South Africa

Court rules it's not a must for Post Office to pay retirement contributions during pandemic

Court rules it's not a must for Post Office to pay retirement contributions during pandemic

The post office retirement fund has failed in its court bid to force the SA Post Office (Sapo) to continue making contributions to the fund despite the tough financial situation the postal agency finds itself in due to Covid-19.

Last week the high court in Pretoria dismissed the fund's case with costs.

In her judgment, Judge Elizabeth Kubushi said the economic downturn resulting from the Covid-19 pandemic was of a magnitude that no-one could have predicted.

The fund took Sapo to court after not receiving members' contributions for May, June and July. In its arguments, the fund said its concern was that the member contributions are deducted from their salaries but not paid into the fund.

The fund argued that the benefit of pension contributions is a legal obligation which must be complied with, adding that according to the fund rules, this must be done monthly.

In response, Sapo agreed that it should have paid the contributions as it was supposed to, but said under the current conditions it would not have been possible.

Sapo told the court that the Covid-19 pandemic and the lockdown regulations had severely affected its revenue.

Another submission made by Sapo was that paying pension funds was not one of its primary and constitutional obligations, and that interpreting the rules to require it to pay in these kind of circumstances would not be constitutionally compliant and would place contractual provisions applicable to a few above the constitutional rights of millions of marginalised South Africans.

Sapo asked for time to pay off the pension contributions. It told the court that in July it had approached the government for financial assistance, and was still waiting for a response.

Kubushi agreed with Sapo on that submission.

“If this court were to rely on the interpretation given by the fund on rule 3.3 and compel Sapo to pay tens of millions of rand to the fund in the prevailing economic conditions, that are not of its own making and that were unforeseen, it would fundamentally jeopardise the ability of Sapo to fulfil its core function and imperil key constitutional rights, if not the total collapse of Sapo,” reads her judgment.

As at end-July, the court heard, the Post Office had 1,416 operational branches of which only 55 were profitable. Postal services revenue for the month was under budget by 49%, mostly as a result of the Covid-19 regulations. Bulk mail revenue was down by 39% in the month.

The court documents show that Sapo's year-to-date revenue of R744m is below budget by 55% with a year-on-year decline of 42%. The postal services’ year-to-date revenue is below budget by 70% with a year-on-year decline of 66%.

Group revenue of R348m in July 2020 was lower than its expenses, resulting in a net loss of R97m after non-operating items — nearly triple the loss it sustained in July 2019.

The group’s year-to-date expenditure is R2.1bn. As at end-July, the Post Office’s creditors including accruals amounted to nearly R1.6bn. Trade creditors were at R362m and accruals totalled R469m. Sapo said it needed to prioritise these payments, which on a monthly basis include: transport, in the amount of R59m, including R42m for vehicle leases, R11m for fuel; national haul expenses of R3m year to date; property cost of R205m, including a rental expense of R118m; IT expense cost of R154m, including R114m incurred for data lines, R20m for software costs, and R13m for telephone costs; and security costs of R201m.

As a result of the economic downturn and constraints on its business, Sapo's year-to-date loss as at end-July 2020 was R1.06bn, with year-to-date staff costs of R1.2bn.

Staff costs constitute 61% of total expenses.

“Despite the risks in not paying creditors, the Post Office has done everything to continue paying the employees basic salaries, even if it cannot afford to cover their fringe benefits, especially medium to long term ones such as the pension fund contribution,” the judge noted.

Kubushi also said the Post Office could not have predicted that it would be required to spend R36m for personal protective equipment, sanitation, social distancing, hygiene chemicals, and deep cleaning of facilities for the foreseeable future.

She said this was an expense that was never foreseen and not budgeted for.

“Sapo had no choice but to prioritise the health and safety of their employees and customers, most of which are already vulnerable and compromised due to their age and possible underlying illnesses,” reads the judgment.

Kubushi, however, said findings in her judgment did not seek in any way to undermine or belittle the rights of Post Office employees to their retirement benefits that they are entitled to, and which could be affected negatively if Sapo's financial situation is not resolved.

“What I’m saying is that remedies which the fund seeks to employ to salvage its members’ contributions and ultimately the members’ retirement benefits are not appropriate for the reasons already stated in the judgment.”

TimesLIVE