SA Post Office pleads for funding and time to build ‘post office of tomorrow’

The loss-making SA Post Office (Sapo) pleaded for a cash injection while it continues on a downward spiral of declining revenue and increasing costs.

Presenting the annual financial report on Tuesday, CEO Nomkhitha Noma told Parliament’s Portfolio Committee on Communication the state entity, deemed commercially insolvent in the last reporting cycle, needed “funding and more time” to fully implement its new strategy and build an e-commerce player for the country.

‘Post office of tomorrow’ strategy

Its ‘post office of tomorrow’ turnaround strategy requires more highly skilled personnel, staff restructuring, modernisation of operations and digitisation – all of which require money from the National Treasury.

“We need time and we need funding so that we can implement the new exciting ‘post office of tomorrow’ strategy. We aren’t folding our arms and waiting for funding to drop, we are looking at other ways to take this forward.

“There are stakeholders who want to defocus us […] but we are not losing focus, we are committed to where we are going,” Noma said.

According to acting CFO Lenny Govender, revenue ending March 2021 was R2.9 billion compared to R4.1 billion in 2020 – a decline by R1.2 billion.

Postal services revenue came to R1.6 billion, from R2.8 billion in the preceding year.

Operating costs totalled R6.2 billion and were reduced by at least R370 million from R6.5billion in 2020. The main cost driver was employee salaries at 60%.

“Current liabilities of R8.7 billion exceed current assets by R4.9 billion. Liquidity position worsened due to the loss of R2.3 billion for the year,” Govender said.

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New skills needed for strategic plan

Talks with National Treasury on funding continued, said Noma, adding that only two executives were in permanent positions at Sapo.

“In implementing the strategy, we recognised that executives needed to be fully resourced. Only myself and the group executive for operations, everyone else is in an acting capacity.

“For us, a successful strategy will require new skills, as you know, one needs to align strategy with good new skills.

“We want to style ourselves as a logistics and warehousing company, so we decided to onboard skills in a phased-in approach while waiting for funding”.

“We would want new skills in the next six to eight months”, Noma added.

Sapo staffing plan

In cutting staff costs, Sapo is considering the owner-driver system to avoid retrenching workers. Meetings with unions continued to appraise them on the staffing plan.

The post office employs at least 14,092 workers.

Reduced working hours and salary cuts are in the planning stages and yet to be finalised, said Geert Bataille, the general manager for strategic planning.

“Notwithstanding funding not yet available, we embarked on initiatives such as the establishment of Sapo as a logistical hub. We are currently redesigning operational model, flattening and merging units to achieve this.”

Data migration plans to migrate Sapo data to the cloud are hampered by connectivity issues and old computers and software that need replacement.

Sapo branches targeted by criminals

As a distributor of billions in social grants, Sapo has been hit by robberies and heists in recent months, said Bataille.

Sapo pays 7.9 million grant beneficiaries monthly.

For the Social Relief of Distress (SRD) grants, 8.9 million people collected their R350 from Sapo between June 2020 and March 2021.

“The unprecedented spike in armed robberies and break-ins at branches are due to high level of cash at certain branches, and Sapo is seen a soft target.

“There has been an increase in CIT heists, vehicle hijacking and business burglaries increased from 583 incidents in 2020 to 887 in 2021.

“In some instances, we were unable to get settlements from insurances, so we need to look at new safety models such as a cashless post office”.

“We need something like a mobile money system as part of our ecosystem.”

Security costs have thus increased in an effort to safeguard the cash, he said.

Targets not reached

Management failed to achieve targeted key performance indicators set last year such as corporate governance and digitisation, blaming lack of funds.

The Auditor-General last issued SA post office with a disclaimer opinion after finding irregular expenditure of over R200 million, R26m in fruitless and wasteful expenditure and R1.7 billion in losses.

Unable to pay its debts, the entity was deemed commercially insolvent.

“We are still in the doldrums, hence we are requesting financial resources and funding especially on rolling out the strategy, which we have started. Despite difficulties, there have been upshoots in trying to get revenue collection.

“We continue to pull, push and shove and are sustained by hope and remain committed to the course. We trust that possible support in terms of allocations will come to light,” said Sapo deputy chairperson Sipho Majombozi.

Noma told MPs the SA post office cannot fail as it fulfils a critical role in servicing the needs of the indigent and a large section of the population, especially in rural areas.