Af­ter decades in the fi­nan­cial ser­vices in­dus­try, Mark Barnes has rolled up his sleeves to im­ple­ment a turn­around at the South African Post Of­fice. He talks about his plans to tackle this Her­culean chal­lenge.

Finweek English Edition - - FRONT PAGE - By Mandy de Waal and Jon Pien­aar

In Fe­bru­ary’s Bud­get Speech, fi­nance min­is­ter Pravin Gord­han ear­marked a bailout of R650m, but Barnes wants more.

at the age of 60, Mark Barnes has taken on the ar­du­ous task of turn­ing around that fail­ing state as­set, the South African Post Of­fice (Sapo). He took over Sapo’s reins in Jan­uary and quickly faced his first big tests – manag­ing labour well, rais­ing the bil­lions the gov­ern­ment en­tity needs to sur­vive, and get­ting peo­ple to use the ser­vice again.

“When I ar­rived I found a com­plete lack of trust in the Post Of­fice to de­liver any­thing. The Post Of­fice was be­ing writ­ten off,” says Barnes in a tele­phonic in­ter­view with fin­week.

In mid-April, when Barnes went hat in hand to Par­lia­ment to present Sapo’s res­cue plan, he con­fessed to the Telecom­mu­ni­ca­tions and Postal Ser­vices com­mit­tee that some 2m post boxes had been aban­doned by their cus­tomers.

This, he said, re­alised lost rev­enues of some R60m a year by the state-owned en­ter­prise (SOE).

Mas­sive debt…

But this is only a frac­tion of the R125m that Barnes says Sapo is los­ing monthly. How much money does Sapo’s new CEO want to en­sure the en­ter­prise will sur­vive? In Fe­bru­ary’s Bud­get Speech, fi­nance min­is­ter Pravin Gord­han ear­marked a bailout of R650m, but Barnes wants more. A lot more.

His price tag? “R2.7bn – and all of that money is just to fill the hole of the past. It’s to pay up the cred­i­tors,” Barnes ex­plains.

As of Jan­uary 2016 the Post Of­fice owed its cred­i­tors just un­der R1bn. Be­cause of slow pay­ment, key sup­pli­ers were re­fus­ing to de­liver es­sen­tial ser­vices and goods to the SOE, which im­peded its abil­ity to func­tion prop­erly. Barnes ex­plains that this has soured, and in some cases ter­mi­nated, re­la­tions be­tween Sapo and its cus­tomers.

“We had a strike in 2014 that lasted for four months and our rev­enues dropped by 30% – and we never re­cov­ered be­cause peo­ple lost faith in the Post Of­fice. We had this ex­tra­or­di­nary or­gan­i­sa­tion that was mis­man­aged – money was blown for decades and peo­ple lost faith in it,” says Barnes.

The net re­sult, he ex­plains, is that cus­tomers were pre­pared to sub­sti­tute the ser­vices that Sapo of­fered at any price, which se­ri­ously dented the SOE’s ex­ist­ing rev­enue streams.

“If you wanted to have a cell­phone de­liv­ered to some­one you would courier the phone and pay any price, rather than go through this Post Of­fice, and this is how we lost mar­ket share, lost rev­enue and even­tu­ally ran out of money. And when we ran out of money we stopped be­ing able to pay those peo­ple that pro­vided the Post Of­fice the ser­vices it needed to keep run­ning well,” ex­plains Barnes.

…has led to labour prob­lems

Cred­i­tors aside, another mas­sive debt con­sists of the funds promised – and owed – to staff. In his pre­sen­ta­tion to Par­lia­ment in April, Barnes pegged this at R800m.

He tells fin­week that the par­ties who haven’t been paid by Sapo in­clude “the peo­ple who move our mail around. We did not pay them so they got slower and slower, and pro­vided less and less ser­vice.”

Barnes says this com­pounded the mess that is SA’s na­tional postal ser­vice, so that an item of mail that should have taken two days to de­liver ended up be­ing in tran­sit a week or more, if it was de­liv­ered at all.

“We’ve had dif­fi­culty with labour over the past four years and now we need to hon­our pre­vi­ous com­mit­ments and strike some sort of deal,” he says. “My pur­pose here is to en­gage with the pos­si­bil­ity of eco­nomic dig­nity for all the peo­ple who work here. Our unions are our part­ners in the saga that is go­ing on here.”

If the SOE col­lapses, says Barnes, “the vul­tures of pri­vate en­ter­prise would be happy to eat off the car­cass of a de­cay­ing Post Of­fice”. But what of the some 22 000 peo­ple who are em­ployed by the coun­try’s postal ser­vice?

A big part of the turn­around plan penned by Barnes, his man­age­ment team and key stake­hold­ers was to try and con­tain staff costs. The big­gest item on its bud­get, Sapo’s ra­tio of labour cost to rev­enue cur­rently stands at some 78%. Barnes wants to at­tempt to halve this fig­ure by of­fer­ing staff mem­bers early re­tire­ment and what he eu­phemisti­cally calls “vol­un­tary sep­a­ra­tion”. The cost of do­ing this is a fur­ther R300m.

To do this well, while si­mul­ta­ne­ously try­ing to “foster a per­for­mance-driven or­gan­i­sa­tion”, Barnes will need the full sup­port of Sapo’s em­ployee force.

If the way the two-day strike this May played out is any­thing to go by, Post Of­fice staff are al­ready well be­hind Barnes. In­stead of go­ing on strike en masse, 98% of the Post Of­fice’s staff con­tin­gent ig­nored the call to strike and turned up for work – busi­ness as usual. And so they should – a strike would only be another nail in the Post Of­fice’s cof­fin.

As a re­sult only 2% or some 400 Sapo work­ers par­tic­i­pated in the in­dus­trial ac­tion, and postal ser­vices weren’t in­ter­rupted. This is a clear show that postal work­ers have bought into the logic that the Post Of­fice is at a cross­roads – ei­ther ev­ery­one pulls to­gether be­hind Barnes to make things work, or ev­ery­one loses.

How did Sapo get here?

Why is the Post Of­fice in such a se­ri­ous pickle? “You start un­rav­el­ling things and what you find is a waste of money on a grand scale that has been go­ing on for the last decade. Wasted, ir­reg­u­lar, fruit­less, fraud­u­lent ex­pen­di­ture and to­tal mis­man­age­ment for a decade,” Barnes says, and true to form, he doesn’t mince his words.

“The con­se­quence of this is that we ended up in a sit­u­a­tion where the Post Of­fice sim­ply ran out of money.”

Dur­ing the last five years or so, SA’s na­tional postal ser­vice has seen a suc­ces­sion of lead­ers come and go – leav­ing with their tails be­tween their legs. Per­haps the most in­glo­ri­ous of th­ese de­par­tures were by Mot­shoanetsi Le­foka and Chris Hlekane, both of whom reached “mu­tu­ally agreed sep­a­ra­tions” with Sapo af­ter breaches of gov­er­nance and cor­rup­tion al­le­ga­tions came to light.

The rot didn’t stop there though. In her re­port is­sued in Fe­bru­ary – and aptly ti­tled

Post­poned De­liv­ery – the Public Pro­tec­tor showed that monies paid to labour bro­kers amounted to some R2.7bn.

“As th­ese re­la­tion­ships were not prop­erly reg­u­lated and the billing dif­fi­cult, if not im­pos­si­ble, to con­trol to pre­vent scope creep, over­billing, over­charg­ing, and false billing, it can­not be said that run­away ex­pen­di­ture in­volved did not con­trib­ute to Sapo’s cur­rent liq­uid­ity and cash flow prob­lems,” the re­port stated.

That re­port also dealt with the R161m lease of Sapo’s new head­quar­ters in Cen­tu­rion, Gaut­eng, in 2010, which the Public Pro­tec­tor said was tainted with cor­rup­tion and ir­reg­u­lar­i­ties, and was “un­law­ful”.

But the mess goes back as far as 2004 when then CEO Maanda Many­at­she was charged with fraud and ten­der mis­man­age­ment. Af­ter that, Khutso Mam­peule (who was in charge from 2005 to 2007) was let go af­ter it was al­leged that he had re­ceived ten­der kick­backs.

Barnes is adamant that the long his­tory of mis­man­age­ment at Sapo stops with him. “There will not be cor­rup­tion here,” he says em­phat­i­cally. “There will not be mis­in­for­ma­tion here and there will not be mis­trust be­tween man­age­ment and staff. There will not be waste­ful and friv­o­lous spend­ing. The peo­ple I am work­ing with have bought into busi­ness prin­ci­ples now, they want to turn this place around.”

A man with a mis­sion

Charis­matic and fiercely in­tel­li­gent, Barnes is pro­pelled by an enor­mous be­lief in both what is pos­si­ble at Sapo, and what he thinks he can pull off.

“I am do­ing this on pur­pose. No one called me up – I went out to look for this chal­lenge be­cause it is one of the most ex­tra­or­di­nary chal­lenges of our times,” Barnes says be­fore telling the story of how he ap­proached Deputy Pres­i­dent Cyril Ramaphosa about turn­ing the ail­ing SOE around.

“Gov­ern­ment an­nounced that they were go­ing to cut 5 000 jobs at the Post Of­fice and close 600 con­tact points,” he says. “I ap­proached Cyril Ramaphosa and said to him: ‘If what you are go­ing to do is cut the or­gan­i­sa­tion back, then you will fail this out­dated or­gan­i­sa­tion.’

“Here is an or­gan­i­sa­tion that has got the most clients in South Africa, it knows ev­ery­one’s ad­dresses, and it has more in­for­ma­tion about ev­ery­body than any other en­tity,” he en­thuses.

“It has got the most per­va­sive in­fra­struc­ture in the en­tire coun­try – more branches than other busi­nesses. In­side it is a bank, and all of its in­fra­struc­ture has been bought and paid for,” he ex­plains.

“The very rea­son why peo­ple at Sapo have been steal­ing our lunch is be­cause the Post Of­fice is a busi­ness, it is not a gov­ern­ment ser­vice. It might have been a gov­ern­ment ser­vice in its ori­gins but it is now a busi­ness.”

What­ever you do, don’t come to Barnes with that old story about how brew­ery boss Meyer Khan once tried to save the po­lice force. He’s heard this many times be­fore, and he’s not im­pressed.

“I am sorry if you think that we as South Africans can just sit im­pas­sively and whinge. If you want to stay here in this coun­try with your fam­ily you can’t just sit and pass judg­ments over the messes. You have got to get up and help to start clean­ing them,” he says.

“I am do­ing this on pur­pose. No one called me up – I went out to look for this chal­lenge be­cause it is one of the most ex­tra­or­di­nary chal­lenges of our times.”

Mark Barnes CEO of the South African Post Of­fice

Pravin Gord­han

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