South Africa Post Office to Tap Banks for Funds After State Cashby
New CEO plans to use $42 million award as base for fundraising
Agreeing to deal with labor unions also high on Barnes agenda
The South African Post Office plans to raise further cash from banks and other financial institutions after receiving a 650 million-rand ($41.5 million) cash injection from the government and is targeting a return to profit by 2018.
“The capital injection will put us in a position to also raise additional funds,” recently appointed Chief Executive Officer Mark Barnes said in a phone interview late on Wednesday. “Our immediate priority will be to pay our creditors.”
Barnes, the chairman of Johannesburg-based investment company Purple Group Ltd. and former CEO of Brait SE, was appointed to run the Post Office in January to turn around the state-owned company and end a succession of strikes that have brought the service to a standstill. The company is targeting a return to profit in 2018 after a loss of 1.5 billion rand in the year through March and a further 1 billion rand of losses in the first 10 months of the current fiscal year, Barnes said.
After repaying creditors, the Post Office is seeking to reorganize the way it gets post to and from its more than 1,500 outlets and strike a deal with labor unions, the CEO said. Barnes will also have to respond to an order from South Africa’s ombudsman to recover at least 22 million rand it paid as part of a lease for its headquarters after an investigation found the bidding process wasn’t fair.
“The organisation has wasted a lot of money over the years, about 2.7 billion rand just on labor brokers,” Barnes said. “But it also shows me that there is potential to make money.”
The 650 million rand cash injection for the Post Office was announced by Finance Minister Pravin Gordhan at his Budget speech on Wednesday.