South Africa Post Office delivers on turnaround

The South African Post Office has exceeded its target of reaching break-even at operating level in the year to end-March and will be well on the way to financial independence if it resolves its huge postretirement medical aid liability this year.

The company has long been a drain on the fiscus, with a controversial failed management contract with New Zealand Post, widespread postal crime and poor delivery standards forcing government to reinstate a R1,5bn three-year subsidy in 2001-02.

Its management implemented a large turnaround programme, aimed at reducing staff numbers, cracking down on corruption, reining in costs and reducing medical aid liability.

As such, the R205m turnaround is a significant achievement for an institution, which a few years ago made losses in the order of R500m, which required government to step in with a subsidy of R600m in 2001-02 and R300m annually since then. So far government has forked out R1,5bn to help the Post Office fulfil its service obligations.

CEO Maanda Manyatse expressed hope before Parliament’s ad hoc communications committee that by cleaning up its balance sheet and getting a corporate rating, the Post Office would be able to go to the market to raise its own funds in about three to four years’ time.

Its preliminary 2003-04 annual results show an operating profit of R35,5m, a swing from the 200203 loss of R170m. Strong efficiency gains of about 20% year on year for the past three years have contributed to the return to operating profit.

Revenue mostly derived from postal services rose 6,3% to R4,3bn, but it was in the area of cost control that most of the gains were made. Costs rose only 1%, while an inflation rate of 6% to 10% prevailed.

Postbank’s deposit book grew 46% (R560m) over the year with the introduction of a range of new savings products. The bank is due to be corporatised with its own banking licence this year.

Manyatse said the decline in the mail business over the past seven years had been arrested and had started to grow again.

Accumulated losses now stand at R1,4bn, with the apartheid legacy of a R2,3bn post-retirement medical aid liability acting as a huge drain on the organisation. Manyatse said he hoped it could be reduced to R800m this year by a 50% reduction in the Post Office’s contribution to the medical aid scheme from its current R319m annually.

Some pensioners on the scheme pay no medical aid contributions in terms of a special agreement signed in 1994. Human resources executive Sipho Nkese said that while lawyers had advised that it was within the Post Office’s power to unilaterally terminate the contract, it was trying to solve the problem through consultation without resorting to the courts .

It also did not want to continue standing surety for the financial sustainability of the medical aid scheme.

Chief financial officer Nick Buick said the Post Office had kept a tight rein on capital expenditure in 2003-04 and had entered into ventures with suppliers to use, rather than buy, equipment.

Staff numbers fell a further 1042 during the year through natural attrition or the taking up of retrenchment, bringing the total to about 17700 from more than 30000 workers in 1998.

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