Delivering: Post Office CEO Mark Barnes has had a tough time getting buy-in from the government for his plans. Picture: FREDDY MAVUNDA
Delivering: Post Office CEO Mark Barnes has had a tough time getting buy-in from the government for his plans. Picture: FREDDY MAVUNDA

Mark Barnes joined the Post Office at the start of 2015.

He moved the head office out of swanky Centurion back to the centre of Pretoria and dumped the R4m-a-month lease, which he declared to be illegal.

The parties are presently involved in litigation.

His first plan to save the Post Office in 2016 was to turn it into a fully fledged bank. With its physical footprint across the country, the Post Office has four times as many branches as Standard Bank. The idea was that it would be a low-cost lender to small and micro businesses and that financial services would fund other non-profitable services, such as mail.

The Post Bank’s legal standing now is that it can take deposits but is not allowed to lend money. Barnes had thought the licence would be granted quickly. However, two and a half years later, the application is still stuck with the Reserve Bank.

While there were legal technicalities that needed addressing – such as amending the Banks Act to allow state-owned companies to engage in banking – the truth is that the Treasury and the Bank balked at the idea that the Post Office should be able to lend money.

To help fund the gearing-up to pay grants and to stave off creditors, Barnes dipped into the reserves of the Post Bank. Everything from forklifts to delivery vehicles to office space was being seized by creditors. Stamps could not be printed and offices ran out of paper.

Not only was the banking licence idea not enthusiastically received, but Barnes’s appeals to the government for funding to solve some of the company’s most dire problems – leaking roofs and broken windows – fell on deaf ears.

"It soon became clear to me that the Post Office is going to be kept but not invested in. We were not a priority budget. In fact, we were regarded as a replaceable service," he says.

A year later, Barnes changed tack. "I said we are not a Post Office; we are a collection of irreplaceable state infrastructure that could never be replicated today. Nobody could roll out today what the Post Office already has.

"Why can’t we collect all monies and pay all the monies on behalf of government?"

The next 18 months were "a war of high resistance" against the department of social development to win government support for the Post Office to distribute social grants. The idea was that instead of allowing the private sector to profit off social grants, "we could invest in infrastructure that government owns already. As more government services come to the Post Office, the Post Office will become more competitive."

Treasury was sceptical and social development officials and their minister, Bathabile Dlamini, seemed set on keeping the social grants contract with CPS.

And then, after no movement for months, the logjam was broken and in December 2017 the Post Office was quite suddenly placed on the spot and asked to gear up to pay social grants.

"There were some turning points — the change in government helped and we got a new minister. It also helped that Nkosazana Dlamini-Zuma was the head of the interministerial committee set up to deal with the problem. She is a person who makes decisions based on facts," says Barnes.

At first, the plan had been that the Post Office would run only the electronic payments and the Social Security Agency of SA (Sassa) would put out a tender for the cash payments.

However, in May 2018, the tender to do cash payments was cancelled by social development minister Susan Shabangu. The Post Office had to scramble to gear up within a matter of months to pay 17-million grants with a value of R160bn a year.

Step in right direction: South African Post Office CEO Mark Barnes, right, greets employee Gloria Malatji on his visit to a branch in Alexandra, Johannesburg. Picture: SUNDAY TIMES
Step in right direction: South African Post Office CEO Mark Barnes, right, greets employee Gloria Malatji on his visit to a branch in Alexandra, Johannesburg. Picture: SUNDAY TIMES

Month one — July – was pretty disastrous as the Post Office’s digital infrastructure was simply unable to cope with the millions of transactions that needed to be processed on the first few days of the month. Investments in technology, paid for partly by Sassa and done in partnership with Telkom, were hastily done. While in July the Post Office could process only 15 transactions per second, by August it could do 200.

By the time August had come and gone, Treasury’s stance had switched to one of cautious support. The Black Sash, a human rights lobby group charged with monitoring the grant payment process, also came out in support, even though "it was not plain sailing", they said.

Most significantly, though, was that Dlamini-Zuma gave the Post Office a strong vote of confidence. While the idea had been that the infrastructure for the payment system would be owned by and hence returned to Sassa after five years, she motivated that the systems that were being invested in become the property of the Post Office.

To help fund the gearing-up to pay grants and to stave off creditors, Barnes dipped into the reserves of the Post Bank. Everything from forklifts to delivery vehicles to office space was being seized by creditors. Stamps could not be printed and offices ran out of paper.

Barnes had earlier appealed to telecommunications & postal services minister Siyabonga Cwele to make use of the Post Bank’s reserves as an emergency measure. Cwele declined, arguing that when this had been done in 2003, the Post Office had given the Treasury an undertaking that it would never happen again.

However, as pressure built and the prospect of 11 million new customers loomed, Barnes went ahead and used the Post Bank funds anyway.

Barnes is adamant it was all by the book. He says the Post Bank is a subsidiary of the Post Office. The funds were transferred with the full permission of the Post Office board, signed for by Barnes and another signatory to the account, also a Post Office executive. Cwele, however, was furious. "I was angry. I told him they were stealing the money…. I understand that they had creditors, but it does not mean that when you are hungry you are justified to steal," he says.

In Barnes’s plan, though, this was not just about getting the bills paid. The social grant contract was to be the Post Office’s ticket out of the past and into the future.

"In two-and-a-half years from now, we will be making R1bn in profit. Last year, this was not a sustainable business; this year, it is," Barnes says.

Correction: September 13, 2018

An earlier version of this article misquoted Barnes' predicted profit for the Post Office in two years' time as R1m.

patonc@businesslive.co.za