A day after President Cyril Ramaphosa told reporters that the ANC’s top decision-making body, the national executive committee, had rallied behind his letter calling for tougher measures against the corruption cancer corroding every layer of the party, the SA Post Office reminded him about his long-standing state-owned enterprises (SOEs) headache.
Like most 100-odd state-owned companies, the Post Office is meant to be self-sufficient but it has barely broken even for years. In its fiscal first quarter, it slumped to a R925m loss, almost equal to the total suffered for the full 2019 financial year and compelling it to extend a presumptuous appeal for financial help.
It needs about R7bn to make up for losses caused by the Covid-19 pandemic amid a business model that already looked broken.
Over the past three years alone it has been suffering annual losses in the region of R1bn a year even after being handed a contract to distribute social grants to millions of South Africans. The quarterly loss makes management projections to narrow 2020 losses before returning to the black the following year a sad joke.
In the age of online bill payments and e-mail, the Post Office is like a metered taxi in the age of Uber.
More than half of the company’s R4bn revenue comes from delivering mail and parcels. Inevitably, the volumes are shrinking quickly. With letters between individuals having long faded into the past, the Post Office is facing an existential threat as banks, retailers and direct mail marketers entice customers to receive their invoices, bank statements and advertising material electronically.
Between 1990 and 2010, letter mail volumes were above 14-billion but with more and more people having access to the internet, they have dropped to about 9-billion today — reflecting a similar trend around the world.
Rest assured the R7bn cash injection, which would come on top of about R3bn advanced by the taxpayer in January, will not be the last, especially given that management is distracted by a brawl between communications minister Stella Ndabeni-Abrahams and axed board chair Colleen Makhubele, who has accused the minister of acting unconstitutionally.
With its long-standing cash cow in irreversible structural decline and no money to reinvent itself, the Post Office will be back with another begging bowl soon. And finance minister Tito Mboweni’s mammoth task of fixing the economy, whose fragile prospects have been whacked by the Covid-19 pandemic, and ensuring SA does not fall into a debilitating debt trap, will become that much harder.
Unless Ramaphosa shows a similar level of determination that helped him walk out of the national executive committee meeting last week with his head held high, he won’t win over a left-leaning faction in the ANC to the view that the Post Office, like other SOEs, is ripe for private-sector partnerships.
With the Post Office having an unparalleled distribution network and warehouses across the country, it should be a bidding war among courier companies, retailers and e-commerce firms as many are forced to step up their online offering after the Covid-19 pandemic built online shopping habits that will stick.
The government’s vast social-distancing strategy during the pandemic has only accelerated the trend in which more and more people choose to buy everything from milk to intricate watches online.
A cursory glance at SA retailers’ profit guidance statements covering the first six months of the year shows a surge in sales over the internet — though trade, industry and competition minister Ebrahim Patel did his best to stifle them at the start of the lockdown period.
Some of these companies would be clamouring to inject cash into the Post Office in exchange for using its vast distribution and warehouse to deliver their goods to far-flung doorsteps.
Relaxing the regulatory environment to allow cash injections from private players into the Post Office will add to a rather small list of victories for Ramaphosa, who was swept to election victory on promises to revive the economy with the help of the private sector.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.