Urgent telegram for the auditor-general

I only heard on Workers’ Day about the opinion piece “Barnes Gets it Wrong” (Financial Mail, April 23-29) by Anoosh Rooplal and Juanito Damons, the business rescue practitioners (BRPs) appointed to the South African Post Office.

Apt, perhaps, as it is the workers at the post office who have suffered most. First (and mostly) under the management and department of communications and its ministers, but also, more recently, under the BRPs.

All of them should be held responsible and accountable for the tragic, unnecessary demise of the post office and the dream it once was. The dream was shattered when the government unilaterally decided to “separate” Postbank from the post office – against my wishes as CEO and despite my objections in writing to the government at the time.

I won’t delve into the BRPs’ patronising explanation of the business rescue process or the carefully chosen extracts and characterisations of past numbers and future promises published in their opinion. However, I do hope that one day soon the goings-on at the post office since I left will be examined in a forensic audit and published for all to see.

I strongly urge the relevant authorities to look into this, be it through parliament’s standing committee on public accounts or the auditor-general (AG). The workers and other prejudiced parties should demand it, and those responsible must account.

I will focus on the published facts and ask the same questions I’ve been posing for more than five years. Mine is not a witch hunt, it’s a fact-finding mission. I am not suggesting that anything untoward or illegal took place, but we need to know for sure.

Bailouts

The problems weren’t started by the BRPs. These arose largely in the period after I left and before they were appointed, three years later. I don’t blame the BRPs for the mess they found but they must be held accountable for what they did (or failed to do) about it.

The audited financial statements of the post office as at March 31 2019 (the last completed year when I was CEO) are a matter of public record. I would suggest that my resignation letter and the correspondence leading up to and surrounding my departure also be made public.

At end-March 2019, the post office’s audited financials were R6.18bn in cash and equivalents; a further R4.46bn in other financial assets; and no external bank borrowings or interest-bearing debt whatsoever (and explicitly no request for any funding allocation out of the medium-term budget allocation of that year).

A full reconciliation is required of how, with a NAV of R5.15bn (after accounting for deposits from the public), the post office moved to a situation where the BRPs felt obliged to write off “historical liabilities” to R400m from R8.7bn (their numbers).

Bear in mind that the BRPs received a R2.3bn capital injection from the National Treasury and are now demanding a further R3.8bn to execute their plan.

Let’s see a reconciliation of all these movements, signed off by the AG.

The liability reduction is the principal reason the post office has now been restored to a “positive NAV” – by writing off about 90% of its liabilities. Imagine if you could create net value in your house by just cancelling 90% of your outstanding bond!

Expropriation without compensation

What beggars belief is that this creditor compromise took place in an entity 100%-owned by the state, with the government’s agreement in its capacities both as shareholder (the Treasury) and creditor (South African Revenue Service). How can we expect anyone to ever do business with a sovereign-owned entity that doesn’t meet its obligations in full?

Do not let anyone beguile you into believing that this was a value-creating exercise. Quite the contrary, it was the elimination of a liability, despite having apparently followed legal due process.

Was the post office compensated for the extraction of Postbank, arguably its most valuable asset and major source of income? I don’t think so, but again, let’s find out. If not, then it should come as no surprise that this value extraction (expropriation without compensation) would be the beginning of the end for the post office.

Is Postbank even allowed to take deposits from the public now, without a banking licence approved by the Reserve Bank or a continuing guarantee of those deposits by the Treasury, which obviated this need before?

Counting the cost

The future seems precarious at best. The Treasury will surely not allocate the R3.8bn the BRPs are looking for until there is proof of executed revenue plans, executive competence, board composition and department support that would be the basic minimum requirements for the funds to flow.

It has been reported that the BRPs and their consultants have cost taxpayers more than R250m so far. At a rate for senior accounting or legal practitioners of, say, R5,000 an hour, that implies work of at least 50,000 hours. That, collectively, is 24 years of 260 eight-hour working days a year (or more than 60 years of my post office CEO salary). I’d love to inspect their work sheets. AG, could you help?

The BRPs refer to the absence of a submission from me in the recent request for private sector participation. Why would I respond, when my last proposal was purposefully ignored by the minister? Why would anybody, until we really know what happened, and what’s left?

We need to know everything before we save this national asset or let it die.

Barnes was CEO of the South African Post Office between 2016 and 2019.

This story was first published by the Financial Mail. Currency and the Financial Mail are part of the Financial Mail Group.

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