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Cwele: Lagging price hikes hit Post Office

Cape Town - Lagging price rises over recent years at the South African Post Office (Sapo) is a key reason for the state-owned entity’s poor performance in recent years, Telecommunications and Postal Services Minister Siyabonga Cwele told MPs on Friday.

Addressing the posts and telecommunications portfolio committee, he said a variety of factors have conspired to undermine the postal business. However, the establishment of a new forum on October 1 this year made up of business, labour and government would go a long way to resolving the key challenges that the business has faced.

A key official told MPs on Friday that there is "a mountain" of backlogged mail, but management is starting to take steps to make up the slack.

Sapo has been faced with a continued labour strike which meant postal operations have been affected for most of 2014, but Cwele previously acknowledged that the post office has been suffering from strikes for a protracted period.

One of the problems is that the post office has lost its state subsidy and it is now clear that it has not put procedures in place to effectively wean it off that subsidy, the minister told the multi-party committee.

He apologised for the entity not presenting its annual report and financial statements, but believed that this would be sorted out soon.

Committee chair and ANC MP Mmamoloko Kubayi said warning lights had flashed when the state-owned entity did not present its financial statements as required. This signified “there is a problem” with the entity, she said.

Officials from the post office said post office expenses have simply exceeded its revenue, and the entity has run at a loss since the state ended its subsidy.

Acting post office board chairperson Nelly Manzini reported that there was a turnaround plan. “We do have a plan to take the post office forward,” she said. This would require buy-in from the board, the workers and other stakeholders, she told MPs.

Senior executive Andrew Nongogo acknowledged that “a mountain of mail” has built up since the strike. A variety of measures are being put in place to resolve this problem, including bringing in temporary staff to help make up the backlog, he told MPs.

“The reality is we do have a universal service obligation… the issue here is around the funding, not the obligation itself. From a policy perspective we need to (know) what are the funding options for the post office.” Post offices are located in rural areas which are not financially viable.

“That is what we are facing,” he said.

Non-investment in infrstructure

Nongogo admitted that the service side of the business has to be significantly beefed up, the industrial action needs to end and there is there is a need for capital funding. “Non-investment in infrastructure over the years has started to catch up with us.”

Nongogo said that it had already been decided to get rid of a system where labour brokers were used to find post office staff.

A key area of growth in the future and part of its turnaround strategy is to focus on e-commerce services for the Post Office.

Cwele said if there was a 20% increase in the courier service business, that would make all the difference for Post Office financials.

The committee chair said the Post Office staff had "not had the decency" to say that they had not paid many workers "even today", which was post office payday. "That is just wrong, you don't understand the role of parliament... this matter is very important."

Cwele said although the government did not budget “for a loss” by this state-owned entity, it was in discussions about how to provide an effective capital injection into the Post Office. “We think we now have a workable turnaround (of the Post Office’s finances).”

Interventions have also been made to ensure that the bank with which Sapo has an account does not freeze the account. He acknowledged that the bank – which he did not name - had been poised to do this.

Sapo told the committee that the entity has suffered a net loss of R538m this financial year so far. Revenue was R2.7bn, but expenses have been R3.2bn to September this year.

 - Fin24

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