Post Of­fice no bar­gain

Business Day - - OPINION -

I won­der if the emo­tion and an­tipa­thy to­wards Cash Pay­mas­ter Ser­vices (CPS) as ser­vice provider for so­cial grants is not caus­ing some sus­pen­sion of crit­i­cal thought. It seems that the South African Post Of­fice will be­come the con­trac­tor for grant pay­ments through a ne­go­ti­ated ar­range­ment with the South African So­cial Se­cu­rity Agency. But where is the price and ef­fi­ciency check that can only be pro­vided by an open ten­der process?

I re­call that when it was last in the mix about a year ago and be­fore the CPS con­tract was ex­tended, the Post Of­fice’s ser­vices were of­fered at a sig­nif­i­cant price premium to that of­fered by CPS and oth­ers. At the time, CEO Mark Barnes ar­gued that this did not mat­ter as the cost and money flow would be kept in the gov­ern­ment/ paras­tatal fam­ily. But surely a cost to the fis­cus re­mains just that, who­ever in­curs it? If the Post Of­fice has sunk costs in un­der­utilised as­sets (both peo­ple and in­fra­struc­ture) and a bank­ing li­cence, surely this should give it com­pet­i­tive ad­van­tage over a pri­vate bid­der and would al­low it to pro­vide the ser­vice for less, not more?

So, if a “to be de­ter­mined” ne­go­ti­ated price is agreed with the Post Of­fice, then at min­i­mum, it should be bench­marked against a best guess as to what a pri­vate bid­der would have charged. Here we at least have some historical data. If the Post Of­fice can­not beat this bench­mark, it should be con­trac­tu­ally bound to re­duce its fund­ing de­pen­dency on the Trea­sury.

A quan­tum could be cal­cu­lated, oth­er­wise we just build in in­ef­fi­ciency. And the ar­gu­ments above do not even in­clude taxes for­gone.

An­thony Still

Waver­ley

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