Opinionista Ivo Vegter 20 October 2014

‘The cheque is in the mail’

As promises go, this is the most infamous of lies. But if you really want to elicit howls of derision, quote the slogan of the South African Post Office to one of its customers: “We deliver, whatever it takes.” It doesn’t deliver, of course. At all. This is harming a great number of people. Nobody will buy the Post Office, but its monopoly status must be repealed.

“The SA Post Office receives SABS quality stamp of approval,” the state-owned disorganisation crowed on 12 March 2014. It had been issued with an official certificate of compliance with a quality management standard known as ISO9001.

Do not be deceived. ISO9001 certification means that a bunch of bureaucrats approve of the box-ticking ability of another bunch of bureaucrats. It does not mean that you’ll get your mail, by a long shot. Your mail is more likely to be lying on the floor of the Benoni post office, or to have been burnt in delivery vans. The Post Office is no longer a functioning institution. It cannot be called “an organisation”, nor can it be accused of “quality”.

To a generation that grew up online, this seems trivial; a victory, even. Who cares about a government-owned dead tree distribution network? Zapiro’s cartoon on “snail mail” expresses a common sentiment. Amusing though it is, however, it is far from true. The Post Office matters a great deal, to many people and businesses. Worse, it is illegal for the private sector to step in and take over its more important functions.

The Post Office has been plagued with nasty strikes for years. Despite having settled a dispute over the status of casual workers with the Communications Workers Union in February 2014, the union has added new demands, including a 15% wage increase. Since mid-August, it has led a strike characterised by vandalism and violence. The letters and packages that lie strewn about inside and outside post offices will never be delivered, mark my words.

Post Office management flat-out lied about the reason for paying September salaries late, and has gone a-begging to the government for help to pay October’s salaries. The responsible minister, former State Security boss Siyabonga Cwele, has been fittingly slow to respond. After two months of chaos, he emerged from his shell earlier this month muttering something about delayed publication of the Post Office’s annual report. A leaked draft does not inspire confidence. Maybe they’re rewriting it to convince auditors of a slick way to hide the hard truth: The Post Office went from dysfunctional and corrupt, to non-functional and bankrupt.

“The financial situation of the Post Office is dire. It is seriously dire,” its general manager for public affairs, Andrew Nongogo, reportedly told Parliament’s communications and public enterprises select committee.

I wouldn’t bet that it can be saved with a bailout, though like other chronically decrepit state-owned companies, it will almost certainly get one. Meanwhile, it is causing private companies and individuals unbearable losses.

This affects a surprising number of people. Although most individuals and small companies invoice their larger clients electronically, the reverse is not true. Companies with many customers are, for the most part, dependent on paper invoices, accounts and statements. The cash flows of thousands of companies are at risk if mail cannot be delivered, as are the individual credit records of millions of consumers.

The Post Office is the conduit for social grants and pensions affecting more millions. Some 400,000 students are dependent on the Post Office for correspondence studies at Unisa alone. Much of what is left of the print media industry depends on the Post Office for delivering magazines. Many people receive chronic medication by post. Most charities, clubs and associations communicate with their members or donors via mail. Many small-scale producers rely on mail to fulfil orders.

Some rich folk might not care, but for many people, especially in poor and rural areas, the Post Office remains a critical hub for essential services. This isn’t only true for South Africa. Tarun Wadhwa made a similar argument in a Forbes piece about the US Postal Service last year. Far too much relies on this infrastructure for it to just go away.

The widespread impact on the economy is illustrated by a group of customers few ever think of. The Post Office has always had a particular symbiosis with stamp collectors. Philately even gets a special mention in the Postal Services Act.

For many collectors, what started as a hobby has become a business. Many earn an income trading stamps or other philatelic items online. Some have retired on it. Clinton Goslin, the auctioneer at Atlas Auctioneers, claims to be losing about R5,000 a week because his company can no longer guarantee quick delivery to customers. A client of his, who asked to remain anonymous for fear that his valuable mail will be damaged, claims to have lost all income as a result of the strikes.

(Full disclosure: my source on philately, as usual, is my father, who was a computer geek when computers were the size of school halls, and today has an award-winning stamp exhibit on the topic. I inherited several of his character flaws, but stamp collecting is not one of them.)

Not only collectors are harmed, however. Any South African who offers items for sale online risks having their reputations permanently harmed on popular shop-front or auction sites, because of long delays or even non-delivery. In many cases, you can’t just send customers another rare item from the storeroom. Even when you can, who – other than the Post Office – can afford grumpy customers at double the cost? People who rate online sellers are vicious, and they have long memories.

So, from large companies to individual traders, the Post Office leaves vast swathes of economic mayhem in its wake. That makes it mildly astonishing to find that the Reserve Bank is still considering issuing this disaster zone of mismanagement and corruption a lending licence. The Postbank has long taken savings deposits and sold government debt as so-called National Savings Certificates, but now it also wants to offer unsecured loans to its mostly poor customers. Most of last year’s Postal Market Review was devoted to analysing the competition in the banking sector.

It just “doesn’t know what the hold-up is,” according to an amusing line in City Press.

With apologies to ZZ Top, I’d like to propose a slogan for the proposed state-owned loan-shark: “We’re bad, we’re nationwide.”

The collapse of the Post Office raises the question of the role of the private sector, of course. Privatising the Post Office as it stands would be a fool’s enterprise. Duncan McLeod, usually an outspoken advocate of free markets, makes a good case why.

Any likely buyer would extract far too many concessions and far too much in subsidies from government. Recall the pain consumers suffered (and still suffer) thanks to the partial sale of Telkom to SBC Communications in 1996. The only winner from that deal was SBC. I agree with McLeod: selling the Post Office in the short term will end in tears.

This leaves private competition that arises naturally. There are courier services aplenty, of course, and they’ve grown by leaps and bounds. There is one problem, however. By law, the Post Office has a monopoly on “all letters, postcards, printed matter, small parcels and other postal articles subject to the mass size limitations (length 458 mm, width 324 mm, thickness 100 mm and a mass of up to one kilogram…)”.

Have you ever wondered why, when you order a small item, it arrives in a big box, or a vast envelope? This is why. Are you keen to cut down on packaging? Campaign for the repeal of section 16 of the Post Office Act of 1998 (and most of the rest of it, while you’re at it). It is a classic example of unenforceable government idiocy that only creates rubbish.

The Post Office handles (well, handled) several thousand individual items per year per capita (you read that right). Yet despite its monopoly on small items, its own data says it has a market share of only 61% in all postal and courier services, accounting for R9.1 billion of revenue. So, by its own accounting, the courier industry is worth R5.8 billion, and constitutes hundreds of businesses, large and small.

As an aside, it claims 98% of the courier market is shared by 20 companies. This state of affairs it tries to pass off as “highly concentrated”, presumably in an effort to repeat an argument it has made before, namely that privatisation wouldn’t make much difference. Meanwhile, it explicitly aims to increase revenue as a share of the economy from about $3 per $1,000 of GDP to the $6 to $8 some foreign postal services earn. Understand this: it wants infrastructure costs to our economy to double or triple, not because it wants to fund better services, but because it wants to make more money. If we’re going to have a public service and outlaw competition, why does it think it is okay if things cost more than they have to?

But back to those hundreds of companies in the “highly concentrated” courier sector. Unless they can evade the law by wasting packaging, it is illegal for any of these companies to encroach on the Post Office’s turf, even if it delivers no service. And if they do manage to evade the law, they’re stuck with another set of complications. There’s competition by a price-controlled government service, for one. There are formal licensing and registration requirements. And there are a whole set of expensive legal restrictions, such as not being allowed to leave anything in a mailbox. No wonder they cost far more.

Since I’ve been proposing slogans, the Post Office should try: “All your mail are belong to us.”

Imagine the businesses that could be built and the employment that could be created if the private sector were allowed to gradually grow into the postal services sector. If supermarkets can get groceries to every roadside stop on the map, and there is no place on earth that doesn’t have beer or Coca-Cola, the argument that only the state can supply poor or rural areas is nonsense. It can’t even supply service to the rich. The Post Office doesn’t care about the poor. It only cares about revenue, and protecting cosy jobs.

Before it takes half the economy down with it, laws that require the use of the Post Office should be repealed. If Post Office managers or employees lose their jobs as a result, that’s just too bad. If they are any good, they’ll easily get work in a private courier business that is booming with small package, accounts and other traditional mail business. If not, perhaps they shouldn’t have destroyed their own civil service jobs. DM


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