How can we allow the iconic South African Post Office business to simply die?

The South African Post Office (SAPO) has recently been placed in with provisional liquidation with final liquidation looming. But with around 6000 jobs on the line, is this the only real option? BDO’s National Head, Business Restructuring Hans Klopper and Chief Operating Officer, Business Restructuring Buhle Hanise CA(SA) question this course of action, making the case for initiating business rescue proceedings instead.

Every South African is familiar with the South African Post Office (SAPO), a state-owned enterprise responsible for providing postal and related services to the country. What many don’t know is that the business’ roots can be traced back to the mid-1800s, when postal services were first introduced to what was then referred to as the Cape Colony. These various postal services were later amalgamated in 1910, when the Union of South Africa was established, forming what we know today as SAPO.

A lot has changed since then. For one, SAPO incorporated telecommunications services in the 1980s and established a separate courier company in the 1990s. For many generations now, SAPO has been responsible for providing a wide range of postal and related services, including mail delivery, postal banking, money transfers, and logistics solutions.

In recent years, though, the organisation has faced numerous challenges, including financial difficulties and allegations of mismanagement and corruption. Which brings us to the recent announcement of provisional liquidation. But given its long history, and the many jobs on the line, one must ask: is this the only option?

The case against liquidation

Usually, the threat of applying for a provisional liquidation order of a business is frequently used as a debt collection tactic, rather than a genuine attempt to terminate a business or company. This raises questions regarding the true intentions behind such actions, particularly in cases like the South African Post Office where there may be limited value in the liquidation proceedings because of the uncertainty regarding the true value of the company's underlying assets and the doubt as to whether it is truly in the interest of the creditors to place the company in liquidation.

The key issue at hand here is whether SAPO’s affairs should have been addressed in a similar manner to SAA, where business rescue proceedings were initiated. The value of the services provided by SAPO to citizens of the country cannot be denied, and a reliable postal service is essential for both individuals and commerce, ensuring a dependable and reasonably priced exchange of communications and documents.

Stakeholders, as such, should seriously consider whether provisional liquidation is in their best interests. And if not, as SAPO’s provisional liquidation order's return date approaches, if it’s worth rather launching an application to put the entity under business rescue.

The case for business rescue

Business rescue allows professionals familiar with turning around businesses or finding other solutions to rescue a business by identifying a commercial solution. This process enables the appointed business rescue practitioner to take complete management control of this enterprise and act within specific mandates and timeframes.

This course of action was proposed in a recent open letter to the president by former CEO of SAPO, Mark Barnes. As Barnes mentioned in his letter, by rather pursuing business rescue for SAPO, an appointed practitioner could engage with the relevant parties and leadership that hold industry experience and so, avoid politically aligned parties. Not only could this provide a more favourable outcome for SAPO’s creditors, but also result in the saving of approximately 6000 jobs that are expected to be lost.

Only through business rescue, will this iconic and vitally important South African institution be able to once again add true value to South Africans. The obstacles here are not insurmountable and there are a myriad of possibilities available to properly run South African Post Office service — we simply need the space to explore them. If not, we’ll be saying goodbye to a business that has been running in one form or another over the course of three centuries.