The SA Post Office may be short of money, but it is not short of turnaround strategies.
The state-owned entity, which owes creditors more than R9bn, entered business rescue last week — a court-ordered process that halts payments to creditors while turnaround specialists restructure the business to restore it to be able to trade successfully.
This will not be the first turnaround strategy put forward to rehabilitate the ailing entity. The Post Office, which has made losses since 2013, proposed modernisation, e-commerce, digitalisation and being the face of government services in its 2015/16 to 2017/18 strategic plan.
It then proposed these again in the 2019/20 to 2021/22 strategy, adding that it should provide free Wi-Fi services to the public. Later it published a new corporate strategy in 2022, which also speaks of digitalisation and being the face of government.
Former Post Office CEO and businessman Mark Barnes, who left the state-owned entity in 2019, told Business Day he believes it can be saved if it uses its vast network to serve citizens, providing payment services, home affairs support, the sale of insurance policies, free Wi-Fi and other government services. It is also a repository of valuable data.
SA Post Office executives say in court papers that R1bn is sufficient for the current turnaround strategy. This would come out of the latest R6.2bn in bailouts being provided this year.
But what the various vague turnaround plans propose — more digitalisation, payments provision, purchases of airtime and setting up an online mall, along with expanded courier deliveries — are already done by retail stores that have footprints as large or larger than the Post Office.
Competition
Setting up an online mall, a plan it seems to have abandoned, would see the Post Office competing with Takealot that after more than a decade is still making a loss. Additionally, it would compete with Walmart-owned Makro that allows third-party sellers to use its online infrastructure and sell directly to the public.
Payments for electricity, airtime, municipal bills, lotto tickets and money transfers can be made at Shoprite, Spar, Pick n Pay and Pep branches. Pep’s Paxi transports more than 4.2-million parcels annually between its extensive network of more than 2,570 stores across SA, which exceed the number of Post Office branches.
MTN and Vodacom have also expanded into the fintech space and provide ways to make payments and buy airtime using both apps or phones that are not connected to the internet, making them additional competitors with large pockets.
Expected revenue
None of the various iterations of plans have an estimated cost of implementing the ideas or an estimate of expected revenue.
The DA last week warned it is not enough to keep spending good money after bad and called for more details on how a turnaround will be implemented. It notes there have been R14bn in bailouts since 2014, including the R3.8bn planned from October. DA communications spokesperson Natasha Mazzone said: “The communications minister must also explain what exactly the bailout will be used for in SAPO’s turnaround plan, what the targets and timelines are, and why this bailout will work when others since 2014 have not.”
While it is necessary to integrate more rural people into the digital economy, it is not clear how providing internet access for free would help increase revenue. Barnes goes further and says the Post Office should allow the free download of educational material.
Barnes says customers could even buy insurance or funeral policies from the Post Office, which could in turn play a role in selling trustworthy policies.
He says the Post Office needs to have access to payment infrastructure and be the face of government across SA, even providing home affairs services in smaller towns.
But with its IT equipment sorely outdated, according to its own reports dating back to 2015, and many of its branches having closed due to nonpayment of rental, this is a tough challenge.
Does SA need a second home affairs?
The Treasury said in 2020 the Post Office may provide ID books, but this hasn’t happened yet. Barnes thinks it should provide identity or other documents in smaller towns where there is no home affairs office. It is not clear if this would make extra money or just reduce the department of home affairs’ income.
To offer services such as the costly delivery of a letter, the Post Office needs a way to make a profit. This is why by law it was given a monopoly on delivering all parcels under 1kg, says Barnes.
The Postal Services Act gives it the sole right to offer “reserved postal services”, which include all letters, postcards, printed matter, small parcels and other postal articles of a mass up to and including one kilogram.
But the Post Office and later the Independent Communications Authority of SA’s (Icasa) attempts to enforce this right have been met with resistance as it may put companies like Takealot and Postnet out of business.
Staff cuts
The latest court documents suggest the Post Office should shed 7,000 of 12,000 employees. This cut would leave too few staff to implement turnaround plans, said the Communication Workers Union’s Aubrey Tshabalala, who points out that the Post Office never provides a consistent figure of how many people it employs.
Barnes says the Post Office needs a private partner to manage the highly complex institution and there is no way that Postbank, which is being separated from the Post Office, should offer loans, a risk better left to existing banks.
In short, the Post Office needs a much more convincing, detailed and costed plan to show how it can finally turn a profit.
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