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Sun Dec 04 01:53:20 CAT 2016

'Corrupt' Post Office wants billions more

Graeme Hosken | 2016-02-24 06:25:38.0
The Post Office is currently supported by a R4-billion state guarantee. Barnes' meeting with the Treasury follows a meeting with banks to secure interim bridging finance pending a cash injection. File photo

As nearly R3-billion in payments to irregularly appointed labour brokers is wiped off the Post Office's slate, the state entity is asking Treasury for a multi-billion rand bailout.

A day after new Post Office CEO Mark Barnes met Treasury officials on Monday requesting a cash injection of R2.5-billion-R3.5-billion, Public Protector Thuli Madonsela delivered a report on "deep-rooted" corruption in the Post Office.

The Post Office is supported by a R4-billion state guarantee.

Barnes painted a bleak picture of the financial position of the Post Office, which he said was due to make a loss of more than R1-billion in the 2015-2016 financial year, almost similar to the "disastrous" result of the previous year when, it had a loss of R1.5-billion.

Barnes, who joined the Post Office last month, said the lack of cash translated to operational paralysis and the loss of clients.

Acting chief financial officer Nichola Dewar told parliament's postal services and telecommunications portfolio committee that delivery standards within the Post Office were quite poor because there was no cash to invest in the business. She said R1.5-billion had been raised against the R4-billion state guarantee, but this had been used for operations.

Madonsela's investigation is one of three probes into the Post Office. The others, by auditing firm KPMG and the Special Investigating Unit, have found fraud, and wasteful and irregular expenditure.

In her report, "Postponed Delivery", she highlighted over a decade's corruption, deceit, millions of rands in fruitless expenditure, circumspect resignations and apparent deliberate hindrance to her office's investigation. All of this was carried out amid economic challenges that adversely affected service delivery.

While the R2.7-billion paid to labour brokers has in large part been written off because of a lack of "important documents, with very few provided to us", Madonsela was adamant the Post Office should repay millions of rands spent on its national headquarters.

Central to her report, a culmination of a four-year investigation after complaints by the Communications Workers Union, is the R22-million the Post Office paid in rent for its national headquarters, which stood empty for 10 months. The offices were moved from Pretoria city centre to Eco Point Office Park in Centurion in 2010.

Madonsela said the relocation constituted "fruitless and wasteful expenditure", with R2.3-million rent paid every month, while the building stood empty for the first 10 months of occupation.

"The acquisition of a 10-year lease for R161-million was tainted by procurement irregularities and corruption.

"Despite this being carried out at the height of economic challenges, which adversely affected service delivery, and which occurred while it implemented severe cost-cutting measures, the Post Office management and board of directors went ahead and procured their current national offices."

She said the Post Office's board had relied on misrepresentation of facts and falsified information regarding structural defects in the National Postal Centre, where the Post Office was accommodated.

"The Post Office failed to ensure the acquisition of the Centurion building was preceded by competitive bidding processes ... with the lease not fair, transparent or equitable."

Madonsela said despite action against officials, which saw some resign and others disciplined before the completion of her investigation, the Post Office failed to, on receiving the KPMG report, "expeditiously" review the deal in light of the finding of corruption.

Madonsela slammed the Post Office over procurement strategies, especially with labour brokers.

"The Post Office irregularly appointed and utilised labour brokers from 2002 to 2012, with some having expired contracts and others having no written contracts. The total amount involved in the procurement of labour brokers was R2.7-billion. As these relationships were not properly regulated and the billing difficult, if not impossible, to control to prevent over and false billing, it cannot be said that the runaway expenditure involved did not contribute to the Post Office's current cash-flow problems."

She said because of the lack of documents around the procurement of labour brokers it would be difficult to recover all of the money spent on such services. "However KPMG received some of these documents so we are demanding the Post Office follow its recommendations around the procurement of labour brokers and the recovery of the monies that they can."

Madonsela has also ordered the Post Office to recover the R22-million paid in rent, carry out the KPMG and SIU recommendations and ensure that all evidence on corruption is given to the police.

Post Office spokesman Johan Kruger said: "We will ensure that her remedial actions are fully implemented." Additional reporting by Bloomberg

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