the postal services sector

12
1 The Postal Services Sector Background Traditionally, communication in society and business has been conducted through various means including telephone, fax and letters. The 1998 White Paper on Postal Policy identified postal services as the most basic and common means by which messages can be communicated and goods delivered. It stated that postal services form a basic link serving the entire population and also serve as an important medium of communications for business. As such, government committed to facilitating the growth and development of the sector and to ensuring the provision of universal and affordable postal services to all South Africans irrespective of race, gender, class, age, or geographic location. The overarching goal of the policy framework was to ensure accessible, equitable, efficient, effective and affordable postal services. Although government owned, SAPO operates independently and is expected to be profitable. However, SAPO faces several challenges, foremost of which is the vast service area, much of it remote and sparsely populated. Consequently, universal service obligations are substantial. The postal services sector is an important component of the economic sector in South Africa contributing approximately 3,16% to GDP. This includes the courier and express parcel market. The sector enables individuals and businesses economically and plays an important role in development. Letter post is declining both in terms of volume as well as a percentage of total revenue generated in the sector. The declining trend in letter mail volumes is ascribed to the global recession and electronic substitution effects. Despite this trend, the need for a postal service is unlikely to disappear. While efforts are being made to bridge the wide digital divide in South Africa, postal services remain important for people and communities who do not have ready access to e-mail or the Internet, for example, when applying for jobs or keeping in touch with family. The postal network also serves as a conduit for government to communicate with communities in the most rural parts of the country, as well as communities without access to electronic media. Besides, almost every business relies on the postal, courier and express parcel market for daily operations. This includes services such as sending out bulk mail (which would typically comprise account statements) from large retail and banking organisations amongst others as well as using the postal network as a marketing and advertising medium. From a commercial perspective, the sector is required to be one of high quality and efficiency so that economic activity in the country is supported by a strong postal, courier and express parcel service. From a social perspective, a basic postal service is the right of all citizens and is essential to the social and economic development of South Africa. Almost every individual is dependent on postal services and almost every business‘s value chain intersects with the postal service‘s value chain. There is, therefore, a need to fulfil the social obligations of the sector while still ensuring that it remains commercially viable. The social objective is characterised by universal service obligations and is driven by affordability, equity and keeping costs down, while the commercial objective is driven by profit maximisation, efficiency, and quality of service imperatives.

Upload: others

Post on 15-Jan-2022

3 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: The Postal Services Sector

1

The Postal Services Sector Background Traditionally, communication in society and business has been conducted through various means including telephone, fax and letters. The 1998 White Paper on Postal Policy identified postal services as the most basic and common means by which messages can be communicated and goods delivered. It stated that postal services form a basic link serving the entire population and also serve as an important medium of communications for business. As such, government committed to facilitating the growth and development of the sector and to ensuring the provision of universal and affordable postal services to all South Africans irrespective of race, gender, class, age, or geographic location. The overarching goal of the policy framework was to ensure accessible, equitable, efficient, effective and affordable postal services. Although government owned, SAPO operates independently and is expected to be profitable. However, SAPO faces several challenges, foremost of which is the vast service area, much of it remote and sparsely populated. Consequently, universal service obligations are substantial. The postal services sector is an important component of the economic sector in South Africa contributing approximately 3,16% to GDP. This includes the courier and express parcel market. The sector enables individuals and businesses economically and plays an important role in development. Letter post is declining both in terms of volume as well as a percentage of total revenue generated in the sector. The declining trend in letter mail volumes is ascribed to the global recession and electronic substitution effects. Despite this trend, the need for a postal service is unlikely to disappear. While efforts are being made to bridge the wide digital divide in South Africa, postal services remain important for people and communities who do not have ready access to e-mail or the Internet, for example, when applying for jobs or keeping in touch with family. The postal network also serves as a conduit for government to communicate with communities in the most rural parts of the country, as well as communities without access to electronic media. Besides, almost every business relies on the postal, courier and express parcel market for daily operations. This includes services such as sending out bulk mail (which would typically comprise account statements) from large retail and banking organisations amongst others as well as using the postal network as a marketing and advertising medium. From a commercial perspective, the sector is required to be one of high quality and efficiency so that economic activity in the country is supported by a strong postal, courier and express parcel service. From a social perspective, a basic postal service is the right of all citizens and is essential to the social and economic development of South Africa. Almost every individual is dependent on postal services and almost every business‘s value chain intersects with the postal service‘s value chain. There is, therefore, a need to fulfil the social obligations of the sector while still ensuring that it remains commercially viable. The social objective is characterised by universal service obligations and is driven by affordability, equity and keeping costs down, while the commercial objective is driven by profit maximisation, efficiency, and quality of service imperatives.

Page 2: The Postal Services Sector

2

Regulatory environment The Postal Services Act No. 124 of 1998 (the Postal Services Act) forms the basis of the regulatory framework for operators in the sector. The Act provides for the regulation and control of postal services in the public interest. According to the Act, an operator needs to be invited by the Minister to provide services within the reserved area. Currently SAPO holds a 25-year licence and is the only operator licensed to provide services within the reserved area. Operators wanting to operate within the unreserved area must apply for a registration certificate with the regulator. The registration is valid for one year from the date of issue and costs a non-refundable fee of R500. SAPO is also required to register in order to provide unreserved postal services. When issuing a licence or registration certificate ICASA may impose certain terms and conditions. SAPO was issued by ICASA an Amended Reserved Postal Services Licence in Notice 149 of 2012, effective retrospectively from 20 October 2008. The licence is issued on a national basis and requires the payment of 0,55% of the licensee’s audited regulated annual turnover in terms of licence fees within 90 days of the end of each financial year. The licence provides for the exclusive provision of reserved postal services by SAPO, subject to the review of such exclusivity by the Minister of Communications every five years or such shorter period as the Minister may determine. So far, no review has been undertaken since the licence was issued. ICASA is expected to monitor not only SAPO’s compliance with licence terms and conditions as well as the law but that of all postal operators, serving the unreserved market. However, due to capacity constraints, over the years ICASA has relied on compliance reports submitted by SAPO and has performed limited inspections. Overview of postal services and products According to the South African Standard Industrial Classification (SIC)12 system an industry is made up of enterprises engaged in the same or similar kinds of economic activity. In terms of this classification, postal activities include the following:

pick-up, sorting, transport and delivery (domestic or international) of letter-post and mail parcels and packages by postal services operating under universal service obligation.

collection of letter-mail and parcels from public letter boxes or from post offices, and distribution and delivery of mail and parcels

Courier activities on the other hand include:

pick-up, sorting, transport and delivery (domestic or international) of letter-post and mail parcels and packages by firms not operating under a universal service obligation

12 The South African Standard Industrial Classification (SIC) of all Economic Activities (Seventh Edition), report no. 09-90-02, October 2012. Statistics South Africa. http://www.statssa.gov.za/additional_services/Web_SIC7

Page 3: The Postal Services Sector

3

distribution and delivery of mail and parcels The Postal Services Act defines a postal service as including the following:

the provision of a reserved postal service or an unreserved postal service as contemplated in Schedule 1 and Schedule 2 of the Act, respectively.

the issuing of postage stamps the provision of roadside collection and address boxes

According to the UPU 2011 Report, letter-post remains the largest revenue source for postal services globally, although this trend is in decline. The decline is mainly due to the recession, but is also attributable to electronic substitution effects (e.g. email or sms) than competition from other market players. For instance, while ten years ago SAPO was delivering seven million pieces of mail per day this figure has dropped to six million pieces per day. By contrast, parcel volumes have been increasing steadily in the past decade, both locally and globally. South Africa is no different from the rest of the world regarding electronic substitution. E-mail, text messages, and social media platforms allow for instant and often free, or at least cheap, communication. However, there remains a strong desire for customers to receive invoices in hard copy in the post. Mail remains a key channel for the delivery of statements as well as advertising. Among the reasons underpinning this trend are the following:

many people feel overloaded with the amount of Internet advertising they receive and therefore tend to disregard it. Therefore, mail remains a popular channel to reach customers.

many people do not have facilities at home to print statements or other items emailed to them and therefore prefer to receive items in hard copy.

Despite the decline in mail volumes over the past decade, price increases have allowed SAPO to continue growing revenue in this part of their business. Mail revenue is by far the largest portion of income for SAPO, accounting for 73%13 of the Group’s income. In its 2012 Annual Report, SAPO group revenue stood at R5 935 million, of which R3 976 million was derived from the mail business and R671 million from courier services14. In the past, SAPO received subsidies from government. This has been reduced over time, for instance, from R306 million in 2010/11, to R180 million in 2011/12. SAPO received the last subsidy from government, estimated at R52 million, during the financial year that ended on 31 March 201315. As with all postal services globally, SAPO has sought ways to leverage its current infrastructure (IT, retail and logistics) to diversify its sources of income. Some of the agency services offered in this regard includes the following:

motor vehicle licence renewals (2,7 million in 2012) account collections on behalf of municipalities social grant payments (8,5 million social grant recipients through SAPO in 2012)

13 Market Sector Analysis. Pygma Consulting. 2013 http://www.doc.gov.za/key-programmes/ict-policy-review.html

14 Ibid 15 SAPO Annual Report 2012/13

http://www.postoffice.co.za/group/aboutus/annualreport/PostofficeAnnualreport2013.pdf

Page 4: The Postal Services Sector

4

private sector share scheme distribution As part of its extended services SAPO also provides financial services through the provision of a savings bank. This has been provided through the Postbank, and has allowed SAPO to further diversify its income stream away from mail revenue. Postal infrastructure The provision of postal services requires an extensive and costly network. However, unlike telecommunications or electricity this network is not constructed of wires or pylons and base stations but rather of workers, outlets and delivery vehicles. Postal services consist of the collection, sorting, conveyance and delivery of tangible goods in the form of letters and parcels16. The sector consists of the following infrastructure: Retail infrastructure During the 2012 financial year SAPO had 1 576 post office outlets and 871 postal agencies countrywide17. This gives SAPO an extensive and perhaps one of the largest retail footprints in the country. The retail network offers an opportunity to extend mailing and courier, as well as agency services. Backbone infrastructure To support all its business functions, such as mail, courier, collections, agency services (TV licences, motor vehicle licence renewals, and municipal collections), logistics and Postbank, SAPO has invested heavily, and continues to make strong investments in IT and broadband infrastructure. Logistics infrastructure Logistics support and management have an important role to play in the success of a supply chain in any business. Postal Services companies are uniquely placed to actively participate in the logistics sector given their considerable infrastructure and national and international delivery networks. SAPO, with its extensive logistics infrastructure and network, is uniquely placed to expand this business line and further support the mail and courier business. According to SAPO’s 2013 annual report, the logistics division continues to leverage the expanding postal and retail network, its infrastructure and opportunities offered by an increasingly changing environment. This enables the division to be a provider of choice, not only for government, but for customers who need to reach all corners of South Africa. SAPO plans to further expand this line of business by:

Integrating its parcel business within logistics consolidating the transport infrastructure in order to eliminate inefficiencies and

improve delivery standards

16 Research Report on the Economic Regulatory Framework for Reserved Postal Services. ICASA. 2010 https://www.icasa.org.za/LegislationRegulations/FinalRegulations/TelecommunicationsRegulations/EconomicRegulatoryFramework/tabid/415/ctl/ItemDetails/mid/1343/ItemID/364/Default.aspx

17 SAPO Annual Report 2011/12

http://www.postoffice.co.za/group/aboutus/annualreport/PostOfficeannualreport2012.pdf

Page 5: The Postal Services Sector

5

recapitalising its container infrastructure and repositioning it to address the key customer requirement of delivering goods to their destinations in their original condition

developing and introducing modern logistics systems in order to respond to changing market conditions and expectations and also enable the logistics division to venture into new markets

Strengthening and growing existing partnerships, especially in the SADC region, as a springboard of moving into the international arena

Thusong Service Centres and the role of SAPO in Universal Access In addition to the above, the Thusong Service Centres also offer key infrastructure that can be leveraged further to ensure greater broadband penetration in remote communities and provide SAPO with an additional means of revenue generation. The integration of government information and services, as well as providing ICT access to socially and economically isolated communities is at the heart of the Thusong Service Centres. Thusong Service Centres were founded in 1999 as multi-purpose community centres aimed at developing communication and information and integrating government service in rural communities to improve the lives of less privileged South Africans. By early 2012, 171 Thusong Service Centres were in operation, making a crucial contribution to the expansion of infrastructure for access to information and services that citizens can use. Typical services found in these centres include18: Government social and administrative services a. grants b. personal documents c. housing applications Office services a. phone, fax, scan, copy and print b. desktop publishing c. postal services Education and skills development services a. Adult Basic Education and Training (ABET) b. further Education and Training c. specialised training Local economic development (LED) services a. small business advice and development Business services and community opportunities a. small, medium and micro enterprises b. other private-sector services such as retail and ATMs

18 http://www.thusong.gov.za/about/what/index.htm ; Market Sector Analysis.Pygma Consulting. 2013.

Page 6: The Postal Services Sector

6

Information and communication activities a. government information and on-site guidance regarding services b. community information and awareness Market Structure and Competition The following section analyses the various ways in which the postal services sector can be segmented19. Reserved and Unreserved Market Segments At a basic level, the postal services market can be divided into reserved and unreserved services, in line with the Act. The South African Post Office (SAPO) has a monopoly of the reserved area and operates under a 25-year licence. The unreserved market includes the provision of all courier services together with any postal service that falls outside of the reserved area. According to ICASA’s database, there were just under 300 courier operators registered in 2012. While there may be several hundred postal and courier operators in South Africa, the sector is dominated by about 20 firms, accounting for 98% of the industry’s revenue. The five largest firms account for 78% of the total revenue in the sector, indicating a high level of concentration. SAPO’s exclusivity renders it the most dominant operator in the sector, accounting for about 60% of market share in terms of revenues from postal and courier services in 2012. Despite the legislative delineation of the market into reserved and unreserved segments, SAPO has on numerous occasions raised concerns of unlicensed operators encroaching on the reserved services market. Despite being illegal, this practice amounts to unfair competition to SAPO because operators in the unreserved market segment do not have universal service obligations. For this reason, the capacity of the Regulator to monitor compliance in the sector cannot be over-emphasised. Communications and Distribution Market Segments The communications market refers to the various ways in which businesses and individuals communicate, including letter and direct mail. Speed, content, size and media variations are factors distinguishing the communications market from the distribution market. There is a thin line dividing the communications and distribution markets. For instance, a letter contains a message, but due to its physical format it needs to be distributed. As the size of the item to be distributed grows, so the letter becomes a parcel. The distribution market includes the transport and delivery of goods to a specified address. Postal delivery is a specialised sector of the distribution market, especially the distribution of individual parcels.

19 White Paper on Postal Policy, 14 May 1998. http://www.polity.org.za/polity/govdocs/white_papers/postalwp.html Department of Communications Postal Policy Review Phase I. Situational Analysis. Pygma Consulting. September 2013 http://www.doc.gov.za/key-programmes/ict-policy-review.html Feasibility Study in The Postal Sector as Part of Managing Liberalisation. Report Submitted to DOC by Selemo Strategic. 2008. http://www.doc.gov.za/key-programmes/ict-policy-review.html

Page 7: The Postal Services Sector

7

According to the South African Express Parcel Association (SAEPA), a courier service is any company that transports/ships time-definite parcels. The amount of time required to deliver couriered parcels varies from one day to three days. Therefore SAEPA sees courier as any service that delivers items that have a maximum of three days for delivery and are more than 1kg in weight. The Letter and Parcel Market Segments Customers utilising the letter service indicate the need for a reliable and secure service. The use of electronic transmission is limited, as many consumers or mail recipients do not have access to the necessary technology. This implies that the letter service will remain as the primary means of communication, at least until broadband is more widely accessible and ICT skills in the country have increased. Given this scenario, customers are offered the choice between the economical standard mail service, and the more expensive fast-mail or courier service. Most letters in the postal system are mailed by organisations to individuals. The parcel distribution market caters for all material falling outside the definition of a letter. Services are offered by companies on high-volume and localised routes which demonstrate the practice of "cherry-picking". Individual and Business Customer Segments Customers in the postal services sector are segmented according to individual consumers and business consumers living or operating in the rural or urban areas of South Africa. Urban areas are characterised by heavy postal traffic, whereas rural areas are characterised by light postal traffic. Financial Services Market SAPO’s role in this market is through third-party payments (such as payment of municipal accounts, TV and motor vehicle licences) and money orders. However, efforts are underway to establish the Postbank as a separate entity within the SAPO group. All financial functions and payment products will be aligned under this division to provide more financial services to all South Africans. The Postbank The Postbank was established in 1910 as a savings bank. It may not provide loans or overdraft facilities to its customers. It is, however, a member of the multinational financial services organisation VISA, and participates directly in the National Payments System (PASA). In its 2012 Annual Report, SAPO reported that deposits grew by 6,9% in the year, bringing the total savings under management by Postbank to R4 258 million. As at 31 December, 2012, there was an industry total of R151 816 million in ‘savings deposits’ of which the Postbank deposits represent 2,6%. However, with over six million customers, the Postbank ranks in the top five banks and has a formidable customer base to launch new services and products in the lending, borrowing and investment sectors and thus provide mush needed competition in the sector. The Postbank is currently undergoing the necessary legal and regulatory processes to become a fully-fledged bank. Postal Universal Service and Access The rationale for universal service and access stems from the realisation that there is an inherent market failure in the final delivery portion of the postal service‘s value chain. The

Page 8: The Postal Services Sector

8

“last mile” of the value chain represents the largest cost component. This discourages commercially driven organisations from operating in under-served areas, which are usually in deep rural and outlying areas because they are seen to be unprofitable due to the long distances involved. Without universal service obligations, it is likely that operators would not serve such areas, or would do so at unaffordable rates that would exclude many South Africans. For this reason universal postal service becomes obligatory. Internationally, there are different approaches to the definition of a universal postal service. There is a clear link between universal service and postal monopoly or the reserved area. The classic economic justification for a reserved area is that it allows the postal operator to cover the costs of providing a universal service to overcome the market failure. The extent of the reserved area becomes an economic calculation based on the costs of providing the universal service. Some 80% of SAPO‘s revenue in its mail business comes from the reserved area. It is unclear to what extent the reserved area and the subsidy assist in covering the cost of providing universal service. Government has been subsidising SAPO for purposes of funding the universal service obligations. According to SAPO’s 2013 annual report, the marginal post offices in the under-serviced areas generate revenues of R73 million but have an operating cost structure of R473 million resulting in a loss of R400 million per annum. It is also unclear how universal service has been monitored and evaluated based on the original targets set in the licence in 2001. In terms of reserved postal services, SAPO must consult with ICASA regarding the fee to be levied on other service providers in the utilisation of its infrastructure for the provision of reserved postal services. Another noteworthy provision contained in the licence is that it requires SAPO to draw up a sustainable programme for a period which will be reviewed annually by the Authority from the beginning of April of one year to the end of March of the next for the delivery point roll-outs and retail outlet roll-outs in the Republic, as well as the development of the reserved postal services commencing from the 1st April, 2008. Additionally, ICASA regulates the SAPO tariffs through the imposition of price caps and the licence contains detailed requirements regarding tariff submissions and costing information required. The licence also deals with postal stamps, postal security and confidentiality as well as compliance with international commitments. Some of the other requirements include the submission of compliance reports and the filing of all contracts with ICASA. These include past agreements, agreements with other licensees and other operators and strategic agreements with other postal authorities. Affordability is seen as one of the key elements of universal service. Lower prices for basic mail can have a positive impact on economic development by keeping communications costs low. However, tariffs that are too low may be reducing the funding pool for additional rural points of presence which is another key element of universal access. Alternative funding mechanisms may need to be considered to ensure that the postal operator can comply with universal service obligations along with other possible policy objectives. From a regulatory perspective a balance must be struck between profitability of the postal operator on the one hand, with accessibility and affordability of postal services on the other. It is likely that as postal operators increase their points of presence to other parts of the country, they experience increases in mail volumes. However, the correlation between postal outlets and mail volume cannot be assumed especially when ambitious roll-out obligations are imposed on the universal postal operator. Arguably, as SAPO arrives at saturation points, there will be a need to moderate licence roll-out obligations or universal service obligations to ensure continued viability of the sector.

Page 9: The Postal Services Sector

9

The Postal Address System According to the UPU, an address is a basic human right. To this end member countries adopted a White Paper during the 2012 Doha Plenipotentiary Congress of the UPU, at the heart of which is a call for member countries to commit to the development of address infrastructure and the provision of an address to everyone20. Notwithstanding the declining mail volumes SAPO has managed to roll out millions of addresses over the recent past. The target of providing addresses to first-time address owners supports SAPO’s mandate of ensuring the right of every citizen to be connected socially and commercially, at an affordable cost. In the 2012 Annual Report, SAPO committed to rolling out an additional 3,6 million addresses between 2011-2013. The amended licence sets a target of 2,3 million new addresses between the years 2012-2014. In the financial year that ended on 31 March, 2012, 1199 273 addresses were rolled out to first-time address owners against a target of 1195 690. The address system is important for a number of reasons, including:

location finding for ambulance, fire, police and rescue services geographical analysis and information about a city and its people, for instance as

conducted in the census home and location addresses for easy communication and delivery business and tax applications provision of municipal services maintenance and repair of water, electricity, sewerage and telephone systems facilitation of law enforcement

Postal Services in the Digital Age The postal services sector is in a state of continuous change. Electronic substitution is threatening the sustainability of the industry. Traditional mail is largely being replaced with email and other methods of instant electronic communication. For instance, many businesses are now using electronic invoice systems and accept electronic payments instead of sending paper invoices through the mail and receiving paper-based payments. Bills, invoices, notifications, and statements of account to customers form the bulk of most postal system volumes and yet are most susceptible to technological advances21. These factors provide competitive pressures and challenges to the postal industry as a whole. According to the Universal Postal Union, postal operators worldwide are dealing with a 4% to 6% negative growth. While much of this is directly related to the economic downturn, the rise in popularity of email as a preferred mode of communication and perceived lack of innovation by postal operators is a contributing factor22.

20 Addressing the world: An address for everyone: UPU White paper. 2012 http://actualites.upu.int/fileadmin/user_upload/PDF/Reports/whitePaperAdressingEn.pdf

21 Research Report on the Economic Regulatory Framework for Reserved Postal Services. ICASA. 2010

https://www.icasa.org.za/LegislationRegulations/FinalRegulations/TelecommunicationsRegulations/EconomicRegulatoryFramework/tabid/415/ctl/ItemDetails/mid/1343/ItemID/364/Default.aspx

22 http://www.capegemini.com

Page 10: The Postal Services Sector

10

The flow of mail has changed from a two-way communication process, to a one-way flow. The mail business is increasingly moving towards ‘pull’ effects, that is, a customer or business requests an item, rather than ‘push’ effects where a business or friend sends a letter. There has also been a shift from business to business (B2B) towards business to consumer (B2C) form of communication23. Despite these challenges, the postal industry still has a relevant place in today’s global marketplace. According to the UPU, despite the international trend towards electronic communication, there remain a limited number of major customers that generate the majority of volume upon which the global postal network operates. As such, the postal market can be viewed as moving away from social mail services, and towards business and corporate mail, albeit with consumers on the receiving end of those transactions24. SAPO is uniquely placed to leverage on the vast network of postal outlets, fleet of delivery vehicles and telecommunications infrastructure to offer integrated services such as telecommunications, financial services and logistics. SAPO’s broadband infrastructure, depending on architecture and capacity, could be leveraged to offer broadband services in rural and under-serviced areas, or to provide Wi-Fi zones within a specified radius of the retail footprint. The regulatory environment needs to be conducive and flexible enough to allow SAPO space for growth despite the emerging challenges, while ensuring that there is competitive behaviour within the postal services sector. Postal Reform Trends According to the Organisation for Economic Co-operation and Development (OECD) traditional network industries have been transformed through reforms that have fundamentally changed the way these industries are regulated. The former reliance on state control and regulation has given way to greater reliance on competition and market forces, which has led to a greater focus on efficiency, innovation and meeting the needs of consumers in these industries. However, these reforms have largely bypassed the postal sector. The postal sector in most OECD countries remains dominated by a state-owned vertically-integrated monopoly, still largely protected from the forces of competition. South Africa is no different and is also faced with challenges of providing universal service. In addition, South Africa is a member of the World Trade Organisation (WTO) and hence has been part of the rounds of negotiations taking place on opening up services sectors to foreign competition. The drive from the Universal Postal Union (UPU) and the General Agreement on Trade in Services (GATS) agreement will put pressure on South Africa to progressively make commitments towards increased (trade) liberalisation of postal services. The global recession, coupled with the proliferation of electronic mail as well as other communication mediums, poses challenges for growth in the postal services market. The critical issue for postal service operators is how to respond to these new technological challenges.

23 Postal Policy Review Phase I. Situational Analysis. Pygma Consulting. September 2013 http://www.doc.gov.za/key-programmes/ict-policy-review.html

24 Ibid

Page 11: The Postal Services Sector

11

Globally there is a trend towards greater corporatisation, commercialisation or privatisation prior to liberalisation of the postal market. The general intention is to create a more efficient governance structure for the postal operator, particularly when it will have to compete with private operators in a liberalised market. The following are some of the conclusions and lessons from international postal reform:

Many countries have successfully undertaken reform. Where postal monopolies have been eliminated this has led to commercial flexibility. Reforms have frequently involved changes in the universal service obligation. Many governments have removed universal service delivery from the postal service

itself and shifted it to another entity, such as the regulator. The experience in countries that have eliminated their monopolies, such as New

Zealand and Sweden, suggests that universal service can still be maintained at affordable prices without a delivery monopoly.

Many reforms have included a mechanism for making the cost of providing universal service explicit such as a universal service fund.

Postal reform in some countries has included changes from government to private ownership, as in Germany and Holland.

Preliminary evidence suggests that international postal reform has been positive. There is no evidence of price spikes, and some postal services, such as in New Zealand, have even lowered their basic postage rate.

Labour relations have been challenging in some countries; many postal service operators had to reduce their workforce as part of reforms. This was done mainly through attrition. However, given South Africa’s highly unionised work force and high rate of unemployment, any reform that results in job losses might be resisted.

With respect to funding of the incumbent postal operator the following are some of the options available: Public Funding

all funding for the operations and subsidies of the institution come from the Government.

Government acts as revenue reserve; all monies appropriated to the institution will be collected and accounted for in the national fiscus

the institution has the benefit of government infrastructure and support structure for operations

Private Funding

the institution is commercially driven and focuses on revenue generation to sustain its operations and make a profit

it is independent of the Government's control it is exposed to the full force of the market

Hybrid Funding

this is typically a corporatised institution that is state owned but functions like a private company

it is revenue driven and is not subsidised in any manner by Government It is expected to pay taxes and may have access to state owned infrastructure at a

nominal usage fee

Page 12: The Postal Services Sector

12

Critical Success Factors The following are some measures that are critical for the success of the postal services market into the future:

Fulfilling universal service obligations will ensure that all citizens have access to basic postal services

In the face of competition, quality of service and customer experience are paramount Attention needs to be paid to security of the system to ensure that letters, parcels

and other postal items are not pilfered, damaged or lost Strict enforcement of the law with respect to unregistered and unlicensed operators

cannot be overemphasised Increased efficiency through technological changes and quick responses to

technological innovation, such as investing in parcel-sorting equipment, is important Develop integrated, coordinated relationship and plan between various stakeholders

trying to achieve similar objectives, e.g. GCIS, Thusong centres, SAPO, USAASA, etc.

As a labour intensive sector, nurturing a good relationship with the unions is critical25.

25 Feasibility Study in The Postal Sector as Part of Managing Liberalisation. Report Submitted to DOC by Selemo Strategic. 2008 http://www.doc.gov.za/key-programmes/ict-policy-review.html