SAPO has closed many of its branches, making it difficult for e-commerce shops to drop off packages and customers to collect their purchases. (Image credit: SAPO via X)

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The newly-passed South African Post Office (SAPO) Amendment Bill could result in higher delivery costs for online shoppers and enable SAPO to monopolise the last-mile delivery sector.

These are the concerns raised by SA’s e-commerce sector, discussing the anticipated impact of the SAPO Amendment Bill on the online shopping sector and the logistics industry.

President Cyril Ramaphosa signed the SAPO Amendment Bill into law in December, setting the stage to transform the postal service into a modern, multifunctional digital hub.

According to the Department of Communications and Digital Technologies (DCDT), the new law expands the objective and mandate of the financially-constrained entity, and enables its relevance and sustainability by including services that respond to the evolving needs of customers in the digital economy.

“SAPO will now serve as a logistics and e-commerce provider of services, as well as a logistics partner for other e-commerce and logistics players, including SMMEs and informal traders,” said the DCDT in a statement, at the time.

Alastair Tempest, CEO of the E-commerce Forum South Africa, tells ITWeb the success of SAPO’s new strategy will hinge on several factors. These include strong partnerships and the entity getting a budget boost from National Treasury, as South Africans eagerly await the finance minister’s budget speech this afternoon.

“SAPO has indicated it will either look for public/private collaborations, or offer licences to courier companies under its overall licence as provided by the Act. This means the last-mile monopoly continues.

“In the case that SAPO reaches an agreement either to go with a public/private collaboration and/or to license existing carriers, we believe little will change, except that, in the case of a licence, the cost of delivery would be impacted.

“This would increase the cost of e-commerce deliveries for the customer, and could make e-commerce less attractive. Since e-commerce works on very slim margins, any licensing that is expensive would definitely be counter-productive.

“Government, the Independent Communications Authority of South Africa and SAPO will therefore have to be extremely careful not to set licence fees that increase delivery costs substantially.”

Tempest says that if SAPO wants to issue licences, it will have to retain the monopoly in order to justify the licence issued to last-mile delivery services.

“The challenge for SAPO has always been that their postal-handling systems did not provide clients with security or door-to-door tracking/tracing. Only the largest sorting facilities were equipped with tracking/tracing. Even these did not always work,” he points out.

Alastair Tempest, CEO of E-commerce Forum South Africa.

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The state-owned entity has been in dire financial straits over the past few years, owing creditors at least R8.7 billion.

Last February, a judgement was issued to place SAPO under provisional liquidation, with a provisional liquidator being appointed at the end of March.

The decision to place the state-owned enterprise under business rescue was aimed at restructuring its debt and addressing operational challenges to prevent its complete collapse.

The post office’s financial woes stem from a combination of factors, including reduced mail volumes due to digital communication trends, mismanagement and an over-reliance on government bailouts to sustain operations.

Additionally, unpaid pensions, salaries and other liabilities exacerbated the crisis, drawing criticism from unions and employees.

The business rescue process aimed to provide SAPO with an opportunity to stabilise, restructure and develop a sustainable operational model.

It received a R2.4 billon funding allocation from National Treasury in 2023. However, there was no funding allocation for SAPO in the 2024 Medium-Term Budget Policy Statement, a National Treasury official specified to ITWeb.

Tempest adds: “SAPO is between a rock and a hard place. It is saddled with historical debt, and it has closed down a lot of its facilities, making it difficult for an e-commerce shop to drop off packages/parcels, or for customers to go and collect their purchases. Many SAPO-trained management staff have moved to the new courier/delivery services.

“If you look at successful national postal operators – like Brazil – there is a lot of investment in rural deliveries, alternative ways to deliver, tracking/tracing, etc. SAPO is now only a shadow of its former self – and needs serious investment to offer modern, effective mailing solutions.”

SAPO still has a strong hold on the rural areas, as not all of these regions enjoy good internet connection and therefore e-commerce is not as popular as in urban areas, he states.

Garry Marshall, CEO of the SA Express Parcel Association, says more competition in this space is welcome, as a mail service is a basic human right. He cautions that in order for SAPO to provide an efficient service to the public, a government bailout would be key.

“We have no problem with the post office; we believe the country needs an efficient postal service. It’s important to understand that the traditional mailing services and last-mile delivery are fundamentally different.

“The reality is that in order to provide a service that is equal to what a courier does – which encompasses all the features that the public demands, such as tracking and tracing, proof of delivery and providing customer updates – this is an IT service that requires efficient systems and hardware in place.

“So, for the post office to efficiently compete, it’s going to have to introduce all these features as part of its offerings. And it’s going to have to do this at a cost and will have to compete at a cost.”

Should SAPO get to a point where it becomes an efficient post office that could eat into the courier service, then “may the best man win”, Marshall concludes.