South African Post Office spends twice as much as it makes

Communications and Digital Technologies Minister Mondli Gungubele revealed that the South African Post Office (SAPO) will record a net loss of over R2 billion, with operational costs set to reach 200% of revenue.

Gungubele’s comments followed news from the Post Office’s business rescue practitioners, Anoosh Rooplal and Juanito Damons, that creditors voted in favour of the business rescue plan.

The plan will be implemented in two phases over two to five years and will see a much leaner organisation.

The first phase involves stabilising the business by reducing the branch network to 600 branches and reducing the workforce to 5,000 employees.

Gungubele said the SAPO currently has 1,023 branches, of which 894 are active. He could not say how many were profitable.

Current staff will be upskilled, and additional digital specialists and leaders will be employed to assist in the modernisation and digitisation transition.

“The focus will be on improving service delivery levels, which will include increasing its fleet to deliver letters and parcels timeously,” Rooplal said.

“New digital products will be considered and launched to increase revenue streams while automating more of the daily tasks.”

The second phase will implement elements of the ‘Post Office of Tomorrow’ strategy and aim to achieve the outcomes defined in the Postal Amendment Bill.

The Post Office will be repurposed to provide diversified and expanded services in a modern world.

These services include hybrid mail extensions, new motor licence disc solutions, increased property rental revenues or sales of owned property and the creation of a digital hub.

It will also seek strategic private and public partnerships and negotiate in the e-commerce and logistics space, which will assist in future-proofing the organisation.   

“A restructured Post Office can contribute to the financial sustainability of many large and smaller businesses due to its many procurement activities,” Rooplal said.

“It will also contribute to the tax-paying base and increase employment again in the future as the business grows.”

Commenting on the plan, Gungubele said the institution could be saved, and liquidation could be taken off the table.

Gungubele told Newzroom Africa that business rescue was needed because of the Post Office’s dire financial situation.

“We are going on a net loss of R2 billion plus, and we are projecting a R1.7 billion loss next year,” he said.

He revealed that the Post Office’s operational costs are around 185% of revenue and are projected to reach as high as 200%. Employee costs alone are 150% of the company’s revenue.

“If you listen to what I have said, if it continues, then it means we must close the South African Post Office,” Gungubele said.

He warned that if the Post Office is shut down, businesses reliant on its services will collapse, and millions of South Africans who rely on it will be stranded.

To save the state-owned enterprise, another R3.8 billion bailout is necessary. Gungubele said this bailout is public knowledge.