South African Post Office: Adapting to a changing commercial landscape

Advancements in technology and a free market economy are meant to increase competition. In the postal industry that has very much proved the case, adding commercial pressures to the South African Post Office.

SAPostOfficeThe past year has been a turbulent one with news breaking that the organisation had lost the South African Social Security Agency (SASSA) grant payout business compounded by illegal strike action.

Yet against these challenges lies a business with clear objectives and ambitions to provide skills and jobs for South Africans. The state-owned South African Post Office has proved resourceful time and again and a look at its history indicates how it has successfully adapted to changes over a number of years, particularly during the 20th Century.

Of course the history of mail delivery in South Africa dates back many centuries; in Colonial Times mail regularly travelled back and forth to England. In 1953 the first South African stamp, the Cape Triangular stamp, was commissioned and 7 years later the first post boxes were erected in the Cape. The construction of railway lines facilitated the expansion of postal services during the 1860s and by 1875 the Post Office had also diversified its range of services to include savings.

In 1932 the first overseas air-mail service was introduced and in 1940 the Post Office began to offer parcel insurance. By 1967 the organisation had introduced the first mail-sorting machine in Pretoria – which came to fruition following a study started in the Johannesburg office in 1963 to compare the cost of manual and automatic sorting of mail. The mail-sorting machine was commissioned in 1968, and that was also the year when the office was made financially independent.

The Savings aspect of the Post Office was further strengthened when in 1974 it took full responsibility for the Post Office Savings Bank and the National Savings Certificates. This service had previously been run by the Treasury on an agency basis. The computerisation of the Post Office Savings Bank was completed later that same year.

Banking continued to play an important role in the development of the Post Office and in 1982 the business launched Telebank on a trial basis. Today of course, the organisation is responsible for Postbank, which allows customers to withdraw funds from any ATM run by a South African bank.

By 1991 the nation’s postal service was operated by a newly formed company: the South African Post Office Limited. Since that time, we have seen the growth of electronic communications and in 2002, embracing this technology, South African President Thabo Mbeki electronically signed the Electronic Communication and Transaction Act into law. This was the first Act in the world to be signed into law by an electronic signature. The signing was enabled using the Post Office authentication service. The Act defines the Post Office as the “preferred authentication service provider” of identification procedures necessary for the issuing of advanced electronic signatures.

So there is plenty of precedence for the Post Office to not only adapt to changing circumstances, but to positively take benefit from it.

Commenting in the 2012/13 Annual Report, Ms Khumo Mzozoyana, Group Chief Financial Officer, stated:

The South African Post Office Group posted an operating loss before tax of R206.859 million (2012: R250.978 million profit) resulting from a sharp decline in revenues of 0.09 per cent to R5.696 billion (2012: R5.701 billion).

Lower mail and courier volumes, labour unrest and the loss of the SASSA grant payout business during the year under review also contributed to the lower revenues and reduction in the profit. The strike action by post office employees during August 2012 and February 2013 contributed to approximately R100 million losses in mail revenue.

The lower revenues were to some extent offset by cost optimisation and containment measures across the Group that resulted in the suppressed growth of 4.4 per cent in operating expenses to R6.296 billion (2012: R6.029 billion). The main contributors to our overheads are staff expenditure, including the employment of staff as casual employees from the labour broking companies, transport and property expenditure.”

The Group’s CEO, Christopher Hlekane, similarly pulled no punches in his statement:

The SA Post Office experienced a challenging year during 2012/13. This was evidenced by lower mail and courier volumes, labour unrest and the loss of the South African Social Security Agency (SASSA) grant payout business, which all decreased net profit.

Going forward, a key priority for the organisation will be a further review of the extent of our future universal service costs following the phasing out of the related government subsidy. These costs will have to be revisited in line with the business sustainability model, funding model and the execution of the mandate. Undoubtedly, the removal of the subsidy weakens our financial situation, as we remain obligated to deliver on our universal service commitments.

We are currently implementing various initiatives to restore the SA Post Office to profitability to meet efficiently our national mandate. Having launched our strategic corporate plan, we seek to diversify the group’s revenue through the introduction of electronic business and other customer solutions inspired by information technology (IT). The strategic plan is our runway towards customer intimacy, agility and, ultimately, profitability.

The executive team has a full appreciation of the various inherent advantages for the SA Post Office, which are underpinned by our leading infrastructure across our 9 provinces. With 2,486 service points spanning rural and semi-rural areas, the SA Post Office is a vital platform for delivering government services. Of particular interest is the growth witnessed with motor vehicle licence renewals and traffic fine payments.

Good progress is being made with the Postbank corporatisation, as it applies for a banking licence in line with the legislative amendment process. Postbank is implementing several significant initiatives to meet the requirements of the Banks Act, including the company registration process, upgrading the core banking system, implementing risk management systems and processes, and hiring additional skilled banking staff.

National Treasury has made funding available for these initiatives, which will enable Postbank to focus on financial inclusion – through provision of simple, affordable and accessible financial products and services – as a registered bank in terms of its mandate in the Postbank Act. This objective necessitates the review of our current product offering, planned product releases and broadening our channels.

As part of our effort to improve employee relations and streamline operations, we began phasing out the use of labour brokers. We continue to employ various strategies to further enhance our relations with employees for the ultimate benefit of customers.

An improved financial position and the single-minded implementation of the strategic corporate plan will be the foundation for future growth. I remain confident that the SA Post Office will continue to be a relevant and essential component of the South African economy,” he concluded.