SA Post Office tried to run a courier company – but failed dismally

The SA Post Office wants to stop courier companies from delivering packages under 1kg in South Africa, but the previous time it tried to run a courier company it failed spectacularly.

This is feedback from the DA’s shadow deputy minister of communications and digital technologies, Cameron Mackenzie.

He was commenting on the SA Post Office’s legal battle to enforce its interpretation of the Postal Services Act that it is the only licensed provider which can deliver reserved postal services.

Reserved postal services include all letters, postcards, printed matter, small parcels, and other postal articles up to and including 1kg.

If successful, private courier companies will be prohibited from delivering small packages like medicine, credit cards, passports, visas, and smartphones.

This, many stakeholders warned, can have devastating consequences because the Post Office is not able to match the private sector’s service levels.

Commenting on the situation, SA Post Office spokesperson Johan Kruger told MyBroadband they would not like to comment on the issue until it has been heard in court.

Kruger did, however, highlight that they are running a courier operation – Speed Services Couriers – and that it is a successful service and remains available.

Speed services couriers

Responding to the Post Office’s plans to take over delivery of all packages of 1kg or less, the DA’s Mackenzie told Parliament the organization cannot run a courier operation.

He highlighted that the Post Office tried it before, but it “ended up with that operation in liquidation”.

Mackenzie was referring to Courier and Freight Group (CFG), which was an operating subsidiary of the South African Post Office (SAPO).

CFG provided courier services – which ranged from overnight to seventy-two-hour delivery – and express freight products.

CFG was a dismal failure. It sustained huge losses for years, including R100 million in 2015 and R115 million in 2016.

CFG was placed under provisional liquidation in 2016. The only reason the company did not go bust was the Post Office’s decision to take over its assets, liabilities, and staff.

Employees of CFG were transferred to SAPO on their existing contractual terms on 1 September 2016.

This poor performance came at a time when the courier industry was growing in South Africa, which illustrates the inability of the Post Office to compete against privately owned rivals.

Cameron Mackenzie
Cameron Mackenzie

Mackenzie told MyBroadband that SAPO’s Courier and Freight Group was riddled with corruption and maladministration.

But there is an even bigger problem with the Post Office trying to get a monopoly on delivering packages under 1 kg – its dire financial state.

“Its last recorded profit was around R200-million in 2014. It made a loss of R1.6-billion for the year ending March 2021 and in 2022 it is expected to make a loss of around R2 billion,” Mackenzie said.

There is no indication from the government how this entity will be funded going forward.

“I’ve lost count of the number of Post Office turnaround plans tabled before Parliament – not one has worked,” Mackenzie said.

It continues to bleed cash at an alarming rate, with expenses consistently outstripping revenue.

Mackenzie highlighted that SAPO can not pay its suppliers, its statutory obligations, like employee pensions and medical aid contributions, or rent for branches.

“If your cash outflows exceed your cash inflows every month, how on earth can this entity operate an effective, efficient, and competent courier company?” he asked.

Now read: The SA Post Office wants to stop couriers from delivering many common items

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SA Post Office tried to run a courier company – but failed dismally