Kenyan postal corporation plans to raise Sh1.7 billion
The Postal Corporation of Kenya is planning to raise Sh1.7 billion to fund its recovery strategy over the next four years.
Mr Dan Ameyo, the Post-Master General, says the aim is to return the giant parastatal to profitability. The strategy, he says, is to raise the funds through new product rollout and the opening of new postal facilities countrywide.
According to Ameyo the corporation has been awoken from slumber by a Government decision to stop funding parastatals through the exchequer.
Consequently, Ameyo says, growth in profitability has taken centre stage as a key element of the company's five-year recovery strategy that enters its second phase this month.
"The financial viability of the corporation has been constrained by low revenue growth and the sharp increase in overheads and recurrent expenditure," Ameyo said.
Meanwhile, the corporation is lobbying the Government to be freed from the many legal hurdles that have made it difficult for it compete on an equal footing with other players in the market.
Many of the said hurdles are legal in nature and would require parliamentary action to deal with.
The corporation?s ability to compete in the liberalized market has over the years been squeezed by contradictions in the various Acts that govern its operations.
These include procurement rules, the State Corporations Act, the Postal Corporations Act, the Communications Act and the Exchequer and Audit Act.
These laws, Ameyo says, have conflicting provisions that make it impossible for the corporation to operate commercially.
"What we are asking for is commercial autonomy as we roll-out the recovery plan," Ameyo told the?Financial Standard.
"Despite the contradictions," he said, "the challenge for the corporation is to increase its revenue base, reduce operational and overhead costs, and increase the productivity of all its internal resources, especially the staff," he said.
In the coming financial year, the corporation will use part of the Sh1.7 billion budget to fund its fleet modernisation program. It also hopes to introduce Internet facilities in more than 400 post offices countrywide.
This year alone, the company hopes to make Sh32 million in gross earnings mainly generated from new products that are on offer. Ameyo, however, says the strategy requires substantial investment in equipment, facilities and technology.
The corporation is also planning to rollout the Very Small Aperture Technology (VSAT) to enable it develop and market electronic products. These include hybrid mail, electronic money orders, e-mail services, and logistics and distribution services.
Investment in Vsat products is initially expected to generate revenue in the 2004/2005 financial year. Besides, revenue from electronic money orders and agency services is expected to grow at a double-digit rate of between 10 – 15 per cent per annum, beginning June this year.
Ameyo said the corporation has made a total of Sh1.3 million from the Internet services since its introduction in January. This, he says, is an indicator of how important information technology has become to the profitability of any company.
Postal Corporation?s recovery strategy also involves introduction of internal restructuring initiatives, which are being extended to cost control and budget discipline.
Last year, the corporation reported a Sh22 million profit against a projected Sh74 million loss.
The long-term plan, Ameyo says, is to raise the company?s profitability to the Sh50 million mark per annum within the next three years.
The projected rise in earnings is hinged on the planned increase in postal outlets to meet universal requirements.
A recent survey done by the corporation indicates that Kenya has one of the lowest ratio of postal services in the world.
According to the survey, there is one postal facility for 36,000 people, compared to the universally accepted ratio of 1:6000.
"We will expand the services, in order to bridge the service delivery gap while at the same time increasing our profitability," Ameyo said.
According to this plan, the corporation will put up 10 new postal outlets at a cost of Sh70 million annually in the next five years.
Other measures include implementation of a counter-automation programme to replace existing manual processes.
The project is being undertaken by Canada Posta, which won the contract in an open tendering process.
Over the years, the parastatal?s image has suffered due to rampant pilferage of customers? parcels, a development Ameyo says is being put to a firm end.
"Any cases of fraud or tampering with customers? and the corporation?s property are swiftly concluded with a clear message to culprits that they are not welcome," he said.
"We not only dismiss the culprits but also hand them over to the police for possible criminal prosecution," he added.
PCK is also working on re-branding and re-launch of some of its services that have fallen on hard times as a result of stiff competition.
Its courier services – also known as EMS Speed Post are being reintroduced.
Ameyo says that while the courier services accounts for only 3 per cent of the corporation?s earnings,the volume of business in the segment has been declining at a rate of 27 per cent per annum in the past three years and there is an urgent need to reverse the trend.
"Courier business requires prompt decisions especially on finances, but we cannot do that because of the contradictions in the various Acts governing our operations," he said.
Currently, the sale of stamps accounts for 22 per cent of the corporation?s annual revenue but declined by a margin of 15 per cent last year due to increased use of the Internet.
Ameyo says this decline is taking place globally as more people switch to the Internet, which is quickly establishing itself as the preferred means of communication.
The corporation is also planning to increase its earnings from post office box rentals to 45 per cent from the current 26 per cent.
Part of product development strategy is also to "aggressively market its money orders segment, which last year declined by 7 per cent.
