South African Post Office 2012 Strategic; Committee Report on Department & Government Communication and Information budget

Meeting report

The Chairperson noted the apologies of Mr G Schneemann (ANC), Ms R Morutoa (ANC), Ms W Newhoudt-Druchen (ANC) and Ms J Killian (COPE).

Strategic Plan and Budget of the South African Post Office (SAPO)
The Chairperson and members of the SAPO Board, representatives from the Department of Communications (DOC) and senior officials of SAPO attended the proceedings.  The Committee was briefed on the strategic plan of SAPO on 18 April 2012.  The Committee had requested certain amendments to the plan.  The strategic plan document originally submitted to the Speaker of Parliament was withdrawn on 20 April 2012 and was replaced by the amended version.

Mr George Mothema, Chairperson of the SAPO Board confirmed that the amendments requested by the Committee had been included in the revised Strategic Corporate Plan for the period 2012/13 – 2014/15.  The quarterly targets for 2012/13 had been included (see pages 11 to 20 of the attached strategic plan document).  Confidential data was excluded but all the necessary information required by the Public Finance Management Act (PFMA) was included.

Mr Nick Buick, Acting Chief Executive Officer, SAPO presented the briefing to the Committee (see attached briefing document).

The briefing covered the vision, mission, values and mandate of SAPO.  The action taken to address the issues that were raised during Committee oversight visits was summarised.  The alignment of SAPO’s operations to the APEX priorities was illustrated.  The initiatives to improve governance were listed.  International postal trends and SAPO’s response to the global challenges were summarised.

Ms Marietjie Lancaster, Group Executive: Strategy, SAPO took the Committee through an analysis of the political, economic, social, technological, legislative and environmental challenges.  Industry factors impacting on the Post Office included competition, customer trends, the threat of new entrants, the bargaining power of suppliers, the threat of substitute products and the role of Government.  The outcome of an analysis of the strengths, weaknesses, opportunities and threats was summarised.  An overview of the business goals and corresponding programmes for the eight key strategic goals that had been identified was provided.  The monitoring and evaluation of performance processes were outlined and an example of the business scorecard (quarterly targets) was included.  SAPO’s environmental strategy included formal carbon emission management and eco-efficiency programmes as well as involvement in community events and social upliftment programmes.

Mr Buick confirmed that the section on the financial analysis of the external and internal environments remained unchanged and was covered in detail during the briefing on 18 April 2012.  The budget assumptions were based on the financial analysis.  The revenue initiatives supporting the budget outlook were listed.  The details of the budget for the Medium Term Expenditure Framework (MTEF) period 2012/13 to 2014/15 remained unchanged.  A summary of the operational budget, statement of financial position and cash flow forecast was provided.  A breakdown of the additional operational budget requirement totaling R698 million was included.  The financial ratios applicable to SAPO were provided and compared to the performance of the post offices in the United States, Canada, Australia and the United Kingdom.

The briefing included the responses to questions asked by the Members of the Committee during the briefing on 18 April 2012.  The information provided concerned the discrepancy in the subsidy figures provided by SAPO and the DOC; the funding of SAPO’s Universal Service Obligation (USO); the Public Information Terminals (PIT’s); job creation statistics; the training budget; the flexible labour strategy and the 2011 MTEF funding request.

Mr Shaheen Adam, Acting Managing Director: Postbank presented the responses to the questions from Members concerning the Postbank corporatisation process.  He explained the corporatisation process, the achievements to date, the critical deliverables and the project plan that had been developed to obtain the Postbank banking license.  The funding shortfall was R276 million.  The implications if the required funding could not be secured were outlined.  In addition, the Board of the Postbank had to be in place before the banking license application process could commence.

Mr Ndala Mnisi, Group Executive: Retail, SAPO provided data on the number of post offices that would be upgraded or relocated to more suitable premises and the number of post offices situated in rural areas.  The target for 2012/13 was to upgrade or relocate ten post offices.  Total expenditure on maintenance of premises during 2011 was R11 million.  A breakdown of the maintenance expenditure on rural and urban post offices was provided.  The number of post offices with disability access facilities was given.  He explained the progress that had been made with reaching agreement with the Mpumalanga, Western Cape, North-West and Northern Cape Provincial Departments of Transport to allow the renewal of motor vehicle licenses at post offices.  The initiatives to improve security at post offices were listed.

The Committee requested that the information provided by Mr Mnisi was submitted in written format.

Mr Janras Kotsi, Group Executive: Mail Services, SAPO acknowledged that the demarcation of post offices had not been aligned with the 1994 provincial boundaries.  However, this had no impact on service delivery.  He assured the Committee that senior management personnel would accompany Members on future oversight visits and would be available to respond to queries.

Mr Mothema added that Members’ concerns over the low standard of post office facilities in less affluent areas of the country had been noted by the SAPO Board.

Discussion
Ms S Tsebe (ANC) observed that budgetary provision had been made for alignment with provincial boundaries.  The correct demarcation was necessary for the efficient management of SAPO’s operations.  She suggested that the Board considered the matter.  SAPO would be playing a key role in the distribution of Set-Top Boxes (STB’s).  The STB’s were a prerequisite for the implementation of the Digital Terrestrial Television (DTT) programme.  She asked what systems were in place for the distribution of the STB’s and if consultation with communities would take place.  SAPO already had problems with a lack of capacity, resulting in complaints of long queues at post offices.  The situation would be exacerbated by more people visiting post offices to apply for the STB’s.  She was aware of challenges concerning the post offices situated in the offices of traditional leaders in remote areas.  Allegations of fraudulent activities had been made and complaints from residents of a village in North-West Province had been referred to SAPO but no action had been taken.

Mr B Steyn (DA) asked for a response to the concerns of the Committee over the governance issue.  He asked what assistance could be provided by the Committee to increase Government utilisation of SAPO services.  It was not clear if the quarterly targets that were set for 2012/13 were cumulative or not.  He asked if the targets that had been set for the succession plan were new.  He asked for an explanation of the targets that had been set for the employee health indicators.  He asked for confirmation of the 96% target that had been set for the logistics indicator.  He felt that the targets that had been set to combat fraud and corruption were too low.  The objectives and targets for the assessment of environmental audits and employment equity were not clear.  He noted that SAPO’s environmental strategy would be presented to the Committee at a later date and he would be interested to learn how SAPO planned to increase deliveries and reduce fuel consumption simultaneously.  The Committee had brought the unacceptable state of the post office in Citrusdal to SAPO’s attention but the upgrade plans did not include any post offices in the Western Cape.  He asked for an explanation of the quarterly capital expenditure targets that were set.  The target for the year should be 100% of the capital expenditure budget.  He observed that SAPO had started to dip into its capital reserves.  It was understood that the reason for diminishing reserves was the reduction and eventual discontinuation of the Government subsidy.  He was concerned that a trend was being established and asked what corrective measures were in place.

Ms F Muthambi (ANC) asked for a more detailed briefing on the current status of the PIT programme and what action plans were in place.  The list of Board members on page 31 of the Strategic Corporate Plan document was incorrect.  The names of recently appointed Board members had been omitted.  She asked what progress had been made in implementing the recommendations included in the independent auditor’s report for the previous financial year.

Ms Tsebe asked for more information on the plan to position SAPO as the delivery arm of Government services.  She asked which operations were most affected by the lack of skills.  She asked for more information on the threat of new entrants in the industry, particularly in the light of the global trend of declining mail volumes.  The issue of security at post offices was raised as a key challenge during the Committee’s oversight visits.  She asked if SAPO had a corporate plan to improve security at all post offices or if each post office implemented its own security measures.

The Chairperson remarked that the lack of capacity was a common complaint amongst State-owned Entities.  It was necessary to provide clarity on exactly what was meant.

Mr Mothema explained that the Strategic Corporate Plan was approved by the previous SAPO Board on 28 February 2012.  The amendments requested by the Committee involved mainly technical enhancements rather than material changes to the content.  The issue of whether or not the names of new Board members appointed with effect from 1 March 2012 should be included in the document was discussed but further clarity on the legal implications was required.  The concern of the Committee was noted.  Mr Buick had requested an urgent meeting to discuss the concerns that had been raised by Members about the governance implications of his occupying the positions of Acting CEO, Acting CFO and General Manager: Business Development.  Mr Buick had submitted a written proposal to address the situation and the Board had been appraised of the situation.  Board approval of the proposed solution would be sought as soon as possible.  Another person would be appointed in the Acting CEO position.  A meeting had been scheduled with the National Treasury on 30 April 2012 to discuss the secondment of a Treasury official to the Acting CFO position.  He hoped that the process of finalising the appointment of permanent incumbents in the CEO and CFO positions would be completed within three months.

Ms Lancaster advised that planning meetings with the Universal Service and Access Agency of South Africa (USAASA) and the DOC had been held to develop workable plans for the distribution of STB’s.  The completed plans and a Memorandum of Understanding (MOU) had been submitted to the DOC.  SAPO’s existing counter and courier systems would be used to distribute the boxes to successful applicants.  The response of the DOC was awaited and it might be necessary to make further amendments to the plan.

Mr Buick advised that the request for accreditation of the Trust Centre had been submitted to the DOC.  The response of the Department was awaited.

Mr Mnisi said that SAPO had a formal agreement with traditional leaders to deliver postal services in remote areas.  SAPO acknowledged that there were instances of problem activities at certain post offices.  If fraudulent activities were detected, the post office was closed down.  SAPO had found that entrepreneurs were reluctant to take over post offices that were situated in the offices of traditional leaders.  SAPO had a monitoring team of 80 employees in place to visit post offices and note issues requiring attention.  Continual monitoring of all post offices took place to ensure that proper records were kept and that the opportunities for fraud were minimised.  Not all post offices were situated in high risk areas.  SAPO used the information provided by the South African Police Service (SAPS) to identify high-risk areas.  All post offices had alarm systems and panic buttons.  Only post offices in shopping malls benefited from the mall’s surveillance cameras.  SAPO was reluctant to arm security guards as this would expose the guards to greater risk from armed robbers.

Mr Buick said that SAPO would be happy to compile a list of issues where the Committee could provide assistance.

Mr Lungile Lose, Group Executive: Public Affairs, SAPO referred Members to the map of the country illustrating the location of post offices included in the briefing documents.  There were other Government entities in these locations that received Government documents and mail, for example police stations, schools and clinics.  The Committee could assist by encouraging other Government entities to make use of SAPO’s services and infrastructure to deliver mail and documents.

Mr Buick explained that mail volumes were affected by seasonal factors, for example major retailers produced much promotional material over the Christmas period.  The quarterly targets took cognisance of such seasonal factors.

Ms Lancaster explained that 70% of employees were already participating in the health and wellness programmes.  The target was to at least retain this level of participation.  A new HIV testing programme was initiated each year and the target was to have at least 20% of employees being tested per quarter to achieve the annual target of 80%.

Mr Molefe Mathibe, Managing Director: CFG and DOCEX, SAPO advised that the actual performance in achieving the capital expenditure targets was 97.1%.  The projects were spread throughout the country and SAPO was satisfied with its performance in this respect.

Mr Buick explained that the internal audit department had categorised audit items and specific targets had been set to ensure that all audit issues were resolved within one year.  The employment equity targets were in accordance with the guidelines of the Department of Labour.  An environmental strategy had been developed and introduced the utilisation of energy-saving devices such as battery-operated motor cycles for deliveries, non-incandescent lights and energy-efficient air conditioning units.  Electricity usage, fuel consumption and the amount of paper being recycled were measured.  SAPO’s courier and freight operations were being integrated.  A hybrid mail service was introduced that allowed for material to be printed and distributed in the same location.  A more detailed briefing on the plan could be provided to the Committee if required. 

Mr Mnisi advised that the upgrading of seven post offices in the Western Cape had commenced in the previous year and would be completed during the current year.  The Citrusdal post office was included in this number.

Mr Buick undertook to provide the Committee with a progress report on the implementation of the audit recommendations.  The shortage of critical skills was in the areas of IT, banking and digital technologies.  The threat of increased competition in the postal sector was addressed by the introduction of new initiatives, for example SMS tract-and-trace advices, internet-based philately services and PO Box rentals.  There were only two multinational companies involved in mail automation services, which resulted in a lack of choice.  He referred Members to the graph illustrating mail volume trends included in the briefing documents.  There used to be a direct link between GDP and mail volumes but the situation had changed since 2009 with the advent of social media and mobile technological advances.  SAPO expected the downward trend to accelerate with the expansion of broadband access.

Mr Kotsi added that customers had cut down on the number of items mailed because of increased postage tariffs.

Ms Tsebe remarked that the closing down of post offices was not the solution to the problem of undesirable activities.  A more comprehensive plan was necessary to deal with the issues.  She asked what action was taken against employees involved in fraudulent activities.  She informed the Board members present at the meeting that the Committee required all members to submit declarations of interest.

Ms Lancaster advised that certain capital expenditure projects were completed over more than one year.  The targets took into account that a project could extend into the following year.  100% of funds made available for capital expenditure were spent.

Mr Mnisi said that a mobile unit was dispatched where a post office had been closed down.  SAPO’s internal security division investigated all instances of fraudulent activity.  Cases involving fraud were reported to the SAPS.

Mr Buick agreed that SAPO had been forced to dip into reserves.  At the moment, the situation was manageable.  The USO targets had to be re-negotiated with the Independent Communications Authority of South Africa (ICASA).  Alternative funding plans had been developed.  SAPO had no debt and if necessary, would be able to raise loans.

The Chairperson advised that the Committee planned to invite all the stakeholders involved in DTT and the STB’s to present a briefing to the Committee, including SAPO.

Ms Muthambi suggested that a summary of the performance highlights of the previous year was included in the strategic plan.  She was aware that more detailed information would be included in SAPO’s annual report.

Mr Buick agreed to include the summary in future strategic plan documents.

The Chairperson asked for a summary of the achievements in the previous year to be forwarded as the Committee would like to establish what the basis for the current plan was.  He suggested that SAPO proceeded with the alignment with provincial boundaries and engaged with the other stakeholders.  The standard of post office premises in the rural areas was unacceptable and more needed to be done.  The incidents of fraud in post offices situated in tribal leader offices had to be followed up.  People had suffered financial losses and had not been compensated.  He warned that the Committee would undertake oversight visits in the near future.  The beneficial aspects of technological developments were of interest.  Rapid technological developments were a reality and diversification plans had to be in place to take advantage of any opportunities.  The Committee would be interested in the international and regional rating of SAPO.  A strategy to deal with the PIT situation needed to be developed.  More information on the utilisation of the post office network for other purposes, the online post office concept, the multi-purpose centre concept, the integration of the freight and courier services and the lack of critical skills was required.  He asked for comment on reports in the media of a strike underway by Post Office workers in Gauteng.

Mr Mothema thanked the Committee for the input provided.  Much had been learned through the interaction with the Committee.  The oversight over SAPO helped the organisation to improve its performance.  He thanked the SAPO executives and Board members for the work done on the strategic plan and briefing documents. 

Mr Kotsi explained that 650 temporary employees had gone on strike in Gauteng.  The workers were employed by labour brokers.  SAPO management was engaging with the striking workers, who were not members of organised labour unions.  SAPO had communicated the matter to customers and regular media briefings were held.  SAPO supervisors and employees were dealing with the sorting of mail.  Although delays were expected, the situation was under control.

The Chairperson said that the Committee had to be informed of such matters by SAPO rather than allowing Members to discover from media reports that there were problems.

Mr Steyn asked how long the strike would last and if it was likely to spread to other areas.

Mr Kotsi replied that the possibility that the strike could spread could not be excluded.  Discussions were being held but it could take up to three months before the matter was resolved.

The Chairperson advised that the Committee had been approached by Cape Mail employees with similar complaints.  The Committee had suggested that the Cape Mail employees referred their grievances to SAPO.  The attitude of managers and supervisors towards temporary employees was not helping the situation.  One of the issues that had been raised was that temporary workers were not issued with protective clothing or SAPO uniforms.  The report on labour brokers was awaited but the situation could be improved if SAPO managers ensured that temporary workers were dealt with more equitably.

Mr Mothema had asked new Board member Mr Patel to look into the matter.  Mr Patel had a background in organised labour.  The Board would meet on 31 May 2012 to adopt the human resource strategy.  In the interim, an urgent meeting would be called with management and the labour unions to develop a plan to resolve the current situation.

The Chairperson thanked the SAPO representatives and Members of the Committee for their participation.

Adoption of Committee Report on the Department Government Communication and Information System (GCIS) Budget Vote
The Chairperson invited comment from Members on the report.

Ms M Shinn (DA) and Mr Steyn pointed out spelling and syntax errors and suggested improvements in sentence construction.

Mr Steyn suggested inserting an additional recommendation that the media bulk-buying programme was not used to punish media organisations that were critical of Government.

Ms Tsebe and Ms Muthambi disagreed with Mr Steyn as the matter did not arise during briefings to the Committee.

The Chairperson said that the issue had not been raised during the hearings that had been held with the sector.  The decision had been taken that Government would increase advertising in community media.

Mr Steyn said that there was a danger that the policy could be misused.  He referred to a complaint from a community media company in Nelspruit that the municipality had withdrawn its support because the company had published articles criticising the municipality.  He suggested that the Committee included the implementation of the new policy in its oversight responsibility.

The Chairperson said that the Committee had not received any written complaints from media companies but would respond if any formal complaint was received.

Mr Steyn conceded that the program was new and had not yet been implemented.  More information on the actual implementation plan was required from GCIS.  He withdrew his proposal.

The Chairperson agreed to include the suggestions concerning syntax and typographical corrections and improvements in the amended report.  Mr Steyn’s proposal was rejected.

Ms Tsebe moved for the adoption of the report, with amendments.  The motion was seconded by Ms Muthambi.

The meeting was adjourned.