A lifeline for Sapo to capitalise its operations
The R2.9bn capital injection from government is set to help speed up the turnaround plan and enhance profitability
The SA Post Office (Sapo) has been allocated R2.9bn capital injection during finance minister Tito Mboweni’s medium-term budget policy statement in October.
This is a much needed investment by the entity as it requires it to capitalise its operations. Sapo’s acting chief financial officer Jabulani Dlamuka says the investment will speed up its turnaround plan.
An investment committee comprising senior executives has been established to oversee the designation of the allocation among various needs requiring capitalisation.
“Previous financial allocations have been directed towards noncapital spend, including settling debt, which generates zero return,” he says. “The difference with this allocation is that a large proportion will be utilised for capital investments aimed at returning Sapo to profitability.”
He says the investment will be channelled into new and existing infrastructure, information technology and human capital initiatives. A total of R1.1bn will be targeted at capital investments in two phases.
The first phase is focused on protecting Sapo’s mail revenue and addressing the decline caused by poor service and performance, due largely to lack of operations investments over a long period. As such, investment will be made in technology and implementing electronic solutions.
The second phase will be focused on improving customer services at branch level. Sapo branches will be equipped with the required facilities to meet the needs of customers, including the SA Security Services Agency (Sassa) grant beneficiaries and will include branch personnel training in order to improve customer service levels.
A total of R900m will be invested in upgrading the branch IT infrastructure to ensure that connectivity is more reliable.
An additional R653m will be targeted at funding an e-commerce project and implementing an improved Trace and Track system, the latter which will allow Sapo to better track where each piece of mail is in the system.
“Currently, as a result of years during which no capital investment was made into Sapo’s mail centres, the technology we have in place is not optimal,” says Dlamuka.
“The implementation of an electronic processing system will allow the organisation to offer a more efficient mail delivery service.”
Sapo, he says, is cognisant of the fact that a reliance on mail revenue is not sustainable in the long term, hence its strategy is to fund e-commerce and financial services offerings’ projects in order to grow alternative sources of revenue.
These strategies aside, Dlamuka indicates that they are also robustly implementing a cost containment programme across the Sapo group, including vying for an optimal employee size.
Sapo has slightly less than 18,000 employees, making its salary bill one of its major costs. In 2016, the company offered a voluntary retrenchment and early retirement programme to its employees.
However, its workforce numbers are still higher than the norm.
Sapo is a state-owned entity with a public service mandate to operate postal branches throughout the country.
Many of these branches, says Dlamuka, are situated in remote areas and don’t generate positive returns.
Though they’re not profitable, Sapo’s public service mandate requires that these areas are serviced. As such, the organisation receives a government grant for servicing these unprofitable areas.
However, Dlamuka believes that Sapo’s public mandate to become present in every corner of the country is being turned into a wellcrafted strategic position.
“Sapo’s intention is to leverage our footprint and infrastructure in order to become a delivery mechanism for government and private sector services,” he says.
He adds that Sapo intends to play a positive role delivering government services to the citizens of SA while at the same time saving government money.
“Expectations are that within the 2019/2020 financial year, Sapo will be a self-sustaining organisation which no longer requires any government funding, and this is achievable,” he says.
Dlamuka says together with his team, he has embarked on a campaign to engage Sapo’s suppliers in order to rebuild relationships that may have been affected by the slow pace of payments for their services.
He says Sapo’s management is doing this because it is cognisant of the importance of suppliers to the organisation.