Publishers abandon SA Post Office, demand answers

You magazine, which falls under Media24 Leisure.
You magazine, which falls under Media24 Leisure.

Cape Town – Publishers big and small have suffered huge financial losses due to the operational issues facing the South African Post Office (Sapo) and, while they want answers from the regulator, they’re now looking to a future without Sapo.

Corporate publishers like Media24 and Times Media Group (TMG) as well as small business-to-business (B2B) publishers told Fin24 that their operations suffered huge financial losses due to the strike at Sapo, which battled to resume operations and was placed under administration due to financial constraints.

“In the last 12 months, they just about bankrupted us,” said Leisure Books general manager Lana Barnett. “Our losses ran into the millions.”

TMG said one of their divisions lost R60m per year due to Sapo’s five-month strike.

Media24 Lifestyle – which publishes magazines such as You, Men’s Health and Drum, said the strikes and bad service delivery cost the magazine industry thousands of rands in additional expenses.

“The Independent Communications Authority of South Africa (Icasa) is long overdue in stepping in to sort out the issues,” said Media24 Lifestyle general manager Charlene Beukes.

However, EE Publishers MD Chris Yelland told Fin24 that a group of small publishers had filed an official complaint with Icasa, but said it had not amounted to much and believed that Sapo had avoided responding to the complaint.

We have changed our strategy - Leisure Books

Barnett said Leisure Books, which is part of Media24’s books division, had to change its strategy to avert the disaster.

“Our club members were impacted because they did not get their catalogues,” she told Fin24. “Even if they did and placed their orders, they didn’t get their parcels – it just went into a black hole.

“We incurred huge additional costs to send parcels by couriers and we had to absorb those costs to keep our customers happy.

“Now, instead of mailing our catalogues, we are doing a joint venture with magazines and newspapers in the Media24 group using On the Dot and they will deliver those now.

“We’re increasing delivery to PostNet where members can fetch parcels,” she said. “We’ve also started a deal with Pargo and will deliver parcels to selected outlets like Caltex and Vee’s Videos. Now customers will be able to collect their parcels 24 hours a day, instead of getting to a Post Office.

“We are now restricting the use of Post Office to 10% when it used to be 90%.

“The post office dissemination is like cloak and dagger stuff,” she said. “We’ve taken a big knock, but with the support of Media24 we hope to get out of it.”

Sapo must respond to Icasa complaint - EE Publishers

About 10 concerned small B2B publishers came together in 2014 to lodge a complaint to Icasa against Sapo, said Yelland. “Another 10 publishers have joined our group,” he said.

The complaint was processed in December 2014 and Sapo had 14 days to respond, but they have not yet done so, according to Yelland.

Yelland said acting Sapo CEO Mlu Mathonsi invited them to a meeting in March, which he said was probably a “fishing expedition”.

Yelland was not happy that they had called them into a meeting instead of following the formal Icasa procedure, but when they told Mathonsi about their complaint, he was apparently caught off guard.

“He said it was the first he heard of it,” said Yelland. “He said he read in the media that we intended to approach Icasa, but had not received any official documents.

“It was very surprising to us,” he said. “If your regulator [Icasa] asks for your formal response and as CEO you don’t see it, then there’s something wrong.

“We left the meeting with his undertaking to investigate the matter and get back to us,” said Yelland. “He didn’t get back to me and I sent him an email to remind him. He replied to say he had made progress to get the documents. However, we still haven’t had a response yet.

“Our view is that we are getting the run around,” said Yelland. “They say they’re acting in good faith, but their actions are showing something different.”

Clients bypassing the Post Office – TMG

On March 30, TMG reported in their unaudited condensed consolidated group financial results for the six months ended December 31 2014 that Uniprint lost R60m per year due to Sapo.

“The Forms Division [which comprises Uniprint] has been significantly impacted by the five month strike at the SA Post Office resulting in several of our major retailers and telecom customers opting to avoid the use of the post office for delivery of their statements and direct mail to their customers,” TMG said in its JSE Sens report.

However, TMG CEO Andrew Bonamour told Fin24 that other units were benefiting and that the real victim will eventually be Sapo.

“The fact of the matter is that clients are now totally bypassing the post office,” he told Fin24. “It's actually accelerated the process to digital.”

He said the situation resulted in banks and retailers avoiding posting statements and rather emailing them to customers.

TMG said on Sens said they would “refocus and re-engineer the Forms Division to replace lost turnover due to the non-functioning of the SA Post Office and consequential rapid migration to digital technology”.

We worry about the trust of our readers - Media24 Leisure

“It is the damage to our long-standing relationship of trust and goodwill with our subscribers that worries us most,” said Beukes.

“In addition, we have great sympathy with smaller publishers who do not have access to similar alternative distribution channels like us.

“Every year, during the annual negotiations, the Sapo is full of promises – and time and again they fail to deliver on these.

“Icasa has an obligation towards us and our subscribers to intervene at the highest level and sort this out once and for all.”

Beukes said Media24 Leisure’s business relationship with its subscribers was one of goodwill and trust, built up over years. “We charge them postage and pay that over to the Sapo,” she said.

“When the Post Office do not deliver the service, we become responsible for both the solution to their problem and the additional costs, which, in all fairness, cannot be recovered from the subscriber.”

However, she said Media24 Lifestyle was fortunate in having access to internal distributor On the Dot, who can handle subscriber deliveries in the metropolitan areas and large towns. “But, this is more expensive and not a solution for our subscribers in the rural areas,” said Beukes.

She said the actual costs of magazines sent out as replacement for copies not received by the subscribers, as well as the additional distribution costs in doing so impacted on costs.

There was also an impact on subscriptions, which were currently around 10% of total circulation. “We use ‘reason’ codes when people cancel their subscription, but the postal strike is not included in this as a separate line/code,” she said.

“Postal delivery has always been a problem,” said Beukes. “Strike or no strike, we replace a serious number of subscriber copies each month as the magazines get lost either at the depots, post offices or en route to the subscriber.

“We’ve extracted the number of subscription copies lost due to the reason codes mention above, between April [start of our fiscal] and November [when strikes were at their height],” she said.

“This comes down to a decline of 0.1% in our total circulation over this period.

“Considering that reasons that could be directly related to the strike represent only a very small portion, the impact on total circulation is actually close to insignificant.”

* Has your business been affected by the SA Post Office? Tell us now.

* Disclaimer: Leisure Books and Media24 Leisure are a part of Media24, which owns Fin24.

* Fin24 has sent this story to Sapo for comment and will publish their response when it is received.

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