RIP the GPO - with more to come?

2014-10-22 07:10

If ever there was a case study in public sector - labour union stupidity it is in the ongoing Post Office dilemma. Actually it is less of a dilemma than an example of business failure for all the most predictable and avoidable of reasons. Our postal authority purports to offer a public service – even if only sporadically - which holds it up to both public scrutiny and considerable ridicule, not to mention the irritation and anger of citizens deprived of their monthly accounts, printed journals and periodicals- and traffic fines! But how did this all come about - and what are the facts?

They are:

FACT 1. Our postal authority is a business model that has for some time been undermined by technology and private operators. The need for posting things has diminished dramatically in recent years as email, courier services and other low cost options undermine their offering. Such alternatives abound as there are few barriers to entry in the market for getting things to other people - with consumers generally confronted with a choice between bad or no service from the parastatal and paying more for better service from private operators. Clearly Postnet and its affiliates can only survive if they cut costs with some urgency.

FACT 2. As most will know, the bulk of any parastatal’s costs are people related.

FACT 3. According to the trade unions (always a source of information needing interrogation), management of the postal service is top-heavy and layered with managers who reward themselves at the expense of the mainstream staff. Indeed, they want temporary workers hired permanently and for them to get a 15% pay rise.

FACT 4. Management’s version paints a different picture. Staff costs are kept in check by hiring people as needed – hence a large corps of temporary or casual workers, whose contracts are rolled over as needed and depending on workload. Without taking sides, this is sensible enough if your aim is to stay in business.

Now imagine that such a scenario was tabled anonymously for consideration by a group of aspirant business school graduates or a management consulting team. You can be certain that a few recommendations would be chalked up within minutes - and my guess is that they would propose –

1.  Fire and re-hire management on merit alone and incentivise them on results. Give the rest severance packages. That would sort out the top heavy problem and save money.

2. Retain a small permanent team of workers – mainly at the levels of foremen and supervisors. That would cut overheads.

3. Apart from some “career” postmen and sorters, identify a pool of temporary or casual personnel and pay market rates for their services, hiring them as needed. That would cut costs and extend the viable life of the enterprise.

Sadly though, our civil service, parastatals and government departments in general do not think like that. They are all modelled on the assumption that management acumen and business principles are optional and secondary to political favour and "transformative" considerations. Core competences and customer  service levels are distant - and often expendable - considerations.

The cherry on the top of this is of course  the contribution offered by the unions. Wanting to use tax payers’ money to subsidise inflated wages to their members and award them full time work into the bargain (for a bail out is what it would take, as happens routinely with SAA) is akin to eating the seeds for a crop before they have been sewn. Par for the course.

It is also interesting to reflect on what would inevitably happen to mines, banks and farms if they too were to be brought into the embrace of the public sector, as some suggest should be done. This is no pie-in-the-sky possibility but an objective of the "National Democratic Revolution" - the lodestar for many in the ANC and tripartite alliance.

And while we are about it - can anyone tell me why in increasing numbers international investors look past South Africa and take their money elsewhere? Or why our Economic Freedom index has dropped from 46th in 1994 to 93rd in 2014?

It’s all a bit of a mystery isn't it? Developments at the Post Office should give us all a clue.

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