Post Office no bargain

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