Over the past decade, the South African Post Office has had significant business problems, including debt to creditors and poor revenue collection.
Over the past decade, the South African Post Office has had significant business problems, including debt to creditors and poor revenue collection. More recently, it has been provisionally liquidated. As a result, the Post Office has had to reconsider its business strategy but finds it difficult to keep up with its closest competitors, the private sector.
Should the Post Office survive provisional liquidation and not reach final liquidation, the long-awaited “Post Office of Tomorrow” must be implemented immediately if the struggling state-owned enterprise is to be saved.
The Post Office of Tomorrow would entail redesigning the Post Office, efficiently digitising the organisation, and bringing it up to date with current technological advances in the postal business while preparing it for a more technological future. For the Post Office of Tomorrow, there is an opportunity to take part in business activities such as distributing medication for the public healthcare sector, partnering with municipalities to boost access to service delivery and partnering with e-commerce market players where Post Office branches would serve as delivery points. These steps would enable the Post Office to be an effective competitor, regain some market share, and contribute to addressing the problems related to its negative balance sheet.
Post Office’s challenges
After a court application by Bay City Trading 457, the property company owed a large amount of rent (allegedly R273 368) by the Post Office, the Pretoria high court on 23 March placed it in provisional liquidation. This ruling resulted from financial difficulties that persisted for more than a decade at the state-owned enterprise. The SOE’s liabilities exceed its assets by R4 billion, and its debt totals R8 billion. These financial difficulties have resulted in monies owed to creditors and workers, Unemployment Insurance Fund contributions for workers and retrenchments, among other things.
One of the factors contributing to the post office’s negative balance sheet is that the state-owned entity has yet to invest in development that matches the times in which it operates. It must effectively respond to its market, which entails a society with increasingly advanced technology. Essentially, the Post Office needs to catch up to its private-sector counterparts in terms of technology adoption. Its inability to do so hitherto has reduced its value proposition in the market. Today, the general perception is that the Post Office and its offerings are unreliable and less advantageous than those in the private sector, resulting in fewer customers and less financial capacity to modernise it. Dealing with these problems will require the government to make deliberate policy decisions to enable growth and public-private partnerships.
South African Post Office Amendment Bill
In April last year, the former minister of communications and digital technologies, Khumbudzo Ntshavheni, introduced the South African Post Office Amendment Bill for public comment. This step in the policymaking process was essential to gather stakeholder views on the proposed legislation. Almost a year later, on 28 February, the department gazetted its plan to present the 2022 bill before the National Assembly, which would be sent back to the president for signing into law. This bill presents an opportunity for the Post Office to be enabled to effect significant institutional redesign.
The bill suggests it is also the government’s view that the current business model of the Post Office is not viable and should be redesigned. That should also include strengthening its governance model to boost accountability measures. The accountability issues at the Post Office have continuously landed it at odds with the auditor general.
In 2021, the auditor general found the Post Office to be commercially and technically insolvent. For the financial statements for 2021-22, the auditor general stated that it was unable to gather enough audit evidence that would have served as a foundation for an audit opinion. As such, the auditor general’s office could not give an audit opinion. In dealing with the leadership problems prevalent at the state-owned entity, the Post Office of Tomorrow would have to be given clear performance indicators allowing the relevant institutions to monitor and evaluate it.
According to the Financial Mail, the Post Office has “guzzled R8.4bn in taxpayer bailouts in the last five years”. Meanwhile, the probability of a parcel actually arriving is a mere 68%, while the state-owned entity paid its directors and other “top brass” a total of R23.9 million.
To have any hope of attaining profitability, an expanded mandate of the Post Office allowing it to venture into e-commerce services would enable an environment for partnerships with business and government departments that could tap into the communities in which its infrastructure is located. Service delivery is increasingly facing problems and the Post Office can help address some of these by being an agent for delivery on behalf of government departments.
Beyond this, to respond to current market demands, the Post Office must partner with business players with an online presence but needs more infrastructure to reach its customers. To sufficiently enter this business space, the Post Office must first deal with its debt and then fund redesigning its business model.
South Africa’s socio-economic issues require an expansion of functional, well-governed private-public partnerships. This extends to the commercial difficulties confronting state-owned entities. As development partners, the private sector could play a significant role which would, among other things, contribute to funding the Post Office of Tomorrow in return for using the Post Office’s infrastructure to reach their customers. So now is the time to test the partnership part of social partners in the South African economy.
Mxolisi Zondo is a public policy researcher at Good Governance Africa.
The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.