AYABONGA CAWE: Post office and Postbank bills will change postal and financial services

The statement after the cabinet meeting on March 9 gave an update on two bills — the SA Post Office Amendment Bill and the SA Postbank Amendment Bill — that might have a lasting impact on postal and financial services, as well as e-commerce and logistics services.

In the case of the SA Post Office (Sapo), the amendments “enable (it) to take advantage of the technological developments in its environment”. These involve integrated logistics, e-commerce and positioning itself as a digital hub for businesses and communities.

The amendments are long overdue and give strong policy signals on what a future Sapo might look like, its relation to the environment it operates in and the kind of revenues it will collect. A few areas of interest underscore how long overdue these amendments have been.

The one area is that of small parcels, or what the legislation calls “reserved postal services” — those weighing less than 1kg, where Sapo has in effect squandered a monopoly position as customers voted with their feet. Moreover, advances in e-commerce have meant that “postal activity” presents a recurring exchange and commerce channel slightly different in scope to the routine dispatching of letters or small parcels and sale of stamps.

Sapo has suggested that many of the new entrants in reserved postal services become its “agents” and pay agency fees, in effect making Sapo a collector of rents arising from its monopoly position. It is undoubtedly considering this because of the success it has experienced as an “agent” in the provision of value-added services provided by its sister departments and agencies in the state.

The shift of the payment of social grants to Sapo in the past few years has meant Sapo’s agency and money transfer revenue has grown from R610m in 2019 to over R1.2bn in 2020, with 388,000 more grant recipients receiving their transfers at the local post office. Add to this the Social Relief of Distress grant, which was subsequently introduced and is also paid out by Sapo. Its monopoly position (on small parcels) and its role as a partner of choice for government entities looking for alternative distribution channels for services, may be Sapo's greatest potential, if well used.

To further illustrate the point, let us compare the value-added service revenue generated by Sapo to that of two big retailers (Shoprite and Pick n Pay), which have a comparable footprint and reach but also have seen these services constitute a growing part of their topline.

Between 2017 and 2020 Pick n Pay grew its revenue from third-party commissions and value-added services by 5.6% from R827m to R1.03bn. Shoprite’s grew by a smaller rate, but between 2017 and 2019 these revenues were still far higher than those of Sapo. The SA Social Security Agency injection in 2019 meant for 2019/20 Sapo received more agency and value-added service fees than either of the two retailers. In the same financial year, revenue from motor vehicle licences increased by over R330m.

This surge in agency type revenue occurs alongside a decline in Sapo’s footprint. In 2015 it had just shy of 2,500 points of presence, while by 2020 it had 2,120, compared to the retailers which both grew their retail store footprints. Shoprite had fewer than 1,500 stores in SA in 2015, but by 2020 it had more than 2,000. Pick n Pay grew its store footprint by expansion and acquisition from 1,189 to 1,771 in the same period.

This suggests that while the legislative amendment may enable Sapo to become a competitive e-commerce and digital hub, it must boost its investments in ICT and arrest the decline in its points of presence, while widening the scope of differentiated services its digital and e-commerce platforms provide.

It won’t make any sense to try to play catch-up if it cannot leverage its role as an extension of public service delivery functions, from motor licence renewals to grants, to grow its revenue base, subject to interdepartmental partnerships. Without these the logic of “downsize and distribute” may stunt Sapo’s renewal before it’s even begun in earnest.

• Cawe (@aycawe), a development economist, is MD of Xesibe Holdings and hosts MetroFMTalk on Metro FM.