Post Office losses at R360m

28 January 2015 - 09:18 By Bianca Capazorio
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South African Post Office
South African Post Office
Image: SUPPLIED

The South African Post Office recorded losses of R360-million in the last financial year, and the situation is expected to get even more grim as the state-owned enterprise projects losses of R1.3-billion this financial year as a result of ongoing strikes.

The Post Office did not release its annual report in line with regulations earlier this year. It was officially tabled in parliament on Monday.

The report paints a bleak picture. This is the second year running that the Post Office has recorded losses. In 2010 it recorded a R293-million profit.

Declining mail volumes is a major reason for the slide as customers move towards digital communications. The report admits the Post Office is using "an inappropriate and inefficient business model".

In the 2013-14 year, 59 days were lost to strike action, totalling around R236-million in revenue. Losses to fraud quadrupled to R10-million.

Damage of more than R6-million was recorded as a result of the strikes but these events are included in a section of the report marked "events after the reporting period".

Among concerns raised by the auditors are the "material uncertainty that may cast significant doubt about the company's ability to continue as a going concern" and dissatisfaction with attempts to reduce fraud and corruption.

The Post Office was in contravention of several laws, including Section 129 of the Companies Act which states an entity should commence voluntary business rescue when it has "reasonable grounds to believe that the entity was financially distressed".

The report indicates that while losses are massive, the entity "is technically solvent" because assets exceed liabilities by R2.48-billion.

"The organisation has been experiencing cash constraints and, as such, has not had sufficient working capital," the annual report states.

The Post Office has secured a R320-million loan from Standard Bank, backed by a government guarantee. A further R1.67-billion government guarantee was also granted to "act as comfort to the creditors".

However, the guarantee comes with terms, one of which is that all salary increases be approved by the ministers of finance and communications.

Another threatens the potential establishment of a separate and independent holding company for Postbank.

According to the report, Postbank has 7.5million customer accounts with deposits increasing by 5% this year to R4.738-billion.

Postbank submitted an application to the Reserve Bank in 2013 that would allow it to function as a bank and complete lending transactions.

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