Post Office roasted after posting R1,5bn loss

The South African Post Office came in for a grilling from parliament's committee on telecommunications & postal services on Tuesday. By Duncan Alfreds.

post-office-640

The South African Post Office came in for a grilling from parliament’s committee on telecommunications & postal services on Tuesday.

The auditor-general’s report into the financial performance at the Post Office showed regression in key areas related to management, financial controls, taxation and goal attainment.

The AG showed that a lack of adequate financial control contributed to irregular expenditure of R576,8m and fruitless and wasteful expenditure of R95m.

“You need to entrench discipline to ensure accurate and relevant financial statements,” auditor Wikus Jansen van Rensburg told the committee.

The Post Office reported a loss of R1,5bn in the 2015 financial year, and a provisional loss of R1bn in the current year.

In terms of the organisation’s performance indicators, the Post Office scored just 14%.

In its presentation, the company told parliament that the results reflect problems related to cash flow as well as the impact of the four month strike at the organisation in 2014.

“It is common knowledge that the results we are to present do not communicate a good story,” said deputy chair Bulelwa Soci.

Data from the results presentation further showed that the Post Office posted losses of R227m in 2013, climbing to R407m in 2014, before jumping to R1,5bn in 2015.

“It is without doubt a shocking set of financial results,” said Democratic Alliance MP Cameron MacKenzie.

Committee chair Mmamoloko Kubayi also expressed frustration at the situation.

“My agitation with the Post Office is that since 2014 we just sit with the same thing,” said Kubayi.

Acting chief financial officer Nicola Dewar said that the Post Office had still not recovered to pre-strike revenue levels but that it has put mechanisms in place to ensure sound fiscal governance.

“We didn’t achieve any of our financial metrics because the Post Office continued to post losses. There was a lot of turnover of staff — we lost a lot of good skills,” she added.

Fin24

Share this article

  • Greg Mahlknecht

    How’s the new guy doing? He seems to be competent, but hasn’t been there long enough to make a difference – any reports from within the PO as to what he’s doing to fix stuff?

    I feel the Post Office absolutely needs to be made to work, not put out of its misery. It’s the only postage option the lower income people in the country will have, couriers are too expensive for them. If they got their act together, the PO could easily take on the courier guys and make a killing from eCommerce.

  • Chris

    Wow, what a sirprice. I for one have stopped using the post office since they had their last strike and I had to wait almost 6 months for a package from the UK. Never again, and Im sure Im not the only one.

  • McTSA

    R617,8m in irregular and wasteful expenditure. And I am sure that there is more where that came from which was skilfully hidden. That sum could have done tons of good elsewhere in the economy. The e-tolls come to mind. Schools and basic education, hospitals and clinics. Policing. The list is endless.

  • gamesbook

    At least your packages actually arrived …

  • gamesbook

    “If they got their act together” – agreed; surely this is not that hard. The world has had postal systems for over 100 years and this should be do-able with the right tools and systems – and attitudes – in place.

  • Ferdi

    “Acting chief financial officer Nicola Dewar said that the Post Office
    had still not recovered to pre-strike revenue levels but that it has put
    mechanisms in place to ensure sound fiscal governance.”

    Some things can not be un-done. The Post Office will need to get competitive in order to compete in the open market and win back their share through sustained delivery of service, or die. Same goes for SAA.

  • Richard Wickens

    That 4 month strike has basically killed them, most people do not use them anymore, even the lower income people. Even when they are not striking, theft and loss of parcels is high enough that unless you are sending xmas cards you don’t use them. What they need to fix is a very very bad reputation of not being reliable (at all). As we all know creating a bad reputation is easy, creating a good one is hard, and fixing a bad one…. well good luck to them.

  • Greg Mahlknecht

    I use them a lot. I experience many delays, but am yet to lose a parcel. The thing is, there is no service that anyone else sells that comes even vaguely close to their snail mail in value. I order small things from China all the time, it comes with free postage, or at worst $1-$2 shipping. This isn’t something that is going to be replaced. It would be a pity to lose it.

  • herman

    I agree with you Greg, i also have the odd Ebay delivery from China that would be impossible without them. I try to use the Post Office wherever possible to support them. I hate using Postnet and yet I find myself using their service more and more often. Just the other day i had to courier documents to Canada, Postnet delivered in 4 days, the best option from Post office was 10 working days. Postnet just passes it along to Aramex couriers and takes a cut for doing nothing (edit:Turns out Aramex owns Postnet). This is something that the post office could also do, but to just offer no priority service at all is poor business!

  • Chris

    Yes! One of the lucky ones.

  • Gene de Murro

    Greg, you have to note the connection between the “value” in sending mail via the PO on the one hand and it’s massive hemorrhaging of cash on the other. Who do you think is making up the shortfall? That’s right, the taxpayer, i.e. you. So you are right to take full advantage of the “cheap” service, since you pay for it either way!

    But it’s worse than that. Poor people who have no need for a cheap delivery from China are *also* funding the diffused costs in your cheap delivery.

    The PO is a make-work social welfare programme to a large extent, but it’s confused about exactly to what extent. IMO it’s preferable for our welfare transfers to be transparent and simple movements of cash, with no pretense. If we put all the PO’s bailout money directly into the hands of the poor, then they could use it to buy expensive mail delivery or choose to spend it some other way. Why presume having cheap postage is what the poor really want right now?

    We should discount any sense that the PO is an unmitigated social good, and check any righteousness that stems from that. The beneficiaries are limited, and the ones extracting the best deal from it aren’t even poor. There are better ways to spend these massive sums of taxpayer money on ourselves, nevermind on people who actually need it.

  • Greg Mahlknecht

    At no point did I suggest I supported ongoing bailouts (ie. that tax funding you’re talking about). The PO must be made in to a viable business and keep going.

    The new guy, who appears to be a competent businessman and not another struggle buddy appointment, plans to return the PO to profitability by 2018.

    I’m saying we NEED to make the post office work for the sake of the service it provides. Poorer people should be confidently using it, it’s them that can benefit the most from it. No taxpayer money should be spent on it. It has to be self-sufficient.

  • Gene de Murro

    I agree that an efficient SAPO would be good. Of course it would. But to become profitable, what are their options? They can only cut costs and/or raise prices. Cutting costs means shedding jobs, closing branches, reducing salaries relative to labour productivity. Raising prices means sending mail via SAPO isn’t so cheap anymore. Both courses of action would impact the very social functions you hold as the reason we should want to help them become viable in the first place.

    But assuming we’ll allow compromise, then which way? Which aspect of their welfare contributions (to employees, or to customers) are you okay with having curtailed in the name of self-sufficiency?

    My point is that this inherent contradiction puts the business and welfare objectives into direct conflict, and an opaque political process offers the only hope of resolution. Politics is a terrible way to do business, and business is a terrible way to achieve political ends.

    Efficient, profitable companies have a social benefit simply by being; meanwhile, pure cash grants achieve government welfare-transfer objectives at low(est) cost.

    So, I hold that SAPO should gradually be cut loose; the cash thus raised and freed can go directly to actual benefits — including a stamp subsidy, if it turns out to be important!

  • Greg Mahlknecht

    > But to become profitable, what are their options?

    We don’t have enough info to start guessing; I have no idea, , but let’s hope Mark Barnes does 🙂 He has an impressive track record.

    I’m cautiously optimistic about SAPO – it was profitable 5 years ago. I suspect just paying the employees on time and competent day-to-day management of SAPO will go a long way to righting the shop.

  • Gene de Murro

    The financial statements show why they’re in this trouble in just two lines. From revenue of R 5 billion, they pay R 3.8 billion in employee costs.

    I think it would be charitable to compare them with Telkom. From R 31 billion revenue, this company pays R 9.3 billion in employee costs, for which it is of course notorious.

    So SAPO spends about 75% of revenue straight over to employees — more than twice Telkom’s relative burden.

    SAPO is quite clearly little more than a make-work programme. For every rand that employees take home, they produce R1.30 revenue on average. This clearly doesn’t cover the cost of having them, you know, deliver mail — or perhaps even the overhead of payroll.

    Delivering mail is labour-intensive, but so is digging holes in the ground and filling them up again. And FedEx, for example, still manages to get their employees to produce $2.76 for every dollar they take home.

    If SAPO is to be considered an actual business, it needs to halve its wage bill, or double its revenue. It really is pretty bad.

  • Gene de Murro

    It has to amount to one or both of the two: cut costs or increase prices. Barnes will have do it, while pretending he’s not. I’m hopeful too, and I hope not too many depots get burned down in the process.

  • Greg Mahlknecht

    Those certainly aren’t the only 2 options. You could also increase productivity, and there’s a number of ways to do that – use exsiting staff better, improving systems and take on more customers with the same assets/staff. I don’t think it’s much of a secret that SAPO staff aren’t overworked 🙂 When they went on a go-slow strike last year, I’m not sure anyone noticed a difference.

  • Gene de Murro

    Yeah, I meant that with the silly phrase “reducing salaries relative to labour productivity”. I imagine he might have success with a bit of gentle “re-education”, in such a way that at worst, the staff lacking the constitution for work quietly remove themselves from the equation. Then again, we’re not Japan.

  • Richard Wickens

    Until the next strike, and the demands for even higher salaries crushes what little trust remains in the PO. It’s a horse with a broken leg, put it out of it’s misery.

  • William Stucke

    Way back when I had a role talking to these people from a position of strength, I suggested that they replace their existing model of 5 employees losing R60,000 per month in each rural Post Office with what Europe came up with many years ago: the local village café owner is appointed Post Master (or Mistress). The proprietor can sell crisps and cool drinks, or sell stamps. No additional costs to SAPO, and an additional income to the village shop of ~R10,000 per month.
    The same service is provided to rich and poor alike. The big difference is that SAPO ceases haemorrhaging money. Of course, this does assume that sense prevails, and that SAPO is no longer assumed to have the sole function of proving employment to the unemployable.
    Needless to say, this suggestion fell upon deaf ears, as did the obvious prediction that they were about to start losing money in a big way. Those two lines on the graph were about to cross.