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The South African Post Office is begging Postbank for R 1 billion so that it can fund 13 million social grants by October 2020, City press reports.
Following the business separation of the two SA Post Office and Postbank, the former has had to obtain pre-financing for social grants, and the Postbank operates independently under stricter banking rules.
On Monday, September 21, the interim financial director of the Post Office of SA would have sent a memorandum to the board in which he highlighted the lack of funds necessary to pay the 13 million subsidies of the Social Security Agency of SA (SASSA ), which were due on October 5.
This resulted in the Post Office writing a letter to Postbank requesting a pre-financing of R1 billion to help pay for social grants.
The South African Post Office said it would commit to return the 1 billion rand, which it expected would be delivered to it on a date agreed upon by the Postbank’s acting CEO and Postbank’s managing director.
Despite sending a letter requesting R1 billion from Postbank for pre-financing of social grants, the South African Post Office said that the payment of social grants would continue as normal and would not be affected by the financial situation of the state-owned company in troubles.
“The South African Post Office would like to assure social grant recipients that payment of social grants will continue as normal and will not be affected by the current financial constraints experienced by the Post Office,” the post office said in a statement.
“The funds for social grants come from the National Treasury through the Department of Social Development and are not financed by the income of the South African Post Office.”
“The SA post office experienced a drastic reduction in revenue during the lockdown period and is currently looking for ways to improve cash flows,” he said.
The report added that earlier this year, the post office asked Grindrod bank for R700 million to continue paying SASSA grants.
However, this agreement has not yet been approved by the Minister of Communications, Stella Ndabeni-Abrahams.
SA post office is ruined
A recent court case revealed that SA post office is ruined and may have difficulty paying September 2020 wages.
The Post Office stated in court that only 55 of its 1,416 branches were profitable during the national COVID-19 shutdown, and in total it had generated just R125 million in revenue from its physical branches.
This is half the amount he had budgeted for, and his total revenue was also R744 million below budget.
The struggling state company has also asked for a ransom from the national government, indicating that it needs R4.9 billion to continue operating.
R2.7 billion were required for operations, R1.4 billion in liabilities owed to Postbank, R300 million for voluntary severance packages and R525 million for other liabilities.
The amount owed to Postbank may increase if the company accepts your request for R1 billion to pay SASSA grants.
Facing collapse
The National Treasury has said that the Post Office is at a critical juncture, with its management structures in disarray and lacking accountability regarding the poor implementation of its strategy.
He added that the Post Office Board is new to the entity and has not actively demonstrated its responsibility to “give effect to the entity’s strategy and direct the CEO regarding the functions of SAPO.”
“If the shareholders department does not act to restructure and reuse the entity, SAPO will collapse,” Treasury said.
“The government must decide whether SAPO has a role to play as the government’s delivery arm.”
“If not, then SAPO must be drastically restructured as the entity will not be able to continue in its current form without annual government funding to cover its losses,” he said.
Prior to the COVID-19 lockdown, the South African Post Office was already expected to post a loss of approximately R1 billion for the financial year ending March 31, 2020.
This is in line with the results of the previous two years, in which the national postal service also suffered losses of around 1 billion rand.
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