MARK BARNES ON FIXING THE POST OFFICE
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.
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).
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