Courier Companies Face the Squeeze
Many companies fear the new rules are going to put smaller companies out of business
OFFICIALS from a range of courier companies, or express parcel companies as they prefer to be known, headed off for Polokwane (formerly Pietersburg) at the weekend to participate in the first roadshow meetings being held on the new postal regulations.
They have a lot to get off their chest. Many are concerned about the effect of the new rules on their businesses and the industry as a whole. "If the regulations are implemented as they stand, it will lead to many small companies going out of business and only the large entities are likely to survive," says one industry official.
The draft regulations were first gazetted late last year, but due to a series of changes within the postal regulator, not least of which was the exit of its head Warara Kakaza, the roadshow is only starting today.
Mikie Kutta, acting chief director of the Postal Regulator, says the aim of the workshops, being held around the country this week, is to get input from as many stakeholders as possible. "We want to ensure we have buyin from everybody," she says.
The main aim of the rules appears to be getting a handle on which and how many companies are operating in the market, while ensuring that the SA Post Office's monopoly over postal items of less than 1kg is protected.
The legislation will prohibit courier companies from operating a postal service without a licence and provides for the regulator to impose fees and carry out inspections.
Applications for a licence and registration will cost R15000 and R10000 respectively, plus a further R550000 a year for three years payable in advance.
After three years, the registration fee will amount to 2% of turnover. In addition, the draft rules reinforce the cap on annual postal tariff increases, which cannot rise by more than the consumer price index or 12 whichever is the lowest.
Kutta says the SA Post Office has been given a range of universal service obligations, in return for which it must be allowed to operate exclusively in one segment of the market.
These include delivering 500000 new addresses each year and operating often unprofitable post offices and postal agencies in outlying areas.
As such, the SA Post Office provides an essential service to millions of South Africans, she says, particularly for people in deep rural areas whose only connection with the outside world is often the small postal outlet in their area. Kutta says private companies would not deliver such services as there is limited, if any, profit motive to do so. As such, the SA Post Office's monopoly must be protected.
Apart from having a limited monopoly, the SA Post Office is also subsidised to the tune of about R500m a year. The subsidy, which Finance Trevor Manuel announced last year, is for three years, and will support its restructuring which is aimed at returning it to self-sufficiency.
The subsidy came after the SA Post Office was hit by a number of upheavals, key among these being last year's decision by its board to cut short the management contract with New Zealand's Transend Worldwide.
This after it emerged that the Post Office would not break even in 2000-01 as promised.
In addition, fraud and corruption are so prevalent that the elite crime-fighters, the Scorpions, had to set up a special investigation unit. The National Intelligence Agency and SA Police Service were also called in. And then it faces the ever-present threat of e-commerce, with the deregulation of the market making it increasingly competitive for the Post Office to operate.
So, government has given the SA Post Office some breathing space to deal with these challenges by allocating a subsidy and drafting the new regulations to try and enforce its monopoly.
However, the courier industry has reacted strongly to the draft regulations which officials say will make it too expensive for most courier companies to operate. They claim, too, that the regulations are vague and unclear.
Peter Baker, spokesman for the SA Express Parcel Association, says the industry is alarmed by some of the provisions of the legislation. The registration application form calls for disclosure of detailed company information which "no company in their right mind" would reveal, particularly in the current competitive market.
Baker says the R25000 application fee is unaffordable for the vast majority of courier companies. The additional fees called for in the rules are likely to have the effect of driving all but the largest of courier companies out of business.
"In addition, many organisations will think very carefully about investing in this business. Not only are the fees onerous but there are many grey areas in the draft rules, and business hates uncertainty," he says.
Baker says the industry asked the regulator last year for a series of interactive workshops to try and discuss the draft rules.
However, it was unclear how the industry's input would be dealt with now as it looked as though public workshops, which could involve hundreds or even thousands of people, were being arranged. "We are going to attend the workshops but it is unclear whether we will be able to engage in discussion," he says.
