Are the Post Office and Postbank worth saving?

Without a viable plan rooted in the reality of business, saving these two institutions will be a waste of the public purse, argues Hlengani Mathebula

There’s been much attention recently on state-owned enterprises and quite rightly so given the risk they pose to the prudent management of government finances.

Most prominent have been Eskom and SAA.

Eskom because of its huge effect on the economy as the dominant supplier of energy, as well as its risk to state finances given that the government has guaranteed R350 billion in Eskom bonds.

SAA attracted attention because the airline was on the brink of liquidation when it was put under business rescue, a process the government has now supported with R3.5 billion in funding via the Development Bank of SA.

But flying under the radar for some months now has been the SA Post Office and Postbank.

The last time these two got some sunshine was when Mark Barnes resigned as CEO in August last year.

Barnes pointed to differences in strategy, specifically relating to the future structure of the Post Office and Postbank, as well as where Postbank should be located.

The two entities are worthy of closer examination because what ails them are good indicators of the general trajectory of public policy on state-owned enterprises.

But, most importantly, the future of these two entities is guaranteed by conference resolutions of the governing party, the ANC, which, for example, regards Postbank as the building block for a state-owned bank.

In this vision, the Post Office is seen as the entity on which Postbank can piggyback.

The supporters of this vision are politically vocal.

Minister of Communications and Digital Technologies Stella Ndabeni-Abrahams said in September last year that the government was debating whether Postbank’s shareholder ministry should be in her ministry or the ministry of finance.

The finance department option is likely to be opposed by some sections of the ANC.

Wherever the Post Office’s political home ends up, the creation of the state-owned bank and the remake of the Post Office aren’t going to be smooth sailing.

This means the new board of the Post Office and the new CEO will have their work cut out.

The Cabinet approved a new board of directors for the Post Office last October.

It is made up of people with relevant industry expertise.

It is on these experts that the public places much reliance for a quick turnaround of the Post Office’s fortunes.

As things stand, the government continues to nurture the ambition that the Post Office and Postbank have a bright and a symbiotic future.

But is this ambition rooted in reality, or is it an offshoot of the governing party’s belief that the state should cling on to the state-owned enterprises even if there is no longer a sound rationale for their existence?

These are the questions the new board and the new CEO need to revisit dispassionately.

Both entities have been run down over the years, so much so that the Post Office lost to the private sector a big chunk of what it used to do.

Most parcel deliveries, both by individuals and businesses, bypass the Post Office.

Even Pep stores now delivers parcels across South Africa and, with its network of outlets in every city and town, it has a good footprint.

The number of people who receive their monthly statements from banks and insurance companies, as well as bills, by mail has declined markedly.

With advances in technology, most people receive their bills and statements digitally.

Historically, the Post Bank had a clientele of old people who kept some of their savings there, but that lessened after continued reports that the bank had failed to keep proper records of those funds and that, in some instances, there had been cases of fraud.

The average South African has a wide range of options in terms of access to financial services.

These will expand as new entrants enter the market, and has already done so.

The question we should ask ourselves, therefore, is what future role is there for the Post Office and Postbank?

A starting point is to look at the description of the nature of the problem that faces both entities.

Read: Post Office bleeds R60m a month due to distribution of social grants

The late management guru, Peter Drucker, once said the root cause of nearly every business crisis was not that things were being done poorly.

Neither was it that the wrong things were being done. Indeed, in most cases, the rights things were being done, but fruitlessly.

“What accounts for this paradox? The assumptions on which the organisation has been built and is being run no longer fit reality. These are the assumptions that shape any organisation’s behaviour about what to do and what not to do, and define what the organisation considers meaningful,” said Drucker.

He said the assumptions were about markets, identifying customers and competitors, their values and behaviour.

The assumptions were about technology and its dynamics, a company’s strengths and weaknesses.

“These assumptions are about what a company gets paid for. They are what I call a company’s theory of business,” Drucker wrote in a 1994 Harvard Business Review article.

His diagnosis aptly describes what has being ailing both the Post Office and Postbank, with one exception.

Both institutions have been run badly for decades. There might have been attempts to do the right thing, but the theory of business for both remains unresolved.

In the absence of a rigorous and cold-hearted interrogation of the theory of business, both institutions will remain on state support for yearsto come.

There will be no economic rationale for their continued existence other than that they employ people.

The government has yet to provide a sound theory of the Post Office’s business, especially at a time when writing and posting letters has declined, if it still exists.

The same can be said for Postbank. Mobile money transfers have done away with the need to go to the Post Office or Postbank branch to collect money.

Government has been talking about the Post Office taking advantage of e-commerce and financial services to justify its existence.

If you use Drucker’s framework to examine this proposition, it’s not clear in the first instance who the customers are that the Post Office will target for such e-commerce services and, if those customers have been identified, who is serving them now and why would they want to switch from their service providers?

Also, what technology investments will the Post Office require to deliver on such a theory of its business?

Most importantly, where will the money for the required investment come from?

As an aside, governments, globally, have been very bad at managing big technology projects.

The government has been battling to get the State Information Technology Agency to operate efficiently and deliver on its mandate of building an efficient platform for the state.

It’s not clear, therefore, how the Post Office will move itself from where it is now.

It is increasingly becoming irrelevant to a future that delivers e-commerce services.

The same can be said about Postbank.

Bar the suggestion of collaring old-age pensioners and other social grant recipients and sending them to the Postbank, there is no clear outline of what the bank’s theory of business is.

Talking about these two institutions in the context of the fourth industrial revolution throws more fog than light on the theories of their businesses.

So, what would the specifications of a valid theory of the business of the Post Office and Postbank look like?

Let me return to Drucker.

The starting point revolves around two issues.

The first is that the government’s assumptions about the environment, the mission and core competencies of each business must fit the reality.

Vague value propositions, such as talking about the two institutions in the same vein as discussions about the fourth industrial revolution don’t meet the criteria of a valid theory of business.

Second, the assumptions in all three – environment, mission and core competencies – must fit one another.

The point here is that even if the assumptions about all three fit the reality of the situation in which the Post Office and Postbank have to operate, if the assumptions about all three don’t fit one another, the entity being examined has no future.

This second point talks to the internal factors of the organisation, whereas the first one speaks to the organisation facing the world.

Without a rigorous and dispassionate examination of these factors, the Post Office and Postbank have no future.

But then, the new board and new CEO of the Post Office might just provide us with a reasonable case why the two entities have a future and why the taxpayer should invest in them.

Mathebula is a former managing executive of Absa Private Bank, nonexecutive director of BMW Group SA and chairperson of the Black Business Executive Circle. Follow him on Twitter @Hlengane

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