Mired in distress, the Post Office will move ahead with its retrenchment drive

In June this year, the South African Post Office implored Government, and the public, to have patience as the entity plotted a recovery path which it labelled The Post Office of Tomorrow. Some of the strategic objectives discussed in the turnaround plan includes:

• moving towards the creation of efficient systems and processes;
• the optomisation of assets and infrastructure;
• the diversification of funding and revenue; and
• the creation of a culture of excellence.

What the plan didn’t discuss is how it would deal with a volatile external environment. We have already seen companies such as Comair file for liquidation and now Tongaat Hulett entering into business rescue because they have faced a significantly volatile operating environment which is negatively impacting operations.

The Post Office’s pleas for patience also came with a request for Government to set aside funding that would allow the entity to implement its turnaround plan. Various funding models have been looked at including privatisation. However, Government has faced its own funding challenges and is addressing the Eskom issue which takes precedence over all others as it directly impacts economic growth.

Left with little choice, the Post Office is now planning a renewed retrenchment drive which it says will hopefully address the entity’s current challenges.

A two phase approach

The Daily Maverick article points out that The Post Office launched a two-phase approach to retrenchments aimed at reducing costs like the company’s salary bill, which accounts for 61% of its total expenditure.

Phase one of the retrenchment process saw 668 job cuts in 2021, reducing the workforce from 15 826 to 14 460. (Beyond planned retrenchments, the Post Office’s workforce was also reduced through resignations, dismissals and the expiration of fixed-term contracts).

The article adds that The Post Office is now pressing ahead with the second phase of retrenchments in which the company is aiming to slash at least 600 more jobs.

Trade Union concerns

The article points out that this number has been disputed by trade unions representing Post Office employees, saying the company plans to lay off as many as 6 000 employees – or 41% of its current workforce.

The Communication Workers’ Union and trade union federation Cosatu believe that the Post Office plans to retrench thousands of employees, a view that could have been informed by the company’s three- to five-year turnaround plan.

Modernising operating models

The article points out that Postal companies around the world are struggling to reinvent their operations for a world in which consumers rely far more on electronic methods of communication than they do on mail. People are also opting for faster, more efficient parcel delivery services run by private sector companies.

And even this is fraught with problems. Meta was forced to retrench 11 000 of its staff members as the company faces reduced revenue in paid advertising. This is another example of how the external environment is applying pressure on companies.

Changing consumer patterns

The article adds that the Post Office is painfully aware of this major shift in consumer patterns, exacerbated by the company not being able to fulfil its basic function of delivering mail on time and to the right address.

For instance, the Post Office’s mail delivery performance reached 75% in 2017. It has fallen to 68% in 2022. The Post Office has missed a self-imposed target of an 80% mail delivery performance for many years.

The article points out that National Treasury sees the Post Office operating with a staff count of 10,254 by 2024/25 as the declining nature of its operations requires fewer employees.

Deep rooted distress

The article points out that Any retrenchments have to be funded because affected staff have to receive severance packages. But the Post Office cannot fund these packages because it is broke – and broken.

The Post Office reported a financial loss of R2.2-billion during the year to the end of March 2022. The company has been reporting financial losses for 15 consecutive years. Operationally, only 303 Post Office branches out of 1,266 in its network are regarded as profitable — meaning that its branches are not suitable or sustainable for generating profits.

The article adds that the Post Office is so broke that it owes some of its employees their salaries. The company has also been deducting medical aid, pension and Unemployment Insurance Fund benefits from pay cheques, as well as personal income tax intended for the South African Revenue Service.

But the Post Office has, for more than a year, failed to hand over the deducted funds to relevant institutions on behalf of its employees.

Deducting from employees’ salaries and not handing the funds over to relevant authorities is illegal, and this has potential consequences. In the private sector, business owners have been prosecuted for such behaviour, yet the Post Office remains untouched.

The article points out that, by the end of March 2022, the outstanding amounts have reached R4.4-billion. This is made up of R928-million owed to the South African Revenue Service, R769-million owed for the retirement benefits of employees, R645-million owed for medical aid contributions, R150-million owed in outstanding salaries and R100-million owed in UIF benefits.