South African Post Office still needs state subsidy
The South African Post Office would continue to need state subsidies for a number of years despite its increasing profitability because of its obligation to roll out infrastructure in underserviced areas, chief financial office Nick Buick told Parliament last week.
Apart from the continued reliance on state subsidies, the troubled organisation has recently been wracked by internal problems and is awaiting the outcome of a forensic investigation into allegations by suspended CEO Khutso Mampeule that his predecessor, Maanda Manyatshe, contravened tender procedures to appoint Vision Design House to redesign post offices.
As a result, Manyatshe resigned as MD of cellphone company MTN and is suing the Post Office for R100m. The forensic report has been handed to Communications Minister Ivy Matsepe-Casaburri.
African National Congress MP Reuben Mohlaloga expressed concern over the constant comings and goings of CEOs, each of whom had their own strategic plans and remodelling exercises and felt compelled to change their top management team.
This was disruptive and costly for the organisation, Mohlaloga said.
However, acting CEO Motshoanetsi Lefoka said the current strategic intent was the same as the plans of Mampeule. She agreed that continuity in the top management team was essential.
Buick noted that in the past the cash-strapped Post Office had dramatically underinvested in infrastructure.
To redress this as well as to fulfil the institution’s universal service obligations, it would continue to need a subsidy for the next few years.
In terms of its licence, the Post Office was obliged to open a specified number of retail outlets in rural areas, which were not always profitable. In the 2006-07 year, the Post Office received a subsidy of R351,4m.
It has been allocated R364m for 2007-08 and is projected to receive R1,1bn in total from the state in the next three years.
Lefoka said the Post Office wanted to be self-sufficient but would be able to fund its universal service obligations only if it succeeded in diversifying its sources of revenue into other markets.
Lefoka told the committee capital investment of R755m was planned for 2007-08, with the bulk of this (R263m) targeted for new retail outlets, relocations and upgrades of existing post offices.
A further R150m was earmarked for the mail business.
One of the organisation’s aims in future, Lefoka said, would be to strengthen the logistics and courier business in order to bring in an equity partner.
The Post Office is projecting an increase in total revenue of 8% to R5bn (R4,6bn) in the current year to end-March and a net profit of R295m (R486m).
Postal services contributed 65% to total revenue and non-traditional income 35%, a split that Lefoka wants to correct by achieving greater diversification into financial services and other non-traditional sources of income.
