Post Office might lose subsidy for rural branches

2012-04-23 00:00

CAPE TOWN — The government is planning eventually to remove the subsidy it is giving to the SA Post Office (Sapo) for developing and managing post offices in rural areas.

This step will mean that Sapo will have to pay between R400 million and R600 million a year out of its own pocket to keep these branches going.

The alternative will be to shut the branches down.

Sapo said the 629 branches that might be affected were those that were not financially sustainable, but were nevertheless important for carrying out the post office’s mandate for service delivery in those areas.

Nick Buick, acting deputy CEO of Sapo, told Beeld that the government has been subsidising the branches’ costs.

He said the branches were an important part of Sapo’s business.

Buick said: “Supposing we have to deliver a letter in the middle of the Karoo or somewhere in the KwaZulu-Natal Midlands.

“If someone sends a letter like that, we have to deliver it. So we have to have branches in rural areas.”

Buick added that these post office branches were not commercially viable.

“That is why the costs are subsidised by the government.”

The total subsidy was originally between R400 million and R500 million a year.

Buick said the fact that Sapo had been profitable in the past few years has probably led the government to decide to end the subsidy.

“They say we are financially strong, we are making a profit, we have a strong balance sheet, etc.

“So now we have to start being independent and standing on our own feet,” says Buick.

According to Sapo’s previous annual statements the subsidy has already been decreasing over the past few years and was about R380 million in 2010.

This year it will be about R180 million and R52 million in 2013, falling away completely from 2014.

According to the latest Sapo strategy document seen by Beeld, rural post office branches will cost Sapo R421 million this year and R446 million next year.

This cost will have to be financed from Sapo’s trading profit from 2013, according to the strategy document.

But Sapo’s statements also show that while it is profitable, these profits are under increasing pressure and are dropping as postal volumes decrease.

Sapo declared a profit of R1,06 billion in 2005.

Since then profits have been decreasing and in 2011 the net profit was R156 million, including the subsidy.

DA MP Marian Shinn said Sapo had a mandate from government to run branches in the rural areas.

“That is why a subsidy was granted. But now, with the new system, the rural branches will cost the post office an enormous amount of money.

“The post office cannot retain the branches without a subsidy. The alternative is to develop a new kind of model for the post office for financing the branches.”

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