Post Mortem
Text: Donwald Pressly. Article from the December 2014 issue of Noseweek.
Recent mail strikes are ruining businesses – and could spell The End for the state-run service.
Frustration with the Post Office has reached fever pitch, particularly in the publishing and mail-order businesses that depend on delivery to customers. The entire business-to-business sector is rushing to find alternative means of delivering all over the country. It’s do – or die.
The government doesn’t appear to give a toss about the public’s outrage at the failure of the Post Office’s management to resolve the strike – which has been off and on (mainly on) for the past three years.
After a four-month bout of striking – particularly concentrated in the Johannesburg sorting sites – the cabinet did not even have the matter on its agenda at its bi-weekly meeting in early November. Minister in the Presidency, Jeff Radebe, who briefed the media at parliament, first avoided a question about the strike, then, when pressed, said: “We did not discuss the issue of the Post Office.”
But he added, with his customary mastery of the understatement: the Minister of Telecommunications and Postal Services Siyabonga Cwele was “busy trying to solve this long drawn out strike… so that it can come to an end. It is an issue of grave concern.”
Cwele, who as intelligence minister didn’t seem to know that his then-wife was involved in international drug dealing, did attend the telecommunications and postal services portfolio committee’s meeting with what is left of the Post Office management – held just a few days before. He seemed almost oblivious to the troubles. “If we… as government can just increase our courier business just by 20 percent, we’ll resolve most of the problems that are facing the Post Office.”
This was at a time when mail-order, marketing and publishing businesses were frantically looking for ways to divorce themselves completely from the Post Office. It took about an hour-and-a-half for the Post Office management present to acknowledge there was perhaps a big problem. Andrew Nongogo, public affairs general manager, finally admitted: “We have a mountain of mail that is undelivered that is now quite substantial.” That is, many millions of items; a three-month backlog – debilitating to weekly or monthly magazines; devastating to the mail-order and mail advertising businesses.
Ton Vosloo, outgoing chairman of Naspers, told a recent Press Club gathering: “As I categorise the government, [it] has a 1960s/1970s Moscow-based, Stalinistic outlook towards the economy… that is smothering any hope of growth.
“Most state entities were running at a profit in the pre-ANC period. Not any more. They don’t put the right people in the right places… what with cadre deployment and that sort of thing.”
Indeed government meddling has put a stranglehold on the entire communications chain, starting at the big media houses, flowing down to street level where the Post Office is unable to deliver magazines and a variety of other news media.
Roland Pulinckx, who was until recently operational director at Cape Town based Arcadia Home Shopping – having once successfully managed a 24-hour dry cleaning shop in Kinshasa – was unable to survive the massive downturn in the mail order business, caused largely by the erratic, unreliable postal service. He is now setting up his own online business. Eckhard Marshing, Arcadia’s CEO, was candid about the Post Office. “We have had postal problems for the past three or four years.” He has had to retrench about 50 staff, bringing his complement to ten. The company specialises in a variety of health, lifestyle, beauty and kitchen products. The bulk of its advertising is through the post.
“This year has been catastrophic,” said Marshing, complaining that the Post Office’s shenanigans had forced business to adopt new models, including moving swiftly to the digital era. “Putting it bluntly, we are writing the Post Office out of the script. We cannot run a business that is dependent on the Post Office.”
It was unlikely he would return to using the Post Office: “The risk is too high.”
Noting that Cwele suggested that price rises had lagged behind inflation, Marshing said raising rates would make them uncompetitive. Cwele also suggested a growth in the Post Office’s courier business. (At the portfolio meeting he constantly confused Sapo with Telkom, and suggested Telkom needed to increase its courier business!)
Edward Sewnarain, managing director of Tunleys, an electronic and postal mail distribution business dubbed “a one-stop mailshop service”, which serves Standard Bank among others, said that while all businesses were affected, mail order businesses were the hardest hit.
“They have no funds coming in… because nothing went out.” His take on problems at the Post Office: “Their management are getting gigantic salaries… there’s been over-zealous [racial] transformation… the management is inept.
“First prize would be to have a privatised mailing company.” A second prize would be to provide competition to the Post Office. The laws that gave it a monopoly needed to be changed so that letters and small parcels weren’t the sole preserve of the Post Office.
The postal collapse has also affected medical services. “For example, medicine supplies and pathology-test reports don’t get to hospitals and patients in good time, which could mean the difference between living or dying.” Financial service companies, banks, insurance houses, academic institutions such as the University of South Africa (Unisa) were all affected.
The Business to Business (B2B) grouping – broadly, the trade magazines – are coming up with a strategy. First they plan to lodge formal complaints with the regulatory authority, Icasa (Independent Communications Authority of South Africa). Then they could take the Post Office to court, challenging its monopoly and suing it for damages.
In the meantime they are issuing tenders to set up a street delivery network to distribute their publications. Rory Macnamara, MD of Interact Media, one of the leaders of the grouping, said they had tried to hold talks with the Post Office. At first, laborious meetings were held with the now-suspended CEO Christopher Hlekane, but these had petered out. (Hlekane was suspended by Cwele at the end of October).
Auditors Deloitte & Touche and accountants Nkonki reported that the Post Office blew R2.1 billion on irregular expenditure in the financial year ending May 2014. Much of it related to irregular tenders. Hlekane did not shortchange himself at this time. He enjoys an annual salary of R2.8m excluding R264,000 in pension fund contributions. In the last financial year the Post Office reported a net loss of R361 million.
Macnamara jokes that Icasa should just cancel the Post Office’s licence, but acknowledged that would be impractical because the Post Office has obligations internationally as well as to under- serviced areas. Macnamara produces Plumbing Africa and Refrigeration and Airconditioning magazines. He said that about a third of his business was done through the Post Office, but now he was tapping into the newspaper delivery market.
Financial Mail editor Tim Cohen said his magazine was largely delivered through the newspaper group’s distributors, while Sandra Gordon – who produces Media magazine, Hotel and Restaurant and RiskSA said she had spent a recent weekend changing all her subscribers’ PO Box addresses to street addresses to which her magazines could be delivered on foot.
Others who have joined the foot soldiers of the B2B group are Kenneth Creamer of Creamer Media which includes Engineering News, Chris Yelland of EE Publishers which includes EngineerlT, PositionIT, Vector, Energize and Anton Marsh of Now Media.
Pressed on how to solve the problems at the Post Office, Gordon said: “Burn it down… but they’ve done that already!” Yelland said: “I am amazed how long-suffering and passive the South African public and business sector is about the dysfunctional postal service in South Africa”. The group has asked Icasa to impose sanctions on the Post Office, including possible punitive financial sanctions. It also wants Icasa to entertain alternative licence applications or additional licence applications “to supplement the activities of Sapo”.
Yelland says the troubles at the Post Office had opened up a yawning gap for business to compete in the postal market. What was needed was for the big bulk services companies to band together to form a Mail Bulk Carrier Division to take on the Post Office.
DA MP Cameron McKenzie said about R350m had been provided as a government guarantee to the Post Office so that it could pay salaries. What was now required was to quickly appoint all temporary workers (about 7,000 of them) and make them permanent. “All the mail has to be cleared first… if it doesn’t move fast, it isn’t a business. They should replace the board that has demonstrated totally incapable leadership.”
The Post Office also needed a capital injection to upgrade its IT systems. Cameron believed that about 20 properties unoccupied by the Post Office – including its headquarters in Pretoria – would sell for millions, which could recapitalise the operation.
Four months into the strike, Cwele finally accepted the resignation of the Post Office board on 9 November. With Finance Minister Nhlanhla Nene, Cwele appointed former Rand Water chief ex-ecutive Simo Lushaba to turn the operations around within three months. Government expressed its commitment to the “no work no pay” principle and the Communications Workers’ Union confirmed that workers – a number believed to be in the hundreds – who had been on strike for four months had received letters of dismissal.
A flurry of questions to the minister’s spokesman Siya Qoza about whether Cwele would consider competition in the postal field were not answered. Significantly Cwele acknowledged the strike as “unprotected and violent”. It had caused “a lot of harm” to many citizens, long-distance students, business – especially the small and medium-sized ones – the diplomatic community and “most of all the workers of the Post Office and the company itself”.
It may be too little too late: most of Sapo’s clients have already voted with their feet.
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