8 February 1999
The Post Office is geared to enter the new millennium
Although early days, 1999 is already proving to be a very good year for the Post Office - delivery standards have improved tremendously, mail theft and violation are being contained and most importantly, financial performance is the best since the Post Office became a company in 1991.
Two years ago the Post Office went through turbulent times. The mail service was being transformed and, in the process of re-engineering and renewing, the mail service in the Witwatersrand area dropped for a period, says Post Office Chairman and acting Managing Director, Max Maisela.
Three short-term objectives were set; improve delivery performance, curb postal crime and reach a financial break-even point.
So what has changed? In the latest report by Independent Services Quality Measurement (ISQM), found that more than 90 per cent of national mail was being delivered on or before due date, compared with 29 per cent in the Witwatersrand region two years ago. These results are audited by the auditing firm De Loitte and Touche. More important, the remaining 10 per cent is being delivered only one or two days later. This is due to virtually no industrial action ant co-operative agreements signed with unions, and by introducing streamlined procedures, commissioning new sorting centres and containers replacing the mail bag.
Finances - reducing the loss by R430 million
Financially, the company has reduced the operating loss and is approaching break-even. For the financial year ending 31 March 1998 the operating loss has been reduced to F271 million from over R700 million the preceding year - a reduction of R430 million!
Maisela says this operating loss includes an annual loss of R153 million from the former TBVC states post offices which were incorporated during the 1997 financial year. Turnover increased by about 25 percent to R2 455 million. The company was close to breaking even after many years of substantial losses.
"A reduced subsidy from the State would however still be provided to the Post Office. For the current year this is R450 million. This will be largely used to recapitalise the Post Office and for the roll-out of postal services to the previously unserviced areas" Maisela said.
"These were the best results that the Post Office had achieved since company formation and show massive improvements over the preceding years. This achievement was made possible by controlling expenses and improving productivity. The productivity of employees had improved consistently during the past five years. With about 26 000 permanent full-time employees the turnover per employee and the turnover per post office was the highest ever. Furthermore, operating efficiency had improved significantly during the past two years.
Zero tolerance for mail theft and fraud
A pressing issue late in 1997 was mail violation. Maisela believes the Post Office's problems reflected "the general lawlessness and increasing crime in South Africa." A security and investigation department was set up in January last year to co-ordinate all security matters. Headed by general manager Reggie Marimuthu, the department now employs nearly 100 people.
The spin-off is that security of the mail was also constantly improving. The Post Office applies zero tolerance regarding mail theft and mail violation and in this financial year the services of over 290 employees found guilty of such acts have been terminated. More than 120 members of the public have also been arrested for such crimes.
Furthermore, security products and services are being developed and introduced: A business unit, Securemail, was launched in May 1997 to deliver credit cards, share certificates cheque books and other security-sensitive mail items. There has been a significant decrease in credit-card theft and 99 per cent of cards handled are being successfully delivered. Those not delivered due to, for example, incorrect addressing, are returned to the financial institution. A tollfree 24-hour crime-buster hotline - 0800 033554 -enables staff and customers to re port any acts of mail theft and fraud. The new registered letter is tracked and traced through the entire mail process until the receiver signs for the item.
Seen in perspective, notes Maisela, under two per cent of mail does not reach its destination and this is mainly due to addresses being incorrect an public apathy in re-mailing these items. This may cost the Post Office up to R500 000 per day.
A postal service is the most basic and common means by which information can be communicated and goods delivered. Postal services are a basic link between people, and an important medium of communication for business and commerce. As such, it is a high-profile and personal service, so when things go wrong they attract a disproportionate amount of attention. "This feeds into perceptions. It is perceptions that we now have to change. The public is not yet fully aware of the improvements to the postal system. This is being addressed by an electronic and print media campaign which is already drawing very positive response.
Rolling out services to particularly previously disadvantaged communities
"The Post Office firmly believes that the right to communicate is a basic human right. So what are we doing to provide every citizen with this basic right? No stone is being left unturned to extend postal services to especially previously disadvantaged communities. In more than two hundred years three million postal addresses were created in South Africa - in less than four years we added more than four million to the network - a world record? So surely, giving a postal address to the remaining four million households in our country is a goal to be achieved sooner than later" says Maisela .
"In the months and years to come, the Post Office will extend itself into those areas where there is a dire need for postal services. We will add outlets to the present number of more than 2 400 in which-ever form; Postpoints or retail postal agencies.
Support of a committed workforce
A crucial part of the turnaround has been bringing employees on board. As a labour-intensive business, the Post Office is highly sensitive to industrial action. "If we have a one-day stay-away," notes Maisela, "the mail process stops and eight million items per day continue to flow in, forming a tremendous backlog. This could cause a drop in a month's performance level of 4,5 to 5%." Reaching the 95% target performance level "thus depends heavily on the co-operation of all employees and unions."
An important programme has been launched to improve labour relations. This includes a Strategic Transformation Committee where management and unions discuss major issues facing the company.
But the Post Office is looking at a more fundamental cultural change. Says Maisela. "A change of culture does not take place overnight. It has to be done in many ways and on many fronts. By improving the changing processes in the company, the culture will change automatically with time."
Pricing for postal services
Another thorny issue for an organisation committed to an affordable universal service is pricing. Following its commercialisation when it became a company in 1991, the Post Office's business plan was to cut losses by increasing the postal .tariff by 30 per cent every year for five years. For political reasons the actual increases applied to the standard letter rate were considerably lower than planned and operating losses were therefore not reduced. After delaying increases until its service improved, the Post Office introduced an average postage rate increase of 30 per cent last year. Maisela says this still did not bring rates to a cost-related level. The average ten per cent increase in April this year, brought rates closer to such a level, although it still costs over R1,30 for street delivery of a single letter, a service for which users now pay R1,10.
Maisela points out that firstly, if 1970 is taken as a base year, postal rate increases have been half the inflation rate, and secondly, South African postal rates are "substantially lower" than other countries. The bottom line is that South African postal rates were about half what they should be." The new tariffs are close to where they should be and further increases will be at around the inflation rate, adds Maisela. "This will require innovation to cover the costs of providing low-volume postal services to uneconomic outlying areas. We have to manage the revenue increase and not the price increase. Revenue is a product of both volume and tariff. Our objective is thus to maximise revenue, not tariff," Maisela says.
The new Postal Services Act
The Act, signed by President Mandela on 2 December 1998, creates a framework for the South African Post Office to become a world class operator in a market which is becoming increasingly competitive. In particular, the Post Office must ensure greater access to postal services by re-balancing the postal network for equity.
The Post Office's previous monopoly applying to all letters up to two kilograms was reduced to one kilogram. At the same time the Post Office will be licensed and will have to provide a universal postal service.
A postal regulator will be established in the Ministry with the main aim of achieving universal service and to make regulations for the sector. In particular, the regulator will monitor and protect the exclusive rights of the Post Office with respect to the reserved services. Further the regulator will ensure that the Post Office does not abuse its monopoly position in the market and with respect to its customers.
Rate increases will be regulated through a price-cap methodology, which links tariff increases to the rate of inflation. The Post Office has been given a financial mandate to reach break-even point within three years.
The government is considering bids for a Strategic Management Partnership between the Post Office and an international postal administration. As far as the subsidiaries are concerned the government will allow the Post Office to enter into partnership with the private sector.
The Post Office is also promoting the economic empowerment of historically disadvantaged communities. A comprehensive human resource plan and strategy is being drawn up by the Post Office with clear targets for affirmative action and training.
On the international front South Africa has joined the Pan African Postal Union, a specialised agency of the OAU. "In line with our foreign policy on the African Renaissance we envisage to play a much more active role in the Southern African Developing Committee (SADC) and on the continent to promote the development of postal services on the continent", Maisela said.
The Postbank provide a unique opportunity to bring savings and banking services to rural and poor communities and to promote a savings culture in South Africa. The Postbank will be repositioned through an evolutionary process to meet the objectives of the Strauss commission. In phase one it will become a profit centre within the current dispensation. A subcommittee of the Board of Directors will oversee its activities. Within the next two to three years it will be corporatised into a subsidiary of the Post Office and will be positioned as a fully-fledged savings bank. At that stage government will consider to engage a strategic equity partner for the Postbank .
"We are geared to serve South Africa with postal services beyond the new millennium. We will continue on the road to transformation we have embarked on. I would like to thank our employees who have assisted in making the turnaround possible. Customers of the Post Office are increasingly voicing their satisfaction with the improvements in postal services. We will continue unabated to improve services to the level our customers expect of us and of which we can be proud, " Maisela said.
Post Office
CORPORATE COMMUNICATION
Tel: (012) 421 7700
Fax: (012) 421 7707