation had been using creditors to fund its expenses.
Sapo owes creditors R893-million while its subsidiary, the Courier Freight Group, owes R179-million.
Sapo had also been affected by a long strike by its employees.
By Linda Ensor for BDLive