The South African Post Office’s (Sapo) plan to cut up to 6,000 jobs shocked many this week, but the writing has been on the wall for the better part of a year.
Planned retrenchments were expected by management, labour and the government, and come after years of financial strife, failure to modernise the business and mismanagement by previous leadership. Aside from cutting jobs, the Post Office has repeatedly failed to timeously pay employee medical aid contributions.
Sapo has sought to characterise its “optimisation” plan as part of efforts to reduce expenditure, but in last year's budget, the National Treasury spelt out the harsh truth that optimisation would have to come with significant job cuts.
Finance minister Enoch Godongwana said in his 2022 Budget Speech that the Post Office’s expenditure was expected to decrease at an average annual rate of 4.8%, from R7bn in 2020/21 to R6bn in 2024/25.
“This is mainly due to a decrease in spending on compensation of employees, from R4bn in 2021/22 to R2.7bn in 2024/25, due to the staff optimisation project, which will see the number of employees decrease from 16,275 in 2021/22 to a projected 10,254 in 2024/25,” the document said.
These cuts now loom.
Sapo confirmed in an email to Business Times that to turn itself around and make the most of its R1.6bn medium-term allocation from the national fiscus, it could not avoid cutting jobs.
It said it was consulting with unions on steps to “right-size employee numbers” after bringing the matter to the table in November last year.
A protracted strike in 2014 was the straw that broke the camel’s back.
— The South African Post Office
“The first letter to the unions to introduce the section 189 process was in November 2022. Prior to that there [were] a number of engagements with all unions recognised at Sapo, considering and exploring the various options to reduce the high cost of employment,” Sapo said.
While it has successfully cut other costs, such as reducing expenses to 25% below budget, the salary bill still makes up 68% of expenditure and needs to be addressed urgently, it added.
This week, Communication Workers Union general secretary Aubrey Tshabalala said retrenching 6,000 workers would lead to a “complete collapse” of Sapo. The union is set to oppose the move at the Commission for Conciliation, Mediation, and Arbitration (CCMA) on March 2.
“When you dismiss workers in this magnitude, you are killing the network that provides universal access to essential services like social grant payments. The Post Office has closed branches and is placing grant beneficiaries at risk,” said Tshabalala.
Sapo said it last posted a profit in 2004, with the decline in its financial position starting as far back as 2006. The economic recession in 2008 and the adoption of smartphones accelerated this.
“A protracted strike in 2014 was the straw that broke the camel’s back. Bulk business customers had to find alternative service providers and this allowed new entrants to come in. Courier companies started encroaching on Sapo business and they are continuing to do so,” Sapo said.
It added that absorbing 8,250 part-time workers (which was among terms to settle the strike), despite having no full-time jobs for them, resulted in the entity being bloated and having increased costs. This saw a division of Sapo, Courier Freight Group, collapsing, as the entity struggled to meet its financial and state obligations.
“While the principle of Sapo distributing social grants is the correct one, the SA Social Security Agency (Sassa) contract was not in the interests of Sapo. Security costs related to the Sassa contract alone amount to roughly R600m per annum,” Sapo said.
The pandemic was “the last nail in the coffin” for the struggling entity as the Post Office was not allowed to provide any services during the earliest stages of lockdown, spurring a spike in digital communication, it said.
This week the Council for Medical Schemes (CMS) secured a North Gauteng High Court order allowing MediPos, the medical aid provider for Post Office employees, to be placed under curatorship. CEO and registrar of CMS Sipho Kabane said the council’s regulation division flagged MediPos’ declining solvency rates, which reached a low of 11% in December and necessitated urgent intervention.
Kabane said: “MediPos has been experiencing challenges in the collection of contributions from Sapo from April 2020 to date” and was required to submit monthly management accounts to monitor Sapo payments as determined by an October 2021 court order.
“The failure in collecting contributions from Sapo resulted in MediPos members being adversely affected, including the suspension of membership, even though contributions were deducted from their monthly salaries,” said the registrar.
Sapo reneged on paying over contributions multiple times last year. In October 2022 the entity was ordered to pay R4.5m in contributions to MediPos by the labour court, after litigation by union Solidarity. By November, it again failed to do so.
Sapo spokesperson Johan Kruger said the Post Office had looked to end the exclusive “in-house” provision of medical aid benefits to employees and sought to give them the freedom to choose their own provider.
Sapo said it suffers from a host of operational challenges, such as not getting exclusive government business, being outpaced by courier companies and litigation to become the only company to deliver packages weighing 1kg or less dragging on.
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