Post Office critical for South Africa

Despite the financial burden the Post Office has posed to South Africa, its services are still necessary to increase e-commerce penetration in the country.

This is according to Zulzi CEO Donald Valoyi, who told Cape Talk he believes the Post Office is worth saving.

Zulzi is an online shopping platform that delivers groceries, pharmaceuticals, and alcoholic beverages. It also developed Checkers’ original Sixty60 service.

Valoyi argued that although private postal and courier services have filled the gap left by the state utility, the Post Office caters to all South Africans — especially those in lower-income segments.

“The reason the Post Office is critical for this country is because it is located where most people are,” says Valoyi.

This is due to the Post Office’s universal service obligations that require it to serve all South Africans.

Anoosh Rooplal, one of the business rescue practitioners (BRP) appointed to prevent the state-owned entity’s closure, recently highlighted this.

“While city dwellers have the means to pay for and access communication networks, South Africans living in rural areas have fewer choices,” said Rooplal.

Valoyi believes that improving delivery access is critical to increasing e-commerce penetration in South Africa.

“One of the biggest problems with private delivery services is that they are very expensive, meaning many people can’t afford to use them,” he says.

“Private delivery services also struggle to reach remote areas, resulting in expensive delivery fees.”

This lack of access to affordable delivery services is impeding the growth of e-commerce in South Africa, which requires high volumes to increase penetration, according to Valoyi.

E-commerce currently accounts for only 6.15% of retail in the country and is valued at R71 billion, and is expected to grow to 10% by the end of 2025.

However, Valoyi admits that the Post Office as we know it won’t do.

He says it must implement technological advancements to compete with delivery services such as Pep’s Paxi, which has stores scattered across South Africa.

Valoyi believes that there is room for private-public partnerships where delivery services and e-commerce platforms can utilise the ubiquity of Post Office locations across the country.

Rooplal and Juanito Damons, the other BRP appointed to the Post Office, have said that unless it urgently receives a cash injection, its reserves will run out in October 2024 and may need to be liquidated.

The Post Office has been plagued by operational issues for over a decade, receiving its first bailout of R205 million in 2014.

More bailouts followed in 2016 and 2017, worth R174 million and R650 million. As it turned out, these were just the tip of the iceberg. 

The Post Office was placed into business rescue in July 2023, and Rooplal and Damons were appointed to formulate a plan, which was adopted in December of that year.

As part of being placed into business rescue, the Post Office received a R2.4 billion injection from National Treasury, which it used to cover operations, settle debts, and pay salaries and severance packages.

The plan has so far resulted in 4,875 people being retrenched out of the 11,083 staff that were employed at the ailing entity.

Two of the three retrenchment package payouts have already been made, with the third scheduled for November this year.

Of its 1,023 branches, with only 113 being profitable, it was decided that 366 should be closed. This left 657 branches nationwide, of which 232 offer motor vehicle licence renewals.

Its debt to secured creditors was reduced by 88% to R842 million. By the end of July, it had paid 98.6% of this.

Statutory and payroll creditors will be paid an additional 18 cents per rand dividends if the Post Office receives the additional R3.8 billion from the Treasury.

Rooplal and Damons also reduced the state entity’s liabilities from R8.7 billion upon entering business rescue to R440 million by the end of June this year through deep compromises.