MTBPS 2024: Despite the South African Post Office’s (SAPO’s) supposed ‘day zero’ scenario anticipated today, the financially-strung entity will not be receiving a bailout from government.
Day zero is understood to be the day when the national postal service is expected to run out of cash reserves required for its operations.
The once-revered institution seeks funding of R3.8 billion to avoid financial collapse.SAPO received a R2.4 billon funding allocation from National Treasury in 2023.
However, there is no funding allocation for SAPO in the 2024 Medium-Term Budget Policy Statement (MTBPS), a National Treasury official specified to ITWeb.
“We had a meeting with the DCDT [Department of Communications and Digital Technologies] and a task team has been set up to reflect on options. One of the key long-term options, of course, is getting in private partners for investment in the post office.
“The second option is finding savings within the department, to be able to bridge the gaps…for that, the department will have the final say, but we’re still working with them in making decisions around where and how resources can be shifted.”
Responding to a question on SAPO during the media briefing ahead of the MTBPS address, finance minister Enoch Godongwana said this is “tough love”.
“We are on that path of making sure not every state-owned enterprise (SOE) is going to receive money when they want more money.
“They told us the D-Day for the post office is today; there’s no money in the adjustments [Estimates of National Expenditure]. As we speak, we are hoping the department will find ways of reorganising and reprioritising their budget to deal with that.”
The minister noted that according to a document tabled earlier this year, bailouts cost government R520 billion from the 2008/9 financial year, to date.
“If we ask where that money came from, it was from social services, the army, the police, correctional services, and so forth. Those departments are still under-funded…and to solve that problem will take us a while.
“The opportunity costs; if we are taking money to state-owned enterprises, then we must underfund something.
“We are engaging and in discussions with the department. Not only are we dealing with how they fund it, but we are also asking the question – what is the future of the post office? We may say today we are giving it R3 billion, assuming we had it, what next? Are they going to come back and require another R3 billion? The discussion must not only centre on the immediate, but about the future of the institution moving forward.”
Within the DCDT portfolio are 11 SOEs: Broadband Infraco, Film and Publications Board, ICASA, NEMISA, Postbank, SABC, SAPO, Sentech, State IT Agency, Universal Service and Access Agency of SA and .ZA Domain Name Authority.
Several of the above-mentioned entities have received billions of rands in bailouts from the state, are under business rescue, in the process of consolidation and often the subject of poor governance controls.
Once considered a key institution, mismanagement, staff retrenchments and inadequate investment in IT systems brought SAPO to its knees.
The ailing state entity, which has been under business rescue for over a year, is in dire financial straits and its once wide branch network has significantly shrunk over the years.
Earlier this month, communications minister Solly Malatsi, whose department oversees SAPO, tabled his plans to reform the organisation, with the “consideration of privatisation scenarios as a preferential option”.
Malatsi announced in a statement that he sought National Treasury’s support in forming a task team to pursue private financial and operational partners for the post office.
The DA’s Malatsi has long favoured the idea of public-private partnerships for some of the entities within his portfolio, previously telling ITWeb that the South African fiscus faces a lot of pressure, with Treasury making it clear its pockets are not that deep.
He said at the time: ““The reality is that for some of these entities, public-private partnerships or partial public-private partnerships or whatever their size will be necessary going forward. We just need to satisfy ourselves post our assessment as to which ones those will be. This is a widely accepted concept throughout government, to say that 100% state ownership in some of these entities will probably be unsustainable going into the future.
“We’ve got to make space for some partial involvement of the private sector through public-private partnerships.”
Dead weight
The state has hundreds of SOEs spread across national and provincial government, with many still highly-dependent on government support.
The financial implication of bailouts for some of these entities has been highlighted in the 2024 MTBPS, under expenditure risks.
According to Treasury, the bulk of government’s contingent liabilities are associated with the poor financial condition of state-owned companies.
“In recent years, some of these liabilities have materialised, straining the fiscal framework. In line with government’s intent to improve transparency and the management of contingent liabilities, Cabinet members who have requested guarantees for state-owned companies are now required to report those requests to Parliament once they have been considered by the minister of finance.”
In the MTBPS, Treasury highlights that government’s guarantee portfolio decreased from R751.9 billion in March 2022, to R663.9 billion in March 2023.
In addition, guarantees to state-owned companies decreased from R543.6 billion in March 2022, to R448.1 billion in March 2023, mainly due to a decline in the Reserve Bank loan guarantee scheme from R100 billion to R20 billion.
However, the financial position of state-owned companies remains distressed, says the mid-term budget statement, listing Denel, Transnet, Land Bank and Sanral among them.
“Despite several notable operational improvements, such as at Eskom, most major state-owned companies continue to post net losses and fall short of performance targets. Many remain unable to fund their operations and debt obligations adequately. They are also unable to optimally invest in infrastructure, with many entities requiring some form of state support to implement their recovery plans.
“Government is pursuing a sustainable turnaround at these companies, while maintaining service delivery. The intent is to attract private-sector involvement to improve efficiency and increase competition. After a period of little movement, turnaround plans have begun to yield some initial results.
“State-owned companies are likely to continue to face high borrowing costs, as poor governance and operations limit their access to funding. Although global interest rates are expected to decline, those entities with weak and highly-leveraged balance sheets, poor cash generation and significant refinancing risks may face difficulty in raising finance until they return to better form.”
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