The downfall of the South African Post Office

The National Treasury disclosed that the financial situation of the South African Post Office worsened this year. In 2022, 60 SAPO branches merged or shut down, mainly due to financial constraints.

This decision followed the company’s earlier announcement that it was laying off 60,000 employees due to declining revenue.

On February 9, 2023, South African Post Office (SAPO) entered provisional liquidation after creditors successfully applied for it, according to Daily Investor

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South African Post Office could not pay debts

SAPO could not pay its debts, forcing it into provisional liquidation. Cabinet approved a voluntary business rescue based on a continuity report.

A specialist now works with SAPO to execute the “Post Office of Tomorrow” Strategy. It was recapitalized with R2.4 billion before the liquidation order.

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National Treasury informed the Parliament’s Standing Committee on Appropriations that the Post Office’s financial health worsened in the first quarter of the 2023/24 fiscal year.

Their revenue of R482.8 million fell short of budget by R86.1 million (15%) and lagged behind the previous year’s performance by R145.5 million (15%).

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The causes for this poor performance included branch closures, power outages, and suppliers suspending services due to unpaid bills.

Operating expenses for the quarter totaled R964.1 million, significantly lower than the budget by R329.4 million (25%) and down R385.6 million (29%) compared to the previous year.

60 Branches were merged or closed in 2022

In 2022, the South African Post Office merged or shut down 60 branches, with some closures due to financial constraints. This decision followed the recent announcement of the company laying off 60,000 employees, citing declining revenue.

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According to Sapo’s chief executive, Nomkhita Mona, the company hasn’t recorded a profit since 2004, and its financial troubles began 17 years ago. Mona attributed this decline to the 2008 recession and the widespread adoption of smartphones.

Profitability exceeds budget

While SAPO’s profitability exceeded the budget in the quarter, this was mainly because expenses were below budget, not because revenue improved.

The cost-to-income ratio for the quarter was 199.7%, showing that the Post Office has an unsustainable cost structure.

As of June 30, 2023, the Post Office had 1,024 operational branches, but only 10.2% of them were profitable.

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SAPO has outstanding liabilities of R4.7 billion, and an additional R3.9 billion is owed to Postbank.

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