BANKING ON LICENCE
The Post Office turnaround: a game-changer
Part 3: The turnaround might not yet have happened, but the Post Office is now a different business
Winning the contract to pay social grants was a decisive breakthrough in the battle to revive the Post Office.
With it though will come a whole raft of necessary new investments. Apart from technology, post offices now need improved security, with one or two already having been robbed of social grants cash.
There are some other positives too: the Treasury, it seems, has realised that cutting the Post Office subsidy was not such a good idea after all. It is in discussions with the Post Office to reinstate a permanent subsidy. This will be a game-changer for the future.
The Treasury has also been warming to the bank idea. It has tabled the Financial Matters Amendment Bill, which will allow a state-owned company to apply for a banking licence. It has also warmed to the payment of social grants idea.
While the Treasury had until 2017 insisted the solution lay mainly with the banks, the banks did not come to the party, and did not adjust the cost of withdrawals for social grant recipients. At the Post Office (as well as retail merchants) these are free at the point of service.
Treasury seems to be able to subsidise the rich to fly SA Airways but not the poor to send lettersAubrey Tshabalala
Above all, when it comes to assessing The Great Post Office Turnaround, CEO Mark Barnes, with his crazy enthusiasm and his SA boytjie language and demeanour, has started to revive what was most in short supply in the Post Office: goodwill.
People are starting to have pride and to take responsibility, says telecommunications & postal services minister Siyabonga Cwele. Veteran unionist Aubrey Tshabalala, the general secretary of the Communications Workers Union, one of the trade unions at the Post Office, says workers gave Barnes the ultimate benefit of the doubt.
In 2016 and in 2017 they accepted a 0% increase after Barnes and Cwele opened the books and showed them the Post Office’s dire position.
"There was a strong voice from workers which said ‘let’s give management a chance’," says Tshabalala.
After two years, though, and no improvement to the broken windows, the leaking roofs and the cold nights without heating, in 2018 workers drew the line.
"Treasury seems to be able to subsidise the rich to fly SA Airways but not the poor to send letters," says Tshabalala.
"After other ailing state-owned companies paid salary increases all these years, we didn’t feel we had any further arguments to put to workers," says Cwele.
The strike was settled on 6%.
The future sustainability of the Post Office is not yet assured. While it will earn good income from paying social grants, more cheaply than was done before and more honestly — it does not allow deductions to be made by loan sharks or retailers — and be able to invest in technology for its banking vision, that business model is far from settled. It has also asked the Treasury for an additional R2.7bn in guarantees so it can pay outstanding creditors and start borrowing.
Cwele and Barnes are of the same mind in thinking that the banking operation will subsidise other operations.
Barnes makes reference to China Post, which he says makes 60% of its revenue from financial services. Barnes’s vision for the bank side of the business is a kind of Grameen Bank — Bangladesh’s micro-finance bank that provides loans to the poor without collateral. "We need to redefine what we mean by lending money. In the informal sector we should be lending against income. So, to me, a woman who has a steady income from renting out a room in her house, has a bankable asset," he says.
The Reserve Bank and the Treasury are not so sure and, in the event that the Post Bank does get a full banking licence, are likely to insist that its operations be kept separate and the (small) profits be invested back into the banking business.
One of the issues that must be decided upon before the banking licence application can be deliberated on is the identity of the bank holding company.
The Bank and the Treasury are in favour of setting up a separate holding company with the minister as the shareholder. This way the Post Bank and the Post Office operations would be kept separate. The Bank, in particular, is keen that if the Post Bank was to receive a banking licence, then for reasons of sustainability all profit for the first 10 years should be reinvested in the bank.
While not everything is settled and mail still sits undelivered, these are a very different set of questions to those that faced the Post Office in 2016. The turnaround might not yet have happened, but the Post Office is now a different business, with the prospect of sustainability on the horizon.