South African Post Office Review and 2006/7 Strategic Plan

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
8 March 2006
SOUTH AFRICAN POST OFFICE: REVIEW AND STRATEGIC PLANS

Chairperson:

South African Post Office presentation

SUMMARY
The South African Post Office (SAPO) presentation highlighted the nine key concerns raised in the meeting with the Committee in March 2005, and the progress made thus far. A synopsis of its strategic focus for 2006/7 and SAPO’s alignment of its operations with government’s Programme of Action was outlined, following a review of the 2005/6 financial year. SAPO’s operations and budget for 2006/7 were outlined, plus a few of its preliminary benchmarking figures.

SAPO was congratulated for doubling its profit over the previous financial year. During the discussion, SAPO's need for a government subsidy was questioned, when it has been profitable for the past two financial years. The economic feasibility of the Public Internet Terminals (PITs) was questioned, as well as its broader role in providing services to rural communities and the need to re-evaluate the location of its post offices. Clarity was sought on the extent of the backlog in rolling out of addresses, and why the Department of Provincial and Local Government had not been consulted to expediting the roll out. SAPO was asked to indicate the successes and failures of the biometric solutions project it had rolled out in the North West province, the take up of digital signatures as an authentication tool and its measures to improve security to eradicate mail theft and fraud. Also discussed was the balance struck by SAPO between the possible automation of its postal functions and government’s objective of job creation.

MINUTES
Briefing by South African Post Office (SAPO)
Mr Khutso Mampeule, Group CEO, thanked the Committee for the opportunity to present its 2006/7 budget to the Committee. The presentation created linkages between what SAPO had presented to the Committee in the corresponding meeting in March 2005. The aim was to refresh Members’ memories on SAPO's strategic focus, the status of its finances at the end of the last financial year, its strategic plans for the current financial year to align itself with its shareholders, to provide a synopsis of SAPO's 2006/7 budget and its plans to embrace new frontiers by positioning itself as a leading player in postal industry on the continent, and the world. The presentation would be concluded by sharing some preliminary benchmarking statistics on SAPO's performance with the Committee.

Building up the linkages: March 2005 focus areas
Mr Mampeule highlighted the nine key areas focused on in the meeting with the Committee held in March 2005, and indicated the progress made thus far. The areas were the:
- corporatisation of the Post Bank
- reorganisation of SAPO;
- development of a Public Private Partnership (PPP) framework;
- enchancement of SAPO's retail business and an upgrade of its ICT infrastructure;
- alliance with other government departments to enhance delivery of service;
- improvement of SAPO's market share;
- investment in further IT infrastructure;
- implementation of SAPO's human resource strategy; and
- efforts to ensure sustainable profitability.

Synopsis: SAPO Strategic focus for 2006/7
SAPO's five key strategic themes and its vision and mission for 2006/7 were outlined, a schematic of the SAPO network and branches was provided and SAPO's new organisation value delivery system was outlined. SAPO’s financial recovery was explained, which indicated a reduction in operating losses since March 2001.

Review of 2005/6 financial year and alignment with government programme of action
Mr Mampeule indicated the extent to which SAPO was aligning itself with government’s national objectives. This included:
- SAPO's role in improving the capacity of the State to deliver services;
- broadening of SAPO's participation in the economy and increasing its competitiveness;
- results of the steps taken to position SAPO as the preferred partner of government;
- the additional government opportunities for SAPO; and
- SAPO’s contribution to a better world.

2006/7: Continuing to fulfil the mandate
The areas listed above, which SAPO continue to focus on, were outlined. These included improving the capacity of the State to deliver, increasing the competitiveness of the South African economy and SAPO’s efforts to contribute to a better world.

2006/7 Group Budget
Mr Mampeule explained:
- the 2006/7 financial year outlook, which included its performance targets and targeted profit margins for 2006/7;
- the assumed budget expenses for the next financial year;
- the diversifying of SAPO’s revenue stream;
- the predicted revenue to be generated;
- the status of the Post Bank depositors fund;
- SAPO’s pretax operating profit;
- the specific allocations of its 2006/7 budget and its operating profit margin;
- the debtors days target; and
- the application of SAPO’s funds

Living the vision; preliminary benchmarking
SAPO’s key ratio indicators were outlined, as well as its staff costs as a percentage of total revenue generated and its support costs as a percentage of its total revenue.

Conclusion
Mr Mampeule stated that SAPO’s 2005/6 performance was a cause for celebration. SAPO acknowledged that rapid technological changes posed a huge challenge to the entity, but it was ready to embrace change and strive towards its new vision.

Discussion
Ms M Smuts (DA) congratulated SAPO on doubling its profit over the previous financial year. She asked SAPO to indicate how soon the practice of government, in the form of the Department of Communications, subsidising SAPO would come to an end. She sought clarity for what exactly the subsidy was granted.

Mr Mampeule replied that intention was for SAPO to become increasingly less dependent on the State, as he had indicated in the presentation. The fact of the matter was that SAPO still had "enormous activities" it had to take care of. These included the significant resources needed to improve the shocking state of the infrastructure and working conditions under which some of the country's post offices operated. A portion of the subsidy would be used to focus on this, at least in the short term.

Mr Nick Buick, CFO, added that the first subsidy was allocated for the Universal Service Obligation (USO) which involved the roll out of the postal addresses as well as the physical street addresses. The second amount was for the new SAPO retail outlets that needed to be established in accordance with the targets agreed to with the postal regulator. Some of the small retail outlets in the rural areas could not be sustained because they commanded low traffic. They operated in communities with smaller populations, with the result that SAPO was unable to cover its fixed costs. Others were investments going forward and were not subsidies, as they were aimed at improving capacity. These included a facility which allowed customers to lodge their mail electronically, so that by the time they got to the post office the mail would already have been cleared and invoiced. This was a world first. This was but one of the investments made by SAPO to improve its efficiency.

With regard to when SAPO would cut off the subsidy, he stated that subsidies or grants were now "VAT-able". This meant that although SAPO received the R300 million it would immediately have to return 14% of that amount, and SAPO was hoping to address this concern with the Department to devise ways for it to make up that 14% that it did not receive from government. SAPO had had huge capital requirements of R570 million which it needed to discharge in 2007, and it would only be generating operating profits of about R350 million. Further, SAPO would have a tax bill in 2007 for the first time, which amounted to approximately of R100 million. If that amount were to be deducted from the R350 million it essentially left SAPO with R250 million, which did not allow it sufficient resources to catch up with the backlog of infrastructure roll-out and the overhauling of the post office network across the country. Thus until SAPO approached its projected profit rates of about 10-15%, it would not be able to generate sufficient after-tax cash to fund those capital requirements and those costs. He suggested that SAPO be allowed to retain its targeted subsidy for at least the next three to five years.

Ms Smuts referred to SAPO’s general and broader mandate to ensure universal service, and stated that the use of libraries and post offices presented exciting possibilities. As SAPO currently had approximately 2 500 outlets but only 700 public internet terminals (PITs), she questioned whether SAPO could not do better and perhaps think beyond PITs as a vehicle to ensure universal service.

The Chair asked whether there was not a cheaper option than the PITs, because they were only able to service one customer at a time.

Mr M Mohlalonga (ANC) commented that he was aware of the Multi-purpose Community Centres (MPCCs) that had PITs that were able to handle four customers per machine. He asked SAPO to indicate the roll out targets for the PITs.

Ms Lefoka, Chief Operations Officer (COO), responded by agreeing that the PIT roll out was not happening as rapidly as SAPO would like. The PITs were however not the only SAPO facility that provided Internet access, as it also had business centres which contained a bank of laptops with Internet access that could be used by customers. The PITs were primarily used in MPCCs in the rural areas, which did not have internet connectivity. Discussions were being engaged in with Sentech to improve Internet access in those areas. SAPO was currently reviewing its PIT setup to make it cheaper and more user friendly.

SAPO had introduced "E-cadres" who were ICT officers tasked with encouraging people in the rural areas to use the PITs and business centres, and not to fear them. SAPO planned to roll out 100 PITs a year, and it aimed to ensure that those PITs in the rural areas were put in place.

The Chair asked whether Ms Lefoka was saying it was due to technical reasons that SAPO was forced to use PITs in the rural areas instead of the better resources business centres.

Ms Lefoka answered in the affirmative. The reasons included the fact that there were not sufficient personnel to look after the security and maintenance needs of the business centres. She said that they were reviewing this to perhaps reconsider where they located them.

Mr Mampeule added that SAPO was not satisfied with the manner in which PITs were being rolled out. He stated that probably in six out of ten post offices he had visited, the PITs were not working. This was due to a number of factors, including the possibility that the staff in the post office did not know how to repair small problems with the PITs. Perhaps the PIT was not seen as a priority by the staff because it was not a revenue generating facility and there could even have been cases in which the staff members turned the PIT off because they considered it a distraction while dealing with customers. A hybrid model was needed for the use of PITs in rural areas, together with the community information officers that would encourage use of the facility by the community.

Mr Mohlalonga noted that the presentation indicated that SAPO had to date rolled out 1,5 million addresses, but sought clarity on the extent of the backlog. That information was important to contextualise the progress made to address the backlog. He asked SAPO to explain what the process of the provision of addresses would entail.

Ms Lefoka responded that the last census indicated that the current count was 9,5 million addresses, with 4 million being box addresses and 5 million street addresses. SAPO realised that its rollout of box addresses was in fact not dealing with the problem of providing citizens with physical addresses. Approximately two years ago SAPO, together with the Postal Regulator, et a target of 4,5 million physical addresses, which was the backlog back then. It was however realised from the last census that the provision of houses nationwide was growing by about 1 million per year, and for that reason SAPO proposed a rolling target that would incorporate new places as well as the housing backlog.

In the rural areas in the Eastern Cape, Limpopo and Kwazulu-Natal provinces, SAPO had piloted the system for the rolling out of physical addresses, which has proven very successful. Out of the total of 1,5 million addresses provided, approximately 70% were street addresses and 30% were box addresses. The roll out of addresses was thus a key issue for SAPO.

The backlog two years ago amounted to 4,5 million addresses, based on the census. The 1,8 million referred to in the presentation was solely the 2005/6 figure and during the last financial year a total of 1,7 million addresses were provided, which would bring the total up to 3,5 million. As she explained earlier, the fact that housing was increasing by approximately 1 million units per year, meant that the provision for the remainder of the address backlog would have to be a rolling out target. SAPO was also focusing on those areas that did not have any addresses in the past at all, and it thus believed that the 4,5 million addresses that had to be rolled out every three years would address the backlog. At the end of March 2006 SAPO believed approximately 2,1 million addresses would have been provided. This would still leave a total of 1,8 million that would have to be rolled out, going forward, to achieve the target set three years ago.

Mr Mohlalonga asked why SAPO’s biometric solutions project had only been conducted in the North West province.

Ms S Vos (IFP) asked SAPO to indicate the successes and failures of the North West project. Secondly, she sought clarity on the take up of digital signatures.

Ms Lefoka replied to the two questions by stating that in the North West province, SAPO was currently employing 117 000 personnel, which were aimed at reaching the most remote areas. It also issued digital certificates to verify the identification of people, but the process was far too lengthy. SAPO was currently investigating the reasons for the slowness of the programme. Secondly, SAPO must reach agreement with the provinces as to the specific area it must focus on. It was currently in discussion with the South African Social Security Agency (SASSA) and the Department to figure out how it could be rolled out as quickly as possible. Some of the challenges included the fact that SAPO was still awaiting regulations from the Department on digital certificates, as well as on the certification of its trust centre. SAPO was also engaged in discussions with the Department of Home Affairs on the use of the trust centre.

In terms of the other provinces, SAPO was engaged in discussions within SASSA with regard to how it could facilitate providing social grants. In practice SAPO would pay the pensions on behalf of the service providers, and in the Limpopo and Mpumalanga provinces SAPO utilised the voucher system. Once the agreement with SASSA had been finalised, SAPO would be able to provide the biometrics.

Mr Mohlalonga suggested that, given the levels of profitability SAPO could realise, it was surely in a position to take care of itself and did not need to rely on subsidies. Furthermore, he asked whether SAPO’s profits were derived from its primary operations and SAPO’s savings on staff costs was due to a reduction in staff cost.

The Chair stated that automation of postal functions would surely effect employment and staff levels. He asked whether SAPO had devised a plan to address this phenomenon.

Mr Mampeule responded that SAPO did not have forced retrenchment, and thus reduction in staff was a voluntary exercise, via offering retrenchment packages. An option was to consider replacing people who were leaving the entity with a technological substitute.

With regard to its relationship with government’s objective of job creation, he stated that SAPO was not against job creation, but was instead against the creation of artificial jobs where they were not required or which would result in non-productivity. The "E-cadres" were perhaps a good illustration of SAPO’s intention to create the right jobs in the right areas.

Issues of automation would be considered, but it was a very sensitive process as it could involve the retrenchment of personnel. A balance must be struck between using manual labour on the one hand and, on the other hand, the expeditious processing of the large numbers of mail SAPO received. SAPO did face some challenges, such as in its courier business. Some of these operations were very clearly unprofitable and must be cleared to improve service delivery. He reiterated that SAPO was very sensitive to the importance of job creation.

Ms Lefoka added that SAPO was currently in discussions with the Department of Labour to decide on alternative positions to which such personnel could be redeployed, and not necessarily retrenched.

Mr Buick explained that, with regard to the profitability of SAPO operations, its mail service had just become profitable. A couple of years ago SAPO was losing approximately 15c per letter it delivered, and it had now moved into profitability on the mail side. Its profitability would grow once the volumes of letters dealt with grew, because of the high fixed cost element of the business. SAPO’s broader financial services were also growing and becoming much stronger, such as the pay bill, its involvement in the payments of rates and the marketing of insurance and savings products. The areas that were not performing were its retail services, and the decision was taken to separate it from the main operations in order to encourage it to cover its own costs. SAPO was considering the provision of services such as pre-paid cellphones and stationery to cover costs in that area. SAPO had targeted to move that area into positive profit over the next year. As mentioned by Mr Mampeule earlier, the courier business division within SAPO was losing money because it operated in a highly competitive field, and SAPO would be focusing primarily on bringing this service into profitability.

Mr Mohlalonga sought specific figures on SAPO’s profitability.

Mr Buick responded that the R135 million profit generated during the previous financial year could be broken down as follows: the mail services contributed R285 million profit, retail services reported a R150 million loss, the Post Bank recorded a R90 million profit and the courier services reported a R90 million loss.

Ms Vos asked whether SAPO anticipated significant levels of fraud with its new VISA branded Post Bank card and, if so, the steps it was taking to deal with that.

Mr Mampeule replied that SAPO was working with the banks to ensure the initiative was a success. He acknowledged that it was an area that required ongoing improvement and monitoring.

Ms Vos asked when the new system for the registration of motor vehicles would be provided in the Western Cape.

Mr T Xiphu, Group Executive: Corporate Services, responded that the system had been piloted in the Nelson Mandela Metropole in the Eastern Cape province. It effectively expanded the current number of three outlets for car registration to 31 outlets. This was done by allowing the post offices to provide this service, because it had offices everywhere. SAPO would continually approach government regarding the provision of this additional service throughout the country. SAPO had been informed that the matter would be taken up at MinMec level by the National Department of Transport, and it merely needed to convince the local authorities that it made sense to use the post office to provide this service, as evidenced by the successful pilot in the Eastern Cape.

Ms Vos drew Members’ attention to a Carte Blanche programme that exposed mail fraud and the ineffectiveness of SAPO’s surveillance equipment.

Ms Lefoka replied that SAPO would perhaps need to invite the Carte Blanche crew into its post offices to show the progress it has made. SAPO’s surveillance systems had not been working and it had now invested significant funds into its mail centres, but not all the major mail centres had yet been reached. The security systems had been upgraded and security procedures had been improved. SAPO had embarked on a very robust process to increase awareness amongst its personnel of the very serious consequences of fraud and mail theft. Discussions were also being held with the South African Police Service (SAPS) to ensure persons found guilty of that violation would face serious punishment, as that crime was not given high priority within SAPS at the moment.

Mr Mampeule added that the security of mail remained a problem. SAPO would focus on two possible options going forward: the first was working with other government departments to assist with service delivery. The second was focused on growing its financial services arm, and specific emphasis would be placed on the Post Bank. The fact of the matter was that, as banks began improving their security measures, criminals were increasingly targeting post. There was no easy solution and SAPO was working very hard to improve security so as to ensure that the kind of occurrence highlighted on Carte Blanche did not happen again. It was suggested that SAPO install a closed circuit television system in the larger post offices, but that idea had to be re-thought when it was discovered that the subcontractors had not installed them properly.

A further problem was the robbing of post offices which, more often than not, involved the collaboration of SAPO staff members. A proper vetting system was needed for SAPO’s recruitment policy, and a zero tolerance approach was firmly in place.

Mr R Pieterse (ANC) asked whether Members were aware that SAPO now offered a funeral policy for R30 a month, which was a great idea to assist poor South Africans. He stated that he himself had very recently signed up.

He sought clarity on the basic resources and functions of the Regional Postal Agencies (RPAs, and how they differed from the services offered by a post office. He wanted to know why SAPO’s service was not profitable, whereas the other players in that sector were.

Ms Lefoka replied that at the moment the law stipulated that only the branch managers of the RPAs was authorised to provide the certification and authorisation service, as offered by the post office. SAPO was currently reviewing both the RPA infrastructure and the services it offered. The vision was for RPAs to provide only the basic postal services. Those structures did have resource challenges as well as problems regarding connectivity systems, and the remuneration of the staff running the RPA. The issues would be clarified with Members once the review process had run its course.

Mr Pieterse stated that SMS posed a serious challenge to SAPO’s mail service, because people could now send one to a Telkom landline number for far less than the cost of mailing a letter.

The Chair contended that it was the elite groups that were SMSing, whereas the majority of South Africans were still writing letters.

Ms Lefoka acknowledged that SMS was much more popular than the postal service. This was a challenge that SAPO must address.

Mr Pieterse noted that Mr Mampeule had mentioned the introduction of "E-cadres", but asked where the Community Development Workers (CDWs) would fit into the process.

Ms Lefoka noted the concern and said that this point would be considered.

Mr Pieterse stated that people were still struggling to access postal services and were paying significant travel costs, because post offices were placed far apart. He was of the view that the RPAs would go a long way to assist, especially in the rural areas. Currently they were being "mis-placed" and the cost for people to access them did not make sense.

Mr Mampeule responded that there was a need for SAPO to re-look the location of its post offices because, historically, they were built within the boundaries of the old Apartheid regime and were based on considerations other than the convenience of our people. The result was that people at the moment still spent significant funds to access the post office. SAPO must reconsider this to make them more accessible. Furthermore, the demographics and location of some of the settlements had been changing very aggressively, and this must be borne in mind. Where in the past there was one post office for every 50 000 people, SAPO was currently engaged in discussion to reduce it to one post office for every 10 000 South Africans. He assured the Committee that SAPO was very sensitive to lowering the cost of accessing its post offices, especially for the poorest of the poor.

Mr Pieterse stated that traditionally a public phone would have been placed at a post office of police station, but that no longer seemed to be the case. He asked whether that kind of co-operation between SAPO and the under-serviced area licence (USAL) holders in fact took place.

Mr Xiphu replied that this was mentioned in the presentation. He preferred not to say too much on the matter, as it was problematic and was currently being investigated. He stated that the Universal Service Agency (USA) was currently reviewing the model because it was discovered that some USALs turned out to actually be service providers for some of the main cellphone companies, which was an unfortunate development.

The Chair stated that there were certain residential areas or townships that were huge, like Tembisa, which will never have sufficient post offices due to its sheer size. He asked whether SAPO ever thought of using an SMME initiative or business that would provide at least some of the services offered by a main post office, such as the daily services needed by ordinary people.

Mr Xiphu responded that there were many sensitivities involved when considering such franchising, and the common misconception was that it would necessarily result in job losses. SAPO had considered the model from various angles, and linked it to job creation. At the moment SAPO was considering the introduction of nodular and or mobile post offices in the rural and under-serviced areas.

Mr M Khumalo (ANC) sought clarity as to why the presentation failed to mention SAPO’s philatelic services. It was an important service, as many of South Africa’s icons were reflected in its stamps.

Ms Lefoka assured the Committee that its omission was merely an oversight. SAPO would be issuing a stamp to commemorate the 50^th anniversary of the Women’s March in 1956, as well as the Bambata rebellion. The service had grown over the past few last years and was an important service. SAPO had managed to win the issue of the FIFA World Cup stamp for 2010, which will be launched at the closure of the 2006 World Cup in Germany. She stated that SAPO was very proud of the achievement.

Mr Khumalo asked why the Department of Provincial and Local Government had not been mentioned as one of the departments that could really assist in expediting the roll out of addresses.

Ms Lefoka replied that all addresses rolled out by SAPO were done in collaboration with municipalities, local government structures and traditional leaders, especially in the rural areas. In the urban areas SAPO obtained plans from the local authorities. In the rural areas it worked closely with the traditional leaders and local government structures to map out exactly where the physical address was needed, because in many cases there were no roads to work from. There was thus extensive interaction with municipalities.

Mr Khumalo expressed concern with the paltry conditions of post offices, as no effort appeared to have been made to accommodate the needs of senior citizens, disabled persons or pregnant women who were forced to stand in long queues.

Mr Mampeule responded that SAPO was aiming to improve conditions at its post offices. The vision was to create the kind of post office in which its customers would feel comfortable and respected, and it aimed to do away with the long queues. A total revamp was needed, including the improvement of the skills of post office staff.

Ms L Yengeni (ANC) noted that SAPO had intended to allocate 45% of its spending towards BEE initiatives, yet it had achieved only 35%. She asked how many companies had benefited from the allocation.

Mr Mampeule replied that it amounted to R900 million per year, but he did not have the exact number of companies that benefited with him. He assured Members that it covered quite a wide range of companies.

The Chair stated that this allocation was in fact job creation which SAPO was not giving itself credit for, and must do so.

Ms Yengeni noted the presentation slide on SAPO’s plans to improving state capacity reflected a target of 55 retail outlets for 2005/6 but it had only managed to establish fourteen. Yet for the 2006/7financial year, SAPO targeted 62 outlets. She asked SAPO to explain how it planned to achieve that total in 2006/7 when it had failed to achieve even 50% of its lower target for 2005/6.

Mr Mampeule responded that SAPO had devised a plan to upgrade 55 of its post offices to make them use friendly, and it had already committed sub contractors to upgrade them. It had however discovered six weeks ago that this was in fact a scheme by some of the contractors aimed at fraudulently benefiting them. SAPO thus had to cancel those contracts. The unfortunate thing was that that subcontractor had been involved with 26 of the post offices, which brought the whole process to a screeching halt. That was the reason for the delay in rolling out the full 55 retail outlets.

He stated that SAPO would still meet the target of 55, the only difference was that that target would now be met after March 2006 due to the delays outlined above. It would thus not affect the target of 62 for the 2006/7 financial year. A total of approximately 30-34 more retail outlets would be constructed by the end of March 2006, and the balance would be finished during the course of the second quarter. SAPO was thus comfortable with the targets.

Ms Yengeni asked SAPO to explain from where the R90 million loss for one of its Public Private Partnerships (PPP) came, and whether that meant that the budget of that service would consequently increase for the next financial year.

Mr Mampeule explained that the loss was incurred by its courier business. The intention was to reduce the loss to R50-60 million, but the main objective was to grow the profitability of that service to R6-7 million. As explained earlier by Mr Buick, SAPO’s courier service operated in a highly competitive sector.

Mr G Oliphant (ANC) stated that SAPO’s aim of "embracing new frontiers" was a loaded statement, but must be unpacked at some point. He found that it was actually old ground that SAPO was breaking again.

Mr Mampeule responded that it was a valid point. He acknowledged that it was an ambitious statement, and one which SAPO must start delivering on. He did however wish to state that people often talk about doing things, but do not necessarily do it properly. An example would be the retail business which was running at a loss and, by embracing new frontiers, SAPO had planned to transform it into a profitable venture. This would be achieved by customising its offerings, included the elimination of very poor service that was currently provided in certain areas and replacing it with a new post office that provided better service. SAPO’s objective was that no one should wait in a South African post office for longer than seven minutes, and he knew of people who had waited for over 30 minutes.

The second dimension to the statement did in fact involve new services that would be provided by SAPO, such as the electronic bill payment system, the provision of investment products for even the poorest citizens, applications for home mortgages and even short term insurance. These were all new offerings not were not currently being provided.

Mr Oliphant was of the view that the CEO’s response to the Chair’s question regarding the balance to be struck between automation and job creation was, with due respect, tentative. The CEO emphasised profitability and efficiency and the eradication of redundancy, which the Committee supported. Yet the national priority of job creation must always be borne in mind while dealing with the pressure of being profitable.

Mr Mampeule agreed with Mr Oliphant that job creation was not a key area for SAPO. He reminded Members that SAPO had only enjoyed profitability for the last two financial years, and thus its focus was to maintain that profitability. It was however not a deliberate strategy not to identify areas in which jobs could be created.

Mr Oliphant requested SAPO to be up front and state whether it should scrap its courier service or retrench staff, as it was operating at a loss.

Mr Mampeule replied that it was difficult to predict at the moment whether staff would have to be retrenched, but it would probably require closing down or relocating certain staff or even retrenchment. Fortunately none of the subsidies were used in an attempt to save the courier business.

Mr Oliphant sought clarity on the new projects in the retail sector, as well as the rationale behind the location of the 62 outlets for the 2006/7 financial year and the 42 relocations.

Secondly, he asked why the figure for the average items of mail received by Australian households was not included in the presentation. This was important because like must be equated with like.

Mr Mampeule responded that its omission was a sheer oversight, because a complete comparative exercise had not yet been conducted.

Concluding remarks
The Chair thanked the SAPO delegation for the presentation and apologised for the inconvenience regarding the mix-up of the date of the meeting.

Mr Mampeule thanked the Committee for the opportunity to address it.

The meeting was adjourned.