Mark Barnes, former CEO of the South African Post Office, says business rescue practitioners (BRPs) who have sent a draft liquidation application to communications & digital technologies minister Solly Malatsi need to explain what they’ve done since being brought in to save it almost three years ago.
“All that they’ve really done is sell assets, fire people and write off loans, which has nothing to do with business strategy.”
More recently, they’ve challenged Malatsi’s termination of the Post Office’s monopoly on the delivery of parcels under 1kg, arguing that it’s part of its social mandate and will have an impact on revenue.
Barnes points out that PostNet and others that were doing this illegally were not successfully challenged because the Post Office was unable to comply with this mandate.
“I think the BRPs are looking for a raison d’être for the Post Office so they can attract funding from the National Treasury. So they’re pursuing every route that might be available to them to persuade the Treasury to forward them money.”
They’ve blamed their failure to implement the rescue plan approved in 2023 on the government’s failure to honour a R3.8bn commitment to recapitalise the Post Office, the country’s oldest institution.
The Treasury says it wants an iron-clad business case from the BRPs first, showing how this money would make the organisation profitable.
“I would regard that as an entirely appropriate condition,” says Barnes. “To go to the Treasury without an overwhelming commercial case and ask for another R3.8bn is being met with the disregard that it deserves, quite frankly.”
Would R3.8bn make it profitable?
“I think the profitability of the Post Office and Postbank has been entirely decimated.”
He says it’s not a question of how much money the BRPs get, but what they’re going to do with it.
“They’ve written off the debt, so money they apply for now must have a capital purpose with a net present value that’s demonstrably worth the Treasury’s while to invest it. It can’t be another bailout into a decimated structure,” says the former investment banker and founder of investing and trading solutions company Purple Group.
Barnes was asked to fix the Post Office in 2016 after the cabinet approved a rescue strategy he’d prepared for then deputy president Cyril Ramaphosa.
A central pillar of this strategy was that Postbank should remain part of the Post Office, something Barnes saw as essential to its sustainability.
However, in 2023 the Postbank Amendment Bill was promulgated to enable Postbank to be extracted from the Post Office, apply for a commercial bank licence, and become a state-owned retail bank. In December 2024 Ramaphosa signed it into law.
“I accepted the appointment as CEO absolutely expecting the integration of Postbank as a division of the Post Office. To hand over the function of lending money to those who can barely afford it and to give that to a state-owned entity which has an agenda other than commercial sustainability is madness.
“To me it was absolutely core to the interests of the broader community of South Africa for the Post Office to have access to the national payment system through Postbank.”
Barnes says this was in his presentation which the cabinet approved in 2015, on the back of which he agreed to Ramaphosa’s request that he become CEO.
Under his leadership the Post Office became the only state-owned entity other than the Reserve Bank that had no debt and no outstanding treasury guarantees.
A successful Post Office is the incubator for the intersection between social requirements and access to services and private expertise. It is the poster child for that
— Mark Barnes
“We were a self-sufficient organisation with a perfectly clear strategy which was presented to the Treasury. They were surprised when, while doing the national budget in February 2019, they asked what our funding requirements were and I said we didn’t have any, and I didn’t expect we ever would.”
Later the same year he resigned when the government’s intention to turn Postbank into a state-owned bank separate from the Post Office became clear.
“I said I could not see a future for a disintegrated Post Office that didn’t have access to a national payment system, and that if they were to remove Postbank, I couldn’t see the integrated future I planned.”
For him the Post Office’s real strength was its commercially irreplaceable footprint. When he left, it had a network of 2,048 branches, extending into remote and rural areas not serviced by other businesses, making it potentially a channel for the delivery of services such as social grants, medication and Wi-Fi.
“That was always its purpose, which was why Postbank had to stay part of the Post Office.”
The demise started with the extraction of Postbank in 2023 without compensation. “The act of taking Postbank out of the Post Office was the beginning of the end, as I predicted it would be. It had a significant and material impact.”
Around R3.5bn was taken from the Post Office without compensation and then, “it seems”, Postbank wrote off another R4.2bn of debt from the Post Office.
“I’m not understanding why there was this debt. What happened between the asset-rich, debt-free group audited by the auditor-general in March 2019 and the separated Post Office and Postbank which had to write off R7.5bn of debt and sell assets to repay some more? That has not been explained. Where did that money go?
“How did the Post Office go from an asset-rich group to two financially defunct separate organisations?”
In 2021 Barnes offered to buy a majority stake in the Post Office and make it profitable. Beyond an acknowledgment of receipt, there was no response from then communications & digital technologies minister Khumbudzo Ntshavheni.
Barnes’s plan was to do a deal with an international logistics company, like Amazon did with United Parcel Services in the US, so the Post Office could compete in the courier space. The offer was for R5.2bn, which was the audited NAV of the Post Office when he left.
They weren’t looking to buy the whole thing, he says, just a significant shareholding, about 60% — of which 10% would go to staff. They weren’t seeking any capital.
“I was asking: ‘How can we marry the state’s influence and infrastructure with the commercial savvy of operations that have become successful at least in part because of the Post Office’s demise?’ I would in that sense get the best configuration of both worlds. And I would look to an international operator, one of the major logistics players, as a principal funder.”
The plan would “probably require not funding from the state but for the state to agree that it’s going to have a reduced participation in a successful business rather than a continuing obligation in a failure. The alternative for the Post Office is liquidation.”
The plan envisaged a public-private partnership (PPP).
“I believe the services which could be made available through Post Office infrastructure, with the state and private sector as partners, will be much better served in that environment than they are being served by the private sector, which is motivated entirely by profits, or the state, which is motivated entirely by social support. There’s an integration of those two, of virtue and value, which could come together in a PPP.”
PPPs are as applicable in the Post Office discussion as in any other discussion, says Barnes.
The alternative is that “the BRPs are going to sell Post Office properties to commercially minded developers who want to get them at the best price for a purpose other than a post office. So it is the end.”
Failure to use the PPP model to save the Post Office will make South Africa the only country in the world that hasn’t solved this equation, he says.
“A successful Post Office is the incubator for the intersection between social requirements and access to services and private expertise. It is the poster child for that.
“We need to recognise that mistakes might have been made and it is not too late to fix them. Then we’ve got to start.”
Money’s the last box to tick, he says.
“If we can produce a sustainable commercial reality for the Post Office group and its current infrastructure, we’ll get the money from whoever we want to.
“That is the foundation of the presentation I gave to the then deputy president in 2015. And I’ve still got the presentation.”
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