State-owned company coming after couriers and deliveries in South Africa

Presenting its latest strategic plan to Parliament, the SAPO outlined its path from bringing in about R1.9 billion in revenue in 2024 to a goal of R5.2 billion by 2029.

This will require a significant restructuring of its revenue base, it said, with targeted growth in both digital services and in couriers and parcels.

As these two sectors grow on its books, its current reliance on postal services and sundry will decline.

According to the group, bulk, franking and registered mail services are expected to decline by between 5% and 7% annually, but this can be stemmed through modernising and digitising operations.

At the same time, international mail and parcel volumes are projected to increase by 50% over the coming years.

It hopes to capture about 5% of the Business-to-Business (B2B) and Business-to-Consumer (B2C) delivery market and gain about 25% of the Consumer-to-Consumer (C2C) market within five years.

It also wants to gain new revenue from connectivity services to underserved areas and expects to gain a significant boost from the AARTO system, once it is rolled out and its mailing requirements are in full effect.

If SAPO’s vision for its business becomes a reality, its courier and parcel services would grow from a paltry R38 million contributor in 2024 to a R1.4 billion behemoth by 2029.

This would also accelerate the Post Office’s path to profitability, it said.

By diversifying its revenue streams, and engaging various “strategic initiatives, operational efficiencies, and focused service offerings”, the group aims to attain profitability by 2028.

It said it is currently projecting a loss of R1.03 billion for 2024, but is on the path to posting a net profit of R1.5 billion by 2029, achieving break-even in 2028.

The R3.8 billion catch

The Post Office’s lofty plans and outlook does come with a major catch, however; it requires R3.8 billion to make it a reality.

After being placed under provisional liquidation in February 2023, the company was instead put into business rescue, and a turnaround strategy was devised.

With over 4,300 employees retrenched as part of the process, and over 360 branches permanently closed, the group required—and still requires—a significant overhaul.

Backed by a R2.4 billion state bailout, the group upgraded its IT systems and infrastructure, modernised remaining branch facilities, replaced old equipment and upgraded its vehicle fleet.

However, the funding was not enough to complete the job.

The group flagged a further R3.8 billion “investment” as being a critical success factor for its plan, along with political buy-in and a significant integration of state-owned enterprises.

The Post Office also faces significant market threats, particularly from the private sector.

It noted that postal operators globally are forming partnerships with e-commerce platforms, logistics providers and SMEs to boost their business.

However, it own operations are under pressure from more agile and technologically advanced players in the private sector.

This is exacerbated by the fact that many large e-commerce platforms have their own internal logistics capabilties, like Takealot and Mr D.

SAPO did flag some key advantages, such as its extensive network that reaches into many areas where private operators have no presence. It also has strong government support.

A major trump card it possesses, though, is that it has “exclusive rights to deliver packages under 1kg, offering a competitive advantage in e-commerce and rural logistics,” it said.

However, without the necessary investment of R3.8 billion, its options are limited, it conceded.

The group faces escalating operational costs, outdated infrastructure, inefficient processes, limited skills, limited access to funding and has been slow to embrace digital transformation.

Issued on BusinessTech by Staff Writer | https://businesstech.co.za/news/business/828695/state-owned-company-coming-after-couriers-and-deliveries-in-south-africa/