Post Office says Sassa costs partly to blame for woes

The SA Post Office, which is about to conduct mass retrenchments, says its former distribution contract with the SA Social Security Agency (Sassa) is partly to blame for its financial woes that have rendered it technically insolvent. 

The state-owned service, which last made a profit in 2004, said the contract for its branches to disburse various monthly government grants to about 25-million needy citizens cost it about R600m a year. The contract ended in November 2022. 

The Post Office is the main means of communication in rural and remote areas, yet is one of many state-owned enterprises that relies on bailouts to keep operating.

Besides mail delivery services, the Post Office and Postbank were responsible for distributing state financial assistance, including the Covid-19 social relief of distress grant that was introduced in April 2020, under national state of disaster regulations to mitigate the impact of Covid-19 lockdowns. The post office said the additional costs associated with the grant placed further strain on its finances while was also battling competition from the private sector and dealing with fewer employees and branches. 

“The long queues as a result of grants (especially social relief of distress grants) were detrimental to other services,” said Post Office spokesperson Johan Kruger. “Customers avoided the queues by choosing different service providers for some of the revenue lines such as motor vehicle licences and financial services.” 

In its most recent annual report tabled in parliament in October, the Post Office said it incurred losses of at least R2.2bn (down from about R3bn the year before) and that its liabilities exceeded assets by more than R4bn.

The report also notes that during the period under review the Post Office delivered just 68% of mail it received and operated with a fleet of 366 vehicles, down from 1,236 a year earlier.

Kruger confirmed the company will cut jobs but said he was unable to give an exact number at it was still consulting affected workers. Staff costs account for 68% of total expenses, he added. 

The Section 189 notice — part of the legislation dealing with retrenchments — issued to Post Office workers after President Cyril Ramaphosa’s state of the nation address last week could affect service delivery to rural and poor communities, the Communication Workers Union (CWU) said. 

“They [Post Office management] gave us a notice on Thursday that they want to retrench 6,000 workers nationally,” CWU general secretary Aubrey Tshabalala told Business Day on Monday.

The company had asked for R3.4bn in government assistance  in the lead up to the 2022 medium term budget policy statement, but only Denel, Transnet and Sanral got bailouts totalling R33bn. 

“The Post Office’s universal service obligation is another contributor to its financial state,” Kruger said. “The government obliges the Post Office to provide a service to all areas of the country, including the unprofitable areas, and the Post Office has been subsidising part of this mandate

“Bulk business customers had to find alternative service providers, and this allowed new entrants to come in. Courier companies started encroaching onto Post Office business and they are continuing to do so.”

maekot@businesslive.co.za