Can the Post Office be saved?

As far back as 1781, workers handled official mail in Simon’s Town, Saldanha Bay and Robben Island. Before that, as early as 1500, sailors from passing ships used postal stones under which they left letters in the hope that they would be picked up by passengers of other ships going in the opposite direction and then sent on towards their final destinations.

Fast forward a few hundred years, and that outdated postal system seems quite reliable when compared to the services being offered by the modern-day South African Post Office (Sapo). 

Most post boxes in South Africa today are ?being used primarily as repositories for junk mail and flyers and while modern technology like email has had a major impact on Sapo’s business, the bigger impact has been the self-destruct buttons this state-owned enterprise (SOE) has been pressing.

The reality is the business is going bankrupt and if a Hail Mary pass – the creation of its own bank – doesn’t work, we may soon see the end of the Sapo. It’s either that or annual bailouts similar to what the public experiences with other SOEs. 

This may already be on the cards anyway, since a few months ago the minister of telecommunications and postal services, Siyabonga Cwele, warned the Sapo “urgently requires about R3.7bn to stabilise operations”.

Over the past three years Sapo losses have grown from R406m in 2013/14 to R1.14bn in 2015/16. The 2016/17 financial year is also expected to be bad, with losses that may exceed those of the past years. 

During the past year, Sapo also received a qualified audit opinion and saw the book value of total liabilities exceed the total book value of assets by R142m. Sapo is faring so poorly that in the past financial year, 22 branches were closed by landlords due to outstanding rent owed to them. Those that did operate often had “no paper, toner or other necessities to provide services to customers”. This last comment was made by the Sapo board chairperson, Dr Simo Lushaba, in the recent annual report. He, by the way, earned R2.3m for his efforts in the past year, roughly R193 000 a month. Not bad for running an entity that was also placed under administration in 2015. 

One major self-destruct button relates to labour challenges. A devastating strike, which paralysed Sapo’s operations completely between 18 August 2014 and 30 November 2014, simply destroyed confidence in the Post Office’s ability to deliver on its mandate and to control its relationship ?with unions.

One of the major outcomes of that strike was that Sapo permanently employed around 6 600 temporary workers, taking the employee headcount by 31 March 2016 to 21 590 people.

The impact on the wage bill was immense and immediate. In 2013/14 the total wage bill was R2.9bn. In the 2015/16 year it increased to R3.5bn. That is a huge wage bill for a company with total revenue of R4.6bn. 

Roughly 76% of total revenue is spent on paying staff. 

One does unfortunately get the impression unions are holding Sapo to ransom and there seems to be very little the organisation can do about it. 

Sapo’s main plan to save itself seems to be built on the establishment of its own commercial bank, called the South African Postbank (SOC) Limited. The idea is to use the Post Office’s existing network of 1 520 fully-fledged branches and 747 retail postal agencies to provide banking services.

The Postbank is meant to be a 100% subsidiary of Sapo and aims to be “a developmental bank that will provide simple, easy-to-understand financial products and services for the unbanked and underserviced”.

Currently Sapo is waiting on a response from the Reserve Bank regarding whether it complies with the necessary requirements for establishing the bank. Besides the obvious question of whether a company that is essentially bankrupt and insolvent should be allowed to create and operate its own bank, one has to ask if Sapo can provide better banking services than the existing banks. What will a Postbank offer that a Capitec – for example – doesn’t already offer, besides more branches? 

The Post Office should rather consider going into partnership with someone like Capitec, allowing an existing bank – with its own people and systems – to use its branches to provide services in exchange for a fee. The alternative doesn’t make sense.

James-Brent Styan authored a book on the energy crisis called Blackout: The Eskom Crisis, published in 2015. He writes here in his personal capacity.

This article originally appeared in the 3 November edition of finweek. Buy and download the magazine here.