The Post Office was placed in provisional liquidation on 9 February 2023, at the instance of an unpaid landlord. Picture: David Ritchie.
Joint provisional liquidators believe that Business Rescue is not an option for the South African Post Office.
The South African Post Office ('Post Office') has been insolvent for some time, with a recently reported debt of some R9.4 billion.
The Post Office and Government ignored a ruling by the Supreme Court of Appeal to pay the retirement fund deductions from employees' salaries to the Post Office Retirement Fund, as well as a judgement handed down by the Pretoria High Court, to pay the medical aid deductions from employees' salaries to Medipos Medical Aid, rather than using those deductions to settle the Post Office's operational costs.
The Post Office was placed in provisional liquidation on 9 February 2023, at the instance of an unpaid landlord.
Eleven additional creditors sought an order to intervene in the liquidation proceedings.
“Since then, it has become evident that numerous landlords are owed unpaid rentals, amounts which are increasing monthly. The joint provisional liquidators, Anton Shaban and Gerry Musi, took control of the Post Office on 30 March 2023. For the last three months, the joint provisional liquidators have been bringing themselves up to speed, as best as they can, with the complicated affairs and financial position of the Post Office and in an effort to keep the business afloat,” the liquidators said in a statement on Friday.
On 30 May 2023 the Minister of Communications and Digital Technologies (‘Minister’) applied to the Pretoria High Court to place the Post Office into business rescue.
The application has been set down for hearing by the Pretoria High Court on 4 July 2023.
In a report filed by the joint provisional liquidators on 28 June 2023, an alternative to a business rescue of the Post Office was proposed.
In that report reasons were set out why they do not believe that business rescue is an appropriate process to turn the Post Office around.
The joint provisional liquidators are of the view that a formal compromise with creditors under section 155 of the Companies Act would be more suitable in terms of cost and efficiency and would yield a better return for creditors than the proposed business rescue plan set out in the Minister’s business rescue application, or in a final liquidation.
The joint provisional liquidators said that it is better for the Post Office and its creditors, if the Post Office's debts are cleared in a compromise, so that the Post Office can emerge from provisional liquidation as a solvent going concern, and Government can then see to the operational restructuring of the Post Office as it deems appropriate.
“Where the Minister expects a dividend to non-employment related creditors of 10c/R in a business rescue, the joint provisional liquidators estimate that in a compromise, a dividend to non-employment related creditors of 12 to 67c/R may be possible, by 30 October 2023. The higher distribution is possible if the Government honours its statutory guarantee obligation to the Post Office Retirement Fund, leaving a greater share of the R2.4 billion that was committed in the recent budget, for distribution amongst non-employment related creditors. In both scenarios, employment related creditors are estimated to receive 100c/R,” the statement further read.
“The joint provisional liquidators are of the view that the business rescue envisaged by the Minister is predicated upon uncertain events. One is the amendments to legislation, i.e. the enactment of the Post Office Amendment Bill, which to date have not been passed and could still be challenged as it may create a government monopoly. The second event, that has not yet occurred, is a further unallocated injection of R3.8 billion by Treasury as envisaged by the Minister, which would be in addition to the allocation of R2.4 billion. The third is the operational restructuring in business rescue, which would need to take place, and which would take substantial time, cost and effort”
The provisional liquidators further said that what should be of great concern to the citizens of South Africa, is that the Minister has failed to appreciate the regulatory environment and impact which business rescue, as envisaged in the Minister's founding affidavit, will have on the Postbank.
“The Postbank is currently a deposit taking institution which services the most disenfranchised of citizens. Its’ ability to conduct business is dependent on the Financial Service Provider (‘FSP’) license held by the Post Office. As a result, the Regulator of FSPs had to be cited under the Financial Advisory and Intermediary Services Act in the business rescue application, but was not. Moreover, if the Postbank is to receive 10c/R, as envisaged in the Minister's application, it will not meet the requirements to obtain a license as a retail bank, something that is envisaged by the Postbank Bill that was passed by National Assembly on 28 February 2023 and the National Council of Provinces on 21 June 2023, and which is now awaiting assent by the President in order to be enacted into law,” the statement went on to say.
Shaban said, “There is no doubt from both the Minister’s application and from our affidavit that there is an urgent need for a restructuring of the Post Office. We are however confident, from our three months of enquiry into the Post Office's financial and operational affairs, that an expeditious compromise procedure, that could take a few months to complete and at a lower cost than business rescue, would be the best route to restore the Post Office to solvency.”
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