I BE­LIEVE IN STATE CAPITALISM

CityPress - - Front Page - DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za

SA Post Of­fice CEO Mark Barnes is a big be­liever in “state capitalism”.

Barnes is still the ma­jor share­holder and nonex­ec­u­tive chair of his fi­nan­cial ser­vices com­pany, Pur­ple Cap­i­tal, and took the reins at the long-suffering postal ser­vice late last year.

“If the Post Of­fice fell to pieces to­mor­row, the pri­vate sec­tor would take it and do all of the func­tions of the Post Of­fice – but ruth­lessly, and at an ex­tra­or­di­nary price for all of us,” he told City Press in an in­ter­view this week.

“If you said to me to­mor­row, ‘We are go­ing to pri­va­tise the Post Of­fice, would you buy it?’, I would say, ‘Ab­so­lutely.’”

So would any num­ber of other pri­vate players, he said.

The Post Of­fice made a R1.5 bil­lion loss last year, and is now rais­ing R2.7 bil­lion cap­i­tal – of which about R1.9 bil­lion is in the bag – off the back of gov­ern­ment guar­an­tees.

The Post Of­fice has al­ready re­ceived a R650 mil­lion in­jec­tion from the gov­ern­ment.

The turn­around plan that Barnes fore­sees is get­ting weaned off this state sup­port within three years.

He sees the fu­ture Post Of­fice run “as a busi­ness, not a so­cial ser­vice” – mak­ing a third of its money from fi­nan­cial ser­vices, an­other third from e-com­merce de­liv­er­ies and the re­main­der from mail.

The Peo­ple’s Bank?

Barnes wants to re­alise a con­cept he came up with two years ago, of a Peo­ple’s Bank of SA.

It comes down to state-sub­sidised un­se­cured lend­ing. This would be a blood bath in the mi­crolend­ing sec­tor but, ac­cord­ing to Barnes, it is “ab­so­lutely a na­tional im­per­a­tive” that small loans to small busi­nesses be­come cheaper.

It should also “at least par­tially” be a gov­ern­ment man­date, he said.

The rea­son that he even took an in­ter­est in the Post Of­fice was be­cause, “at the core of it, there is a fi­nan­cial ser­vice at play”, he told City Press.

“If you think un­se­cured lend­ing is go­ing to go away, you are very con­fused. It is not,” he said.

“The real prob­lem is that the in­dus­try has to charge in­ter­est rates and fees that are sim­ply un­work­able.

“The cost of cap­i­tal is too high. I raise cap­i­tal at 15%, and I will have to lend it out at 30% just to break even, be­cause half the money goes bad [de­faults]. “So I will lend it out at 45% to make a profit. “There is no as­set that yields 45%, so how can you bor­row money at 45%? It will never work. It can­not work.”

The Post Of­fice’s sub­sidiary, Post­bank, takes de­posits but does not lend out money. “That has to change,” said Barnes. The plan hinges on the state put­ting eq­uity into Post­bank, so that it is not de­pen­dent on rais­ing ex­pen­sive cap­i­tal in the mar­ket.

“Then, as­sum­ing we can start lend­ing money out at 8% ... ev­ery­body would go to the Post Of­fice,” he told City Press.

Pri­vate sec­tor

The Post Of­fice would need an eq­uity in­jec­tion at some point, said Barnes.

Whether that took a sim­i­lar form to the par­tial pri­vati­sa­tion and JSE list­ing of Telkom was not up to him, he said.

“It is not my place; it is not my man­date. But I would ar­gue that for us to com­pete, at some point we need to in­ter­cept with busi­ness. That is as much as I am pre­pared to say.

“We need eq­uity, not debt. We are pay­ing an ex­tra­or­di­nary amount of in­ter­est to the pri­vate sec­tor, just be­cause we are bor­row­ing against gov­ern­ment guar­an­tees. “That is a com­plete waste. “In the gov­ern­ment’s eyes, I want to move from be­ing a nec­es­sary ex­pense to be­ing a valu­able as­set.

“What do you want to do then? Do you want to sell some of this?”

In the mean­time, Barnes wants the Post Of­fice’s state sub­si­dies back.

These used to be worth just un­der R400 mil­lion a year, back in 2010. Then they started get­ting phased out “for rea­sons that es­cape me”, said Barnes.

The sub­si­dies were meant to pay for the Post Of­fice’s universal ser­vice obli­ga­tion – the need to have a post of­fice within reach of ev­ery­one in South Africa.

“To the ex­tent that that costs us money, the state must pay for it ... We want our sub­si­dies back,” said Barnes.

Not all re­mote of­fices were un­prof­itable and there was a process un­der way to see how many the Post Of­fice in ef­fect sub­sidises, he said.

Apart from turn­ing Post­bank into a lender, Barnes’ strat­egy re­volves around the Post Of­fice “own­ing the last mile”.

“I think that in 10 years’ time, we will be the only phys­i­cal in­fras­truc­ture left stand­ing,” said Barnes. “No one else will have branch net­works. “Let us zoom to the fu­ture: Banks have with­drawn from their branches and Edgars does not have a shop in ev­ery town … You will be or­der­ing ev­ery­thing over the in­ter­net and col­lect­ing it at the Post Of­fice.”

And he means ev­ery­thing – from goods bought on­line to so­cial grants, medicines to fu­neral poli­cies and ID books, and more.

He wants the Post Of­fice to be the con­tact point for “any fi­nan­cial trans­ac­tion be­tween any­one and the state”.

“We are the near­est ac­cess point, al­most for ev­ery­body – cer­tainly for the ma­jor­ity – to a for­mal distri­bu­tion in­fras­truc­ture that is there 24 hours a day,” he said.

“Grants, pen­sions, tele­phone bills – any­thing that re­quires trans­ac­tions – should hap­pen at a post of­fice.

“Let us go fur­ther. Why can you not vote at a post of­fice?

“Why should San­lam build an­other of­fice in Dull­stroom when we have an of­fice there?

“Our am­bi­tion is to own the last mile. For ev­ery­thing.”

If you said to me to­mor­row, ‘We are go­ing to pri­va­tise the Post Of­fice, would you buy it?’, I would say, ‘Ab­so­lutely’

PHOTO: TE­BOGO LETSIE

AC­TI­VAT­ING CHANGE Mark Barnes, CEO of the SA Post Of­fice, wants cheaper loans for small busi­nesses and is ad­vo­cat­ing for the re­turn of state sub­si­dies

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