More than 20 years ago Maanda Manyatshe served as CEO of the SA Post Office. Called upon in 2003 to account for the organisation’s losses, Manyatshe took MPs through a detailed analysis of the state-owned entity’s fragile business model.
In the preceding three years the Post Office had recorded losses of R584m, R371m and R215m. Core to these losses was that while it processed more than 6-million letters per day, it was spending an average of R1.35 to deliver each but charging only R1.23.
The inevitable losses were compounded by the state’s expectation that the Post Office served the poor — whose capacity to absorb cost-reflective costs for mail services was low — and also generate a profit. This conflicting mandate was the primary strategic and operational challenge.
The growth of nascent technologies such as email, the internet and mobile phones meant the Post Office’s distinguishing feature — connecting citizens and helping them communicate — was clearly in terminal decline. Its infrastructural footprint across the country was its strongest chance of remaining relevant. Using its branch network to provide services such as distributing social grants looked like the obvious pivot that should have been embedded into the business model.
Unfortunately, the Post Office never managed this transition, and last week the announcement that it was in provisional liquidation did not surprise many people. Like SAA and other state-owned entities, the Post Office languished in that grey space where ownership by the state and commercial pressures from private competition created a strategic squeeze that ignited the journey towards extinction. The pitfalls of state ownership include the inability to pursue economic opportunities without the concurrence of politicians.
For SAA, its ability to get approvals for key decisions depended on the availability and willingness of bureaucrats in the National Treasury to listen to the business case, and a longer process to obtain funding approvals. Given the intensity of competition in the aviation sector, delayed and abandoned procurement decisions simply escalated the decline towards operational irrelevance.
When the Post Office should have leveraged its infrastructure footprint to explore new business opportunities, such as providing social grants and reducing the digital divide between citizens by bringing technological resources closer to communities, it languished in mission drift where the main activity became paying salaries to its employees at the end of each month.
In response to the liquidation, communications minister Mondli Gungubele indicated that he will seek more information about what has gone wrong. While many reasons will inevitably be proffered, it is in the widely known generic issues where the minister is likely to find answers. The business model of a post office — offering to connect citizens separated by distance — has long been superseded by logistics and communications companies that offer the same services with superior turnaround times, lower costs and higher reliability. Reversing the trends of the past two decades — getting people to send letters rather than emails, for instance — is clearly not an option.
The government’s insistence on preserving institutions whose purpose is no longer clear to anyone reflects the bigger problem of conflating the primary role of the state — regulating market participants — with being an active market player. This conflict leads to regulatory paralysis as such conflicted governments address regulatory reform not only from the prism of what is important for the viability of the market, but also from the prism of whether their “entity” will survive any regulatory transition.
In the case of the Post Office, the irony is that it was the evolution of other industries that gradually cannibalised the Post Office’s business model and left the state regulating and participating in a sector that was fading into obscurity one email at a time.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
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