<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JEREMY MAGGS: The South African Post Office (Sapo) says it\u2019s finally moving out of business rescue and towards becoming a sustainable public enterprise, and this is obviously after years of financial distress, heavy losses and shrinking operations.<\/p>\n
But while its balance sheet has improved, cash flow remains under pressure. More government funding may still be needed, and questions also remain about whether a turnaround can survive without continued state support.<\/p>\n
Read:<\/p>\n
SA Post Office\u2019s new chapter post business rescue
\nNew bill aims to reboot the ailing SA Post Office<\/p>\n
Joining us now is the acting chief executive of the SA Post Office, Fathima Gany. Thank you very much indeed. Do you think the Post Office is genuinely saved or has business rescue just bought you more time?<\/p>\n
FATHIMA GANY: I think we need to step back in terms of what are the objectives of the business rescuer. They work within a defined framework of the Companies Act and it\u2019s really to reset the business in readiness.<\/p>\n
So when you tick against the criteria, the objectives of what they set out to do, those have certainly been achieved, and it\u2019s about now being positioned to take the business forward.<\/p>\n
So can it be saved? Yes, I\u2019m here and I\u2019m saying it can. Differently though, we keep benchmarking ourselves to the prior periods.<\/p>\n
So a very different version of a post office, but that would still require a capital injection and whether it\u2019s from the fiscus or Sapo raising [that] itself on its balance sheet or through a partnership.<\/p>\n
But it\u2019s not out of the woods in terms of a break even or even profitability. That\u2019s not what the business rescuers have achieved. They have right-sized the business and they have reset the balance sheet in readiness for the next phase of the business.<\/p>\n
JEREMY MAGGS: I want to talk to you about what that different version of the Post Office is going to look like. But you do have an unqualified audit. But the Auditor-General is still questioning the Post Office\u2019s ability to continue as a going concern. Difficult to reconcile, surely, those two points of view.<\/p>\n
FATHIMA GANY: I\u2019ve come through the ranks of the auditing profession. The unqualified opinion is a very big win for us because it puts credibility for the numbers at a period in time, which is the year end. So those numbers that are now signed off on, you can place reliance on them.<\/p>\n
So what does that mean?<\/p>\n
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It means you\u2019re in a state of readiness to on board a partner that\u2019s going to conduct a due diligence on you. So in the conduct of the due diligence, they can look at our balance sheet.<\/p>\n
They can look at our operations and say, okay, I can place reliance on these numbers. It\u2019s been signed off by the highest service assurance provider in the country.<\/p>\n
Read: Has the post office used up its nine lives?<\/p>\n
Similarly, if you take our balance sheet and we get PFMA (Public Finance Management Act) approvals, and we go to banks and try to raise funding on the balance sheet, banks can place reliance on what we are giving them because there\u2019s now credibility.<\/p>\n
So at a point in time, that unqualified opinion makes a big difference.<\/p>\n
Going forward and looking at the going concern, that emphasis of matter is really looking to the forward and saying, okay, here we could have an issue because again, the business is not breaking even.<\/p>\n
There will be a point where cash, which is a finite resource, is going to run out.<\/p>\n
If our partnerships or if our revenue diversification projects don\u2019t take off at the speed that\u2019s required, then we will be looking to the fiscus and saying we need some working capital to keep us at abeyance while this materialises.<\/p>\n
JEREMY MAGGS: That\u2019s a difficult one to justify to taxpayers who might want to say, why should we put more money into the Post Office after business rescue?<\/p>\n
FATHIMA GANY: Why you should is because the social mandate has never gone away. So the reason why we exist today is because \u2013 and it was worth putting the business into rescue and not liquidating it at the time of provisional liquidation \u2013 is because there is a social mandate that the Post Office still holds and needs to execute on.<\/p>\n
Now, the relevance of the social mandate is declining because mail in its traditional form is a declining mail business, but it\u2019s still relevant for South Africa and its people because not everybody has connectivity to emails and to be able to receive electronic communication.<\/p>\n
Read:<\/p>\n
Postbank shifts services from Post Office to new banking channels
\nGrant beneficiaries abandon Postbank after years of glitches and card swap failures<\/p>\n
So there\u2019s a huge dependency, particularly in the areas that are not urbanised, for the mailman. Our business model is really twofold, it\u2019s the mailman, and then what we call last mile, and then it\u2019s our branches.<\/p>\n
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A lot of times we are benchmarked on the branches and so the last mile and the mail business is forgotten.<\/p>\n
JEREMY MAGGS: I want to talk to you a little bit about that different version. If I\u2019ve read the data correctly, well over 4 000 jobs have gone, branches have been cut.<\/p>\n
Fathima, how much smaller must the Post Office become before the numbers actually start to work? In other words, what is that different version going to look like down the line?<\/p>\n
FATHIMA GANY: The version of Fathima is that it can\u2019t be cut any further. Then it\u2019s not relevant. In order to meet that social mandate, the number that we have today, which is, after the Section 189 job losses and after the branch rationalisation, that is the tipping point of I need to be in existence for this.<\/p>\n
Now it\u2019s about how you build on it and diversify because you really need commercial activities to supplement the social mandate, which is why you are relevant and why you exist.<\/p>\n
So it\u2019s complex and not a perfect science, but you can only build from the number of employees that you have, and you can only build from the number of branches that you have.<\/p>\n
It\u2019s pointless reducing it, because where we\u2019re sitting today is unique, we have a national address database and we have a reach, and that is the reason why we deliver on the social mandate, and that\u2019s not gone away.<\/p>\n
JEREMY MAGGS: What would you say to private courier companies, Fathima, that argue the Post Office has been kept alive by the state while they have to compete without that safety net.<\/p>\n
FATHIMA GANY: Because the private courier companies, and we\u2019ve seen this, we went to market for public-private partnerships in December, and over and above that, we\u2019ve had unsolicited companies coming to us, which we are busy with, it\u2019s a workstream for us and how we onboard, is that the private players are good in the urban areas, and where the Post Office has value for them is in the rural areas, because we have the footprint and the reach.<\/p>\n
So it could complement and be a very good marriage between the state as well as these private entities in terms of delivering a holistic courier service to South Africans, because their value proposition is more dense in your cities, and we have the ability in rural areas.<\/p>\n
That should be the value proposition and the win-win between both entities.<\/p>\n
JEREMY MAGGS: To that point, you have received, as I understand it, strong interest from potential partners. But you\u2019ll agree with me that interest is not revenue. At this point, as we have this conversation, how much of the turnaround is still only a plan?<\/p>\n
FATHIMA GANY: A significant amount of the turnaround is a plan because we are coming out of business rescue. So it\u2019s about how do you get the plan in motion and while we have workstreams and there are some activities which have taken off the ground, they\u2019re not the activities that are going to move the needle.<\/p>\n
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So bringing on Aarto (Administrative Adjudication of Road Traffic Offences) with motor vehicle licensing or bringing on the new lottery operator, those are good initiatives.<\/p>\n
Read:<\/p>\n
Aarto rollout challenged \u2013 again
\nWhat every motorist should know about Aarto demerit points<\/p>\n
However, what\u2019s going to move the needle is onboarding a significant partner that complements or supplements our business.<\/p>\n
Now, they will have their process and we have our process. You\u2019re absolutely correct in saying yes, we\u2019ve gone to market, we\u2019ve had surprisingly very good traction.<\/p>\n
We now have a framework with a transaction advisor on how to onboard the partners. So the next point is, after a request for information, we\u2019re now going to draft requests for proposals and make it tangible. We are still a state-owned entity, so we have to comply with Public Finance Management Act.<\/p>\n
These are the things that probably take longer, but you\u2019re doing it in the manner that you should be doing it.<\/p>\n
So yes, it\u2019s taking longer, but while we\u2019re speaking, the Post Office is still in motion and so you\u2019re still burning working capital.<\/p>\n
Which brings me to yes, that\u2019s where we are in terms of the auditor being concerned that a going concern is something they would like to emphasise on.<\/p>\n
JEREMY MAGGS: Just a final question. Assets now exceed liabilities. That\u2019s a good thing. But cash, as you\u2019ve outlined to me, does remain under pressure. How close are you to another liquidity crisis?<\/p>\n
Read: The high cost of delaying corporate distress decisions<\/p>\n
FATHIMA GANY: We have applied to government on our MTEF (Medium Term Expenditure Framework)\u00a0funding. I know it\u2019s been deliberated on because I worked on further supplementary information. So we\u2019re very dependent on that, or we\u2019d be having a different conversation if that didn\u2019t materialise.<\/p>\n
JEREMY MAGGS: I\u2019m going to leave it there. Acting chief executive officer of the South African Post Office, Fathima Gany, thank you indeed.<\/p>\n
#Post #Office #turnaround #hinges #funding #partnerships<\/p>\n","protected":false},"excerpt":{"rendered":"
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