SA Post Office’s social grants deal is a massive failure – Report

The SA Post Office is losing at least R60 million a month from distributing social grants, reports the City Press.

This is due to the high fees it must pay to cash-in-transit drivers to deliver cash to paypoints.

Insiders told the City Press they estimate that for every R100 the Post Office earns from this deal with Sassa, it is spending R500.

The social grants deal was originally touted as a big opportunity for the Post Office to earn more revenue.

Massive increase in costs

According to the Post Office’s income statements ending December 2019, security costs have increased by over double what they were when the Post Office took over the project in April 2018.

“The income statement reveals that security costs increased by R355 million to R600 million – from R265 million – due to the increased costs for Sassa payments,” said the City Press.

This expense was allegedly highlighted by Post Office Chief Information Officer Refilwe Kekana in an internal memorandum.

“The Sassa project won by the Post Office has proved to be a loss-making initiative that the Post Office continues to subsidise at its own risk of financial viability, going concern, and reckless trading,” Kekana is quoted as saying.

When asked for official comment, a Post Office spokesperson told the City Press that Kekana’s memorandum was “an internal discussion document reflecting an individual’s views, and not an official position of the Post Office”.

Searching for revenue opportunities

Kekana also reportedly said the new Post Office board has established a committee which is tasked with finding opportunities to form partnerships that can bring revenue to the entity.

Partnerships that have allegedly been considered include selling life insurance, partnering with R1-billion tech factory failure Yekani to sell set-top boxes, and partnering with the national lottery for cash distribution purposes.

The Post Office also reportedly plans to review major contracts – especially those involving Sassa, which Kekana reportedly said have put the Post Office in a worse position.

However, the Post Office told Parliament in October that its forecasts show it could earn R1.9 billion in gross revenue from its Sassa project per year.

Ecommerce platform

The reported failure of this initiative brings into question the viability of other new revenue streams, such as the upcoming ecommerce platform the Post Office plans to launch.

This new platform is seen as “an important new revenue generator” by the Post Office.

The company predicts ecommerce and financial services will comprise a major portion of its revenue by 2030, with only 20% of its revenue expected to come from the traditional postal services it offers.

“We’re going to be focusing on the export of South African-made goods on our platform,” said former Post Office CEO Mark Barnes.

“It’s the Post Office’s vested interest to have a platform that promotes exports, because the way the postal revenue works is the originator of the postal event gets most of the revenue.”

Post Office spokesperson Bongani Diako previously told MyBroadband that one of the key benefits of using the Post Office is its reach, which includes 2,199 points in South Africa as well as international deliveries to 179 countries.

He also highlighted that, as of June 2019, the Post Office’s courier divisions were performing to a level nearly in alignment with ICASA expectations.

According to Diako, the Post Office’s Speed Services Couriers’ on-time delivery performance was 88% as of this date, which was only slightly below the 92% target agreed in the SLA with ICASA.

Now read: SA Post Office CEO suspended after just 4 months

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SA Post Office’s social grants deal is a massive failure – Report