Sapo business rescue: Experts explain why govt continues to pour money into ‘bottomless hole’

With debt of about R9.4 billion and now placed in business rescue, questions loom on whether the South African Post Office (Sapo) should be saved while, at the same time, the SABC faces a similar question as it faces financial collapse.

Having failed to pay its creditors, Sapo was placed into provisional liquidation this year but Communications Minister Mondli Gungubele brought an urgent application on 30 May to place it in business rescue.

Enoch Godongwana, standing in for Gungubele who is abroad, welcomed the decision of the high court to put Sapo into business rescue.

ALSO READ: ‘Business rescue will give Post Office time to turn its fortunes around,’ says government

Godongwana further noted the appointment of Anooshkumar Rooplal and Juanito Martin Damons as joint interim business rescue practitioners in respect of the “business rescue proceedings subject to approval by the registrar of financial services and ratification by the majority of Sapo’s creditors”.

Business rescue was introduced into SA legislation under the Companies Act, becoming effective in 2011, with a view to saving and restructuring, rather than liquidating, companies deemed to have a reasonable chance of survival.

Sapo ‘a serious financial drain’

However, independent economic analyst Bonke Dumisa said Sapo was a serious financial drain on government coffers. The pouring of more money into the Post Office had always been like “throwing good money into a bottomless hole”.

“It has been permanently plagued by majority of workers who have been on strike all the time and incompetent management. It was time someone pulled the plug,” he said.

ALSO READ: A private-public partnership, political changes could save Post Office, say analysts

Dumisa said the major reason the government tried to save Sapo was for political reasons.

“It’s to opportunistically turn it to a state bank in order to pacify the many misguided political demagogues who have been screaming for the nationalisation of the South African Reserve Bank for the politically connected to plunder, like they did with the likes of VBS,” he said.

Under a business rescue process, creditors owed more than R5 billion could recoup some of the money they are owed. The government expected creditors to be paid 10 cents in the rand under a business rescue process. It argued a bigger loss under liquidation was expected, as creditors stood to receive 4c in every rand owed.

SABC next in line

SABC chief financial officer Yolande van Biljon recently warned that the public broadcaster might have to apply for business rescue to avoid liquidation.

With financial challenges due to load shedding, the analogue switch-off and the current economic decline, the SABC was set to announce a loss of more than R1 billion for the financial year, which ended in March.

ALSO READ: Business rescue not an option for Post Office

Broadcasting Electronic Media and Allied Workers Union president Hannes du Buisson told Radio 702 that the situation could be reversed if the SABC was able to collect the licence fees it was owed. This has grown to R44 billion because of a noncompliance rate of almost 90%.

Du Buisson said if the SABC could collect just 10% of outstanding TV licence fees, it would turn the R1-billion deficit into a R3-billion surplus. Dumisa said the SABC may be worth saving because it had a public interest mandate which private broadcasters did not fulfil.

“But the question is – do they fulfil that public interest mandate?” he asked.

Sapo ‘too costly’

Political analyst Prof André Duvenhage said Sapo was too costly and government could not manage it properly.

“It cannot deliver services. It’s the old problem, with people without capacity and low working ethics. You will find a lot of cadres in the system,” he said.

Duvenhage said there was a lack of political will to take the necessary decisions. A manager and leader could not always take the popular and populist decision but should take a decision in the best interest of the institution.

“It is a bit ironic because the more the government would like to control everything, the less they are controlling things. We are seeing a form of false privatisation, where government is failing and the private world is entering and they are making a success,” he said.

ALSO READ: Post Office now the fourth SOE in business rescue

“The one example we can use is an institution like PostNet, who are very successful and privately driven. And it seems as if the state is abdicating their responsibilities to the private sector and the authorities are absolutely in the opposite direction.”

In February, Treasury said the Post Office would receive another government bailout of R2.6 billion for its turnaround plan, but it was not enough to pay its debts.

‘Good reasons’

Chief economist at Efficient Group Dawie Roodt said: “They may have some good reasons why they are pulling out all the stops to keep the Post Office alive, because there are many millions of people who used it. It was the only thing that was supposed to work in some rural areas, for example for people to receive grants and so on.

ALSO READ: Post Office heading for business rescue

“So there could be good reasons why they would like to increase the chances of the Post Office surviving – and that is by putting it under business rescue.”

– lungas@citizen.co.za