Positioning Post Office outlets in expensive shopping malls has been a big mistake, says the administrator tasked with turning around the struggling state-owned entity.
Post Office administrator Simo Lushaba told MPs on parliament’s telecommunications & postal services portfolio committee on Tuesday that “there has been a trend … to move into (shopping) malls guided on the thinking that there is more [foot traffic] in the mall”.
Lushaba noted that about a thousand extra branches were added to a network of 1 500 and many of these had proved too expensive. “This has contributed to the increase in the losses … the retail costs.”
He described this trend as “a mistake”. He reported that the 20 worst performing branches were mostly in large metropolitan areas and “a large number of these are in shopping malls”.
Lushaba reported that property leases had increased by 15% over the last five years.
“This is largely due to the recent trend of vacating existing Post Office premises in favour of leased spaces in shopping malls,” he said.
“The loss-making branches have a total property cost to revenue of 35% compared to just 8% for the profitable branches,” he added.
Lushaba further spoke of a litany of troubles at the entity including an inflexible business model, dropping mail delivery services, and increased staff and logistics costs.
He also said that approximately 5 000 people would be “reduced” from the 28 000 employees. It was envisaged that about a thousand staff would be encouraged to take early retirement.
Noting that the there were a number of key interventions which could be carried out to improve the business in the longer term, Lushaba said the corporatisation of the Post Bank, the rolling out of e-commerce initiatives to catch up with competitors — such as click and deliver services — and the upgrading of postal sorting systems are all required.
He said that a letter from Cape Town to Bushbuckridge ended up being sorted at three sorting centres.
Meanwhile, acting chief financial officer Manteng Maleka reported that Standard Bank had approved an overdraft facility of R270m for the Post Office which was backed by a state guarantee, granted in December last year of R1,7bn.
In addition, the Post Office has sought an increase in borrowings of R1,2bn with national treasury. It said it had already received binding term sheets of R1bn from interested banks.
“We are just awaiting final approval from the national treasury to access the funding,” said Maleka, noting that much of this would be earmarked to paying creditors and funding the turnaround initiative.
Lushaba also explained that the company aims to boost trade with with government from 33% of its business to 55%. This included providing traffic fine payment services at postal outlets.
Lushaba noted that while staff morale was still low, there was a realisation that changes needed to be made. There had also been no strike action since last November.
Lushaba is a former Lonmin and Trans-Caledon Tunnel Authority executive who was brought in last November as the Post Office’s turnaround strategist. — Fin24
