Government15.10.2024

Post Office online shopping delivery monopoly fight

Senior politicians are clashing over the future of the struggling South African Post Office’s (Sapo) legislated monopoly on reserved postal services, which gives it the exclusive right to deliver sub-1kg packages.

Communications minister Solly Malatsi recently said his department was considering partly privatising the Post Office to help modernise its operations and improve its competitiveness.

His vision includes government retaining a majority stake in the Post Office, while ending its monopoly as a reserved postal service in South Africa.

Sapo has repeatedly emphasised it has the sole right to deliver postal items weighing less than 1kg, as determined by a 25-year licence issued under the Postal Services Act of 1998.

The postal service’s dismal delivery fulfilment record and staff’s infamous reputation for stealing items forced South Africans to turn to alternatives in the form of private courier companies like Postnet.

That led to Sapo lodging a complaint against Postnet with the Independent Communications Authority of South Africa (Icasa) in 2018.

Icasa ordered Postnet to cease delivering small parcels in early 2020, but the company secured an interdict from the High Court, ensuring it could continue offering the service.

Sapo and Icasa have filed dispute papers to defend their position, but the case has remained in limbo since Sapo’s provisional liquidation in 2023 and subsequent business rescue proceedings.

Malatsi believes that the Post Office should rather focus on building public trust than enforce a state-sanctioned monopoly.

“The preferred outcome is for Sapo to get back on its feet by regaining the public’s trust, including public entities, not through compulsory use of its services,” Malatsi stated.

His views stand in stark contrast to Parliament’s portfolio committee on communications, which previously called on the department to renew the Post Office’s exclusive licence.

The chair of Parliament’s portfolio committee on communications, Khusela Snagoni Diko, recently also released a media statement strongly opposing Malatsi’s plan to abolish the Post Office’s licence.

Although she welcomed the minister’s support for stronger value-creating public-private partnerships, she argued that the government should be “preserving, protecting and extending its competitive advantage”.

Diko said this should be done “as provided for in law to reserve its exclusive licence to provide postal services for all parcels weighing under 1kg.”

Diko also maintained it was “concerning” that Malatsi’s statement suggested a foregone conclusion that this would privatise the Post Office.

“Sapo is a strategic state institution with an important mandate to connect people to one another and to the government in a fast-evolving technological age,” said Diko.

“As such, it must remain in the hands of the state, not beholden merely to commercial interests but committed to delivering on its universal services obligations espoused in the Postal Services Act of 1998.”

It is important to emphasise that Malatsi explicitly said government must maintain majority control of the Post Office.

He only advocated for opening it up for “some private partnerships” to leverage the service’s infrastructure to be competitive and commercially viable.

Communications minister Solly Malatsi (left) and Parliamentary communications portfolio chair Khusela Diko (right)

A non-functional monopoly

The call to renew the postal service’s exclusive licence could be met with fierce resistance from the e-commerce sector and courier services currently delivering small parcels.

Nortons Inc director Anton Roets, who was the legal representative for the South African Express Parcel Association (Saepa) and others, previously argued that Icasa and the Post Office had misinterpreted the legislation.

He said the court needs to decide what the Act truly says and whether the Post Office’s argument infringes on constitutional rights.

“If the Post Office’s interpretation of the Act is correct, it will have various constitutional implications. It will infringe on freedom of expression, privacy, and dignity,” said Roets.

“You will be required to use the services of a state-owned enterprise without certainty of when, and even if, the package will arrive.”

While many private couriers have been providing excellent services to the South African public, the Post Office has failed to meet the delivery targets set out in its licence for at least the past decade.

The Postal Services Act also imposes strict conditions on the reserved postal services licensee. In partcular, it must deliver 92% of packages within five business days.

In its last reported financial year — 2023 — Sapo could only deliver 51.62% of packages within five business days.

Considering the service is currently in business rescue and has slashed costs, it is highly unlikely that the metric has improved in any material way.

The graph below shows the proportion of the Post Office’s deliveries completed within five business days since 2015.

No penalty despite years of failures

Saepa has argued that the Postal Services Act only restricted sub-1kg deliveries made using a postal service.

“It permits couriers and express logistics services providers to also convey such items, albeit by means other than a reserved postal service,” said Saepa CEO Gary Marshall.

“Saepa’s members are permitted to convey sub-1 kilogram packages by way of courier service.”

Marshall told MyBroadband that despite the Post Office’s obvious failure to abide by its licence requirements, Icasa has never fined or otherwise punished the state-owned mail carrier.

He explained that Icasa had the power to conduct an inquiry into licencing conditions and that it could suspend or revoke any licence if the holder contravened the requirements.

“This extends to Sapo’s compliance with the mail delivery standards or other performance standards prescribed in terms of its licence,” Marshall stated.

While Saepa had not lodged a complaint about this particular issue, it had drawn Icasa and the communications department’s attention to the Post Office’s deficiencies.

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