Business

Post Office in the black by 2017

2015-05-10 08:10

Johannesburg - The SA Post Office projects it will hit a R1.3bn profit by 2017, and a R1.5bn profit by 2018.

The ailing parastatal, which was brought to its knees by a four-month strike last year, revealed its turnaround strategy in Parliament this week, part of which involves closing down branches and reducing its workforce.

Acting CEO Mlu Mathonsi and interim administrator Simosizwe Lushaba insisted that a massive turnaround was taking place.

The Post Office reported that the group’s preliminary net loss for the financial year to March 31 2015 was about R1.1bn and it was struggling to pay some of its suppliers.

Technology company Siemens has reportedly pulled out of the Post Office – which affects its automated letter-sorting services – due to nonpayment. Siemens did not respond to a request for confirmation by City Press.

Another technology company, Syntell, is reportedly owed millions of rands and is threatening to pull out of the company.

But the Post Office went to Parliament with a plan to turn things around.

According to the strategic turnaround plan it presented to Parliament’s portfolio committee on communications this past week, it plans to reduce its 23 820 staff by 5 065, and close 652 retail branches and eight mail processing hubs over five years.

About 2 308 staff members affected by the cuts will come from natural attrition and potential early retirement. However, it said that it would consult with the unions to consider strategies and options for the rest of the staff who might be affected.

One way the Post Office seeks to mitigate the loss of staff is by creating entrepreneurs from whom it can source certain services.

“An average of R3.4m a month is spent on cleaning services. An opportunity analysis will be done on insourcing. Alternatively, a business opportunity could be presented to affected staff.

“This could accommodate an average of 300 employees,” the Post Office said in its presentation.

However, it will also need to fill critical positions that are vacant.

It has budgeted about R9m for that. In total, it plans to save R719m on labour costs.

The Post Office also said there was a misalignment in the cost of operating branches as well as the profitability of those branches.

The top 20 worst performing branches were mostly all in large metropolitan areas and a large number of these were in shopping malls.

Cameron Mackenzie, a DA member of Parliament’s communication portfolio committee, said the turnaround plan “beggars belief”.

“I think its overly ambitious and I don’t see how you can turn a R1.2bn loss into a R1.3bn profit in two years. Even with Cabinet’s instruction that 30% of government’s business be done with the Post Office, I can’t see it turning around,” said Mackenzie.

An area of revenue leakage the Post Office wants investigated is the regulation that reserves the Post Office a monopoly over parcels that weigh less than 1kg.

Courier companies have cashed in because instead of posting items that weigh less than 1kg, which would need a stamp, people choose to courier things to avoid using the Post Office.

In an interview with City Press during the postal strike last year, then CEO of OneLogix, where PostNet was a subsidiary, Ian Lourens, said a contributing factor to the growth of the business was the unavailability and unreliability of the Post Office. PostNet was sold to Dubai company Aramex for R190m in December.

The Post Office has started discussions with the Independent Communications Authority of SA and a task team has been assembled to probe further into the matter.

“They [the Post Office] didn’t go into detail on this, but I suppose they’re targeting the PostNets and other courier companies,” said MacKenzie.

Several courier companies that City Press reached out to did not respond to requests for comment on this issue.

If the regulator clamps down on parcels that weigh less than 1kg, this would mean that people may not have the option to courier and will be forced to use the Post Office, a move that may seem uncompetitive.

Anthony Norton, a lawyer at Nortons Inc, said there was very little that the competition authorities could do if that happened.

“It does strike me that this type of regulation is anti-competitive because it seems to reserve a particular type of activity for the Post Office, and one would think it would be in the interests of consumers to have many parties who could offer similar services in the interests of not only a more efficient service, but also a more cost-effective one,” he said.

“Unfortunately, where a statute reserves a particular category of service or function for a particular entity, the competition authorities have previously found that they do not have the necessary jurisdiction to entertain such complaints. Accordingly, it will probably be necessary for there to be some form of legislative amendment by Parliament to create a more competitive environment.”

Another competition lawyer agreed with Norton.

“The Competition Act does not apply if another law authorises a particular state of affairs. For example, because there is legislation that requires petrol stations to all charge the same price at the pump for petrol, this does not amount to price-fixing in terms of the Competition Act.

“So if there is such a law relating to parcels, there may be no basis for a complaint in terms of the Competition Act – Parliament would have to amend the law,” she said

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June 18 2017