Description
It is hereby certified that this Strategic Corporate Plan Was developed by the management of the South African Post Office (SA Post Office) under the guidance of the Acting Group Chief Executive Officer and the Administrator.
South African Post Office
Strategic Corporate Plan
2015/16 – 2017/18
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Table of Contents
PART I: FOREWORD AND OVERVIEW 2
1. FOREWORD BY THE ADMINISTRATOR 3
2. OVERVIEW BY THE ACTING GROUP CHIEF EXECUTIVE
OFFICER 4
3. EXECUTIVE SUMMARY 6
PART II: STRATEGIC OVERVIEW 7
4. STRATEGIC DIRECTION 8
5. SHAREHOLDER MANDATES AND NDP 10
6. SITUATIONAL ANALYSIS 17
7. STRATEGIC TURNAROUND PLAN 24
8. STRATEGIC ALIGNMENT 28
9. FINANCIAL PROJECTIONS 43
10. BORROWINGS AND FUNDING PLAN 52
11. CORPORATE GOVERNANCE 53
PART III: STRATEGIC OUTCOMES 59
12. PERFORMANCE MEASURES 60
PART IV: APPENDICES 71
13. A – STRATEGIC TURNAROUND PLAN 72
14. B – LIST OF PRODUCTS AND SERVICES 73
15. C – LIST OF RELATED LEGISLATION 75
16. D – FRAUD PREVENTION STRATEGY 77
17. E – RISK REGISTER 85
18. F – INTERNAL AUDIT STRATEGY 86
19. G – MATERIALITY FRAMEWORK 89
20. H - COMMUNICATION STRATEGY 93
21. I - ENVIRONMENTAL STRATEGY 98
22. J - ABBREVIATIONS 100
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Strategic Corporate Plan 2016 – 2018
OFFICIAL SIGN OFF
It is hereby certified that this Strategic Corporate Plan:
? Was developed by the management of the South African Post Office (SA Post Office) under the
guidance of the Acting Group Chief Executive Officer and the Administrator;
? Takes into account all the relevant policies, legislation and other mandates for which the SA Post Office
is responsible;
? Reflects the strategic objectives and goals which SA Post Office endeavours to realize over the next
three year period from 2016 to 2018.
Ms Manteng Maleka
Acting Chief Financial Officer Signature:
29 April 2015
Mr Mlu Mathonsi
Acting Group Chief Executive Officer Signature:
29 April 2015
Approved by:
Dr Simo Lushaba
Administrator Signature:
29 April 2015
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PART I:
Foreword and Overview
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1. Foreword by the Administrator
The South African Post Office currently finds itself at an unprecedented cross-road where for the first time in
its history it has been placed under administration. Financial and other operating challenges facing the
organisation are not unique to the SA Post Office though. What will differentiate the company from others in
similar situations is the manner in which it responds to these challenge in order to come out stronger, agile
and on a path of sustainable recovery for the future.
Global and local trends impacting the postal industry dictate that the SA Post Office responds accordingly by
adapting to the changing landscape. As part of the turnaround plan devised to move the organisation from
being under administration to healthy financial and operational positions achieved sustainable growth, the
SA Post Office is working on implementing a new business model. This model is aligned to the vision and
goals of government under the National Development Plan. The South African government adopted the
National Development Plan which aims to eliminate poverty and reduce inequality as the guiding roadmap
for our country’s future development path. All efforts of the SA Post Office’s new business model are directed
at improving our service delivery capability.
The 2015/16 – 2017/18 Strategic Corporate Plan takes on greater focus now, not only as our roadmap for
achieving our strategic objectives and delivering on our mandate, but as the defining plan which articulates
the new business model and positions the organisation for sustainable operations.
As with many developing countries, South Africa is faced with a massive ‘triple’ challenge of inequality,
poverty and unemployment. As a state-owned entity, we have a responsibility to assist government to
provide adequate and reliable access to services for our people. The SA Post Office must provide affordable
access to postal and financial services to all people in the country. This however, has to be balanced with the
need for the organisation to be profitable and self- sustaining.
Our customers require us to be competitive, innovative and agile. The new business model will help to
reposition the SA Post Office to meet its customer demands in a rapidly changing and technologically-driven
market. The Shareholder is mindful of the challenges facing the organisation and remains supportive of the
efforts to turn around the fortunes of the organisation.
This Strategic Corporate Plan will guide us as we strive towards the realisation of our goal of creating a
better life for all our people. We commit ourselves to working with all our stakeholders to ensure that we
achieve the key objectives outlined in this Plan.
Dr Simo Lushaba CD(SA)
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2. Overview by the Acting Group Chief
Executive Officer
The SA Post Office’s Strategic Corporate Plan points the way towards the achievement of the goals and
objectives that we have set ourselves as an organisation. This year’s Plan is a reflection of the
unprecedented situation the organisation finds itself in, challenged by a lack of working capital, without
funding for capital projects and having to deal with low morale amongst employees, to name but a few, all of
which resulted in the organisation being placed under Administration.
While the natural desire is to continue with business operations “as usual” this challenging time calls for
some radical intervention on both the part of executive management, employees and all other stakeholders.
Executive Management especially appreciates the intervention of the shareholder through the Administrator
to deploy a technical team to provide assistance in turning the organisation around and onto a sustainable
trajectory. It is “business un-usual” indeed.
All recovery initiatives of the organisation continue to be aligned to our mandate, license agreement,
priorities of Government, and the National Development Plan. The financial position of the SA Post Office
has been largely affected by declines in our mail volumes compounded by an inflexible operating model that
has failed to adapt to the substitution effect of digital trends.
Our license obligations require the SA Post Office to provide affordable postal and financial solutions to the
nation, as well as rolling out additional addresses to communities in under-serviced and rural communities.
Remaining financially viable and true to our mandate requires us to radically transform the organisation to
find sustainable alternative revenue streams. This focus will enable the organisation to become less
dependent on the mail business.
The 2015/16 – 2017/18 Strategic Corporate Plan provides us with a good opportunity to chart a new path
underpinned by a new operating model. This journey will see us using a new business and operating model
to create a healthy, financially stable, and highly efficient and customer centric organisation that is a key
contributor to the South African economy. Over the next three years, our main focus will be on ensuring that
the new business model is successfully deployed across the organisation, that the business is self-
sustaining, and that we improve our financial position (i.e. increasing our revenue base and aggressively
managing our costs) and that we improve overall efficiencies throughout our new operating business
functions.
Our focus in the new financial year includes the implementation of a new organisational structure and the SA
Post Office Strategic Turnaround Plan. The new structure is intended to introduce a new commercial and
business delivery focus within the Group, in addition to entrenching a new culture of responsibility and
accountability. The Strategic Turnaround Plan will focus on different phases that will see the organisation
addressing its fundamental building blocks (including addressing its capacity and capability shortcomings).
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The phases will include focusing on revenue improvement, cost containment initiatives, implementing
initiatives that will drive diversification, and innovation to enable the business to drive growth. Key to our
plans will be the following:
? redefining the way that we serve our customers,
? the roll-out of the Government’s Digital Terrestrial Television (DTT) project,
? a revised digital strategy that is responsive to current local and global trends,
? a rationalised mail processing and retail delivery function,
? rationalisation of transport capability,
? optimisation of our property portfolio to unlock value,
? corporatisation of Postbank which will see more people having access to financial services.
In delivering this Strategic Corporate Plan, it is important to acknowledge that we will need the full
commitment and support of all our stakeholders for delivering on the strategic intent laid out in this
document.
We remain committed to good governance. With this in mind, we will renew our focus to improve our
levels of transparency and strengthen our internal controls in order to improve accountability and
decision making. Underpinning all this, is our goal of delivering value to our primary shareholder, the
South African Government and delivering vital services to all South Africans.
We will deliver whatever it takes.
Mr Mlu Mathonsi
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3. Executive Summary
The South African Post Office SOC Ltd (SA Post Office) is mandated through its license agreement and
Universal Service Obligation (USO) to provide postal, and communication services to all South Africans at
affordable prices. This mandate charges the regulator, ICASA, with ensuring the provision of universal
services and managing the performance of the SA Post Office through the license agreement. In order to
fulfil on the mandate of the USO, a strategic priority for the SA Post Office includes, rolling out new
addresses and points of presence in rural and under-serviced areas. This requirement is aligned to enabling
the Government’s national development program for 2030.
The postal industry has been going through a major transformation to adjust to structural changes in its core
mail business, for a number of years which has seen declines in revenue and volumes. The SA Post Office
remains a monopoly entity in the reserved mail business, which constitutes the biggest component of its
business. The global trend has seen a steady decline in mail volumes as other forms of communication
pervade the market. In an effort to reduce its dependency on mail and exploit new revenue streams, the SA
Post Office needs to focus on further diversifying its products and services.
The SA Post Office faces several challenges that impact the business’s ability to deliver against its mandate
and license requirements. These include, negative customer perception, uncertain financial sustainability due
to declining revenues, loss of USO subsidy and a large fixed cost base. These challenges present the
organisation with opportunities to exploit new growth alternatives. The 2015/16 – 2017/18 Strategic
Corporate Plan of the SA Post Office is aimed at addressing these business challenges facing the
organisation and mapping out a new path that will see the organisation reposition itself, into a profitable, self-
sustaining, efficient and customer centric organisation.
The SA Post Office Management team has been implementing short term initiatives to address the current
performance barriers and concerns in the Group. This has led to the development of the Strategic
Turnaround Plan (STP) that is aimed at implementing strategic initiatives that will stabilise the business and
steer it in a positive growth direction. This plan, now in its second revision, sets the course for the
organisation going forward. The initiatives include amongst others, the implementation of alpha-numerical
postal codes, the roll-out of the Government’s Digital Terrestrial Television project, expansion of the E-
Business products and channels, optimisation of our property portfolio to optimise value, providing more
South African homes with addresses and the corporatisation of Postbank (which will see more people
having access to financial services).
The successful implementation of the new business model and the Strategic Turnaround Plan are key to the
success of this Strategic Corporate Plan.
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PART II:
Strategic Overview
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4. Strategic Direction
Strategic Intent
The strategic intent is to turn SAPO around in line with the Strategic Turnaround Plan, which establishes a
new business model, such that SAPO becomes customer–centric, with income derived from the reserved
markets being sufficient to meet operating costs for the developmental obligations of SAPO such as the
universal service obligation (USO) whilst ensuring that business activities, including government business, in
the unreserved markets are competitive, profitable and commercially viable to achieve sustainable growth for
SAPO. We will position SAPO as a key service provider that delivers government services to citizens.
Business derived from government will grow to levels of 50 - 55% of SAPO revenue per annum whilst still
growing from the current revenue levels from private and consumer segments of the market.
Vision
A leading provider of postal, logistics and financial services that is responsive to market changes whilst
achieving sustainable growth.
Mission
We facilitate communication and delivery of services by linking government, business and customers with
each other across the world by leveraging our broad reach, employees, technology and innovation.
Values
SA Post Office subscribes to the following values when planning and executing business delivery within the
agreed mandate:
• We are customer centric and will meet customer specific needs through excellent service;
• We contribute positively to our communities and environment;
• We treat each other with respect, dignity, honesty and integrity;
• We strive for a high performance culture and recognise individual contributions;
• We embrace change and diversity in the way we conduct business.
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Strategic Goals and objectives
The following key Strategic goals and objectives were identified for the SAPO Group that will serve as
the foundation for the execution of the strategy:
No Strategic Goals Strategic Objectives
1
Implement the Strategic Turnaround Plan
to achieve a sustainable organisation
Deliver sustainable developmental obligations funded from
the reserved market
Create a commercially viable business from the
unreserved markets
Achieve operational efficiency and effectiveness
Achieve Leadership stability that ensures continuity and
accountability
Achieve labour stability and improve labour relations,
Achieve financial sustainability
2
Create a customer centric organisation to
restore customer confidence
Improve the customer experience to achieve customer
loyalty
3
Position SAPO as a key service partner
that delivers government services
Grow to levels of 50 - 55% of SAPO revenue per annum
4
Corporatisation of Postbank and increase
access to financial services,
Facilitate the corporatization of Postbank
Increase access of financial services to the unbanked
5
Ensure good corporate citizenship and
corporate governance
Ethical Leadership
Sustainability contribution
Legal compliance
Effective risk and governance
Effective stakeholder management
Figure 1: SA Post Office Strategic Goals and Objectives
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5. Shareholder mandates and NDP
Mandate
The SA Post Office is mandated through the Postal Act 44 of 1958 and the Postal Services Act 124 of 1998
to provide postal services to all South Africans. These Acts provide for the regulation of postal services and
the operational functions of the company, including its Universal Service Obligations (USO), as well as the
operation of the Postbank.
The USO mandates the SA Post Office to provide services such as address provision, basic letter and
accessible mail delivery and collection services to all under serviced areas.
The SA Post Office is also a major state entity in terms of Schedule 2 of the Public Finance Management Act
(PFMA) No 1 of 1999 (as amended) and is a State Owned Company (SOC) Limited in terms of the
Companies Act No 71 of 2008 (as amended).
The SA Post Office’s legislative mandate in terms of its licence and Universal Service Obligation (USO);
The mandate of the SA Post Office as a State Owned Entity to ensure alignment of its programmes with the
overall programmes of Government;
The mandate of the Postbank is derived from the Postbank Act 9 of 2010 as amended and Government’s
priorities of financial inclusion of rural and lower income individuals and communities in South Africa.
Licence
The Postal Services Act of 1998 charges the regulator, the Independent Communications Authority of South
Africa (ICASA), to ensure the provision of universal service through the reserved postal services licensee
namely the South African Post Office.
The license to operate as South Africa’s postal services provider was issued to the SA Post Office on behalf
of the regulator in August 2001. The licence is valid for a period of 25 years and reviewed every three (3)
years in terms of targets and performance. The License will be reviewed in 2015/16 with the Regulator.
The Postal Services Act further appoints ICASA to monitor the incumbent against any “anti-competitive”
behaviour. Further, effective from October 2011, the South African Post Office was licensed as an
Authorised Financial Services Provider by the Financial Services Board (FSB) in terms of the Financial
Advisory and Intermediary Services (FAIS) Act 37 of 2002.
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Legislation
The SA Post Office complies with the protocols and legislation governing state owned companies and is
guided by various postal, courier and financial regulations laid down by the regulatory bodies such as ICASA
and the Financial Services Board (FSB).
The Group is required to comply with, inter alia, the following legislation:
• SA Post Office SOC Ltd Act 22 of 2011 (as amended);
• Postbank Act 9 of 2010 (as amended);
• Postal Services Act 124 of 1998 (as amended);
• Public Finance Management Act 1 of 1999 (as amended);
• Companies Act 71 of 2008 (as amended);
• Relevant legislation applicable to the postal sector and to SOCs;
• King III Code on Good Corporate Governance; and
• Electronic Communications and Transactions Act 25 of 2002 (as amended).
A detailed list of other related legislations are included in Appendix C.
The Department of Telecommunications and Postal Services
The Department of Telecommunications and Postal Services is mandated to develop ICT policies that create
conditions for an accelerated and sustained shared growth of the South African economy, and to ensure the
development of robust, reliable, secure and affordable ICT infrastructure. This is to contribute to the
development of an inclusive information society in which information and ICT tools are key drivers of
economic and societal development.
The national development plan considers ICT to be a critical enabler of economic development, mainly
because enhanced communication and information flows improve productivity and efficiency. The
Department of Telecommunications and Postal Services will thus focus on the development of various
aspects of ICT policy, increased broadband coverage, the migration to digital broadcasting, and a new postal
services delivery model over the medium term. These activities all contribute to outcome 6 of Government’s
2014-2019 medium term strategic framework (an efficient, competitive and responsive economic
infrastructure network).
The following programmes are key to the Department achieving its strategic objectives and aligned to the SA
Post Office’s strategy:
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Programme 2: International Affairs and Trade
Programme purpose - Ensure alignment between South Africa’s international activities and agreements in
the field of ICT and South Africa’s foreign policy.
Objectives - Contribute to the harmonisation and coordination of the frequency spectrum with neighbouring
countries through bilateral agreements with neighbouring countries by March 2016. Strengthen national and
regional capacity in the postal sector in the SADC region through international cooperation by:
- collaborating with the International Telecommunications Union and Universal Postal Union to
deliver improved connectivity and financial services in rural and underserviced areas of South Africa
through the postal network by March 2016
– implementing the Universal Postal Union Quality of Service Fund projects to improve sub-regional
postal services by March 2016.
Programme 3: Policy, Research and Capacity Development
Programme purpose - Develop ICT policies and legislation that support the development of an ICT sector
that creates favourable conditions for the accelerated and shared growth of the economy. Develop strategies
that increase the uptake and use of ICTs by the majority of the South African population in order to bridge
the digital divide.
Objectives
• Ensure that broadband connectivity provides secure and affordable access for all citizens to education,
health and other government services, and stimulates socioeconomic development by:
– implementing the digital readiness programme in line with South Africa Connect (the national
broadband policy and strategy)
– compiling a report on legislation and regulations that inhibit the achievement of broadband policy
objectives by March 2016
– developing policy to enable the rapid deployment of electronic communications networks by March
2016
– developing and facilitating the implementation of capacity building programmes focusing on IT
literacy for educators, government officials, health care workers and other provincial governments by
March 2018.
• Implement the cost to communication programme of action aimed at promoting affordable ICT services for
consumers by:
– developing an approved roaming policy by March 2016
– developing an approved local loop unbundling strategy by March 2017
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– developing a policy directive on the reduction of data costs by March 2016.
• Ensure that broadband connectivity stimulates socioeconomic development by implementing the digital
opportunities programme of the broadband policy and strategy of South Africa Connect, through developing
and facilitating the implementation of the digital entrepreneurship programme to enhance ICT adoption and
usage by SMMEs by March 2018.
• Ensure that citizens have access to postal services to achieve economic inclusion by developing and
facilitating the implementation of the national address system policy by March 2018.
Programme 4: ICT Enterprise Development and SOE Oversight
Programme purpose - Oversee and manage government’s shareholding interest in the ICT public entities.
Facilitate growth and development of small, medium and micro enterprises (SMMEs) in the ICT sector.
Objectives
• Ensure optimally functional ICT state owned companies that effectively deliver on their respective
mandates by:
– reviewing the mandates and funding models for state owned companies by March 2016
– developing and implementing oversight models for state owned companies by March 2016
– monitoring state owned companies’ compliance with statutory requirements on an ongoing basis.
• Ensure that South Africa has access to modern, sustainable and competitive banking services by
facilitating the corporatisation of the Postbank through:
– facilitating the licensing of the Postbank by March 2016
– facilitating the appointment of Postbank board members by March 2016
– facilitating the establishment of the Postbank Holding Company by March 2016
– facilitating the incorporation of the Postbank Company by March 2016.
Sub-programmes
• Public Entity Oversight provides oversight on state owned enterprises by managing government’s
shareholder interests in public enterprises. This includes facilitating the enterprises’ corporate plans and
ensuring that planning cycles are aligned with and comply with guidelines.
• Small, Medium and Micro Enterprise Development facilitates the growth and development of ICT SMMEs.
This sub-programme hosts an e-commerce platform and will produce content that covers the agriculture,
tourism, and arts and craft sectors.
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• ICT Support administers and manages the transfers to the .za domain and hosts the 112 emergency call
centre programme.
Programme 5: ICT Infrastructure Support
Programme purpose - Promote investment in robust, reliable, secure and affordable ICT infrastructure that
supports the provision of a multiplicity of applications and services.
Objectives
• Ensure that broadband connectivity provides secure and affordable access for all citizens to education,
health and other government services, and stimulates socioeconomic development by implementing the
digital development and digital future programmes.
• Implement digital development and digital future pillars in line with South Africa Connect (the national
broadband policy and strategy) by: implementing phase 1 of the digital development programme, which is
focused on providing connectivity to 1 296 identified government institutions, by March 2016
– implementing the digital future strategy, which is focused on the implementation of a wholesale
open access network, by March 2018
– finalising the policy directive on spectrum for broadband by March 2016
– providing connectivity to 972 schools in line with phase 1 of digital development, as part of the
Broadband Policy and Strategy of South Africa Connect, by March 2016
– establishing institutional capacity for cyber security through operationalising the cybersecurity hub
by March 2018
– creating an effective national spectrum framework to ensure that citizens reap socioeconomic
benefits from the use of the spectrum through reviewing and updating the national radio frequency
plan, and reviewing the national radio frequency spectrum policy, by March 2017.
Sub-programmes
• Broadband is responsible for developing and facilitating the implementation of the broadband policy,
strategy and implementation plan, and ensuring that goals for broadband are achieved.
• Digital Terrestrial Television is responsible for supporting the conversion from analogue to digital television
transmission technology, with the ultimate goal of releasing valuable frequency spectrum from next
generation mobile broadband and other applications
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The National Development Plan (NDP)
The National Development Plan (NDP) has been accepted as the main guiding policy document of
Government with the primary aim of charting a new path for the country. The NDP’s main aim is to change
the life chances of millions of South Africans and seek to build a country where all citizens have the
capabilities to grasp the ever-broadening opportunities available.
Postal Services, by their very nature, founding legislation and regulatory frameworks, have a fundamental
role to enable development, economic activity, trade and social cohesion. The Post Office’s network is key to
ensuring inclusion of vulnerable and marginalised communities into services such as financial and
government services. SAPO must build its value proposition and commercial ethos around this unique
positioning. SAPO is well positioned to support attainment of specific elements of the National Development
Plan. The diagram below indicates the different SA Post Office initiatives intended to support the NDP:
Figure 2: SA Post Office alignment to NDP Priorities & Objectives
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In the long-term, SAPO is positioned to become the face of South African government services to citizens,
through its proposition as a trusted platform for government delivery and providing access for citizens. Core
to this proposition, is the vast physical delivery infrastructure and branch network touching all corners of
South Africa. The 30% Government business that has been given to SAPO, will enable SAPO to play a
meaningful role in reducing the cost of providing government services to all South Africans.
Specifically, government offerings include:
? Improvement in the efficiency and effectiveness of delivering government services to citizens;
? Position SAPO branches as citizen-service desks for government and leverage Post Office branch
network for service delivery and improvement of citizen access to services;
? Support cost efficient and smarter way of working for government, and
? Become the logistics partner of choice to government.
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6. Situational analysis
SAPO’s strategic planning model
The SA Post Office’s utilises an integrated strategic
management model which is based on figure 2. This
models enables SAPO to develop informed strategic
responses and adjust the strategy, if required, through a
continuous environmental to understand the impact of all
internal and external factors that may influence SAPO’s
ability to maintain its competitive advantage as well its
ability to deliver on its universal service logistics.
A key component of the strategic formulation is to assess
the business and operating model for relevance in the
situation it finds itself in. If there is a need for
organisational adjustments, then SAPO will move, with
speed, to ensure that the organisation is optimised for
efficiency and effectiveness. Figure 3: SAPO Integrated strategic management model
The strategic plan informs the various programs, projects and operational plans that will move the
organisation towards its strategic goals. These plans are under-pinned by critical success factors along with
the applicable key performance indicators ensuring that effective monitoring and evaluations mechanisms
are in place for the strategic journey that SAPO plans to undertake.
Environmental Scan
South Africa’s economic growth path, inflation trajectory, and balance of payments performance since 1994
have moved to structurally more favourable levels. Further evidence of this improvement is found in the
following statistics:
? South Africa is an upper-middle income economy, with a GNI that is among the 25 largest in the
world (measured in PPP terms).
? South Africa has a fairly diversified economy; services account for almost two-thirds of total
economic activity.
However, South Africa’s unemployment rate remains high, limited progress has been made in narrowing
wealth and income gaps, unemployment and poverty levels remain disturbingly high. Economic growth is
barely averaging 2%, while the CPI inflation rate has breached the 6% upper control targeted limit as set by
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the South African Reserve Bank. This unfortunate combination (stagnating growth and rising inflation)
presents a major dilemma to the policy makers.
South Africa, with the most advanced economy in Africa, will continue to play an important role in regional
and world affairs. Alongside fellow members of the Southern African Development Community, South Africa
will also seek to build closer "South-South" ties, especially with China, India and Brazil, as well as with other
African trade blocs. South Africa will also prioritise the maintenance of close relations with the EU and the
US.
The key task facing policymakers will be to facilitate growth while avoiding macroeconomic imbalances. The
authorities will employ a fiscal stimulus and targeted industrial incentives to boost activity and employment,
but will also focus on keeping spending in check to guard against the loss of South Africa's investment grade
credit rating. The main medium term challenge is to overcome structural constraints such as skills shortages
and inadequate infrastructure, which are preventing South Africa from growing more quickly.
Government has indicated its commitment to fiscal consolidation by curtailing proposed growth in spending
while simultaneously increasing taxes in the form of higher income tax rates and fuel duty. The monetary
environment will become less accommodating because of concerns about inflationary pressure arising from
the sustained weakness of the rand, which is market-determined and widely traded. Nonetheless, rates will
rise during the forecast period, translating into higher bank lending rates and costlier credit.
Growth is expected to quicken during the 2015-19 period and will be helped by a further modest increase in
world growth and an expansion of regional trade, but the rate of expansion will remain relatively modest
because of several factors. These include delays in the installation of new electricity capacity, sluggish
private investment (because of strike threats and policy uncertainty), fiscal consolidation and progressively
tighter money. Growth will benefit from a small rise in job creation, higher real wages and the expansion of
the black middle class, which will spur consumer outlays on goods and services.
However, despite a steady improvement in power supplies, structural constraints will persist, including skills
shortages, crime, corruption and inefficient parastatals, while unemployment will remain high.
Industry Analysis
Postal Sector Trends
The global financial crisis brought an unprecedented disruption to the postal market and, while there are
signs of recovery, economic instability within the postal market remains. Mail volumes continue to decline in
most markets and it is clear that postal operators are entering a new era for the postal industry; an era where
volume decline of traditional mail is a sustained feature.
Internationally, the postal industry is undergoing a transformation. Business models that have existed for
generations are clashing with the latest technology and social trends. In response to these key market
trends, postal operators are focusing on diversification, launching profitable new business lines that are
vastly different from their historic business. They have also reworked their legacy mail networks into parcel
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networks that are well positioned to take advantage of the growing eCommerce wave. Postal operators are
also placing a major emphasis on modernizing across all areas of their operations through the effective use
of technology.
Below are a number of relevant global trends that are already or will likely impact the postal, retail and
transportation activities at SA Post Office
Figure 4: Global postal trends
Financial Industry Trends
The continued rapid growth in the number of black people with middle and high incomes should promote an
increased demand for financial services products during the forecast period. Meanwhile, continued efforts by
the government to increase the availability of financial services products to low-income earners should
increase financial services activity at the lower end of the market.
Banks
Future areas of growth in the banking sector include personal banking (especially at the lower end of the
market), further African expansion for some banks, and the small and medium-sized business sector. All four
of the largest local banks have established branches or offices in Africa, Europe, Australia, the US and Asia.
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Demand for personal banking services will be partly driven by the growing number of people joining the
ranks of the middle- and high-income groups. However, there will also be continuing efforts to tap into the
unbanked market, via special low-cost accounts and a possible expansion of tele/cell-phone banking.
Insurance
South Africa is by far the biggest insurance market in Africa and ranks 17th in the world. Local insurers
collected an estimated R450bn in premiums in 2012, a rise of 10.9% in inflation adjusted terms compared
with the previous year. Life insurance accounted for 82% of all premiums, while all non-life policies together
brought in the remaining 18%.
The industry is divided into three sectors: long-term insurers (mostly life); short-term insurers that deal with
corporate general insurance and standard individual coverage, such as households and automobiles; and
reinsurance companies.
Personal insurance is expected to increase at a fairly rapid rate over the forecast period. The growing
number of black people in the middle- and high-income brackets will boost the motor and homeowner
insurance segments, while ongoing concerns about the high rate of violence and crime in the country will
also prompt people to take out insurance cover.
The life insurance sector will also continue to expand. One of the fastest growing product lines is investment-
linked life annuities, marketed through linked product companies and consisting mostly of unit trusts.
Despite expanding demand for life cover, South Africa’s traditional insurers are facing intense competition
from abroad. Such competition is raising fears that downward pressure on premium rates is pushing revenue
below the levels required to cover actual risks.
Telecommunications Industry
Mobile
The number of mobile subscriptions is expected to expand by an annual average of 7% over our 2015-19
forecast period, taking the total number of subscribers to nearly R107m in 2019. Growth in the mobile market
will largely reflect the continued expansion of the number of black people joining the middle- and high-
income groups, as it is this demographic segment that is responsible for much of the increase in mobile
ownership, although the rate of increase is slowing, reflecting the maturity of the market. High penetration
rates and market maturity are forcing network operators to compete for customers at the service level and to
look for new revenue streams.
Demand for mobile data services and mobile banking is growing rapidly which reflects the difficulty faced by
low earners in setting up traditional bank accounts and hence the recent boom in mobile-phone accessibility.
Mobile payment apps are on the increase, as a growing number of shoppers across the income spectrum
revert to cashless shopping.
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Internet
Internet penetration and broadband subscriptions are still at a relatively low level. Around one-third of South
African households had Internet access as of 2012, according to the International Telecommunication Union
(ITU). However, much of this access appears to be taking place at work, in universities or in Internet cafés:
according to the general household survey for 2012 released by Statistics South Africa in August 2013,
fewer than 10% of South African households have access to the Internet at home. Mobile solutions will
continue to provide the most rapid growth in Internet access.
Logistics Industry
The South African courier industry is estimated to have an annual turnover of some R8 billion and is made
up of a large number of industry players ranging from companies with an international footprint to single
individuals. It is estimated that there are some 30-40 medium to large courier companies in South Africa and
between 2,000 and 3,000 small players.
The current courier industry is currently undergoing significant changes. Firstly, increased use of electronic
communication has resulted in a move from the delivery of envelopes, packets and parcels. Secondly,
increasing e-commerce is causing a shift from traditional Business to Business deliveries to Business to
Consumer.
Online shopping has brought new opportunities to the courier industry as consumers have high expectations
and expect speed delivery. As a result of this shift, traditional routes to commercial and industrial areas had
to be extended to include residential areas where the SAPO has traditionally had supremacy.
In recent years, there has been an increase in the delivery costs due to one parcel per trip deliveries and
having to make repeat deliveries. Rising fuel and electricity costs and the implementation of e-tolls from 2013
has resulted in a renewed focus on cost containment by the larger operators across the logistics sector.
The role of information technology in the courier market is becoming increasingly important as there is a
need to transfer and share information with customers. In particular, customers are increasingly demanding
the ability to communicate via social media platforms which will become a significant medium of interacting
with customers in future.
In recent months, labour unrest has become a significant factor in South Africa and the logistics industry
has not been immune to these developments. Companies that experience less labour unrest will
invariably attract more customers.
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Internal assessment of SAPO
A diagnostic review of the South African Post Office revealed findings that are summarised below:
Figure 5: SA Post Office key challenges
Governance weaknesses are evident across all domains, including poor enforcement of the reserved area
and unclear definition of the Universal Service Obligation (USO) by the Regulator; limited oversight by the
Department; inadequate oversight by the Board and ineffective management. These weaknesses have
created various deficiencies within the organisation and they must be addressed in the period of this
Strategic Plan.
Staff morale is very low and the environment has become toxic due to perceived lax attitude in dealing with
perceived corruption and poor consequence management within SAPO.
The relationship between labour and management is currently weakened as a result of a lack of consultation
and communication between management and labour.
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The SWOT Analysis
The SWOT analysis builds on the other components of the strategic context work and identifies in simple
terms where SAPO is positioned with regard to trends, developments and the broader environment in which
it operates. The analysis identifies the organization’s strengths and weaknesses, as well as the threats and
opportunities concerning the organization’s future.
Figure 6: Summary SWOT Analysis
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7. Strategic Turnaround Plan
In November 2014, the Minister of Telecommunications and Postal Services appointed an Administrator for
the South African Post Office to bring stability to the organisation following prolonged labour unrest,
instability within the organisation, continuous financial strain as well as problems with service delivery. The
Administrator was also required to develop a Strategic Turnaround Plan for SAPO.
In December 2014, a technical intervention team was appointed, to assist the administrator in stabilising the
organisation and guide it towards sustainability and are mandated to:
? Facilitate the processes of resolving leadership instability at SAPO and restoring clients/business and
public confidence in the Post Office;
? Bring the business operations and the organisation to normality, including resolving the current labour
unrest;
? Ensure that SAPO builds up revenue streams to sustain its business operations and be able to meet its
short-term operational commitments.
? Ensure the resolution of outstanding Human Resources issues
? Fast-track Postbank license application process;
? Give effect to the Corporate Plan of the Post Office contemplated in Section 52 of the Public Finance
Management Act in order to achieve the objectives of the Post Office;
? Develop a business case that would underpin National Treasury support; and
? Ensure compliance with all relevant legislation and regulations.
Although it is critical to create an enabling environment for SAPO, the organisation must also resolve a
plethora of internal issues that threaten its sustainability. SAPO’s main revenue streams remain the mail
business, with limited success in diversifying revenue to other related and adjacent markets. A number of
offerings have been deployed as revenue diversification opportunities, however achieving scale in any of
them remains a challenge.
Drawing on the diagnostics findings, SAPO’s sustainable growth strategy is underpinned by the following
four key pillars:
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Figure 7: Key Transformation Themes
The SA Post Office Turnaround Approach
To realise the strategic turnaround plan, an implementation approach is developed with clearly defined
milestones per phase:
Figure 8: Journey of the Turnaround implementation
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The roadmap to achieve the implementation of the turnaround is indicated in the figure below.
Figure 9: SAPO Turnaround roadmap
Phase 1: Stop the bleeding
This phase intends to arrest the current financial distress faced by SAPO. The key milestones within this
phase includes short term cash management, capacitate SAPO with strong and capable leadership and this
team is required to ensure the successful implementation of SAPO’s sustainable growth strategy. The
management team is also required to drive the various revenue initiatives identified in the strategic plan. The
process of implementing the new model is also planned to start in this phase. The duration of this phase is
estimated to continue for the first half of 2015/16FY.
Phase 2: Strategic Positioning for the Future
The focus area in phase 2 will be a continuation of the business model implementation to systematically
address fundamental flaws in SAPO’s business model. The business model initiatives will be executed in
manner whereby the key flaws are addressed first.
Phase 3: Sustainable Growth
This phase intends on building the newly establish business model and intends on focusing on sustaining its
growth trajectory. At this point SAPO should be declaring significant profits of which will be recycled into the
organisation to maintain the momentum gained over the previous two phases.
Year two
Year three
Year one
The South African Post Office
Strategic Roadmap
FY 2015/16
FY 2017/18
? Crisis Stabilisation
? New Leadership
? Drive Retail and
logistics revenue
? Implement Business
model
? Implement Business
model
? Drive Retail and
logistics revenue
? Embark on
sustainability
initiatives
Year One: Stop the bleeding
Q1 Q2 Q3 Q4
FY 2016/17 FY 2017/18
Implementation Timelines
Year two: Business model for the future
Year three: Sustained growth
FY 2016/17
FY 2015/16
- R102 m
Nett loss
R1,3bn
Nett profit
R1,5bn
Nett profit
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The SA Post Office Management team has been working on a detailed list of initiatives to address the
current performance barriers and concerns in the Group. This integrated Programme is currently under
review, including an assessment of the overall business impact, integration requirements and costs. A brief
summary of the Programme is presented here, with the detailed Programme plan and budget to be
presented to the Board of Directors and other stakeholders for approval on its completion.
The sustainability growth strategy focuses on implementing initiatives within four key areas:
? Operations ? Product Innovation
? Commercial (Revenue Growth) ? Business Model
The detailed Strategic Turnaround Plan, as submitted to the Honourable Minister of Telecommunications and
Postal Services is included in Appendix A.
The Implementation Process
In order to achieve the delivery of the Strategic Turnaround Plan SAPO will mobilised a team housed within
the Group Project Management Office (PMO) which will be tasked with driving the business to implement the
initiatives. The team will develop a roadmap and framework that will assist the business managers to create
project charters and identify key performance indicators (KPI’s) that need to be monitored and ensure
delivery of the committed benefits.
The Monitoring Process
The progress on initiatives will be monitored on a monthly basis to ensure that the initiatives are on track to
deliver on the commitments. The Project Management Office (PMO) will be tasked with monitoring
implementation and progress on all initiatives.
The current process of the Monitoring Task Team, as established through the DTPS and National Treasury,
will be used to monitor progress on the STP implementation.
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8. Strategic Alignment
The new Operating Model
The current BU driven operating model has led to silos and inefficiencies and the organisation is
cumbersome and top heavy. The organisation is neither market focused, nor is it customer focused.
A sustainable business model for SAPO is one that reduces the reliance on mail business and moves
towards a balanced revenue mix, where Retail, Logistics and Postbank improve their contribution and each
operates profitably.
SAPO’s new business model will be characterised by strong government revenue growth by scaling up the
government offering; strengthening non-banking financial services offerings to drive Retail volumes; tapping
into the fast growing SMME sector; growing e-Business revenue and growing major and large accounts
revenue through cross-selling. The cost side will be managed down through leveraging strategic
partnerships; streamlining Operations, Transport and Property, optimising IT, Procurement and Human
Capital cost as well as reducing the cost of the Retail network.
Implementation of the new business model will necessitate a change in SAPO’s operating model to place the
customer at the heart of the business, break Business Unit silos, create market facing commodity-based
SCM, create a commercial capability at SAPO, and consolidate all “commercial” functions, outsource SAPO
and Postbank IT and break down e-Business into Mail and Channels.
Figure 10: New Business model
Products
Core
Operations
Letter mail Parcels Banking
Non-Banking Financial
Services
Mail Operations Parcels Operations
Retail Operations Postbank
Retail Solutions
Customers
Marketing & Communication
Business Government Consumer
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Information Technology
Property Management
Supply Chain Management
Human Resources Management
Stakeholder Management
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Strategy and Sustainability
Financial Management
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Strategic Review: Core Operations
The strategic positioning for SA Post Office to become a customer focused integrated distribution and
financial services organisation requires the organisation to restructure the operations environment to ensure
that it meets its mandate and is able to deliver customer centric solutions optimally. The organisation has
been structured in different business units creating silos and duplication of resources such as infrastructure,
personnel and duplication in processes. The bloated structure creates inefficiencies and impacts negatively
on customer service and ultimately the SA Post Office brand. This has over the years resulted in a decline in
consumer confidence, staff morale and revenue.
The customer service delivery model will be achieved through structural changes that will integrate the
processes for the acceptance, processing and delivery of mail and parcel items which are identical across
Mail and CFG thus changing the organisation structures and operational management across the entire
value chain.
Regional management duplication will be reduced from being managed by Retail and Mail business and
integrated with the consolidation of the area and regional levels for the operational areas and administrative
sections such as finance and HR.
SAPO is managed in terms of business units (Mail, e-Business, Retail, Postbank) and has Support Functions
to provide services to those business units (e.g. finance, procurement etc). As noted earlier, the current
structure has resulted in silos, with some duplication of functions such as mail processing across the Mail
and Retail business units, duplication of support functions e.g. Retail structures and Head Office, etc. In
addition, the support functions are supposed to operate using a shared services model, but this has not
actually been achieved in practice. Hackett was engaged to perform a review of the efficiency of certain
support functions, and the findings from this exercise have been taken into consideration when preparing the
initial proposal around their restructuring.
The current value chain, excluding the acceptance of deposits and the provision of financial services, can be
depicted as follows:
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Figure 11: SAPO Postal value chain
Taking the above into consideration, SA Post Office’s operating model needs to change significantly.
Functions currently performed in various parts of the group will be centralised (Properties, Transport, parcels
across Mail and CFG will be re-integrated into Mail).
A new Customer Service area will be created to drive the focus on customer service, value propositions,
strategic data analytics, market research, sales etc.
For support functions, Supply Chain Management will be incorporated into Finance, and Governance
structures will be combined. Support and area management structures currently in the Retail and Mail
operations will be collapsed to improve end to end customer service.
Strategic Review: Postbank
Postbank’s strategic intent is to serve as the partner of choice for government with regard to its objective of
providing affordable transactional banking services and accessible social services to all citizens that need
these services. It is through the Post Office’s expansive nationwide network that Postbank will be able to
provide extensive accessibility, particularly in rural areas.
To enable the above stated strategic intent, Postbank’s value proposition to its existing and prospective
customers is the promise of low cost financial services to all South Africans. This includes lower income
citizens who may have limited access to, or cannot afford, traditional banking services.
Postbank’s Corporatisation, will ultimately enable the bank to offer a wider range of affordable products and
services to the mass market. This is while adhering to industry standards and meeting the regulatory
requirements applicable to a registered bank. The Corporatisation process will serve as a key enabler in
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realising the Postbank’s strategic intent and value proposition to its customers. During the next three years,
Postbank will be pursuing several initiatives:
? Corporatisation:
– The Banks Act section 12, the application to establish a bank was submitted to the SA Reserve
Bank in 2013. The focus will now shift to meeting the Banks Act and supporting regulatory
requirements. This will include the hiring of key skilled resources and the establishment of
requisite efficient and effective organisational, compliance, IT and process infrastructure;
? Channel Strategy:
– Developing alternative channels to efficiently deliver relevant banking services at low cost, while
also improving the convenience and access for customers. This includes ATMs, Internet
Banking and other alternative channel options,
? Product Innovation:
– Offering innovative products and services that fulfil Postbank’s mission and provide relevant, low
cost banking and related financial services to South African citizens throughout the country;
– Evaluating the building blocks required to introduce affordable lending products as part of the
corporatisation; and
– Re-evaluating Postbank’s role in the insurance industry to enable greater access to financial
services.
Though commercial banks and finance companies have recently increased their focus on lower income
customers, there is a viable and important role for Postbank to play in offering affordable banking services
that support SA citizens’ needs, compared to the profit-driven objectives in commercial shareholder-driven
enterprises.
Strategic Review: Commercial
SAPO’s revenue growth continues to rely on mail business, with stagnant to negative growth in the Retail
and Logistics BUs. SAPO lacks a cohesive commercial strategy, resulting in a fragmented view of the
customer, disparate value proposition, channel, sales, and customer experience strategies. The silo
organization of the Business Units has led to an organization that is unable to capture commercial value
across all products and offerings. Each BU drives its own “commercial strategy” with no consolidated view
across the Group; for example, innovation and new products in e-Business target the same clients and
provides offerings that are in direct competition with Mail and Retail BUs. The positioning of e-Business as a
standalone profit-centre is fundamentally flawed, rather it must be viewed as an “innovation hub” that
develops e-enabled products for mail, logistics, financial services and retail and e-channels for the entire
SAPO Group. Management information relating to customer and product profitability is not readily available
and utilised in day-to-day management of commercial opportunities and this will change.
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Postal Services, by their very nature, founding legislation and regulatory frameworks thereof, have a
fundamental role to enable development, economic activity, trade and social cohesion. The Post Office’s
network is key to ensuring inclusion of vulnerable and marginalised communities. SAPO must build its value
proposition and commercial ethos around this unique positioning. SAPO is well positioned to support
attainment of specific elements of the National Development Plan.
Products
The lack of a SAPO-wide product strategy has resulted in new products cannibalising existing products.
Some of the key gaps include:
? No lifecycle management framework, new product development process, which has led to each
business unit having their own teams, frameworks and deploying their own product management
practices;
? Management information on product performance and profitability is not readily available;
? New innovations are not approached within a consolidated view of the product portfolio, to ensure
that they complement the entire offering of SAPO whilst responding to changing needs of the market;
and
? Pricing is sub-optimal due to poor application of the costing model in pricing, discounts and rebates
decisions.
Planned Initiatives
– Development of a multi-pronged product development and management strategy
Figure 12: SAPO Product strategy
Components of the strategy:
? Define product lifecycle management process ownership and develop SAPO-wide product strategy;
? Define product performance reporting requirements and work with management accounting to
develop on a regular basis;
? Review and balance entire product portfolio and develop recovery strategies for poorly performing
products; and
? Review product pricing strategy across all BUs.
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The product map is indicated in the figure below.
Figure 13: SAPO Product map
A detailed listing of the current products and services is included in Annexure B.
Channels
SAPO’s channel strategy is still in its infancy, and fragmented with Retail Branches being the dominant
channel, but completely divorced from other channels such as contact centres, online, mobile, mailmen,
salesforce, etc.
SAPO’s biggest weakness in its business model is the high-fixed cost basis of its large retail infrastructure.
The retail branch network investments have tended to be biased towards regulatory compliance and property
development trends, rather that commercial performance of branches in economically viable areas and
developmental” or USO branches in uneconomical areas.
South Africa Post Office Product Map
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In Store
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TnT WRE NAMS EBDN
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Online Mobile
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Figure 14: SAPO Channel strategy
Planned Initiatives
– Establishment of a single channel management function to support the multi-channel strategy.
o The retail network will be Rebalanced, Remodelled and Revitalised to ensure a cost
efficient model for future SAPO business model.
o Remodel the retail branch network to improve sustainability, ensuring an optimal mix
of brick and mortar, Own versus RPA and franchise, mobile units, self-service
kiosks, etc. to achieve the following mix:
? 40% RPA,
? 25% Owned: conventional,
? 20% store-in-store,
? 15% mobile,
? 5% self-service kiosks;
o Consolidate and modernise contact centres – develop an outsource option to optimise
costs, improve service quality and adopt best in class practices.
o Define a role for delivery men and sales force as a channel.
o Allocate specific branches as Postbank flagship branches.
Customers
A customer segmentation study was initiated in 2010 to cover the mail and logistics business units, however,
implementation of the customer segmentation model was not carried through.
Similarly, SAPO’S value proposition is not clearly defined, consistently understood and implemented across
the Group. Postal Services play a vital enabling role for communications and transactions, linking South
Africans to each other and South African businesses and government to all citizens through the vast branch
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network and strong physical distribution and delivery network. SAPO supports social cohesion and the
developmental agenda, whilst at the same time remaining an important enabler to trade and the economy.
Customer segmentation model
SAPO’s major customers are big business, followed by public sector – together contributing 98% of SAPO
revenues.
SAPO must become a partner to business by providing value-added business communication and
transaction solutions. The strategy for business customers is to retain the existing Large Business customer
base by enhancing customer experience and key accounts management. The following interventions are
key:
? SAPO must reclaim its relationship with Large Business Customers from the Mailing Houses that
process and lodge mail on their behalf.
? Single-view of the customer and intimate understanding of needs to improve cross-selling
opportunities.
? Urgently close capacity and capability gaps in customer understanding through deep analytics within
the key sectors that drive post office’s revenue, namely; retail, financial services,
telecommunications, education and healthcare sectors.
? Improve customer value proposition and product offerings to meet client needs.
? Improved quality, reliability of service, and customer service.
Previously untapped markets such as the SMME sector will be developed through deliberate offerings that
address specific needs to support their core needs. In the short-term, Business Solutions, within SAPO
branches and the Online SMME trading platform are specific offerings that will drive this market, as enablers
for SMME’s businesses.
Government, as a customer segment will drive SAPO’s growth in the short to medium term. This customer
segment will grow; through implementation of the 2015 Cabinet Decision to set aside 30% of government
spend on SAPO business offerings. In the 2015/16 fiscal year, a growth from the current R1, 2 billion
revenue per annum to over R3 billion per annum is targeted through specific “quick win” opportunities.
Projects that will yield a revenue contribution of R11 billion to SAPO, in the next three years have been
identified.
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Figure 15: SAPO Customer segment model
Strategic Review: Delivery Platforms and Enablers
The delivery platforms and enablers that are responsible for strategic direction, corporate governance, policy
and procedures of the Group, and Shared Services that is responsible for the management and centres of
excellence to the Group.
It is clear that the delivery platforms and enablers have a critical role to play in providing efficient and cost
effective support to the core operations, while also setting strategy, creating policy and ensuring compliance
on behalf of the Group. The technical focus areas vary widely and each unit will continue to develop and
refine its technical competence. In addition, the focus on the following improvement areas during the
planning period:
? Cost management;
? Business process efficiency and integration;
? Expansion of the use of enabling technologies;
? Increasing the efficiency and service quality from Group Shared Services;
? Talent Management;
? Create a business support environment that promotes and facilitates innovation;
? Efficient and effective procurement processes.
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Transport and logistics
SAPO runs various transport and logistics operations both within the postal business operations as well as
the parcel business, CFG. The transport and logistics stream sought to analyse these and identify
opportunities for improvement in terms of efficiency, cost and service level enhancement
A key recommendation for the group is to proceed to restructure the Transport and Logistics function and
bring this under one structure for the entire business. Mandate for such a structure is to find opportunities for
network optimisation and economies of scale across the SAPO Group.
Information Technology
The current systems are old and out of support. The old business model enabled silos within SA Post Office
resulting in decentralisation and duplication of solutions, bespoke solutions deployed and no longer
compatible or scalable, lack of disaster recovery due to concentration of risk in the current data centre and
no network redundancy.
Through Infrastructure Refresh to replace legacy systems Group IT will enable standardisation, high
availability of systems with full redundancy and faster turnaround time for deployment of solutions.
The upgrade of the following core systems is critical for business to perform its services.
? Universal Banking Solution (UBS) Banking system
? Postilion Financial Switch
? Websphere Message Queue (MQ)
? SAP Enterprise Resource Planning (ERP) system
? Third Party Management System
? Microsoft Exchange
? EMC backup and Storage systems
? Microsoft Active Directory
? Database systems
? WRE Point of Sale system
? Track and Trace solution
The current SA Post Office data network consist of current core network infrastructure with some but not
optimal redundancy in place, ageing regional network infrastructure which could result in an entire region
going “off-line” and copper-based Telkom infrastructure that does not enable scalability for sites. Group IT
proposes the outsourcing of the data network infrastructure with full redundancy which will provide reduced
operating costs, provide access to certified competent resources and make capital funds available by
outsourcing non-core business functions. The outsourcing of the data network infrastructure will reduce risk
by leveraging the technology available within a managed service company and provide flexibility as vendors
have multiple resources available to them.
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Property Management
The scope of the proposed initiatives covers all the owned and leased properties in use by the SAPO group.
The entire organisation is in scope, all business units will be affected, key of which will be the core business
areas in particular, Retail, Mail and Courier business as the biggest clients of the Properties BU. The
processes within SCM, Legal, OHS Services and Retail have a significant impact on the ultimate delivery of
these initiatives.
In summary, the initiatives are aimed at:
? Developing a property management strategy for the SAPO group guiding the approach to acquisition
and alienation of property, developing, leasing or otherwise making property available to Group for all
operational purposes. The governance, decision making criteria, economic evaluation criteria,
interfaces with other BUs, use of benchmarks and business unit mandates will be included.
? Maintaining a comprehensive, accurate register of all assets owned by the SAPO group which was
steadily rebuilt in the past year. Specific data required will be market related value, asset condition,
potential revenue generation capability, current OHS Act compliance, and an estimate of operating
and capital expenditure to rectify any significant compliance or revenue potential concerns.
? Reviewing all current property leases to align the leased properties with the property management
strategy, and to renew, cancel or renegotiate leases as required.
? Developing a comprehensive plan to renovate and / or buy, sell or lease all the properties owned by
SAPO in alignment to the license requirements, OHS Act requirements, business needs and property
management strategy.
? Agreeing on a sourcing model for facilities management services to inform the most cost effective
strategy for the organization.
? Designing and implementing a complete range of internal operations capabilities to manage and
enhance the property portfolio once it has been stabilized. The scope of this initiative will include
integrated business processes, enabling technologies, governance structures, updated policies, and a
reviewed organizational structure.
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Supply Chain Management
SCM is accountable for ensuring a transparent, fair, competitive and equitable procurement process.
The following strategic objectives have been identified for SCM to deliver on its mandate:
? Reduction of the total cost of ownership through sustainable savings.
? Enhance efficiency and improve process turnaround times.
? Extract value for money through strategic sourcing initiatives.
? Improve customer service satisfaction levels.
? Drive BBBEE initiatives and ensure compliance with legislation
? Supplier Service Management
Human Resources Management
The current efforts to reposition the company to improve its effectiveness require a more coherent and
focused people strategy that addresses two critical issues, namely; building employee capacity that is
relevant for this purpose and ensuring a climate and culture that would enable this transition.
The foundations for establishing this goal was the focus of the Human Capital in the past year with specific
emphasis on normalisation of employment on the top level of the organisation together and surfacing of
concerns in the Labour environment. This proved to be challenging, however there was movement towards
the stabilisation of employee relations.
Human Capital Management initiatives are focussed to address the following key areas:
? Stabilization of the employee relations environment
? Enable optimal levels of employee engagement to enable empowerment and performance
? Efficient and effective workforce management to enhance efficiencies through an optimally
structured and capacitated workforce (Effective staff numbers, enabling structures as well as well
and appropriately developed employees)
? Enhanced governance and efficiencies (Including an automated human capital management system)
? Embedding a High Performance Culture through the inculcating the organisational values and
effective management of the Post Office
? Development of the required competencies and skills to enable the organisation to meet current and
future business needs
? Developing the management capability to ensure compliance and implementation of best practices
in the HCM field
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? Re-engineering and /or improving HR practices, processes and systems to ensure operational
excellence in alignment with business requirements.
These focused initiatives in HCM must be underpinned by continuous programmes to empower managers
with the required knowledge and skills to manage the organisations maintaining human capital to enable
higher levels of productivity and performance within relevant industry frameworks and ensuring legislative
compliance e.g. FAIS, AARTO, South Africa’s labour law transformation, etc.
Stakeholder management and expectations will be considered and addressed through various Human
Capital Management initiatives amongst others; The Government’s annual programme of national
imperatives provides an opportunity for HCM to contribute to particularly education and training; and
employment creation through various programmes such as graduate programmes and learnerships. The
increased commitment from government departments such as the DTPS, to increase e-skills and the uptake
and usage of ICTs creates an opportunity for HCM to make a contribution through the company’s CSI
programme for e-literacy. Further to this the South African Post Office is committed to support initiative such
as the National Development Plan (NDP) through various initiatives, such as: gainful employment for people
who are differently abled, ensuring gender equity, especially at leadership level, building capacity through
the youth of South Africa e.g. take a girl child to work initiatives and others.
The evolving Employee –Employer value proposition must balance the needs and aspirations of the
different categories of the workforce through a more customised approach to the design of employee
offerings such as remuneration and benefits, etc., balanced with organisation requirements for increased
human capital efficiencies to ensure higher productivity and efficiencies.
The Communications strategy is included in Appendix H and the Environmental Strategy is included in
Appendix I.
Strategic Review: Regulation
The purpose of the regulatory stream was to advance SAPO’s position on how the regulatory regime should
be reviewed to enable sustainability. One of the most contentious issues for SAPO with respect to the
regulatory regime is the definition and funding model for universal service in a digital era with particular
emphasis on the Universal Service Obligations (USO). The USO is underpinned by the Constitution of the
Republic as every citizen’s right to access basic postal services especially in the underserviced and rural
areas.
In broad terms universal service means the rolling out of infrastructure and postal services whilst
guaranteeing a postal point of presence within 3kms walking distance where citizens can access a basket of
basic postal service or a group of services e.g. money transfer, parcel, and ordinary mail at a uniform cost
irrespective of their geographical location. Access to a postal point is fundamental to participation in
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economic and social activities. Postal services ensure access through the movement of articles for economic
and social participation. Social participation in the South African context is linked to the fact that this is a
developmental state with a lot of social imbalances and discrepancies and cost implications. The
developmental objective is to ensure that every citizen is afforded access to and inclusion into economic
activity.
Notwithstanding the above mentioned socio-economic development objectives of Government and its
concurrent universal service obligation to South Africans, the challenge is that the increasing cost of rolling
out the USO in its current form, that is roll-out through physical infrastructure in a low margin and declining
mail volume environment has lowered SAPO's profitability for reinvestment in under serviced areas and to
roll out future infrastructure expansion projects. In fact, the physical retail network is a loss leader in SAPO’s
business.
In the South African context this social mandate given to SAPO was funded through both a Reserved Market
and a state subsidy until recently where it was decreased with the view to phase it out. The phasing out of
the subsidy came at a time where the world was going digital and mail volumes were going down, bearing a
financial strain on SAPO.
The South African fiscus is under pressure from competing and increasing developmental needs in a
shrinking economy, consequently funding of the USO through the subsidy allocation is not sustainable.
The current legislative definition of the USO is now incongruous with the developments in the ICT industry -
specifically liberalisation and convergence. The definition is a barrier to finding innovative solutions to the
funding of the USO and identification of suitable execution agencies other than SAPO. The regulatory space
therefore is not moving with the technological changes- within a digitised era.
Policy makers must recognise the converging nature of communications, SAPO’s proposed role in ICT and
the rapid congruence of the physical and digital mail domains to review the Postal Services Act including
defining a sustainable mechanism for funding the USO. A number of sources must be explored including:
? Ring-fencing underserviced and uneconomic areas to subsidise SAPO’s retail branches, to cover
both capital investment and on-going operating losses via a direct government subsidy;
? SAPO as an ECNS and ECS licensee, can access the Universal Service Fund that was established
through the Electronic Communications Act, under the custodianship of USAASA, provided that
these licences are being utilised, and a contribution into the Fund is made. The Strategic Turnaround
Plan proposes an offering that SAPO will launch to the market, using its ECS and ECNS licences.
At that point SAPO will be eligible to contribute to the USF and also access funds for specific
universal access projects.
? The recent Cabinet Decision on a 30% set aside from government business will become a key
funding mechanism for SAPO’s Universal Service Obligation upon implementation.
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? The DTPS must co-ordinate the strengthening of the enforcement role of the Regulator to protect
SAPO’s reserved area.
? Initiatives to reduce the cost of the USO including the proposed retail branch remodelling must be
supported.
Engagements have commenced with the Regulator and a task team has been formulated, consisting of
participants from the DTPS, National Treasury, ICASA and SAPO, to move the regulatory matters forward.
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9. Financial Projections
Group Financial Overview for the 2014/15 Financial Year
The South African Post Office (SAPO) continues to face challenges such as increasing digitisation, stronger
competition and weaker economic conditions. These trends continue to drive structural declines in letter mail
volume. The financial performance has further been impacted by the four-month industrial action resulting in
direct loss of revenue of R358 million during this period. The industrial action has also resulted in loss of key
customers.
The forecasted revenue of R5 292 million is projected to decline by R680 million (11%) in comparison to prior
year due to lower revenue for mail (decline of 11%), e-business (decline of 20%) and logistics revenue
(decline of 30%).
The main contributors to operating expenditure are staff (59%), transport (10%), and property expenditure
(10%).
The operating expenditure of R6 483 million will increase by 3%:
? Higher staff costs - increase of 8% due to annual salary increase for the bargaining unit and
conversion of casual staff to permanent staff.
? Material & services costs - increase of 4% due the increase in software costs, maintenance of mail
sorting equipment and uniform costs.
? Interest costs - increase of 13% due to the interest paid on Postbank depositors funds which is off
set by the higher interest income received for Postbank investments.
? Also contributing is the interest paid on the overdraft facility.
Cost containment initiatives implemented limited the operating expenditure increase to 3%; transport costs
will reduce by 12% on prior year (due to lower national line haul and airline cost), property costs will reduce
by 7% on prior year (due to lower maintenance cost) and travel costs will reduce by 37% on prior year.
The forecasted net loss for the 2014/2015 financial year is R1 155 million in comparison to a net loss of
R359 million for the previous financial year and budget net loss of R249 million.
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Group Financial Projections 2015/16 to 2017/18
As mail volumes decline and parcel volumes continue to grow internationally, the focus over the medium
term is to transform the business operations by re-aligning and streamlining operations and expanding into
new areas of growth through product diversification. The implementation of the revised business-operating
model over medium term will be another key area of focus. The cost reduction initiatives for the primary cost
drivers (staff, transport and property costs) will remain key focus areas over the medium term to drive
business operations to acceptable net profit margin of 16%.
The realization of the Strategic Turnaround Plan initiatives reduces net loss to R102 million for the
2015/2016 financial year and significant improvement in the net profit position for the 2016/2017 and
2017/2018 financial years.
SAPO Group Income Statement
Figure 16: SAPO Group income statement
Actuals
2013/2014
Forecast
2014/2015
Budget
2015/2016
Budget
2016/2017
Budget
2017/2018
R'000 R'000 R'000 R'000 R'000
Revenue 5 972 505 5 292 080 6 732 978 8 365 401 8 855 879
Mail revenue 3 863 158 3 444 152 4 531 912 5 631 414 5 863 044
E-Business revenue 222 461 178 188 294 032 323 435 355 779
Logistics revenue 724 749 508 065 617 902 802 450 939 940
Postbank revenue 256 549 221 499 252 760 299 482 303 256
Retail revenue 389 421 392 593 469 095 734 050 788 296
Interest revenue 407 033 457 905 487 538 511 652 537 235
Sundry revenue 109 135 89 677 79 738 62 918 68 330
Expenses 6 319 246 6 482 965 6 856 584 6 448 287 6 561 338
Staff expenses 3 537 402 3 835 491 3 911 637 3 674 213 3 824 864
Transport expenses 713 413 628 547 629 205 538 853 553 390
Property expenses 697 017 651 261 684 049 592 036 608 785
Material and services 278 646 288 601 353 821 371 512 390 087
Interest paid 74 338 83 839 313 384 317 984 322 815
Depreciation 166 928 164 571 196 201 267 481 293 471
Other operating expenditure 851 502 830 655 768 288 686 208 567 927
Operating (loss) / profit (346 741) (1 190 885) (123 606) 1 917 114 2 294 541
Non ops item (162 198) (49 486) (50 942) (50 271) (49 294)
Subsidy 0 85 305 56 888 0 0
Taxation 150 062 0 15 207 (569 339) (705 456)
Net (Loss) / Profit (358 877) (1 155 065) (102 453) 1 297 504 1 539 791
SA Post Office Group
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SAPO Group Statement of Financial Position
The salient points of the SAPO Group Statement of Financial Position:
? The forecasted net loss position for the 2014/2015 financial year has reduced the retained earnings.
? The consequence of the business operations not generating positive cash flows resulted in the
overdraft position being maintained.
? A 3 year term loan of R1 200 million will secured in the 2015/2016 financial year to fund the Strategic
Turnaround Plan implementation.
? The Postbank short-term investments and cash surplus over depositor’s funds is maintained over the
medium term.
Figure 17: SAPO Group statement of financial position
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 2,954,225 3,424,187 3,868,653 4,029,882 4,215,369
Property, plant and equipment 1,367,609 1,345,194 1,407,268 1,444,260 1,511,769
Investments and other financial assets 653,485 1,010,904 1,074,379 1,144,202 1,221,007
Deferred tax 800,568 800,685 800,685 800,685 800,685
Other non current assets 132,563 267,404 586,320 640,734 681,909
Current Assets 8,337,216 7,377,737 8,423,880 9,700,566 11,519,559
Trade and other receivables 600,618 528,238 522,338 516,496 510,713
Cash & short term investments 7,659,095 6,775,979 7,831,699 9,117,719 10,945,812
Other current assets 77,503 73,520 69,844 66,351 63,034
11,291,441 10,801,924 12,292,533 13,730,448 15,734,928
Equity 2,438,296 1,319,398 1,492,944 2,790,448 4,330,240
Share capital 200,940 200,940 200,940 200,940 200,940
Non-distributable reserves 1,313,470 1,329,637 1,605,637 1,605,637 1,605,637
Retained income 923,886 (211,179) (313,633) 983,871 2,523,663
Non- current liabilities 2,028,192 2,003,576 3,291,642 3,384,117 3,481,222
Operating lease liability 76,491 84,052 88,255 92,669 97,304
Retirement benefit obligation 1,308,066 1,395,952 1,465,850 1,539,248 1,616,322
Deferred tax 244,287 244,287 244,287 244,287 244,287
Provisions 399,348 279,286 293,250 307,912 323,308
3 year term loan 0 0 1,200,000 1,200,000 1,200,000
Current liabilities 6,824,953 7,478,950 7,507,947 7,555,883 7,923,467
Subsidy unutilised 85,305 0 0 0 0
Trade and other payables 809,000 1,565,409 1,337,270 1,116,557 1,201,519
Retirement benefit obligation 131,243 146,755 154,183 161,988 170,188
Unearned revenue 324,631 318,138 311,776 305,540 299,429
Provisions 330,109 257,347 262,494 267,744 273,098
Deposits from the public 4,737,610 4,820,446 5,061,468 5,314,542 5,580,269
Funds collected on behalf of third parties 92,040 96,642 106,306 114,811 123,996
Bank overdraft 311,378 270,000 270,000 270,000 270,000
Other current liabilities 3,637 4,212 4,450 4,701 4,968
11,291,441 10,801,924 12,292,533 13,730,448 15,734,928
SA Post Office Group
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SAPO Group Statement of Cash Flows
The salient points of the SAPO Group Statement of Cash Flows:
? The business operations not generating positive cash flows resulting in serious cash flow challenges.
? A 3 year term loan of R1 200 million will be secured in the 2015/2016 financial year to fund the
Strategic Turnaround Plan implementation.
? Allocation of R56,888 million (after payment of vat) subsidy allocation for the 2015/2016 financial
year.
? Postbank depositors’ funds is projected to growth annually by 5%.
? Capital expenditure for Postbank over the medium term amounts to R453 million.
? Capital expenditure of Post Office over the medium term amounts to R707 million which is
depended on the availability of funding.
Figure 18: SAPO Group statement of cash flows
SAPO Group excluding Postbank
Income Statement
The forecasted net loss for the 2014/2015 financial year was impacted by the industrial action and
continuation of Mail volume decline of 5% annually. Revenue is forecasted to decline by 14% to R4 633
million due to decline in mail revenue by 11%, E-Business by 20% and Logistics by 30%. The investment
reserves have been depleted resulting in no further interest revenue.
Operating expenditure of R6 528 million for the 2014/2015 financial year is forecasted to increase by 2% due
to cost optimization initiatives implemented during the year. Transport and property costs is forecasted to
decline by 12% and 7%; whilst staff costs will increase by 8% due to the annual inflationary increase and
conversion of casual employees to permanent employees.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Net cash from operating activities (333 969) (639 019) (188 016) 1 333 305 1 892 082
Net cash (to)/ from investing activities 306 551 (1 375 051) (771 196) (553 432) (595 443)
Proceeds from subsidy 0 0 56 888 0 0
Movement in overdraft facility 311 378 (41 378) 0 0 0
3 year term loan 0 0 1 200 000 0 0
Movement in deposits from the public 245 399 82 836 241 022 253 073 265 727
Funds from National Treasury - Postbank 205 000 276 000 0 0
Total cash movement for the year 734 359 (1 972 612) 814 698 1 032 946 1 562 367
Cash at the beginning of the year 3 276 755 4 011 114 2 038 502 2 853 200 3 886 146
4 011 114 2 038 502 2 853 200 3 886 146 5 448 513
SA Post Office Group
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The realization of the Strategic Turnaround Plan initiatives reduces net loss to R256 million for the
2015/2016 financial year and significant improvement in the net profit position for the 2016/2017 and
2017/2018 financial years.
Figure 19: SAPO Group (excluding Postbank) income statement
Statement of Financial Position
The salient points of the Statement of Financial Position:
? The net losses have reduced the retained earnings.
? The consequence of the business operations not generating positive cash flows resulted in the
overdraft position being maintained.
? A 3-year term loan of R1 200 million will be secured in the 2015/2016 financial year to fund
implementation of the Strategic Turnaround Plan.
? The Postbank short-term investments and cash surplus over depositor’s funds is maintained over the
medium term.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 194,845 246,542 529,351 559,824 585,188
Property, plant and equipment 18,421 18,184 18,007 17,892 17,841
Other non current assets 176,424 228,358 511,345 541,932 567,347
Current Assets 6,529,744 6,770,081 7,131,061 7,468,513 7,828,439
Trade and other receivables 123,045 104,831 106,927 109,066 111,247
Cash & short term investments 6,406,699 6,665,251 7,024,133 7,359,447 7,717,191
6,724,589 7,016,624 7,660,412 8,028,337 8,413,627
Equity 1,911,867 2,122,608 2,521,674 2,632,639 2,748,121
Non-distributable reserves 314,057 314,057 590,057 590,057 590,057
Retained income 1,597,810 1,808,551 1,931,617 2,042,582 2,158,064
Non- current liabilities
Current liabilities 4,812,722 4,894,016 5,138,738 5,395,697 5,665,506
Trade and other payables 23,215 19,177 20,136 21,143 22,200
Retirement benefit obligation 2,008 2,128 2,256 2,392 2,535
Intercompany loans 49,775 52,264 54,877 57,621 60,502
Deposits from the public 4,737,724 4,820,446 5,061,468 5,314,542 5,580,269
6,724,589 7,016,624 7,660,412 8,028,337 8,413,627
Postbank
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Figure 20: SAPO Group (excluding Postbank) statement of financial position
Statement of Cash Flows
The salient points of the Statement of Cash Flows:
? The business operations not generating positive cash flows resulted in serious cash flow challenges.
? Allocation of R56, 888 million (after payment of vat) subsidy allocation for the 2015/2016 financial
year.
? A 3-year term loan of R1 200 million will be secured in the 2015/2016 financial year to fund the
Strategic Turnaround Plan implementation.
? Capital expenditure of Post Office over the medium term amounts to R707 million which depends on
the availability of funding.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 2,897,164 3,315,429 3,477,085 3,607,842 3,767,965
Property, plant and equipment 1,349,188 1,327,010 1,389,261 1,426,369 1,493,927
Investments and other financial assets 653,485 1,010,904 1,074,379 1,144,202 1,221,007
Deferred tax 800,568 800,685 800,685 800,685 800,685
Other non current assets 93,923 176,830 212,760 236,586 252,346
Current Assets 1,807,472 607,655 1,292,820 2,232,053 3,691,120
Trade and other receivables 477,573 423,408 415,410 407,430 399,465
Cash & short term investments 1,252,396 110,728 807,566 1,758,272 3,228,621
Other current assets 77,503 73,520 69,844 66,351 63,034
4,704,636 3,923,084 4,769,905 5,839,895 7,459,085
Equity 526,429 (803,210) (1,028,730) 157,809 1,582,119
Share capital 200,940 200,940 200,940 200,940 200,940
Non-distributable reserves 999,413 1,015,580 1,015,580 1,015,580 1,015,580
Retained income (673,924) (2,019,730) (2,245,250) (1,058,711) 365,599
Non- current liabilities 2,028,192 2,003,576 3,291,642 3,384,117 3,481,222
Operating lease liability 76,491 84,052 88,255 92,669 97,304
Retirement benefit obligation 1,308,066 1,395,952 1,465,850 1,539,248 1,616,322
Deferred tax 244,287 244,287 244,287 244,287 244,287
Provisions 399,348 279,286 293,250 307,912 323,308
3 year term loan 0 0 1,200,000 1,200,000 1,200,000
Current liabilities 2,150,015 2,722,718 2,506,993 2,297,970 2,395,745
Subsidy unutilised 85,305 0 0 0 0
Trade and other payables 785,785 1,546,232 1,317,134 1,095,415 1,179,319
Retirement benefit obligation 129,235 144,627 151,927 159,596 167,653
Unearned revenue 324,631 318,138 311,776 305,540 299,429
Provisions 330,109 257,347 262,494 267,744 273,098
Funds collected on behalf of third parties 92,040 96,642 106,306 114,811 123,996
Bank overdraft 311,378 270,000 270,000 270,000 270,000
Other current liabilities 91,646 89,732 87,357 84,865 82,250
4,704,636 3,923,084 4,769,905 5,839,895 7,459,085
SA Post Office Group excluding Postbank
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Figure 21: SAPO Group (excluding Postbank) statement of cash flows
Postbank
Income Statement
The forecasted net profit for the 2014/2015 financial year will increase by 52% to R211 million due to a 23%
increase in interest income; whilst the increase of 22% increase in staff costs is due to the filling of critical
positions and increase in interest paid by 59%.
The reduced net profit of the medium terms is due to the increase in staff costs (continuation of populating
the structure), increase in marketing costs, material services (replacement of Postbank cards), depreciation
and marketing costs.
Figure 22: Postbank income statement
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Net cash from operating activities (433,942) (867,389) (311,737) 1,169,250 1,719,130
Net cash (to)/ from investing activities (89,690) (230,412) (245,700) (215,800) (245,900)
Proceeds from subsidy 0 0 56,888 0 0
Movement in overdraft facility 311,378 (41,378) 0 0 0
3 year term loan 0 0 1,200,000 0 0
Movement in intercompany trading account 200,466 (2,489) (2,613) (2,744) (2,881)
Total cash movement for the year (11,789) (1,141,668) 696,838 950,706 1,470,349
Cash at the beginning of the year 1,264,185 1,252,396 110,728 807,566 1,758,272
1,252,396 110,728 807,566 1,758,272 3,228,621
SA Post Office Group excluding Postbank
Actuals
2013/2014
Forecast
2014/2015
Budget
2015/2016
Budget
2016/2017
Budget
2017/2018
R'000 R'000 R'000 R'000 R'000
Revenue 612 159 658 624 739 083 810 121 851 256
Postbank revenue 256 549 221 499 252 760 299 482 315 085
Interest revenue 354 087 436 573 486 306 510 621 536 152
Sundry revenue 1 523 553 17 18 19
Expenses 114 419 169 306 328 751 397 527 419 064
Staff expenses 50 644 61 917 111 604 117 184 123 043
Transport expenses 668 471 3 110 3 265 3 429
Property expenses 4 994 6 512 6 424 6 746 7 083
Material and services 4 418 3 794 35 524 37 300 39 165
Interest paid 35 588 56 571 79 056 83 009 87 160
Depreciation 4 379 3 446 1 665 54 086 58 451
Other operating expenditure 13 727 36 595 91 369 95 937 100 734
Operating (loss) / profit 497 739 489 318 410 332 412 594 432 192
Non ops item (359 289) (278 577) (287 266) (301 629) (316 710)
Subsidy 0 0 0 0 0
Taxation 0 0 0 0 0
Net (Loss) / Profit 138 450 210 741 123 067 110 965 115 481
Postbank
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Statement of Financial Position
The salient points of the Statement of Financial Position:
? The Postbank balance continues to improve due to the growth in the Postbank depositors and short
term investments.
? The depositor’s funds is projected to growth by 5% annually.
? The short-term investment and cash surplus over depositors’ funds is maintained in the medium
term.
? The increase in non-current assets is due capital expenditure of R453 million over the medium term.
Figure 23: Postbank Statement of financial position
Statement of Cash Flows
The salient points of the Statement of Cash Flows:
? The business operations are generating positive cash flows.
? National Treasury funding of R252 million allocated for the 2014/2015 financial year has been rolled
over to the 2015/2016 financial year.
? Postbank depositors’ funds is projected to growth annually by 5%.
? Capital expenditure for Postbank over the medium term amounts to R453 million.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 194 845 246 542 529 351 559 824 585 188
Property, plant and equipment 18 421 18 184 18 007 17 892 17 841
Other non current assets 176 424 228 358 511 345 541 932 567 347
Current Assets 6 529 744 6 770 081 7 131 061 7 468 513 7 828 439
Trade and other receivables 123 045 104 831 106 927 109 066 111 247
Cash & short term investments 6 406 699 6 665 251 7 024 133 7 359 447 7 717 191
6 724 589 7 016 624 7 660 412 8 028 337 8 413 627
Equity & Liabilities 1 911 867 2 122 608 2 521 674 2 632 639 2 748 121
Non-distributable reserves 314 057 314 057 590 057 590 057 590 057
Retained income 1 597 810 1 808 551 1 931 617 2 042 582 2 158 064
Non- current liabilities
Current liabilities 4 812 722 4 894 016 5 138 738 5 395 697 5 665 506
Trade and other payables 23 215 19 177 20 136 21 143 22 200
Retirement benefit obligation 2 008 2 128 2 256 2 392 2 535
Intercompany loans 49 775 52 264 54 877 57 621 60 502
Deposits from the public 4 737 724 4 820 446 5 061 468 5 314 542 5 580 269
6 724 589 7 016 624 7 660 412 8 028 337 8 413 627
Postbank
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Figure 24: Postbank Statement of cash flows
Capital Investment
The plan capital requirements for the MTEF period amounts to R1 160 million and includes an amount of
R453 million for Postbank corporatisation. The capital program of R707 million for the Post Office excluding
Postbank will have to be reprioritised during the year. The capital projects that improves business efficiency
or generate positive cash flows will have to be accelerated.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Net cash from operating activities 99 973 228 484 123 721 164 055 172 952
Net cash (to)/ from investing activities 396 241 (1 144 639) (525 496) (337 632) (349 543)
Movement in intercompany loans (200 466) 2 489 2 613 2 744 2 881
Movement in deposits from the public 245 399 82 722 241 022 253 073 265 727
Funds from National Treasury - Postbank 205 000 0 276 000 0 0
Total cash movement for the year 746 148 (830 944) 117 860 82 240 92 017
Cash at the beginning of the year 2 012 570 2 758 718 1 927 774 2 045 634 2 127 874
2 758 718 1 927 774 2 045 634 2 127 874 2 219 892
Postbank
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10. Borrowings and Funding Plan
Borrowings
SAPO has an approved overdraft facility of R270 million and National Treasury has issued a guarantee for
the overdraft facility.
A finance bridging facility of R200 million for a period three months has been approved during April 2015.
The bridging facility has been secured against the R1,67 billion National Treasury guarantee.
SAPO is in the process of securing proposals for borrowings for an amount of R1,2 billion. The borrowing
proposals will be submitted to the Department of Telecommunications and Postal Services for consideration
and the requisite approvals.
Funding Plan
The SA Post Office has approached the market to raise debt funding in the amount R1.2 billion to support
the implementation of the Strategic Turnaround Plan and address delayed creditor settlements.
Significant transactions
The implementation of the new business model will require a re-organization of the subsidiaries (Courier
Freight Group and Docex). This will require the necessary Ministerial approvals by the Department of
Telecommunications and Postal Services and Department of Finance.
Dividend Policy
The company’s dividend policy is to consider an interim and a final dividend in respect of each financial year.
Depending on the perceived need to retain funds for expansion or operating purposes, the board of directors
may pass a resolution for the payment of dividends, subject to the provisions of paragraph 22.1 of the SA
Post Office Memorandum of Incorporation (MOI).
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11. Corporate Governance
Appointment of Administrator
On 7 November 2014, all the non-executive members of the Board resigned and all of its committees
dissolved. Dr Simo Lushaba was appointed as administrator in terms of Section 25 of the South African Post
Office Act No 22 of 2011 (as amended). The Administrator is charged with the responsibility of bringing
stability within SAPO and to finalise the Strategic Turnaround Plan (STP) to improve the financial
performance.
The process to appoint a new Board of Directors has been initiated by the Department of
Telecommunications and Postal Services.
SAPO Board of Directors
The function of board and its committees is to effect good corporate governance through oversight, directing,
controlling and monitoring SAPO to achieve its Strategic Corporate Plan and fulfil its mandate. It is
responsible for overseeing, on behalf of the Shareholder, the performance of the South African Post Office
against its corporate plan. In carrying out its oversight role, the Board holds management accountable for
business performance as well as achievement of the South African Post Office’s strategic objectives.
The function of board committees is generally to allow more attention to be given to certain oversight
matters. Committees are not intended to replace management nor for the board to abdicate its
responsibilities. They exist rather to facilitate a more efficient operation of the board. The Board and its
Committees can only work if supported by management who are adequately skilled, delegated with the
appropriate authority and responsibility and trusted to deliver on the Board requests (refer Appendix G for the
detailed Materiality Framework). This will allow the Board to focus on its primary function, which is to offer
strategic direction, to monitor and to take timeous corrective action.
The Minister of Telecommunications and Postal Services in accordance with section 11 of the SA Post Office
Act appoints the non-executive directors of the Board. The SA Post Office Board has executive directors,
appointed by Cabinet on the recommendation of the Minister of Telecommunications and Postal Services.
The Board has delegated certain functions without abdicating its own responsibilities to the following
committees:
? Audit Committee,
? Risk Management Committee,
? Postbank Committee,
? Human Resources, Remuneration and Performance Management Committee and
? Social, Ethics and Transformation Committee
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Committees of the board
Audit committee
The SAPO Audit committee was established in terms of Companies Act No. 71 of 2008 (as amended) and
the Public Finance Management Act as amended and relevant Treasury Regulations and in accordance with
section 19.1.1.3 of the SAPO MOI. As a major public entity in terms of Schedule 2 of the PFMA and the
Company’s Act, SAPO is required to, establish an Audit Committee. The Audit Committee is responsible for,
evaluating the Group’s financial statements which will be provided to Parliament and other stakeholders, the
systems of internal control which management and the Board have established, the audit processes, the risk
management framework and assesses the Group’s financial performance against its Corporate Plan.
Representatives of external and internal audit have direct access to the Chairperson of the Committee. The
Audit Committee meets at least four times a year.
Risk Management Committee
The SAPO Risk Management Committee was established in terms of section 51 (1) (a) (i) of the Public
Finance Management Act No. 1 of 1999 as amended. The committee monitors, evaluates and advises the
Board on the adequacy of risk management processes and strategies within the Group and recommends the
approval of risk policies to the Board. It further reviews significant risks facing the company and reports these
to the Board. The scope of the Risk Management Committee extends across the Company to include the
subsidiary companies whose products and processes expose the Group to Credit Risk, Liquidity Risk,
Market Risk, Balance Sheet Risk and Operational Risk within the legislative and regulatory framework that
governs the SAPO Group. Representatives of Group Risk Management, Internal Audit, the Security and
Investigations division and all core Business Units attend all meetings of the Committee. The committee
meets four times a year.
Postbank Committee
The Postbank Committee was established with an oversight role over the Postbank to ensure that the
Postbank operates within all the applicable legislation, monitors the performance of the investment portfolio
of depositors’ funds as well as ensuring that these funds are invested appropriately. It also recommends the
approval of ledger fees and bank charges to the Board. The committee meets four times a year. The
Postbank Act which came into operation in late 2010, now provides for the establishment of a Board of
Directors for the Postbank when it starts operating as a licensed bank.
Human Resources, Remuneration and Performance Management Committee
The Human Resources Remuneration and Performance Management Committee was established in
accordance with the Company’s Memorandum of Incorporation. The committee reviews all aspects relating
to human resources and remuneration within the Group. It also monitors compliance with relevant labour and
employment legislative matters and recommends approval of significant human resources related policies to
the Board. This committee’s mandate includes remuneration and performance management issues. The
committee meets at least four times a year.
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Social, Ethics and Transformation Committee
The committee was established to monitor the Group’s socio-economic development and transformation
activities, its adherence to generally accepted ethics standards, and to ensure it is seen as a good corporate
citizen through its strategies to combat corruption, protect the environment, and labour and employment
practices. The Group CEO and key representatives from management attend meetings of the committee.
The committee meets at least four times a year.
IT Governance Committee
The IT committee is responsible for overseeing on behalf of the Board, the execution of IT governance
across the Group. The committee reports to the Board and is responsible for the governance of IT across the
Group, which includes monitoring and reviewing IT policies and practices to ensure that the required IT
support is provided and that IT is positioned as a key enabler for business. The Group CEO, the CIO and
relevant representatives from management attend meetings of the committee. The committee meets at least
four times a year.
Internal Control
Internal control is a framework designed to provide reasonable assurance regarding the achievement of
organisational objectives. The system of internal control, which is embedded in all key operations, provides
reasonable rather than absolute assurance that the Group’s strategic objectives will be achieved. The Board
has the overall responsibility for internal control.
The executive management, as mandated by the Board, has established an organisation-wide system of
internal control to manage significant risks. There is on-going monitoring and reporting processes by
Business Unit heads to provide feedback on the status of internal controls.
The Board also receives assurance from the Audit Committee, which derives some of the information from
regular internal and external audit reports.
Internal Audit and Assurance
Internal control is a framework designed to provide reasonable assurance regarding the achievement of
organizational objectives. The system of internal control, which is embedded in all key operations, provides
reasonable rather than absolute assurance that the Group’s strategic objectives will be achieved. The Board
has the overall responsibility for internal control.
Management prepares the company’s financial statements and the auditors examine the underlying
accounting assumptions, principles and procedures management has adopted, with Board approval. To
make the comparisons required by an audit, the auditor must examine not only the financial statements
themselves by the records on which they have been based and the company’s system of internal controls,
including internal audit.
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The executive management, as mandated by the Board, has established an organisation-wide system of
internal control to manage significant risks. There is on-going monitoring and reporting processes by
Business Unit heads to provide feedback on the status of internal controls.
The Board also receives assurance from the Audit Committee, which derives some of the information from
regular internal and external audit reports.
The detailed Internal Audit Strategy are included in Appendix F.
Risk Management Strategy
The Board acknowledges the legislative requirements which define and direct the risk management
responsibilities of the Board, the executive management, management and employees as pertained in the
PFMA and King III.
The Group’s risk management methodology has been formalised and aligned to Par.14 of the National
Treasury Practice Note 4 of 2009/2010 issued in terms of Section 52 of the Public Finance Management Act
as well that of King III principles. The Board through the Risk Management Policy and Framework has duly
accepted accountability for risk management across the Group and has additionally established risk
governance structures e.g. Board Committees and other management structures to monitor risk and
compliance levels within the organisation.
The Risk Management Policy and Framework is aimed at ensuring the deployment of a common and
systematic risk management-operating standard in accordance with international best practices across all
operational activities within the South African Post Office. This will ensure the appropriate management of
risks, enhance sound corporate governance and to effect regulatory compliance, strategic management,
leadership efficiency and performance.
The Board requires management to reinforce effective control measures, continuous improvement strategies
and compliance. All Group Executives, Business/Support unit heads and management at all levels have
been duly mandated and are required to develop, implement and maintain risk management plans for their
respective areas of responsibility and accountability with regards to:
? Achieving an optimal and cost effective balance between risk exposure and risk mitigation;
? Monitoring and maintaining sound business operating environments in order to ensure that these
remain within the operational risk appetite;
? Enhancing management decisions with regards to newly identified risks; and
? Reinforcing effective control measures, continuous improvement strategies and compliance.
As a State Owned Company, the Group also has a risk management plan, which is aligned to King III and
the ISO 31000 requirements and is inter alia directed at:
? The systematic identification and documenting of key risks that may impact negatively on the ability
to achieve the strategic objectives;
? The identification of relevant control failures;
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? The identification and implementation of risk mitigation strategies;
? Provide timely information to all relevant stakeholders in order to enhance the decision making
process;
? Safeguarding the Group’s resources against loss due to fraud, misuse, damage and fruitless and
wasteful expenditure;
? Safeguarding the availability, confidentiality and integrity of information systems;
? Ensuring conformance to with applicable legislation, regulations, policies, procedures and operating
standards;
? Enhancing policies and procedures for the management of operational risk, financial risk and
treasury operations; and
? Ensuring compliance to the Group’s Code of Ethics.
The Risk Register and mitigation plan is included in Appendix E.
Fraud Prevention Strategy
The South African Post Office Group operates through the retail network, which processes numerous
banking and non-banking financial transactions on a daily basis, therefore presenting potential opportunities
for fraud. To mitigate this risk of fraud, numerous systems of internal controls have been designed and
implemented. Furthermore, the Group also operates according to the defined and approved Fraud
Prevention Plan. The Audit Committee also assumes enhanced responsibility to consider fraud and error in
the Group’s financial statements.
The detailed Fraud Prevention Strategy is included in Appendix D.
Governance Framework
SA Post Office Group Shareholding Structure
The SA Post Office operates in terms of a Group holding structure, with the SA Post Office as the Group
holding company, with two operating subsidiaries and several property companies. The subsidiary
companies have their own boards comprising SA Post Office non-executive directors, executive directors
and the holding company executives who are appointed in a non-executive capacity to the subsidiary
boards. The managing director of the subsidiary company acts as the executive director of the subsidiary.
The relationship between the subsidiary companies and the SA Post Office, as the shareholder, is governed
by the individual shareholders’ compacts between the holding company and the subsidiary. The shareholder
compact, as well as spelling out the roles and responsibilities of the parties, outlines the performance targets
to be met by the subsidiary in terms of the overall annual strategic plan for the Group.
The Postbank Act has allowed for the creation of the Postbank Company (SOC) Limited as part of the
process of corporatizing Postbank. The processes to register Postbank as a fully-fledged commercial bank
with a banking license and as a SOC are currently underway and will result in changes in the current Group
structure.
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The Group structure is illustrated below.
Figure 25: SAPO Group structure
SHAREHOLDER:
MINISTER OF
TELECOMMUNICATIONS &
POSTAL SERVICES
SAPO BOARD of
DIRECTORS
STAMP ADVISORY
COMMITTEE
SUBSIDIARY
BOARDS
DOCEX
PROPERTY
COMPANIES
CFG
EXCO
GROUP AUDIT
COMMITTEE
RISK MANAGEMENT
COMMITTEE
HUMAN RESOURCES,
REMUNERATION AND
PERFORMANCE
MANAGEMENT
COMMITTEE
POSTBANK
COMMITTEE
IT GOVERNANCE
STEERING
COMMITTEE
SOCIAL ETHICS AND
TRANSFORMATION
COMMITTEE
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PART III:
Strategic Outcomes
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12. Performance Measures
The key performance measures sets out targets to facilitate the realisation of SAPO goals and objectives as
outlined in the Strategic Plan. The achievement of the key performance measures will be closely monitored
by the Executive management team and reported quarterly to the SAPO Board of Directors and other
relevant stakeholders. SAPO aims its hold itself accountable for the delivery and achievement of the key
performance measures. The key performance measures will be cascade to individual performance
management levels.
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Deliver sustainable
developmental
obligations funded from
reserved market
Financial
performance of the
reserved market
Revenue
Develop the
financial model
Implement
model
Implement
model
Develop the
financial model
Develop the
financial model
Develop the
financial model
Develop the
financial model
Cost
Net income
Financial
requirements of
the reserved
market
Capex
Opex
Subsidy
Create a commercially
viable business from the
unreserved markets
Competitive and
Profitable
Market share
Conduct a
market analysis
Implement
strategies
Implement
strategies
N/A N/A N/A
Conduct a
market analysis
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Achieve operational
efficiency and
effectiveness
Profitability
Conduct a
market analysis
Implement
strategies
Implement
strategies
N/A N/A N/A
Conduct a
market analysis
Service standards
Mail delivery
standards
92% 92% 92% 92% 92% 92% 92%
Retail queue
waiting times
7 minutes 7 minutes 7 minutes 7 minutes 7 minutes 7 minutes 7 minutes
Productivity
People
(Mail processing)
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
Transport
Develop and
implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Develop
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Property
(Retail revenue per
square metre)
R791 per square
metre
R910 per square
metre
R1046 per
square metre
R688 per square
metre
R713 per square
metre
R738 per square
metre
R791 per square
metre
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Achieve Leadership
stability that ensures
continuity and
accountability
Vacancies
% staff turnover 10%
5%
5%
3% 5% 7% 10%
Time to fill
vacancies
90 days 90 days 90 days 90 days 90 days 90 days 90 days
Performance
management
Contracts in place 100% 100% 100% 100% 100% 100% 100%
% of organisational
scorecard target
achieved
90% 95% 95% 90% 90% 90% 90%
Achieve labour stability
and improve labour
relations,
Effective Labour
forums
Lost hours due to
industrial action
0 0 0 0 0 0 0
Compliance to
labour agreements
100% 100% 100% 100% 100% 100% 100%
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Time to conclude
agreements
90 days 60 days 45 days 90 days 90 days 90 days 90 days
Achieve financial
sustainability
Profitability
Product
Develop and
implement
model
Implement Implement Develop Develop Implement
Develop and
implement
model
Customer segment
Channels
Revenue R6.733bn R8.365bn R8.856 To be aligned To be aligned To be aligned R6.733bn
Expenses R6.857bn R6.448bn R6.561bn To be aligned To be aligned To be aligned R6.857bn
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Net loss / net profit
Net loss
(R102m)
Net Profit
R1.298bn
Net Profit
R1.540bn
To be aligned
Net loss
(R102m)
Debtors days
Debtors days
outstanding of
20 days
Debtors days
outstanding of
15 days
Debtors days
outstanding of
15 days
Debtors days
outstanding of
45 days
Debtors days
outstanding of
30 days
Debtors days
outstanding of
25 days
Debtors days
outstanding of
20 days
Creditors days
Creditors days
outstanding of
45 days
Creditors days
outstanding of
30 days
Creditors days
outstanding of
30 days
Creditors days
outstanding of
90 days
Creditors days
outstanding of
75 days
Creditors days
outstanding of
60 days
Creditors days
outstanding of
45 days
Stock days
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Develop
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Stock turnover
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Develop
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Balance sheet
SAPO Group
excluding
Postbank)
Solvency <1
Total assets to
exceed total
liabilities
Total assets to
exceed total
liabilities
<1 <1 <1 <1
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Liquidity
Current assets /
current liabilities
1:1 1:1 1:1 <1 <1 <1 1:1
Gearing ratios
(Debt /equity)
-143% 932% 93% N/A N/A N/A -143%
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Strategic Goal 2: Create a customer centric organisation to restore customer confidence
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual
Target
2016/17
Annual
Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Improve the
customer
experience to
achieve customer
loyalty
Customers Customer satisfaction
Customer
satisfaction
index
40% 50% 60% N/A N/A 40%
Strategic Goal 3: Position SAPO as a key service partner that delivers government services
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Grow to levels of 50
- 55% of SAPO
revenue per annum
Government business
Implementation of
cabinet memo
30% of
Government
business
40% of
Government
business
55% of
Government
business
10% of
Government
business
20% of
Government
business
25% of
Government
business
30% of
Government
business
Number of accounts
Develop and
implement
Implement Implement
Develop and
implement
Implement Implement Implement
Revenue from
Government
Develop and
implement
Implement Implement
Develop and
implement
Implement Implement Implement
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Strategic Goal 4: Corporatisation of Postbank and increase access to financial services,
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Facilitate the
corporatization of
Postbank
Bank registration
Obtain section 16
approval to register a
bank
50% 75%
100% 10% 20% 30%
50%
Increase access of
financial services to
the unbanked
Provide banking
services
Growth the Postbank
depositors
5% 5% 5% 5% 5% 5% 5%
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Strategic Goal 5: Ensure good corporate citizenship and corporate governance
Strategic
Objective
Key Performance
Areas Key Performance Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Ethical
Leadership
Improving the
ethical
environment of
the organisation
Effective ethics office
Establish the
ethics office
Effective
monitoring and
reporting
Effective
monitoring and
reporting
N/A N/A N/A
Establish the
ethics office
Sustainability
targets
Environmental
sustainability
Reduce electricity
consumption
Reduce electricity
consumption by
3% over prior
year
Reduce electricity
consumption by
3% over prior
year
Reduce electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce total carbon
emissions
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Legal
compliance
Adherence to
PFMA
Elimination of Irregular
expenditure
Reduction of
100%
Reduction of
100%
Reduction of
100%
Reduction of
50%
Reduction of
75%
Reduction of
100%
Reduction of
100%
Minimise fruitless and
wasteful expenditure
Reduction of
100%
Reduction of
100%
Reduction of
100%
Reduction of
50%
Reduction of
75%
Reduction of
100%
Reduction of
100%
Effective risk
and
governance
Risk management
Implementation of the Risk
Mitigation Plan to support
the STP
100% 100% 100% 100% 100% 100% 100%
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Strategic Goal 5: Ensure good corporate citizenship and corporate governance
Strategic
Objective
Key Performance
Areas Key Performance Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Internal control
environment
Operational audit issues to
be resolved in a timely and
effective manner to
maintain a sustainable
control and governance
framework
zero operational
audit issues
outstanding
longer than 90
days
zero operational
audit issues
outstanding
longer than 60
days
zero operational
audit issues
outstanding
longer than 30
days
0 > 120 days 0 > 100 days 0 > 90 days 0 > 90 days
Effective
stakeholder
management
Stakeholder
relations
Stakeholder satisfaction
survey
Develop and
Implement survey
80% 90% N/A N/A N/A
Develop and
Implement
survey
Timely submissions of
statutory reporting
requirements
100% 100% 100%
100% 100% 100% 100%
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PART IV:
Appendices
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13. A – Strategic Turnaround Plan
Attached in a separate document
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14. B – List of Products and Services
Product Lines Product and service
Letter Mail Bulk mail (Ordinary letter mail statements; Invoices; accounts)
Direct Mail (addressed and unaddressed)
Registered letters
Postage included envelopes
Distribution of parcels (e.g. research docs; valuable items such as
credit cards and legal docs)
Box & Private Bag rentals
Promotional Mail & Advertising Mail
Product: Magazine Mail
Product: Infomail
Secure Mail
Safe Mail
Postage-Included Envelopes
Hybrid Mail
Mailroom services
Messenger Service
Franking
Postage stamps & philately items
Commemorative stamps and envelopes
e-Registered Mail
Database Management
List provision services
Geo-mapping services
Banking Savings accounts (Smart Save, Bonus Save)
Group savings accounts (Bakgotsi)
Debit cards (Flexi, Pension Flexi, Mzansi)
Investment accounts (Term Save, Term Save Plus)
Non-banking Financial
Services
Pay a bill (payments to Corporates)
Prepaid airtime
Lottery
Money transfers
Government bonds
Corporate share issues
Business solutions Mobile Based Solutions – Bulk & Premium Rated SMS
Notifications & USSD Applications
Internet Based Solutions – Electronic Bill Presentment &
Payments Solution. Web Based Online Payments Solutions
Personal Certificate Class 1, 2,3 and 4
SSL Certificate
Certificate Authorities
Registration Authorities
Software Customisation
PKI Training
Secure Fax
Fax and Photocopier
Parcels
Overnight Express to doors
Overnight Express to counters
Counter to Door
Door to Counter
Economy Service
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Product Lines Product and service
Home Deliveries
Brokerage – drive-aways
Same day delivery
Saturday delivery
After hour service
Customised solutions (safe-hands, red bin, closed loop)
International service
Access to the back offices of the courts
Door to Door
Point to Point
International Brokerage
Semi Consolidated and Bulk Freight
International Clearing and Forwarding
Customised solutions – closed loop, safe hands
Warehousing
Standard 3 ton container
Shelved Container
Ventilated/Insulated Container
Half Container
VALUE ADDED SERVICE (SURCHARGE)
CG Guaranteed Service – applicable to all above
De-stuffing Service – applicable to all
Storage
Cross Border Brokerage
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15. C – List of related legislation
No Legislation impact SAPO
1
Administrative Adjudication of Road Traffic Offences Act, No. 46 of 1998
2
Banks Act, No. 94 of 1990
3
Basic Conditions of Employment Act,75 of 1997
4
Broad Based Black Economic Empowerment Act, No. 53 of 2003
5
Compensation for Occupational Injuries and Diseases Act, No. 130 of 1993
6
Customs and Excise Act, No. 91 of 1964
7
Criminal Procedure Act, 51 of 1977
8
Consumer Protection Act, No. 68 of 2008
9
Drugs and Drug Trafficking Act, No. 140 of 1992
10
Electronic Communications Act ,36 of 2005
11
Electronic Communications and Transactions Act, No. 25 of 2002
12
Employment Equity Act, No. 55 of 1998
13
Financial Advisory and Intermediary Services Act, No. 37 of 2002
14
Financial Intelligence Centre Act, No. 38 of 2001
15
Income Tax Act, No. 28 of 1997
16
Labour Relations Act, No. 66 of 1995
17
National Environmental Management - Air Quality Act, No. 39 of 2004
18
National Energy Act, No. 34 2008
19
National Environmental Management - Waste Act 59 of 2008
20
National Payment System Act, No. 78 of 1998
21
Occupational Health and Safety Act, No. 85 of 1993
22
Preferential Procurement Policy Framework Act, No. 5 of 2000
23
Prevention and Combating of Corrupt Activities Act, No. 12 of 2004
24
Prevention of Organised Crime Act, No. 121 of 1998
25
Promotion of Access to Information Act, No. 2 of 2000 - Public Bodies
26
Protected Disclosures Act, No. 26 of 2000
27
Post Office Licence (ICASA)
28
Protection of Constitutional Democracy Against Terrorist and Related Activities Act, No. 33 of 2004
29
Regulation of Interception of Communications and Provision of Communication-related information
Act, No. 70 of 2002
30
Short-Term Insurance Act, No. 53 of 1998
31
Skills Development Act, No. 97 of 1998
32
Skills Development Levies Act, No. 9 of 1999
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33
Trade Marks Act, No. 194 of 1993
34
Trade Metrology Act, No. 77 of 1973
35
Unemployment Insurance Contributions Act, No. 4 of 2002
36
Value-Added Tax Act, No. 89 of 1991
37
Long-Term Insurance Act, No. 52 of 1998
38
Copyright Act, No. 98 of 1978
39
Constitution of the Republic of South Africa, No. 108 of 1996
40
South African Post Office SOC Limited Amendment Bill
41
Protection of Personal Information Act
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16. D – Fraud Prevention Strategy
Group Crime Prevention Strategy and Plan
Apart from the direct losses stemming from fraud, theft, mail violation and corruption, acts of crime and
dishonesty a secondary effect and equally damaging, is the impact on the Company’s image and brand.
Individuals and syndicate elements continually vary their initiatives and modus operandi in targeting specific
products/assets as well as reengineering their ways and means to overcome operational and financial
processes, in fulfilling their criminal objectives.
The single key factor that most negatively impacts upon security and subsequent financial loss is the lack of
compliance by employees to the instructions, procedures and systems that govern business operations. This
is compounded by the failure of supervisory staff and operational management, to effectively apply and
ensure the relevant control measures.
The ability of the South African Post Office to maintain a competitive advantage within an environment of
direct competition, ensuring customer trust and service reliability is positively influenced by the Company’s
ability to effectively detect and prevent incidents of criminality, financial misconduct and dishonesty. It
remains an ever challenging objective to identify those areas where human behaviour in conjunction with
system and product weaknesses create the opportunities and environment for irregularities to be committed,
which contribute to financial loss.
Accountability and control which will enable the prevention of criminality, financial misconduct and
dishonesty, is vested within management and all its employees, with the Security and Investigation Services
fulfilling an internal preventative and investigative responsibility.
The sustainable detection and prevention of incidents of criminality, financial misconduct and dishonesty can
only be achieved through a multi-faceted approach that includes the following:-
? Adopting a preventative style of investigating irregularities with an emphasis upon cause analysis
? The development and deployment of strategic crime prevention strategies
? Directing the integration of physical and electronic security into Business Unit planning
? Overt and covert crime intelligence collection techniques
? The implementation of an effective crime information management system
? Establishment of internal and external partnerships
The investigation and prevention of acts of criminality within the Post Office and its subsidiaries are focussed
upon the following:-
? Postal Crime and Offences relating to:-
? Theft, secretion, wrongful diversion and a unauthorised disposal of mailbags and postal articles
? Violation, damage, destruction, unauthorised opening of mail and postal articles
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? Postal Revenue Offences relating to:-
? Forgery of postage stamps and money orders
? Re-usage of postage stamps with the intent to defraud
? Theft, misappropriation and embezzlement of money and postage stamps
? Bulkmail and franking machine fraud
? Commercial Offences relating to:-
? Fraud with the inclusion of postal order -, cheques -, credit card -, savings bank and
? Pension fraud
? Corruption and collusive tendering for contracts
? Unauthorised expenditure of postal money
? Theft of equipment and post office assets
? Cyber crime
? Crimes Against Postal Property and Identity relating to:-
? Armed robberies at post office premises
? Hi-jacking of postal vehicles
? Housebreaking (burglary)
? Malicious damage to property
? Crime through the Mail, Postal Financial Systems and IT Infrastructure relating to:-
? Illicit prohibited substance trafficking
? West African Fraud Schemes (Nigerian “419” scams)
? Dangerous Goods and Mail Bombs
? Child pornography
? Money laundering
? Mail fraud
? Cyber crime
National Fraud Prevention Plan:-
The Group’s Fraud Prevention Plan (NFPP) is aligned in accordance to Par.14 of the National Treasury
Practice Note 4 of 2009/2010 issued in terms of Section 52 of the Public Finance Management Act as
well that of King III principles.
The National Fraud Prevention Plan (NFPP) of the South African Post Office is not only limited to
compliance to the Public Finance Management Act (PFMA) and the Treasury Regulation 29.1.1. The
Company considers the Plan as imperative to the business, but is also aware of prevalent fraud and
corruption risks that its businesses are exposed to.
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In doing business, the Post Office expects all its employees and organizations that are in any way
associated with it to be honest and fair in their dealings with and on behalf of the organization, its clients and
customers.
The main objective of the NFPP is to create a culture which is intolerant of fraud and corruption, by
regulating an ethical conduct of its personnel, clients and customers. The Plan seeks to implement response
mechanisms in all its businesses to deter any form of fraudulent or corrupt activities. It also places
responsibility on the personnel of the S.A. Post Office to conduct their business in a manner that is
conscious of the values of the organization.
The effectiveness of the FPP would be ensured by an all-round approach to fraud and corruption, covering
elements of fraud prevention, detection, response to fraud and raising personnel awareness on fraudulent
and corrupt activities.
There will be a concerted drive to develop and foster a climate within the South African Post Office where all
employees strive for the ultimate eradication of fraud, corruption and theft as well as re-enforcing existing
regulations aimed at preventing, reacting to and reducing the impact of fraud, corruption, theft, and
misadministration where these dishonest acts subsist.
The Group’s Crime Prevention Strategy will continue to focus upon the physical and electronic security of
premises and business operations at post office outlets, agencies and pension pay-out points, as well as the
current focus on products, systems and processes which are targeted by criminal and dishonest elements.
The deployment of the Crime Prevention Strategy will be Business Unit specific to reinforce the current
strategies relating to:
? The prevention of fraud, theft and corruption across all Business Units
? The Mail Violation Prevention Strategy
? Regularization and managing the contracts of security service providers such as guarding armed
response and CIT
? The deployment of cost effective electronic security systems to reduce reliance on physical security
and its associated cost and
? The deployment of a dedicated project management focus with an increased level of crime and
cause analysis, project evaluation and impact.
Its zero tolerance approach towards crime is directly in support of the National Crime Prevention Strategy
(1995) of the South African Government and is deployed in close co-operation and partnership with other
policing and intelligence agencies.
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
1 Electronic Fraud The risk of electronic fraudulent for the purpose of information theft, fraud,
releasing of spyware, viruses, or destruction of files and information due to:
** Unauthorized access to Sapo systems
** Destruction of information
** System errors
** Manipulation of data
** Databse access failures
** Inadequate system administration, etc
10.0 10.00 Improved control requirements:
** Firewalls
** Dedicated access and not shared access
** Access to servers to be controlled
** Improved user name authentication
** Improved password administration
** Database and sytem administration
** Ensuring proper audit trail log analysis
** Database access protocols
- security level segregation & authorisation
** Termination of access to systems
** Remote access control management
2 Postbank Account Opening Procedures Postbank account fraud regarding:
Existing Accounts: Account take over of existing Debit Cards & SB6
Savings Bank Books against fraudulent applications & documentation
or
New Accounts: Application of new Postbank Debit Card & SB6 Savings
Bank Book against fraudulent applications & documentation for the purpose
money laundering
Key causes:
** FICA Non-compliance:
Fraudsters present false ID documents as well as FICA documents by which
new accounts are opened or new cards or savings bank books are issued
** Non-validation of Documents:
FICA documents presented on opening Post Bank Accounts or re-issuing of
cards/saving books at Retail outlets are not validated for authenticity by Retail
and or Postbank.
** Poor Client Verification & Identification:
Teller staff does not have the tools to distinguish between a fraudulent ID and
a genuine ID.
Identity theft is therefore prevalent.
Collusion:
Collusion between SAPO Retail staff and external syndicates
10.0 10.00 Enforcing procedures to ensure that original ID documents are presented at account
opening or re-issuing of new cards or saving books
Online transmitting of all FICA documents to Postbank where a dedicated team
confirms/validates authenticity of documents provided.
Regular scrutiny of account history especially with large amounts circulating through the
account
Implementation of Online Finger Print Verification.
Introduction of the HANIS verification system linking Post Bank to Department of Home
Affairs.
SMS notification to clients of transactions
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
3 Procurement Fraud Procurement fraud resulting in corrupt activities
Manipulation of quotes and or supplying information to service providers that
will assist potential suppliers in winning tenders with kick back to
employees.
Inadequate minuting of PC, EXCO and Board discussions and decisions
(Minutes do not reflect reasons for decisions)
8.0 6.40 Enhance control, transparency and documenting of decisions regarding bids across all
levels of the process
Ensure the following:
** Bid specifications: Document approvals
** CFST: Fulfillment of CFST Charter
** PC: Transparency of discussions & decisions
** EXCO: Transparency of discussions & decisions
** Board: Transparency of discussions & decisions
4 Postage Fraud
(Post Office, Speed Services & XPS)
Losses incurred by the SAPO Group due to:
The understating of mail and parcel volumes & weigths at Branches and Mail
Centres
Corrupt relationsship between teller, client and mail houses.
Inadequate costing models (weight vs volumetrics - SWADDING at PO's and
Logistics)
Pricing - open to interpretation
7.5 6.00 Income Protection to improve role and visibility at specifically at Branches and Logistics
Ensure the availability of Rate Cards at Branches for Speed Services & XPS
Ensure payment against correct weight & volumetrics costing models (SWADDING at
PO's and Logistics)
Improved Mail House inspections by Income Protection
Supervisors to conduct inspections at counter points
Product development must include all affected stake holders
5 Banking Deposit Fraud Inconsistent application of banking procedures at Retail Outlets resulting in
shortage of cash when the deposit is processed at the banking institution.
Banking prepared by one person without a witness present.
Risk of deposit bag and slip being disposed off and unavailable for further
investigations.
While banks have their process of opening and counting the cash under
camera, SAPO Retail does not have this ability and therefore SIS is
dependent on the statements furnished by the SAPO staff responsible for
making up the banking.
Current reconciliation takes between 48 hours to 4 days
Inadequate and reactive monitoring of delayed banking
7.5 6.00 Adequate internal controls should be defined and implemented to effectively detect and
prevent incidents of banking fraud
Management to monitor overnight cash volmues and daily banking reports more
rigorously and institute consequence management for procedural non compliance
The banking Section should improve the reconciliation turn around times. Banking
section to notify Area office immediately in terms of discrepancies.
A witness to be present when banking is prepared
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
6 Property Fraud The potential of corrupting practices due to the manipulation of processes
pertaining to new or extention of lease agreements between SAPO and
Landlords
Non-compliance to the PFMA and Constitution relating to the property
procurement procedures
Disfunctional and fragmented approach pertaining to property management in
SAPO - Dual management of the property portfolio across 2 Business Units:
Infrastructure and Properties
5.0 4.00 Develop and establsih a dedicated Property Lease Procurement Policy in accordance
with the requirements of Law. This should also provide for exceptions with regards to the
leasing of properties in the Rural areas ito USO and ICASA requirements
Centralised Properties section with vetted employees to perform the agreements on
rentals.
7 Qualification Fraud Supplying false qualification documents when applying for vacant positions.
Inadequate criminal record verification
Inconsistent qualifications checks being done by Recruitment and Selection
prior to appointments.
After the fact qualification assessments (Undertaken after an employee has
been appointed - perception that this is delberately delayed until an employee
is appointed)
3.8 3.00 Consistent application of Qualifications Screening Process prior to employment.
Proper checks performed with institutions of issuing qualifications.
8 Pat Label Fraud The Webripos system duplicates Pat Labels when printing and the duplicate
label doesn’t register on the system
3.8 3.00 Re-engineering of system to overcome the duplication
9 Petrol Card Fraud Overstated First Auto statements compared to vehicle fuel capacity and
usage
Corrupt relationships between company employee and petrol
attendants/management/owners.
Inconsistent control and management of petrol cards and transactions
scrutinised by a Logistics co-ordinator.
3.8 3.00 Regular reconciliations and checks (daily) of fuel usage and petrol card expenditure by
line management
Fraud Awareness training
Line Management to stringently apply control measures for the use and allocation of
petrol cards.
SIS to incorporate inspections of the Logistics control process into their risk audits.
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
10 Receipt Manipulation Tellers and agencies reissue paid receipts of clients to other clients and
enrich themselves with the corresponding amount
Clients issued with duplicate receipts and payments not accounted
Postbox renewal, POS refunds, Third Party Payments, BRS receipting,
Bulkmail receipting, photocopy receip[ts, etc
3.8 3.00 PO Outlets to request next level of authorisation when teller requests point of sale
system to print a duplicate receipt at branch level
Supervisors to conduct regular inspection of payment records
Crime Awareness Sessions, including public education
11 Remuneration Fraud Casual labour: Overstated hours claimed by casuals
Overstated overtime and night shift allowance payments
Claims for overtime and night shift allowance which was not worked
3.8 2.25 Cost Centre Manager to pre-approve hours / additional hours to be worked / additional
hours
12 Leave Fraud Subbmission of fraudulent sick leave applications
Non completion, submission and approval of leave forms/LAS applications for
leave
3.8 2.25 Proper management of leave/absenteeism by cost centre manager
Consequent management
All offices to have access to LAS
13 Payroll Manipulation Financial loss due to the payment of non-existent employees
Appointment of family members or friends who do not work but receive a
monthly salary
3.8 2.25 DoA in terms of the payroll approval processes
Proper employee audit to be conducted (TK 31's to be analysed regularily by responsible
management)
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No. Risks Risk Description Inherent
Risk
Residual
Risk
Additional/enhancement management actions required to improve the current
risk management process
1 Governance: BU Accountability Failure by BU's at the operational levels specifically to take ownership of fraud
prevention and detection
Fraud resulting from the failure by management & employees to apply,
enforce and comply with operating standards as well as security and
prevention standards at their respective workplaces
Failure by BU's to adequately address non-compliance to policies and
proceduresmonitor due to the lack of analysing key causes
7.5 6.00 Management & employees to apply, enforce and comply with operating standards as
well as security and prevention standards at their respective workplaces in order to
prevent incidents of crime and dishonesty
Increased consequence management for failure to apply, enforce and comply with
operating procedures
BU's to establish adequate processes to monitor and analyse fraud related incidents in
order to ensure that mitigation actions are implemented
4 Governance: S&I Fraud Prevention Inadequate and ineffective fraud prevention and awareness initiatives by S&I 3.8 3.00 In support of BU's to prevent fraud, S&I is to ensure that it deploys effective fraud
prevention and awareness initiatives across BU levels
Security audits to include farud risk assessments
2 Governance: SAPS Reporting Failure to report fraud related incidents to the SAPS for external investigation
and thereby developing a tolerance for crime within SAPO.
3.8 2.25 BU's in coordination with the S&I to report fraud related incidents more vigilantly to the
SAPS for external investigation.
3 Governance: S&I Incident Analysis Inadequate analysis of fraud related incidents in order to determine causes,
non-compliance to policies and procedures as well as determining modus
operandi
3.8 2.25 S&I to improve on existing processes during investigations that are directed at determing
causes, non-compliance to policies and procedures as well as determining modus
operandi and to share such information with BU's
5 Governance: BU Incident Reporting Failure by management and employees to ensure that all fraud related
incidents are in a timely manner reported to Security and Investigation
Services for investigation. Lack of reporting will influence effective analysis of
fraud incidents
3.8 1.50 Management and employees need to ensure that all fraud related incidents are in a
timely manner reported to Security and Investigation Services for investigation
6 Governance: S&I Investigation Reports Final Investigation Reports submitted to management, are not of an
acceptable quality and do not adequately contain the investigation findings as
well as realistic recommendations in order for management to deploy
preventative actions.
2.5 1.00 Final Investigation Reports by S&I are to be submitted to management timely, and are to
be at an acceptable quality and should contain the investigation findings as well as
realistic recommendations in order for management to deploy preventative actions.
7 Governance: S&I Incident Registration Failure by the Security and Investigation Services to ensure that all fraud
related incidents reported for investigation, are individually registered on the
RUBI system and to inform the reporter of the RUBI Ref No as well as the
particulars of the investigation officer.
2.5 0.50 Security and Investigation Services is responsible to ensure that all fraud related
incidents reported for investigation, are individually registered on the RUBI system and to
inform the reporter of the RUBI Ref No as well as the particulars of the investigation
officer.
Legend - Inherent and residual Risk
Level Description Factor
High Disaster with potential to lead to collapse of business and is fundamental to
the achievement of objects.
>5 <=10
Medium Critical event which can be endured but which may have a prolonged negative
impact and extensive consequences. Major events which can be managed
but requires additional resources and management effort.
>2<=5
Low Event which can be managed under normal operating conditions. >=1<=2
2015/2016 Fraud Governance Assessment (As at 20 April 2015)
Page 85
17. E – Risk Register
The Risk Register is included in this section and must be referenced to the legend below.
The Risk Register follows.
No Strategic Goals No Strategic Objectives
1.1 Deliver sustainable developmental obligations funded from reserved market
1.2 Create a commercially viable business from the unreserved markets
1.3 Achieve operational efficiency and effectiveness
1.4 Achieve Leadership stability that ensures continuity and accountability
1.5 Achieve labour stability and improve labour relations,
1.6 Achieve financial sustainability
2 Create a customer centric organisation to restore customer
confidence
2.1 Improve the customer experience to achieve customer loyalty
3 Position SAPO as a key service partner that delivers government
services
3.1 Grow to levels of 50 - 55% of SAPO revenue per annum
4.1 Facilitate the corporatization of Postbank
4.2 Increase access of financial services to the unbanked
5.1 Ethical Leadership
5.2 Sustainability targets
5.3 Legal compliance
5.4 Effective risk and IT governance
5.5 Effective stakeholder management
Implement the Strategic Turnaround Plan to achieve a sustainable
organisation
1
Ensure good corporate citizenship and corporate governance
5
Corporatisation of Postbank and increase access to financial
services,
4
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18. F – Internal Audit Strategy
Internal Audit Statement of Intent:
To provide a professional, independent, objective assurance and consulting service designed to add value
and contribute to the improvement of the SAPO operations.
Functions:
? Development of a risk based, three year rolling audit plan for the entire SAPO Group
? Provision of assurance to all key stakeholders in respect of internal control, risk management and
corporate governance
? Carrying out of appropriate consultancy service and ad hoc investigations at the request of key
stakeholders
? Provision of written reports on the results of the assurance audit work and other services to the
SAPO Executive management and the Board Audit Committee
? Liaison with external audit and other key assurance providers with regard to ensuring an overall
effective, combined audit plan to stakeholders
? Training and development of internal audit staff
Key Strategic Initiatives:
Initiatives 2015/2016 2016/2017 2017/18
1. Maintaining a formal
quality assurance
programme for
Internal Audit
Internal QA
programme
Plan for an External
Independent QA
assessment ito of the
IIA Standards
Continue with internal,
annual peer QA
assessment
programme
2. Maintain an
Internal Technical
Committee within
Internal Audit to
ensure ongoing
assessment of new
and improvement
audit methodologies,
technologies and
review of new
standards from the IIA
and appropriate
application to the
discipline
Internal QA
programme
Continuous review of
audit methodology and
compliance
Ongoing technical
assessment
programme
Ongoing technical
assessment
programme
3. Re-establish the
Information
Technology audit
team
Re Assess the IT audit
strategy based on the
new SAPO business
model and its impact
on the revised IT
strategy of the Group
Develop the
appropriate IT audit
plan with concomitant
IT audit skills – in
conjunction with the
External Auditors
Ongoing
4. Re Assess the overall
audit strategy and
Re assess current
skills and
Maintain and evolve
quality internal audit
Maintain and evolve
quality internal audit
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Initiatives 2015/2016 2016/2017 2017/18
assurance focus
within a new SAPO
business model
competencies and re
alignment of audit
structure and team
focus areas, wrt to risk
management,
governance and
internal control
assurance to all
stakeholders as
relevant to the new
SAPO
assurance to all
stakeholders as
relevant to the new
SAPO
Capital investment programme – NONE
Key performance Indicators:
Indicator 2015/2016 2016/2017 2017/18
Maintain the risk based
effectiveness and
assurance focus of the 3
year rolling audit coverage
plan
Ongoing ongoing Ongoing
Provision of independent,
relevant quality assurance
with regard to internal
control, risk management
and corporate governance
90% achievement of
the BAC approved
plan
Achieve 80% in the
Audit Committee
Satisfaction Survey
90% achievement of
the BAC approved
plan
Achieve 80% in the
Audit Committee
Satisfaction Survey
90% achievement of
the BAC approved plan
Achieve 80% in the
Audit Committee
Satisfaction Survey
Ensure that all planned
audit projects are
completed and reported to
management within an
established benchmark
target of productivity time
planned
90% achievement of
targets as determined
within the Approved
detailed audit plan
90% achievement of
targets as determined
within the Approved
detailed audit plan
90% achievement of
targets as determined
within the Approved
detailed audit plan
Ensure that Internal Audit
appropriately complies
with the SAPO audit
methodology and the
standards of the IIA - this
will be achieved through
the establishment of an
effective QA process
within audit:
(1) annually - satisfactory
results of an internal peer
review
(2) satisfaction levels of
external audit reliance
(3) generally compliant
assessment with 4 yearly
independent review
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
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Indicator 2015/2016 2016/2017 2017/18
Maintain effective
productivity levels so that
the approved risk based
audit plan is
comprehensively
completed in a timely
manner, to ensure
effective assurance is
provided to all
stakeholders
Productivity
Target: 80%
Non Productive time:
20%
Productivity
Target: 80%
Non Productive time:
20%
Productivity
Target: 80%
Non Productive time:
20%
Effectively manage
employment equity targets
of the SAPO within the
audit discipline
Aim to achieve or
better the established
SAPO targets within
IA discipline
Aim to achieve or
better the established
SAPO targets within
IA discipline
Sustain SAPO targets
within IA discipline
(1) Develop a skills matrix
which can be used to
assess any skills and
competency gaps
within Internal Audit
(2) Ensure PD Training
programme are
strategically
established and
qualitatively beneficial
to improving overall
standards in audit
(3) Effective and timeous
management of the
PMS process within
IA dept.
(4) Establish and ensure
effective succession
strategies for the
discipline
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
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19. G – Materiality Framework
Materiality and Significance
Treasury Regulation No. 28.3.1 of the PFMA requires a public entity to develop and agree a significance
framework with the relevant entity’s Executive authority. The PFMA prescribes that levels of materiality
(section 55) and significance (section 54) be determined for the purposes of interpretation and compliance.
Practice Notes are issued by National Treasury from time to time to further provide guiding principles on
determining qualitative and quantitative parameters for significance:
? Material disclosure as per section 55 of the PFMA: Disclosure is prescribed in terms of:
? Losses due criminal conduct;
? Irregular expenditure; and
? Fruitless and wasteful expenditure.
Please Note: The above are dependent on the expense categories involved, e.g. if the loss or irregular
expenditure relating to salaries constitutes at least 1% of staff expenses, it will be disclosed in the Annual
Report. However, the disclosure requirements with regard to fruitless and wasteful expenditure is not value/
amount dependent, i.e. any amount qualifies for disclosure.
Transactions are deemed to be “significant” where the rand value exceeds any of the following:
? 1% - 2% of the value of total assets;
? 0.5% - 1% of total revenue; and
? 2% - 5% profit after tax.
The framework of acceptable levels of materiality and significance, applied by the SA Post Office Board of
directors during the 2013/14, for the purpose of the interpretation of and compliance with the Public PFMA is
the following:
? Qualifying transactions are considered to be of an operational nature where they are concluded as part
of the normal business of the South African Post Office, and are concluded within the framework of the
South African Post Office Act, its mandate and delegations of authority, as well as the agreements with
the Shareholder contained in the Shareholder’s Compact and Corporate Plan; and Qualifying
transactions are considered to be of a strategic nature where they are not part of the normal business of
the South African Post Office, are concluded outside the framework detailed above or when they link to
national priorities.
The SA Post Office Group Materiality and Significance Framework for 2013 – 2014 was approved by the SA
Post Office Board of directors as follows:
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? Material transactions and capital expenditure from R50 million and above to be submitted to the Minister
for noting;
? Material transactions and capital expenditure above R100 million to be submitted to the Minister for
approval;
? Material transactions and capital expenditure above R20 million to be approved by the SA Post Office
Board of directors;
? The CEO or his/her appointed designate delegated to approve all transactions across the Group from
R50 million and below;
? The CFG Board delegated to approve material transactions and capital projects within CFG up to R12,5
million and transactions above R12,5 million to be submitted to the SA Post Office Board for approval as
the shareholder; and
? The DOCEX Board delegated to approve material transactions and capital projects within DOCEX up to
R5 million and all transactions above R5 million to be submitted to the SA Post Office Board for approval
as the shareholder.
Should any changes be required in respect of the current Group delegation of authority the Board will make
the relevant submissions to the Minister in this regard.
Materiality Framework 2015/16
Type of transaction
Materiality
Framework
Approved
financial
thresholds for
for 2014/15
Underlying
Principles
Material for Section
55 of the PFMA :
Disclosure in the
annual report,
? Losses due to
criminal conduct;
? The following
should be
disclosed
irrespective of the
amounts involved;
? Irregular
expenditure; and
? Fruitless and
wasteful
expenditure.
Quantitative
? Capital expenditure:
10% of the capital
expenditure budget
line item;
? Other expenditure:
10% of the related
operating expenditure
budget line item,
except for the
following key cost
drivers:
o 1% of staff
expenses; and
o 5% of transport
costs.
Depends on the
related
expenditure
budget line item.
? Section 55: Evaluation of
each loss due to criminal
conduct, in the context of
the expense category to
which it relates to
determine whether it
qualifies for disclosure in
the annual report as
required;
? The value of any
identified fruitless or
wasteful expenditure will
also be reported; and
? In line with good
business practice, as
well as the requirements
of the Act, the South
African Post Office is
committed to the
prevention, detection of
and taking appropriate
action on all irregular
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Type of transaction
Materiality
Framework
Approved
financial
thresholds for
for 2014/15
Underlying
Principles
expenditure, fruitless
and wasteful
expenditure, losses
resulting from criminal
conduct and expenditure
not complying with the
operational policies of
the South African Post
Office. To this end the
South African Post
Office’s systems and
processes are designed
and continually reviewed
to ensure the prevention
and detection of all such
expenditure, irrespective
the size thereof.
Significant for Section
54 of the PFMA:
Notice to the
shareholder and
approval by the
Minister of Finance of
the following
“qualifying
transactions” i.e.:
? Establishment or
participation in
the establishment
of a company;
? Participation in a
significant
partnership, trust,
unincorporated
joint venture or
similar
arrangement;
? Acquisition or
disposal of a
significant
shareholding in a
company;
? Acquisition or
disposal of a
significant asset;
? Commencement
or cessation of a
significant
business activity;
and
Quantitative:
Qualifying transactions of
an operational nature:
? 2.5% of total asset
category;
? Qualifying
transactions of a
strategic nature;
? 5% of asset category;
? Qualitative:
A qualifying
transaction may also
be considered
significant based on
considerations other
than financial when,
in the opinion of the
Board, it is
considered to be
significant for the
application of section
54;
? The decision on
which non-financial
issues may be
considered at any
time requires careful
judgement at a
strategic level, and
should therefore rest
with the Board as
? Maximum
R100 million
however all
expenditure
above R50
million
approved by
the Board
must be
submitted to
the Minister
for noting.
? The PFMA is not
intended to affect the
autonomy of the
organisation, but its
stated objectives are to
ensure transparency,
accountability and sound
management of revenue,
expenditure, assets and
liabilities of the
institutions to which the
Act applies. Therefore,
the legislature could not
have intended for the
public entities to report
and seek approval on
matters of a daily basis;
? The business of the
South African Post
Office is conducted
within the framework of
the mandate, objects
and powers contained in
the South African Post
Office Act, as well as the
business and financial
direction set out in the
corporate plan;
? The South African Post
Office also has defined
accountability and
approval structures from
the Board, as the
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Type of transaction
Materiality
Framework
Approved
financial
thresholds for
for 2014/15
Underlying
Principles
? A significant
change in the
nature or extent
of its interest in a
significant
partnership, trust,
unincorporated
joint venture or
similar
arrangement.
representative body
of the Shareholder.
As an example, the
Board may consider a
qualifying transaction
as significant when it
could impact
significantly on a
decision or action by
the Minister such as a
large retrenchment of
less than R100
million.
shareholder
representative, to the
Group CEO and
management;
? The responsibility for the
day-to-day management
of the South African Post
Office vests in line
management through a
clearly defined
organisational structure
and through formally
delegated authorities.
Delegation of Authority
The SA Post Office Board as the accounting authority, has unfettered powers to direct and control the
business of the company and may delegate the day to day management to the executive management, but
at all times retain full and effective control over the direction and performance.
Although the Board’s ultimate accountability is to lead and manage the Group, some of the responsibilities
are delegated to executive management. In this regard, to manage the business affairs of the South African
Post Office Group, the delegated responsibilities are managed through established governance structures at
Board and Executive Committee level. The Board has delegated certain of its powers to management but
has retained some powers to itself to control the management and strategic direction of the SA Post Office.
The Board may, in instances of crises within the company, revoke any powers granted to management in
order to stabilise the organisation. The Board may also revoke any powers conferred to any official in line
with the role of the Board as the Accounting Authority.
The SA Post Office Board has developed a clear definition of the levels of materiality and significance in
order to determine the scope of delegation of authority and to ensure that the Board reserves specific
powers and authority to itself. The delegated authority from the Board to its subsidiary Boards and to
management is in writing and is reviewed and regulated on a regular basis.
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20. H - Communication Strategy
Objective
The objective of this communication plan is to provide a holistic communications support of the Corporate
Plan and build the reputation of the SA Post Office reputation in the market. The holistic management of the
SA Post Office’s reputation, both internally and externally, is essential in helping the organisation reach the
targets set out in this document. The synergy of the internal and external communications is necessary for
optimal positioning of the SA Post Office as articulated in the Strategic Plan. This will assist in achieving
strong sentiments amongst internal and external stakeholders, motivated and informed employees, a strong
media share of voice, positive image and showcasing the intellectual ‘horsepower’ of the organisation are
key ingredients in building a leading edge company.
Reputation management is not an isolated exercise driven through marketing communications efforts; it is
something that requires the entire organisation to appreciate that our individual behaviours have a material
impact on the group’s reputation. Reputation management is not the sole preserve of communication but
rather belongs to everyone. Through a clear, focused and synergised communications strategy, the SA Post
Office will look to grow and enhance its reputation both internally and externally. Therefore, reputation
management is an exercise of externalising positive organisational developments.
External communications
The purpose of external communication will be to leverage existing platforms to position the SA Post Office
brand as elicited in the Corporate Plan pillars. In this regard, attention will be placed on public influence
media platforms to position the SA Post Office brand as top of mind entity in the eyes of the public. In this
regard, the following external communications areas, which continue from the previous plan, will be
embarked upon:
Segmentation and identifying of targeted media: strong emphasis will be placed on identifying relevant media
who have the ability to shape reputation with audiences nationally, locally and to an extent globally. This will
be cross-referenced against where marketing spend is directed to (paid and unpaid media efforts will be
aimed at the same media platforms as far as possible).
Brand positioning and company reputation management efforts: understanding the mechanics of managing
the SA Post Office’s reputation and leveraging this.
Continuous and systematic communication: based on national and organisational milestones, newsworthy
proactive and reputation-enhancing messages will be developed.
By way of the media strategy, key objectives (in line with the overall company objective) will be helping the
SA Post Office be recognised as a world-class innovative and diversified service provider. In realising this
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objective, there will largely be three primary goals: protecting the reputation of the SA Post Office,
building the reputation of the SA Post Office and strengthening media relations.
Media relations goals linked to KPIs:
GOAL STRATEGY
Protect the
reputation of the
SA Post Office
- Pre-empt issues
- Create and maintain standard operating procedures for communications (crisis)
Build the
reputation of the
SA Post Office
- Leverage media engagement for the key audiences
- Maintain strong visibility in the industry
- Showcase SA Post Office’s expertise (thought leadership)
Strengthen
media relations
- Media engagement optimized based on a segmented approach
-Spokespeople to be well managed and trained
- Be the first port-of-call for the media
- Synergy with advertising
Internal communications
The purpose of internal communications is to lobby internal stakeholders on the company vision and
mission, including soliciting their buy-in on tactical and strategic thrust of key corporate plans. Therefore, the
role of internal communications is to support the organisational objectives of the SA Post Office inwardly,
while also this is synergises with media communications to reflect a holistic picture of an organisation that is
optimal internal as it would be seen externally by public stakeholders (such as customers). Therefore, all
internal communications, as is the case with external communications efforts, are aimed at driving the efforts
of achieving the company vision and mission as outlined in the Corporate Plan pillars. In this regard, the
internal communications efforts will be geared at ‘taking the company’s internal stakeholders (employees,
unions, etc.) along the journey’ of the company as outlined in the Corporate Plan. Additionally, the aim of
internal communications will be retain critical talent, employee goodwill and high moral by positioning the SA
Post Office as ‘the company to work for’. In addition, alongside other internal departments, the internal
communications function will seek to play a greater role in training and development in so far as performance
issues are concerned, and to strategically position business units and the strategic corporate plan amongst
internal stakeholders.
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Based on previous research and the last employee climate survey, 48.5% of employees are not familiar with
a high performance culture whilst 32% of employees are not familiar with customer intimacy and operational
excellence strategic themes. Key observations about the gaps in internal communication include:
Literacy levels – limited at the lower levels of SA Post Office.
Geographical Spread – the SA Post Office locations/offices vary in respect of geographical locations, as
well as infrastructure within each branch.
Numbers – approximately 17,000 employees poses a difficult logistical challenge to meet.
Casual labour – problems around casual labour resulted in unprotected strikes previously. Negative
sentiments often permeate this section of the employee base.
Computer literacy and penetration – a large proportion of the SA Post Office population do not have PCs,
which in effect, translates to a substantial cross-section of the employee base being excluded from electronic
communication.
Communications platforms:
Staff newsletters
Electronic communications platforms (Takenote and Touchingbase)
Notice boards
Meetings
Teleconferences
Video conferences
Podcasts, and
Executive regional roadshows (networking sessions, town-hall meetings, social events and regular
leadership engagement sessions).
It is recommended that the messaging of the Corporate Plan be simplified to reach the diversity of all
employees of the SA Post Office.
Internal communication goals linked to KPIs:
GOAL STRATEGY
Inform and motivate the
employee base
Create a message calendar
Create pre-determined message themes which are linked to external
messages
Channel management - create and maintain a variety of informative,
engaging communication platforms
Support training and development
Content management
Strategically position
business imperatives staff
Keep the organisation abreast with latest corporate plan
developments
Ensure that BU messages align with overall company objectives
Ensure that all business imperatives have an equitable and relevant
share of voice internally
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GOAL STRATEGY
Build and protect the
reputation of the SA Post
Office with internal
audiences.
Manage content dissemination to ensure that content is relevant
Fast turnaround times to counter reputational risks and crises
Position the key
leadership in the SA Post
Office
Strategically position the Board, GCEO and Exco members to
employees
Ensure two-way engaging communications
Key message framework
As indicated earlier, it is vital that internal and external messages synergise to minimise confusion and
maximise on impact when targeting stakeholders proactively. All proactive internal and external should link to
the following, simple core themes for the business:
Business sustainability
? Business sustainability through systems and processes
? the SA Post Office has a core team to wrong-foot competitors and deliver solutions
? A systematic approach being key to business delivery
? If change has to be sustainable, it has to be systematic
? The SA Post Office is facing challenges which are not dissimilar to those faced by other operators;
but we don’t take these for granted
? We need to take advantage of technological changes to provide efficient solutions to our customers
? Execution and focus being key tenets for improved delivery
? Nationwide network is a launching pad for competitive advantage
? Postbank’s value is intrinsically linked to the SA Post Office’s unrivalled network across provinces,
villages and towns
? The rolling-out of the alphanumerical postal codes is a game-changer for the SA Post Office, as it
enables the delivery of mail/parcels to the recipient, affords our customers an economic opportunity,
etc.
? Investment in our people/employees is fundamentally important
? Meticulous distilling of the role of the shareholder is vital – we should add tangible value to the
shareholder
Corporate governance
? Accountability regarding public funds
? Transparency key in how business in conducted at the SA Post Office
Taking the SA Post Office into the future
? The need to view technological enhancements as something to embrace (versus viewing this as a
competitor)
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? The needs of all our customers (including commercial and private customers) will be central in the
development of future product and service offerings
? The SA Post Office will be involved in the roll-out of set-top boxes for instance
? Given the SA Post Office’s unrivalled footprint in South Africa, the organisation will leverage this to
offer customers a variety of postal, communication and transactional services
? Money transfer, financial services, delivery, logistics, STB roll outs will offer a full bouquet of services
to customers that go beyond the traditional mailing services
? The intention is to ultimately create an organisation that is agile, adaptable and reflective of its
significance to the SA economy
? Delivery of our customer promise will be central to the SA Post Office going forward
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21. I - Environmental Strategy
Overview
The South African Post Office recognize that to move beyond greening quick, an immediate paradigm shift
must happen and the focus move from pollution control to pollution prevention, clean technologies, service
stewardship in support of the environmental sustainability vision.
SAW is chosen to represent the impacts we have on the natural environment and represents:
? S (Soil): Buildings, road networks, biodiversity and energy
? A (Air): Fleet and buildings Greenhouse Gas (GHG) emissions
? W (Water): consumption and monitoring
Environmental measurements
The environmental monitoring and measurement tools are key in achieving the environmental objectives, the
indicators below are a tool for measuring performance and a guide for continuous improvement.
Indicators 2015/16 2016/17 2017/18
Energy
Management
Reduce electricity
consumption by 3% from 34,
847, 796.42 kWh to 33, 802,
362.53 kWh
A
Reduce electricity
consumption by 3% over
prior year
Reduce electricity
consumption by 3% over prior
year
Retrofit buildings with energy
efficient lights
Retrofit buildings with
energy efficient lights
Retrofit buildings with energy
efficient lights
Install sensor in buildings Install sensor in buildings Install sensor in buildings
Install 30% of electricity smart
metering system in buildings.
Install 60% of electricity
smart metering system in
buildings.
Install 80% of electricity smart
metering system in buildings
Install 1% of renewable energy
technology on SAPO buildings
Install 2% of renewable
energy technology on
SAPO buildings
Install 2.5% of renewable
energy technology on SAPO
buildings
Carbon
management
Reduce 2.5% of total
emissions for scope 1 from
12,569.69 to 12,255.45 tCO2e
and for Scope 2 from 30,
909.85 to 30, 137.10 tCO2e
B
Reduce 2.5% of total
emissions from prior year
Reduce 2.5% of total
emissions from prior year
Offset 10% of total emissions
Offset 15% of total
emissions
Offset 20% of total emissions
Introduce 0.5% of alternative
energy
Introduce 0.5% of
alternative energy
Introduce 1% of alternative
energy
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Water
Consumption
Reduce water consumption by
3% from 202, 585.06 Kl to
196,507.57 Kl
C
Reduce water consumption
by 3% over prior year
Reduce water consumption by
3% over prior year
Waste
management
Reduce paper consumption by
2.5% from 146.08 tons to
142.43 tons
D
Reduce paper consumption
by 2.5% over prior year
Reduce paper consumption by
2.5% over prior year
Recycle 95% of used paper
E
Recycle 95% of used paper Recycle 95% of used paper
Recycle all waste electronics
Recycle all waste
electronics
Recycle all waste electronics
Recycle all waste cartridge
Recycle all waste
cartridge
Recycle all waste cartridge
Pollution
Prevention
Ensure that 60% of all material
procured by SAPO is
biodegradable
Ensure that 80% of all
material procured by SAPO
is biodegradable
Ensure that 100% of all
material procured by SAPO is
biodegradable
A
Electricity reduction is dependent on the overall number of buildings that are billed. This number may
increase due to fact that SAPO does not currently collect 100% of the bills every month.
B
Scope 2 carbon emissions is dependent on the number of buildings which are reported on, this number
changes with increase in number of buildings reported on.
C
Water reduction reporting is also dependant on the number of buildings that are billed. Currently SAPO
does not collect 100% of data on the buildings that consume water.
D
Paper consumption reporting is dependent on statistics of all papers that is purchased and consumed.
Currently, there is paper purchased that is not accounted for. This number will increase with an improvement
in the data collection systems.
E
There is not target set for the paper recycled following that this aspect is not condoning paper consumption,
rather aims to reduce impact of paper to the landfill by recycling all unwanted scrap and paper, respectively.
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22. J - Abbreviations
Abbreviation Explanation
AARTO Administrative Adjudication of Road Traffic Offences
ATMs Automatic teller machines
BBBEE Broad Based Black Economic Empowerment
BOD Board of Directors
BU Business Unit
CAT1B Category 1B
CFG The Courier Freight Group
CEO Chief Executive Officer
CFO Chief Financial Officer
CIO Chief Information Officer
COO Chief Operations Officer
CFST Cross functional sourcing team
COBIT Control Objectives for Information and Related Technology
CMMI Capability Maturity Model Institute
CPI Consumer Price Index
CSI Corporate Social Investment
DOA Delegation of Authority
DR Disaster Recovery
DTPS Department of Telecommunications and Postal Services
DTT Digital terrestrial television
ED Enterprise Development
ERP Enterprise Resource Planning system
EU European Union
EXCO Executive Committee
FSB Financial Services Board
FAIS Financial Advisory and Intermediary Services
GNI Gross National Income
HCM Human Capital Management
HR Human Resources
ICASA Independent Communications Association of South Africa
ICT Information and Communications Technology
IT Information Technology
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ITIL Information Technology Infrastructure Library
ITU International Telecommunication Union
MOI Memorandum of Incorporation
MoU Memorandum of Understanding
MQ Message Queue
MTEF Medium Term Expenditure Framework
MTO Money Transit Office
OHS Occupational Health and Safety
OHSA Occupational Health and Safety Act
PaaS Platform as a Service
PFMA Public Finance Management Act
PPP Purchasing power parity
RPA Retail Postal Agency
SaaS Software as a service
SADC Southern African Development Community
SAP Systems, Applications & Products
SAPO South African Post Office
SCM Supply Chain Management
SDC Supply and Distribution Centre
SOE State Owned Entity
SOC State Owned Company
SMME’s Small, medium and micro enterprises
STP Strategic Turnaround Plan
SWOT Strengths, weaknesses, Opportunities, Threats
TBVC Transkei, Bophuthatswana, Venda, Ciskei
TOGAF The Open Group Architecture Framework
USO Universal Service Obligation
US
United States
UBS Universal Banking Solution
WRE Webriposte
doc_335167878.pdf
It is hereby certified that this Strategic Corporate Plan Was developed by the management of the South African Post Office (SA Post Office) under the guidance of the Acting Group Chief Executive Officer and the Administrator.
South African Post Office
Strategic Corporate Plan
2015/16 – 2017/18
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Table of Contents
PART I: FOREWORD AND OVERVIEW 2
1. FOREWORD BY THE ADMINISTRATOR 3
2. OVERVIEW BY THE ACTING GROUP CHIEF EXECUTIVE
OFFICER 4
3. EXECUTIVE SUMMARY 6
PART II: STRATEGIC OVERVIEW 7
4. STRATEGIC DIRECTION 8
5. SHAREHOLDER MANDATES AND NDP 10
6. SITUATIONAL ANALYSIS 17
7. STRATEGIC TURNAROUND PLAN 24
8. STRATEGIC ALIGNMENT 28
9. FINANCIAL PROJECTIONS 43
10. BORROWINGS AND FUNDING PLAN 52
11. CORPORATE GOVERNANCE 53
PART III: STRATEGIC OUTCOMES 59
12. PERFORMANCE MEASURES 60
PART IV: APPENDICES 71
13. A – STRATEGIC TURNAROUND PLAN 72
14. B – LIST OF PRODUCTS AND SERVICES 73
15. C – LIST OF RELATED LEGISLATION 75
16. D – FRAUD PREVENTION STRATEGY 77
17. E – RISK REGISTER 85
18. F – INTERNAL AUDIT STRATEGY 86
19. G – MATERIALITY FRAMEWORK 89
20. H - COMMUNICATION STRATEGY 93
21. I - ENVIRONMENTAL STRATEGY 98
22. J - ABBREVIATIONS 100
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Strategic Corporate Plan 2016 – 2018
OFFICIAL SIGN OFF
It is hereby certified that this Strategic Corporate Plan:
? Was developed by the management of the South African Post Office (SA Post Office) under the
guidance of the Acting Group Chief Executive Officer and the Administrator;
? Takes into account all the relevant policies, legislation and other mandates for which the SA Post Office
is responsible;
? Reflects the strategic objectives and goals which SA Post Office endeavours to realize over the next
three year period from 2016 to 2018.
Ms Manteng Maleka
Acting Chief Financial Officer Signature:
29 April 2015
Mr Mlu Mathonsi
Acting Group Chief Executive Officer Signature:
29 April 2015
Approved by:
Dr Simo Lushaba
Administrator Signature:
29 April 2015
Page 2
PART I:
Foreword and Overview
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1. Foreword by the Administrator
The South African Post Office currently finds itself at an unprecedented cross-road where for the first time in
its history it has been placed under administration. Financial and other operating challenges facing the
organisation are not unique to the SA Post Office though. What will differentiate the company from others in
similar situations is the manner in which it responds to these challenge in order to come out stronger, agile
and on a path of sustainable recovery for the future.
Global and local trends impacting the postal industry dictate that the SA Post Office responds accordingly by
adapting to the changing landscape. As part of the turnaround plan devised to move the organisation from
being under administration to healthy financial and operational positions achieved sustainable growth, the
SA Post Office is working on implementing a new business model. This model is aligned to the vision and
goals of government under the National Development Plan. The South African government adopted the
National Development Plan which aims to eliminate poverty and reduce inequality as the guiding roadmap
for our country’s future development path. All efforts of the SA Post Office’s new business model are directed
at improving our service delivery capability.
The 2015/16 – 2017/18 Strategic Corporate Plan takes on greater focus now, not only as our roadmap for
achieving our strategic objectives and delivering on our mandate, but as the defining plan which articulates
the new business model and positions the organisation for sustainable operations.
As with many developing countries, South Africa is faced with a massive ‘triple’ challenge of inequality,
poverty and unemployment. As a state-owned entity, we have a responsibility to assist government to
provide adequate and reliable access to services for our people. The SA Post Office must provide affordable
access to postal and financial services to all people in the country. This however, has to be balanced with the
need for the organisation to be profitable and self- sustaining.
Our customers require us to be competitive, innovative and agile. The new business model will help to
reposition the SA Post Office to meet its customer demands in a rapidly changing and technologically-driven
market. The Shareholder is mindful of the challenges facing the organisation and remains supportive of the
efforts to turn around the fortunes of the organisation.
This Strategic Corporate Plan will guide us as we strive towards the realisation of our goal of creating a
better life for all our people. We commit ourselves to working with all our stakeholders to ensure that we
achieve the key objectives outlined in this Plan.
Dr Simo Lushaba CD(SA)
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2. Overview by the Acting Group Chief
Executive Officer
The SA Post Office’s Strategic Corporate Plan points the way towards the achievement of the goals and
objectives that we have set ourselves as an organisation. This year’s Plan is a reflection of the
unprecedented situation the organisation finds itself in, challenged by a lack of working capital, without
funding for capital projects and having to deal with low morale amongst employees, to name but a few, all of
which resulted in the organisation being placed under Administration.
While the natural desire is to continue with business operations “as usual” this challenging time calls for
some radical intervention on both the part of executive management, employees and all other stakeholders.
Executive Management especially appreciates the intervention of the shareholder through the Administrator
to deploy a technical team to provide assistance in turning the organisation around and onto a sustainable
trajectory. It is “business un-usual” indeed.
All recovery initiatives of the organisation continue to be aligned to our mandate, license agreement,
priorities of Government, and the National Development Plan. The financial position of the SA Post Office
has been largely affected by declines in our mail volumes compounded by an inflexible operating model that
has failed to adapt to the substitution effect of digital trends.
Our license obligations require the SA Post Office to provide affordable postal and financial solutions to the
nation, as well as rolling out additional addresses to communities in under-serviced and rural communities.
Remaining financially viable and true to our mandate requires us to radically transform the organisation to
find sustainable alternative revenue streams. This focus will enable the organisation to become less
dependent on the mail business.
The 2015/16 – 2017/18 Strategic Corporate Plan provides us with a good opportunity to chart a new path
underpinned by a new operating model. This journey will see us using a new business and operating model
to create a healthy, financially stable, and highly efficient and customer centric organisation that is a key
contributor to the South African economy. Over the next three years, our main focus will be on ensuring that
the new business model is successfully deployed across the organisation, that the business is self-
sustaining, and that we improve our financial position (i.e. increasing our revenue base and aggressively
managing our costs) and that we improve overall efficiencies throughout our new operating business
functions.
Our focus in the new financial year includes the implementation of a new organisational structure and the SA
Post Office Strategic Turnaround Plan. The new structure is intended to introduce a new commercial and
business delivery focus within the Group, in addition to entrenching a new culture of responsibility and
accountability. The Strategic Turnaround Plan will focus on different phases that will see the organisation
addressing its fundamental building blocks (including addressing its capacity and capability shortcomings).
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The phases will include focusing on revenue improvement, cost containment initiatives, implementing
initiatives that will drive diversification, and innovation to enable the business to drive growth. Key to our
plans will be the following:
? redefining the way that we serve our customers,
? the roll-out of the Government’s Digital Terrestrial Television (DTT) project,
? a revised digital strategy that is responsive to current local and global trends,
? a rationalised mail processing and retail delivery function,
? rationalisation of transport capability,
? optimisation of our property portfolio to unlock value,
? corporatisation of Postbank which will see more people having access to financial services.
In delivering this Strategic Corporate Plan, it is important to acknowledge that we will need the full
commitment and support of all our stakeholders for delivering on the strategic intent laid out in this
document.
We remain committed to good governance. With this in mind, we will renew our focus to improve our
levels of transparency and strengthen our internal controls in order to improve accountability and
decision making. Underpinning all this, is our goal of delivering value to our primary shareholder, the
South African Government and delivering vital services to all South Africans.
We will deliver whatever it takes.
Mr Mlu Mathonsi
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3. Executive Summary
The South African Post Office SOC Ltd (SA Post Office) is mandated through its license agreement and
Universal Service Obligation (USO) to provide postal, and communication services to all South Africans at
affordable prices. This mandate charges the regulator, ICASA, with ensuring the provision of universal
services and managing the performance of the SA Post Office through the license agreement. In order to
fulfil on the mandate of the USO, a strategic priority for the SA Post Office includes, rolling out new
addresses and points of presence in rural and under-serviced areas. This requirement is aligned to enabling
the Government’s national development program for 2030.
The postal industry has been going through a major transformation to adjust to structural changes in its core
mail business, for a number of years which has seen declines in revenue and volumes. The SA Post Office
remains a monopoly entity in the reserved mail business, which constitutes the biggest component of its
business. The global trend has seen a steady decline in mail volumes as other forms of communication
pervade the market. In an effort to reduce its dependency on mail and exploit new revenue streams, the SA
Post Office needs to focus on further diversifying its products and services.
The SA Post Office faces several challenges that impact the business’s ability to deliver against its mandate
and license requirements. These include, negative customer perception, uncertain financial sustainability due
to declining revenues, loss of USO subsidy and a large fixed cost base. These challenges present the
organisation with opportunities to exploit new growth alternatives. The 2015/16 – 2017/18 Strategic
Corporate Plan of the SA Post Office is aimed at addressing these business challenges facing the
organisation and mapping out a new path that will see the organisation reposition itself, into a profitable, self-
sustaining, efficient and customer centric organisation.
The SA Post Office Management team has been implementing short term initiatives to address the current
performance barriers and concerns in the Group. This has led to the development of the Strategic
Turnaround Plan (STP) that is aimed at implementing strategic initiatives that will stabilise the business and
steer it in a positive growth direction. This plan, now in its second revision, sets the course for the
organisation going forward. The initiatives include amongst others, the implementation of alpha-numerical
postal codes, the roll-out of the Government’s Digital Terrestrial Television project, expansion of the E-
Business products and channels, optimisation of our property portfolio to optimise value, providing more
South African homes with addresses and the corporatisation of Postbank (which will see more people
having access to financial services).
The successful implementation of the new business model and the Strategic Turnaround Plan are key to the
success of this Strategic Corporate Plan.
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PART II:
Strategic Overview
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4. Strategic Direction
Strategic Intent
The strategic intent is to turn SAPO around in line with the Strategic Turnaround Plan, which establishes a
new business model, such that SAPO becomes customer–centric, with income derived from the reserved
markets being sufficient to meet operating costs for the developmental obligations of SAPO such as the
universal service obligation (USO) whilst ensuring that business activities, including government business, in
the unreserved markets are competitive, profitable and commercially viable to achieve sustainable growth for
SAPO. We will position SAPO as a key service provider that delivers government services to citizens.
Business derived from government will grow to levels of 50 - 55% of SAPO revenue per annum whilst still
growing from the current revenue levels from private and consumer segments of the market.
Vision
A leading provider of postal, logistics and financial services that is responsive to market changes whilst
achieving sustainable growth.
Mission
We facilitate communication and delivery of services by linking government, business and customers with
each other across the world by leveraging our broad reach, employees, technology and innovation.
Values
SA Post Office subscribes to the following values when planning and executing business delivery within the
agreed mandate:
• We are customer centric and will meet customer specific needs through excellent service;
• We contribute positively to our communities and environment;
• We treat each other with respect, dignity, honesty and integrity;
• We strive for a high performance culture and recognise individual contributions;
• We embrace change and diversity in the way we conduct business.
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Strategic Goals and objectives
The following key Strategic goals and objectives were identified for the SAPO Group that will serve as
the foundation for the execution of the strategy:
No Strategic Goals Strategic Objectives
1
Implement the Strategic Turnaround Plan
to achieve a sustainable organisation
Deliver sustainable developmental obligations funded from
the reserved market
Create a commercially viable business from the
unreserved markets
Achieve operational efficiency and effectiveness
Achieve Leadership stability that ensures continuity and
accountability
Achieve labour stability and improve labour relations,
Achieve financial sustainability
2
Create a customer centric organisation to
restore customer confidence
Improve the customer experience to achieve customer
loyalty
3
Position SAPO as a key service partner
that delivers government services
Grow to levels of 50 - 55% of SAPO revenue per annum
4
Corporatisation of Postbank and increase
access to financial services,
Facilitate the corporatization of Postbank
Increase access of financial services to the unbanked
5
Ensure good corporate citizenship and
corporate governance
Ethical Leadership
Sustainability contribution
Legal compliance
Effective risk and governance
Effective stakeholder management
Figure 1: SA Post Office Strategic Goals and Objectives
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5. Shareholder mandates and NDP
Mandate
The SA Post Office is mandated through the Postal Act 44 of 1958 and the Postal Services Act 124 of 1998
to provide postal services to all South Africans. These Acts provide for the regulation of postal services and
the operational functions of the company, including its Universal Service Obligations (USO), as well as the
operation of the Postbank.
The USO mandates the SA Post Office to provide services such as address provision, basic letter and
accessible mail delivery and collection services to all under serviced areas.
The SA Post Office is also a major state entity in terms of Schedule 2 of the Public Finance Management Act
(PFMA) No 1 of 1999 (as amended) and is a State Owned Company (SOC) Limited in terms of the
Companies Act No 71 of 2008 (as amended).
The SA Post Office’s legislative mandate in terms of its licence and Universal Service Obligation (USO);
The mandate of the SA Post Office as a State Owned Entity to ensure alignment of its programmes with the
overall programmes of Government;
The mandate of the Postbank is derived from the Postbank Act 9 of 2010 as amended and Government’s
priorities of financial inclusion of rural and lower income individuals and communities in South Africa.
Licence
The Postal Services Act of 1998 charges the regulator, the Independent Communications Authority of South
Africa (ICASA), to ensure the provision of universal service through the reserved postal services licensee
namely the South African Post Office.
The license to operate as South Africa’s postal services provider was issued to the SA Post Office on behalf
of the regulator in August 2001. The licence is valid for a period of 25 years and reviewed every three (3)
years in terms of targets and performance. The License will be reviewed in 2015/16 with the Regulator.
The Postal Services Act further appoints ICASA to monitor the incumbent against any “anti-competitive”
behaviour. Further, effective from October 2011, the South African Post Office was licensed as an
Authorised Financial Services Provider by the Financial Services Board (FSB) in terms of the Financial
Advisory and Intermediary Services (FAIS) Act 37 of 2002.
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Legislation
The SA Post Office complies with the protocols and legislation governing state owned companies and is
guided by various postal, courier and financial regulations laid down by the regulatory bodies such as ICASA
and the Financial Services Board (FSB).
The Group is required to comply with, inter alia, the following legislation:
• SA Post Office SOC Ltd Act 22 of 2011 (as amended);
• Postbank Act 9 of 2010 (as amended);
• Postal Services Act 124 of 1998 (as amended);
• Public Finance Management Act 1 of 1999 (as amended);
• Companies Act 71 of 2008 (as amended);
• Relevant legislation applicable to the postal sector and to SOCs;
• King III Code on Good Corporate Governance; and
• Electronic Communications and Transactions Act 25 of 2002 (as amended).
A detailed list of other related legislations are included in Appendix C.
The Department of Telecommunications and Postal Services
The Department of Telecommunications and Postal Services is mandated to develop ICT policies that create
conditions for an accelerated and sustained shared growth of the South African economy, and to ensure the
development of robust, reliable, secure and affordable ICT infrastructure. This is to contribute to the
development of an inclusive information society in which information and ICT tools are key drivers of
economic and societal development.
The national development plan considers ICT to be a critical enabler of economic development, mainly
because enhanced communication and information flows improve productivity and efficiency. The
Department of Telecommunications and Postal Services will thus focus on the development of various
aspects of ICT policy, increased broadband coverage, the migration to digital broadcasting, and a new postal
services delivery model over the medium term. These activities all contribute to outcome 6 of Government’s
2014-2019 medium term strategic framework (an efficient, competitive and responsive economic
infrastructure network).
The following programmes are key to the Department achieving its strategic objectives and aligned to the SA
Post Office’s strategy:
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Programme 2: International Affairs and Trade
Programme purpose - Ensure alignment between South Africa’s international activities and agreements in
the field of ICT and South Africa’s foreign policy.
Objectives - Contribute to the harmonisation and coordination of the frequency spectrum with neighbouring
countries through bilateral agreements with neighbouring countries by March 2016. Strengthen national and
regional capacity in the postal sector in the SADC region through international cooperation by:
- collaborating with the International Telecommunications Union and Universal Postal Union to
deliver improved connectivity and financial services in rural and underserviced areas of South Africa
through the postal network by March 2016
– implementing the Universal Postal Union Quality of Service Fund projects to improve sub-regional
postal services by March 2016.
Programme 3: Policy, Research and Capacity Development
Programme purpose - Develop ICT policies and legislation that support the development of an ICT sector
that creates favourable conditions for the accelerated and shared growth of the economy. Develop strategies
that increase the uptake and use of ICTs by the majority of the South African population in order to bridge
the digital divide.
Objectives
• Ensure that broadband connectivity provides secure and affordable access for all citizens to education,
health and other government services, and stimulates socioeconomic development by:
– implementing the digital readiness programme in line with South Africa Connect (the national
broadband policy and strategy)
– compiling a report on legislation and regulations that inhibit the achievement of broadband policy
objectives by March 2016
– developing policy to enable the rapid deployment of electronic communications networks by March
2016
– developing and facilitating the implementation of capacity building programmes focusing on IT
literacy for educators, government officials, health care workers and other provincial governments by
March 2018.
• Implement the cost to communication programme of action aimed at promoting affordable ICT services for
consumers by:
– developing an approved roaming policy by March 2016
– developing an approved local loop unbundling strategy by March 2017
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– developing a policy directive on the reduction of data costs by March 2016.
• Ensure that broadband connectivity stimulates socioeconomic development by implementing the digital
opportunities programme of the broadband policy and strategy of South Africa Connect, through developing
and facilitating the implementation of the digital entrepreneurship programme to enhance ICT adoption and
usage by SMMEs by March 2018.
• Ensure that citizens have access to postal services to achieve economic inclusion by developing and
facilitating the implementation of the national address system policy by March 2018.
Programme 4: ICT Enterprise Development and SOE Oversight
Programme purpose - Oversee and manage government’s shareholding interest in the ICT public entities.
Facilitate growth and development of small, medium and micro enterprises (SMMEs) in the ICT sector.
Objectives
• Ensure optimally functional ICT state owned companies that effectively deliver on their respective
mandates by:
– reviewing the mandates and funding models for state owned companies by March 2016
– developing and implementing oversight models for state owned companies by March 2016
– monitoring state owned companies’ compliance with statutory requirements on an ongoing basis.
• Ensure that South Africa has access to modern, sustainable and competitive banking services by
facilitating the corporatisation of the Postbank through:
– facilitating the licensing of the Postbank by March 2016
– facilitating the appointment of Postbank board members by March 2016
– facilitating the establishment of the Postbank Holding Company by March 2016
– facilitating the incorporation of the Postbank Company by March 2016.
Sub-programmes
• Public Entity Oversight provides oversight on state owned enterprises by managing government’s
shareholder interests in public enterprises. This includes facilitating the enterprises’ corporate plans and
ensuring that planning cycles are aligned with and comply with guidelines.
• Small, Medium and Micro Enterprise Development facilitates the growth and development of ICT SMMEs.
This sub-programme hosts an e-commerce platform and will produce content that covers the agriculture,
tourism, and arts and craft sectors.
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• ICT Support administers and manages the transfers to the .za domain and hosts the 112 emergency call
centre programme.
Programme 5: ICT Infrastructure Support
Programme purpose - Promote investment in robust, reliable, secure and affordable ICT infrastructure that
supports the provision of a multiplicity of applications and services.
Objectives
• Ensure that broadband connectivity provides secure and affordable access for all citizens to education,
health and other government services, and stimulates socioeconomic development by implementing the
digital development and digital future programmes.
• Implement digital development and digital future pillars in line with South Africa Connect (the national
broadband policy and strategy) by: implementing phase 1 of the digital development programme, which is
focused on providing connectivity to 1 296 identified government institutions, by March 2016
– implementing the digital future strategy, which is focused on the implementation of a wholesale
open access network, by March 2018
– finalising the policy directive on spectrum for broadband by March 2016
– providing connectivity to 972 schools in line with phase 1 of digital development, as part of the
Broadband Policy and Strategy of South Africa Connect, by March 2016
– establishing institutional capacity for cyber security through operationalising the cybersecurity hub
by March 2018
– creating an effective national spectrum framework to ensure that citizens reap socioeconomic
benefits from the use of the spectrum through reviewing and updating the national radio frequency
plan, and reviewing the national radio frequency spectrum policy, by March 2017.
Sub-programmes
• Broadband is responsible for developing and facilitating the implementation of the broadband policy,
strategy and implementation plan, and ensuring that goals for broadband are achieved.
• Digital Terrestrial Television is responsible for supporting the conversion from analogue to digital television
transmission technology, with the ultimate goal of releasing valuable frequency spectrum from next
generation mobile broadband and other applications
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The National Development Plan (NDP)
The National Development Plan (NDP) has been accepted as the main guiding policy document of
Government with the primary aim of charting a new path for the country. The NDP’s main aim is to change
the life chances of millions of South Africans and seek to build a country where all citizens have the
capabilities to grasp the ever-broadening opportunities available.
Postal Services, by their very nature, founding legislation and regulatory frameworks, have a fundamental
role to enable development, economic activity, trade and social cohesion. The Post Office’s network is key to
ensuring inclusion of vulnerable and marginalised communities into services such as financial and
government services. SAPO must build its value proposition and commercial ethos around this unique
positioning. SAPO is well positioned to support attainment of specific elements of the National Development
Plan. The diagram below indicates the different SA Post Office initiatives intended to support the NDP:
Figure 2: SA Post Office alignment to NDP Priorities & Objectives
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In the long-term, SAPO is positioned to become the face of South African government services to citizens,
through its proposition as a trusted platform for government delivery and providing access for citizens. Core
to this proposition, is the vast physical delivery infrastructure and branch network touching all corners of
South Africa. The 30% Government business that has been given to SAPO, will enable SAPO to play a
meaningful role in reducing the cost of providing government services to all South Africans.
Specifically, government offerings include:
? Improvement in the efficiency and effectiveness of delivering government services to citizens;
? Position SAPO branches as citizen-service desks for government and leverage Post Office branch
network for service delivery and improvement of citizen access to services;
? Support cost efficient and smarter way of working for government, and
? Become the logistics partner of choice to government.
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6. Situational analysis
SAPO’s strategic planning model
The SA Post Office’s utilises an integrated strategic
management model which is based on figure 2. This
models enables SAPO to develop informed strategic
responses and adjust the strategy, if required, through a
continuous environmental to understand the impact of all
internal and external factors that may influence SAPO’s
ability to maintain its competitive advantage as well its
ability to deliver on its universal service logistics.
A key component of the strategic formulation is to assess
the business and operating model for relevance in the
situation it finds itself in. If there is a need for
organisational adjustments, then SAPO will move, with
speed, to ensure that the organisation is optimised for
efficiency and effectiveness. Figure 3: SAPO Integrated strategic management model
The strategic plan informs the various programs, projects and operational plans that will move the
organisation towards its strategic goals. These plans are under-pinned by critical success factors along with
the applicable key performance indicators ensuring that effective monitoring and evaluations mechanisms
are in place for the strategic journey that SAPO plans to undertake.
Environmental Scan
South Africa’s economic growth path, inflation trajectory, and balance of payments performance since 1994
have moved to structurally more favourable levels. Further evidence of this improvement is found in the
following statistics:
? South Africa is an upper-middle income economy, with a GNI that is among the 25 largest in the
world (measured in PPP terms).
? South Africa has a fairly diversified economy; services account for almost two-thirds of total
economic activity.
However, South Africa’s unemployment rate remains high, limited progress has been made in narrowing
wealth and income gaps, unemployment and poverty levels remain disturbingly high. Economic growth is
barely averaging 2%, while the CPI inflation rate has breached the 6% upper control targeted limit as set by
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the South African Reserve Bank. This unfortunate combination (stagnating growth and rising inflation)
presents a major dilemma to the policy makers.
South Africa, with the most advanced economy in Africa, will continue to play an important role in regional
and world affairs. Alongside fellow members of the Southern African Development Community, South Africa
will also seek to build closer "South-South" ties, especially with China, India and Brazil, as well as with other
African trade blocs. South Africa will also prioritise the maintenance of close relations with the EU and the
US.
The key task facing policymakers will be to facilitate growth while avoiding macroeconomic imbalances. The
authorities will employ a fiscal stimulus and targeted industrial incentives to boost activity and employment,
but will also focus on keeping spending in check to guard against the loss of South Africa's investment grade
credit rating. The main medium term challenge is to overcome structural constraints such as skills shortages
and inadequate infrastructure, which are preventing South Africa from growing more quickly.
Government has indicated its commitment to fiscal consolidation by curtailing proposed growth in spending
while simultaneously increasing taxes in the form of higher income tax rates and fuel duty. The monetary
environment will become less accommodating because of concerns about inflationary pressure arising from
the sustained weakness of the rand, which is market-determined and widely traded. Nonetheless, rates will
rise during the forecast period, translating into higher bank lending rates and costlier credit.
Growth is expected to quicken during the 2015-19 period and will be helped by a further modest increase in
world growth and an expansion of regional trade, but the rate of expansion will remain relatively modest
because of several factors. These include delays in the installation of new electricity capacity, sluggish
private investment (because of strike threats and policy uncertainty), fiscal consolidation and progressively
tighter money. Growth will benefit from a small rise in job creation, higher real wages and the expansion of
the black middle class, which will spur consumer outlays on goods and services.
However, despite a steady improvement in power supplies, structural constraints will persist, including skills
shortages, crime, corruption and inefficient parastatals, while unemployment will remain high.
Industry Analysis
Postal Sector Trends
The global financial crisis brought an unprecedented disruption to the postal market and, while there are
signs of recovery, economic instability within the postal market remains. Mail volumes continue to decline in
most markets and it is clear that postal operators are entering a new era for the postal industry; an era where
volume decline of traditional mail is a sustained feature.
Internationally, the postal industry is undergoing a transformation. Business models that have existed for
generations are clashing with the latest technology and social trends. In response to these key market
trends, postal operators are focusing on diversification, launching profitable new business lines that are
vastly different from their historic business. They have also reworked their legacy mail networks into parcel
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networks that are well positioned to take advantage of the growing eCommerce wave. Postal operators are
also placing a major emphasis on modernizing across all areas of their operations through the effective use
of technology.
Below are a number of relevant global trends that are already or will likely impact the postal, retail and
transportation activities at SA Post Office
Figure 4: Global postal trends
Financial Industry Trends
The continued rapid growth in the number of black people with middle and high incomes should promote an
increased demand for financial services products during the forecast period. Meanwhile, continued efforts by
the government to increase the availability of financial services products to low-income earners should
increase financial services activity at the lower end of the market.
Banks
Future areas of growth in the banking sector include personal banking (especially at the lower end of the
market), further African expansion for some banks, and the small and medium-sized business sector. All four
of the largest local banks have established branches or offices in Africa, Europe, Australia, the US and Asia.
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Demand for personal banking services will be partly driven by the growing number of people joining the
ranks of the middle- and high-income groups. However, there will also be continuing efforts to tap into the
unbanked market, via special low-cost accounts and a possible expansion of tele/cell-phone banking.
Insurance
South Africa is by far the biggest insurance market in Africa and ranks 17th in the world. Local insurers
collected an estimated R450bn in premiums in 2012, a rise of 10.9% in inflation adjusted terms compared
with the previous year. Life insurance accounted for 82% of all premiums, while all non-life policies together
brought in the remaining 18%.
The industry is divided into three sectors: long-term insurers (mostly life); short-term insurers that deal with
corporate general insurance and standard individual coverage, such as households and automobiles; and
reinsurance companies.
Personal insurance is expected to increase at a fairly rapid rate over the forecast period. The growing
number of black people in the middle- and high-income brackets will boost the motor and homeowner
insurance segments, while ongoing concerns about the high rate of violence and crime in the country will
also prompt people to take out insurance cover.
The life insurance sector will also continue to expand. One of the fastest growing product lines is investment-
linked life annuities, marketed through linked product companies and consisting mostly of unit trusts.
Despite expanding demand for life cover, South Africa’s traditional insurers are facing intense competition
from abroad. Such competition is raising fears that downward pressure on premium rates is pushing revenue
below the levels required to cover actual risks.
Telecommunications Industry
Mobile
The number of mobile subscriptions is expected to expand by an annual average of 7% over our 2015-19
forecast period, taking the total number of subscribers to nearly R107m in 2019. Growth in the mobile market
will largely reflect the continued expansion of the number of black people joining the middle- and high-
income groups, as it is this demographic segment that is responsible for much of the increase in mobile
ownership, although the rate of increase is slowing, reflecting the maturity of the market. High penetration
rates and market maturity are forcing network operators to compete for customers at the service level and to
look for new revenue streams.
Demand for mobile data services and mobile banking is growing rapidly which reflects the difficulty faced by
low earners in setting up traditional bank accounts and hence the recent boom in mobile-phone accessibility.
Mobile payment apps are on the increase, as a growing number of shoppers across the income spectrum
revert to cashless shopping.
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Internet
Internet penetration and broadband subscriptions are still at a relatively low level. Around one-third of South
African households had Internet access as of 2012, according to the International Telecommunication Union
(ITU). However, much of this access appears to be taking place at work, in universities or in Internet cafés:
according to the general household survey for 2012 released by Statistics South Africa in August 2013,
fewer than 10% of South African households have access to the Internet at home. Mobile solutions will
continue to provide the most rapid growth in Internet access.
Logistics Industry
The South African courier industry is estimated to have an annual turnover of some R8 billion and is made
up of a large number of industry players ranging from companies with an international footprint to single
individuals. It is estimated that there are some 30-40 medium to large courier companies in South Africa and
between 2,000 and 3,000 small players.
The current courier industry is currently undergoing significant changes. Firstly, increased use of electronic
communication has resulted in a move from the delivery of envelopes, packets and parcels. Secondly,
increasing e-commerce is causing a shift from traditional Business to Business deliveries to Business to
Consumer.
Online shopping has brought new opportunities to the courier industry as consumers have high expectations
and expect speed delivery. As a result of this shift, traditional routes to commercial and industrial areas had
to be extended to include residential areas where the SAPO has traditionally had supremacy.
In recent years, there has been an increase in the delivery costs due to one parcel per trip deliveries and
having to make repeat deliveries. Rising fuel and electricity costs and the implementation of e-tolls from 2013
has resulted in a renewed focus on cost containment by the larger operators across the logistics sector.
The role of information technology in the courier market is becoming increasingly important as there is a
need to transfer and share information with customers. In particular, customers are increasingly demanding
the ability to communicate via social media platforms which will become a significant medium of interacting
with customers in future.
In recent months, labour unrest has become a significant factor in South Africa and the logistics industry
has not been immune to these developments. Companies that experience less labour unrest will
invariably attract more customers.
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Internal assessment of SAPO
A diagnostic review of the South African Post Office revealed findings that are summarised below:
Figure 5: SA Post Office key challenges
Governance weaknesses are evident across all domains, including poor enforcement of the reserved area
and unclear definition of the Universal Service Obligation (USO) by the Regulator; limited oversight by the
Department; inadequate oversight by the Board and ineffective management. These weaknesses have
created various deficiencies within the organisation and they must be addressed in the period of this
Strategic Plan.
Staff morale is very low and the environment has become toxic due to perceived lax attitude in dealing with
perceived corruption and poor consequence management within SAPO.
The relationship between labour and management is currently weakened as a result of a lack of consultation
and communication between management and labour.
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The SWOT Analysis
The SWOT analysis builds on the other components of the strategic context work and identifies in simple
terms where SAPO is positioned with regard to trends, developments and the broader environment in which
it operates. The analysis identifies the organization’s strengths and weaknesses, as well as the threats and
opportunities concerning the organization’s future.
Figure 6: Summary SWOT Analysis
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7. Strategic Turnaround Plan
In November 2014, the Minister of Telecommunications and Postal Services appointed an Administrator for
the South African Post Office to bring stability to the organisation following prolonged labour unrest,
instability within the organisation, continuous financial strain as well as problems with service delivery. The
Administrator was also required to develop a Strategic Turnaround Plan for SAPO.
In December 2014, a technical intervention team was appointed, to assist the administrator in stabilising the
organisation and guide it towards sustainability and are mandated to:
? Facilitate the processes of resolving leadership instability at SAPO and restoring clients/business and
public confidence in the Post Office;
? Bring the business operations and the organisation to normality, including resolving the current labour
unrest;
? Ensure that SAPO builds up revenue streams to sustain its business operations and be able to meet its
short-term operational commitments.
? Ensure the resolution of outstanding Human Resources issues
? Fast-track Postbank license application process;
? Give effect to the Corporate Plan of the Post Office contemplated in Section 52 of the Public Finance
Management Act in order to achieve the objectives of the Post Office;
? Develop a business case that would underpin National Treasury support; and
? Ensure compliance with all relevant legislation and regulations.
Although it is critical to create an enabling environment for SAPO, the organisation must also resolve a
plethora of internal issues that threaten its sustainability. SAPO’s main revenue streams remain the mail
business, with limited success in diversifying revenue to other related and adjacent markets. A number of
offerings have been deployed as revenue diversification opportunities, however achieving scale in any of
them remains a challenge.
Drawing on the diagnostics findings, SAPO’s sustainable growth strategy is underpinned by the following
four key pillars:
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Figure 7: Key Transformation Themes
The SA Post Office Turnaround Approach
To realise the strategic turnaround plan, an implementation approach is developed with clearly defined
milestones per phase:
Figure 8: Journey of the Turnaround implementation
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The roadmap to achieve the implementation of the turnaround is indicated in the figure below.
Figure 9: SAPO Turnaround roadmap
Phase 1: Stop the bleeding
This phase intends to arrest the current financial distress faced by SAPO. The key milestones within this
phase includes short term cash management, capacitate SAPO with strong and capable leadership and this
team is required to ensure the successful implementation of SAPO’s sustainable growth strategy. The
management team is also required to drive the various revenue initiatives identified in the strategic plan. The
process of implementing the new model is also planned to start in this phase. The duration of this phase is
estimated to continue for the first half of 2015/16FY.
Phase 2: Strategic Positioning for the Future
The focus area in phase 2 will be a continuation of the business model implementation to systematically
address fundamental flaws in SAPO’s business model. The business model initiatives will be executed in
manner whereby the key flaws are addressed first.
Phase 3: Sustainable Growth
This phase intends on building the newly establish business model and intends on focusing on sustaining its
growth trajectory. At this point SAPO should be declaring significant profits of which will be recycled into the
organisation to maintain the momentum gained over the previous two phases.
Year two
Year three
Year one
The South African Post Office
Strategic Roadmap
FY 2015/16
FY 2017/18
? Crisis Stabilisation
? New Leadership
? Drive Retail and
logistics revenue
? Implement Business
model
? Implement Business
model
? Drive Retail and
logistics revenue
? Embark on
sustainability
initiatives
Year One: Stop the bleeding
Q1 Q2 Q3 Q4
FY 2016/17 FY 2017/18
Implementation Timelines
Year two: Business model for the future
Year three: Sustained growth
FY 2016/17
FY 2015/16
- R102 m
Nett loss
R1,3bn
Nett profit
R1,5bn
Nett profit
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The SA Post Office Management team has been working on a detailed list of initiatives to address the
current performance barriers and concerns in the Group. This integrated Programme is currently under
review, including an assessment of the overall business impact, integration requirements and costs. A brief
summary of the Programme is presented here, with the detailed Programme plan and budget to be
presented to the Board of Directors and other stakeholders for approval on its completion.
The sustainability growth strategy focuses on implementing initiatives within four key areas:
? Operations ? Product Innovation
? Commercial (Revenue Growth) ? Business Model
The detailed Strategic Turnaround Plan, as submitted to the Honourable Minister of Telecommunications and
Postal Services is included in Appendix A.
The Implementation Process
In order to achieve the delivery of the Strategic Turnaround Plan SAPO will mobilised a team housed within
the Group Project Management Office (PMO) which will be tasked with driving the business to implement the
initiatives. The team will develop a roadmap and framework that will assist the business managers to create
project charters and identify key performance indicators (KPI’s) that need to be monitored and ensure
delivery of the committed benefits.
The Monitoring Process
The progress on initiatives will be monitored on a monthly basis to ensure that the initiatives are on track to
deliver on the commitments. The Project Management Office (PMO) will be tasked with monitoring
implementation and progress on all initiatives.
The current process of the Monitoring Task Team, as established through the DTPS and National Treasury,
will be used to monitor progress on the STP implementation.
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8. Strategic Alignment
The new Operating Model
The current BU driven operating model has led to silos and inefficiencies and the organisation is
cumbersome and top heavy. The organisation is neither market focused, nor is it customer focused.
A sustainable business model for SAPO is one that reduces the reliance on mail business and moves
towards a balanced revenue mix, where Retail, Logistics and Postbank improve their contribution and each
operates profitably.
SAPO’s new business model will be characterised by strong government revenue growth by scaling up the
government offering; strengthening non-banking financial services offerings to drive Retail volumes; tapping
into the fast growing SMME sector; growing e-Business revenue and growing major and large accounts
revenue through cross-selling. The cost side will be managed down through leveraging strategic
partnerships; streamlining Operations, Transport and Property, optimising IT, Procurement and Human
Capital cost as well as reducing the cost of the Retail network.
Implementation of the new business model will necessitate a change in SAPO’s operating model to place the
customer at the heart of the business, break Business Unit silos, create market facing commodity-based
SCM, create a commercial capability at SAPO, and consolidate all “commercial” functions, outsource SAPO
and Postbank IT and break down e-Business into Mail and Channels.
Figure 10: New Business model
Products
Core
Operations
Letter mail Parcels Banking
Non-Banking Financial
Services
Mail Operations Parcels Operations
Retail Operations Postbank
Retail Solutions
Customers
Marketing & Communication
Business Government Consumer
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Strategic Review: Core Operations
The strategic positioning for SA Post Office to become a customer focused integrated distribution and
financial services organisation requires the organisation to restructure the operations environment to ensure
that it meets its mandate and is able to deliver customer centric solutions optimally. The organisation has
been structured in different business units creating silos and duplication of resources such as infrastructure,
personnel and duplication in processes. The bloated structure creates inefficiencies and impacts negatively
on customer service and ultimately the SA Post Office brand. This has over the years resulted in a decline in
consumer confidence, staff morale and revenue.
The customer service delivery model will be achieved through structural changes that will integrate the
processes for the acceptance, processing and delivery of mail and parcel items which are identical across
Mail and CFG thus changing the organisation structures and operational management across the entire
value chain.
Regional management duplication will be reduced from being managed by Retail and Mail business and
integrated with the consolidation of the area and regional levels for the operational areas and administrative
sections such as finance and HR.
SAPO is managed in terms of business units (Mail, e-Business, Retail, Postbank) and has Support Functions
to provide services to those business units (e.g. finance, procurement etc). As noted earlier, the current
structure has resulted in silos, with some duplication of functions such as mail processing across the Mail
and Retail business units, duplication of support functions e.g. Retail structures and Head Office, etc. In
addition, the support functions are supposed to operate using a shared services model, but this has not
actually been achieved in practice. Hackett was engaged to perform a review of the efficiency of certain
support functions, and the findings from this exercise have been taken into consideration when preparing the
initial proposal around their restructuring.
The current value chain, excluding the acceptance of deposits and the provision of financial services, can be
depicted as follows:
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Figure 11: SAPO Postal value chain
Taking the above into consideration, SA Post Office’s operating model needs to change significantly.
Functions currently performed in various parts of the group will be centralised (Properties, Transport, parcels
across Mail and CFG will be re-integrated into Mail).
A new Customer Service area will be created to drive the focus on customer service, value propositions,
strategic data analytics, market research, sales etc.
For support functions, Supply Chain Management will be incorporated into Finance, and Governance
structures will be combined. Support and area management structures currently in the Retail and Mail
operations will be collapsed to improve end to end customer service.
Strategic Review: Postbank
Postbank’s strategic intent is to serve as the partner of choice for government with regard to its objective of
providing affordable transactional banking services and accessible social services to all citizens that need
these services. It is through the Post Office’s expansive nationwide network that Postbank will be able to
provide extensive accessibility, particularly in rural areas.
To enable the above stated strategic intent, Postbank’s value proposition to its existing and prospective
customers is the promise of low cost financial services to all South Africans. This includes lower income
citizens who may have limited access to, or cannot afford, traditional banking services.
Postbank’s Corporatisation, will ultimately enable the bank to offer a wider range of affordable products and
services to the mass market. This is while adhering to industry standards and meeting the regulatory
requirements applicable to a registered bank. The Corporatisation process will serve as a key enabler in
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realising the Postbank’s strategic intent and value proposition to its customers. During the next three years,
Postbank will be pursuing several initiatives:
? Corporatisation:
– The Banks Act section 12, the application to establish a bank was submitted to the SA Reserve
Bank in 2013. The focus will now shift to meeting the Banks Act and supporting regulatory
requirements. This will include the hiring of key skilled resources and the establishment of
requisite efficient and effective organisational, compliance, IT and process infrastructure;
? Channel Strategy:
– Developing alternative channels to efficiently deliver relevant banking services at low cost, while
also improving the convenience and access for customers. This includes ATMs, Internet
Banking and other alternative channel options,
? Product Innovation:
– Offering innovative products and services that fulfil Postbank’s mission and provide relevant, low
cost banking and related financial services to South African citizens throughout the country;
– Evaluating the building blocks required to introduce affordable lending products as part of the
corporatisation; and
– Re-evaluating Postbank’s role in the insurance industry to enable greater access to financial
services.
Though commercial banks and finance companies have recently increased their focus on lower income
customers, there is a viable and important role for Postbank to play in offering affordable banking services
that support SA citizens’ needs, compared to the profit-driven objectives in commercial shareholder-driven
enterprises.
Strategic Review: Commercial
SAPO’s revenue growth continues to rely on mail business, with stagnant to negative growth in the Retail
and Logistics BUs. SAPO lacks a cohesive commercial strategy, resulting in a fragmented view of the
customer, disparate value proposition, channel, sales, and customer experience strategies. The silo
organization of the Business Units has led to an organization that is unable to capture commercial value
across all products and offerings. Each BU drives its own “commercial strategy” with no consolidated view
across the Group; for example, innovation and new products in e-Business target the same clients and
provides offerings that are in direct competition with Mail and Retail BUs. The positioning of e-Business as a
standalone profit-centre is fundamentally flawed, rather it must be viewed as an “innovation hub” that
develops e-enabled products for mail, logistics, financial services and retail and e-channels for the entire
SAPO Group. Management information relating to customer and product profitability is not readily available
and utilised in day-to-day management of commercial opportunities and this will change.
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Postal Services, by their very nature, founding legislation and regulatory frameworks thereof, have a
fundamental role to enable development, economic activity, trade and social cohesion. The Post Office’s
network is key to ensuring inclusion of vulnerable and marginalised communities. SAPO must build its value
proposition and commercial ethos around this unique positioning. SAPO is well positioned to support
attainment of specific elements of the National Development Plan.
Products
The lack of a SAPO-wide product strategy has resulted in new products cannibalising existing products.
Some of the key gaps include:
? No lifecycle management framework, new product development process, which has led to each
business unit having their own teams, frameworks and deploying their own product management
practices;
? Management information on product performance and profitability is not readily available;
? New innovations are not approached within a consolidated view of the product portfolio, to ensure
that they complement the entire offering of SAPO whilst responding to changing needs of the market;
and
? Pricing is sub-optimal due to poor application of the costing model in pricing, discounts and rebates
decisions.
Planned Initiatives
– Development of a multi-pronged product development and management strategy
Figure 12: SAPO Product strategy
Components of the strategy:
? Define product lifecycle management process ownership and develop SAPO-wide product strategy;
? Define product performance reporting requirements and work with management accounting to
develop on a regular basis;
? Review and balance entire product portfolio and develop recovery strategies for poorly performing
products; and
? Review product pricing strategy across all BUs.
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The product map is indicated in the figure below.
Figure 13: SAPO Product map
A detailed listing of the current products and services is included in Annexure B.
Channels
SAPO’s channel strategy is still in its infancy, and fragmented with Retail Branches being the dominant
channel, but completely divorced from other channels such as contact centres, online, mobile, mailmen,
salesforce, etc.
SAPO’s biggest weakness in its business model is the high-fixed cost basis of its large retail infrastructure.
The retail branch network investments have tended to be biased towards regulatory compliance and property
development trends, rather that commercial performance of branches in economically viable areas and
developmental” or USO branches in uneconomical areas.
South Africa Post Office Product Map
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Figure 14: SAPO Channel strategy
Planned Initiatives
– Establishment of a single channel management function to support the multi-channel strategy.
o The retail network will be Rebalanced, Remodelled and Revitalised to ensure a cost
efficient model for future SAPO business model.
o Remodel the retail branch network to improve sustainability, ensuring an optimal mix
of brick and mortar, Own versus RPA and franchise, mobile units, self-service
kiosks, etc. to achieve the following mix:
? 40% RPA,
? 25% Owned: conventional,
? 20% store-in-store,
? 15% mobile,
? 5% self-service kiosks;
o Consolidate and modernise contact centres – develop an outsource option to optimise
costs, improve service quality and adopt best in class practices.
o Define a role for delivery men and sales force as a channel.
o Allocate specific branches as Postbank flagship branches.
Customers
A customer segmentation study was initiated in 2010 to cover the mail and logistics business units, however,
implementation of the customer segmentation model was not carried through.
Similarly, SAPO’S value proposition is not clearly defined, consistently understood and implemented across
the Group. Postal Services play a vital enabling role for communications and transactions, linking South
Africans to each other and South African businesses and government to all citizens through the vast branch
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network and strong physical distribution and delivery network. SAPO supports social cohesion and the
developmental agenda, whilst at the same time remaining an important enabler to trade and the economy.
Customer segmentation model
SAPO’s major customers are big business, followed by public sector – together contributing 98% of SAPO
revenues.
SAPO must become a partner to business by providing value-added business communication and
transaction solutions. The strategy for business customers is to retain the existing Large Business customer
base by enhancing customer experience and key accounts management. The following interventions are
key:
? SAPO must reclaim its relationship with Large Business Customers from the Mailing Houses that
process and lodge mail on their behalf.
? Single-view of the customer and intimate understanding of needs to improve cross-selling
opportunities.
? Urgently close capacity and capability gaps in customer understanding through deep analytics within
the key sectors that drive post office’s revenue, namely; retail, financial services,
telecommunications, education and healthcare sectors.
? Improve customer value proposition and product offerings to meet client needs.
? Improved quality, reliability of service, and customer service.
Previously untapped markets such as the SMME sector will be developed through deliberate offerings that
address specific needs to support their core needs. In the short-term, Business Solutions, within SAPO
branches and the Online SMME trading platform are specific offerings that will drive this market, as enablers
for SMME’s businesses.
Government, as a customer segment will drive SAPO’s growth in the short to medium term. This customer
segment will grow; through implementation of the 2015 Cabinet Decision to set aside 30% of government
spend on SAPO business offerings. In the 2015/16 fiscal year, a growth from the current R1, 2 billion
revenue per annum to over R3 billion per annum is targeted through specific “quick win” opportunities.
Projects that will yield a revenue contribution of R11 billion to SAPO, in the next three years have been
identified.
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Figure 15: SAPO Customer segment model
Strategic Review: Delivery Platforms and Enablers
The delivery platforms and enablers that are responsible for strategic direction, corporate governance, policy
and procedures of the Group, and Shared Services that is responsible for the management and centres of
excellence to the Group.
It is clear that the delivery platforms and enablers have a critical role to play in providing efficient and cost
effective support to the core operations, while also setting strategy, creating policy and ensuring compliance
on behalf of the Group. The technical focus areas vary widely and each unit will continue to develop and
refine its technical competence. In addition, the focus on the following improvement areas during the
planning period:
? Cost management;
? Business process efficiency and integration;
? Expansion of the use of enabling technologies;
? Increasing the efficiency and service quality from Group Shared Services;
? Talent Management;
? Create a business support environment that promotes and facilitates innovation;
? Efficient and effective procurement processes.
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Transport and logistics
SAPO runs various transport and logistics operations both within the postal business operations as well as
the parcel business, CFG. The transport and logistics stream sought to analyse these and identify
opportunities for improvement in terms of efficiency, cost and service level enhancement
A key recommendation for the group is to proceed to restructure the Transport and Logistics function and
bring this under one structure for the entire business. Mandate for such a structure is to find opportunities for
network optimisation and economies of scale across the SAPO Group.
Information Technology
The current systems are old and out of support. The old business model enabled silos within SA Post Office
resulting in decentralisation and duplication of solutions, bespoke solutions deployed and no longer
compatible or scalable, lack of disaster recovery due to concentration of risk in the current data centre and
no network redundancy.
Through Infrastructure Refresh to replace legacy systems Group IT will enable standardisation, high
availability of systems with full redundancy and faster turnaround time for deployment of solutions.
The upgrade of the following core systems is critical for business to perform its services.
? Universal Banking Solution (UBS) Banking system
? Postilion Financial Switch
? Websphere Message Queue (MQ)
? SAP Enterprise Resource Planning (ERP) system
? Third Party Management System
? Microsoft Exchange
? EMC backup and Storage systems
? Microsoft Active Directory
? Database systems
? WRE Point of Sale system
? Track and Trace solution
The current SA Post Office data network consist of current core network infrastructure with some but not
optimal redundancy in place, ageing regional network infrastructure which could result in an entire region
going “off-line” and copper-based Telkom infrastructure that does not enable scalability for sites. Group IT
proposes the outsourcing of the data network infrastructure with full redundancy which will provide reduced
operating costs, provide access to certified competent resources and make capital funds available by
outsourcing non-core business functions. The outsourcing of the data network infrastructure will reduce risk
by leveraging the technology available within a managed service company and provide flexibility as vendors
have multiple resources available to them.
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Property Management
The scope of the proposed initiatives covers all the owned and leased properties in use by the SAPO group.
The entire organisation is in scope, all business units will be affected, key of which will be the core business
areas in particular, Retail, Mail and Courier business as the biggest clients of the Properties BU. The
processes within SCM, Legal, OHS Services and Retail have a significant impact on the ultimate delivery of
these initiatives.
In summary, the initiatives are aimed at:
? Developing a property management strategy for the SAPO group guiding the approach to acquisition
and alienation of property, developing, leasing or otherwise making property available to Group for all
operational purposes. The governance, decision making criteria, economic evaluation criteria,
interfaces with other BUs, use of benchmarks and business unit mandates will be included.
? Maintaining a comprehensive, accurate register of all assets owned by the SAPO group which was
steadily rebuilt in the past year. Specific data required will be market related value, asset condition,
potential revenue generation capability, current OHS Act compliance, and an estimate of operating
and capital expenditure to rectify any significant compliance or revenue potential concerns.
? Reviewing all current property leases to align the leased properties with the property management
strategy, and to renew, cancel or renegotiate leases as required.
? Developing a comprehensive plan to renovate and / or buy, sell or lease all the properties owned by
SAPO in alignment to the license requirements, OHS Act requirements, business needs and property
management strategy.
? Agreeing on a sourcing model for facilities management services to inform the most cost effective
strategy for the organization.
? Designing and implementing a complete range of internal operations capabilities to manage and
enhance the property portfolio once it has been stabilized. The scope of this initiative will include
integrated business processes, enabling technologies, governance structures, updated policies, and a
reviewed organizational structure.
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Supply Chain Management
SCM is accountable for ensuring a transparent, fair, competitive and equitable procurement process.
The following strategic objectives have been identified for SCM to deliver on its mandate:
? Reduction of the total cost of ownership through sustainable savings.
? Enhance efficiency and improve process turnaround times.
? Extract value for money through strategic sourcing initiatives.
? Improve customer service satisfaction levels.
? Drive BBBEE initiatives and ensure compliance with legislation
? Supplier Service Management
Human Resources Management
The current efforts to reposition the company to improve its effectiveness require a more coherent and
focused people strategy that addresses two critical issues, namely; building employee capacity that is
relevant for this purpose and ensuring a climate and culture that would enable this transition.
The foundations for establishing this goal was the focus of the Human Capital in the past year with specific
emphasis on normalisation of employment on the top level of the organisation together and surfacing of
concerns in the Labour environment. This proved to be challenging, however there was movement towards
the stabilisation of employee relations.
Human Capital Management initiatives are focussed to address the following key areas:
? Stabilization of the employee relations environment
? Enable optimal levels of employee engagement to enable empowerment and performance
? Efficient and effective workforce management to enhance efficiencies through an optimally
structured and capacitated workforce (Effective staff numbers, enabling structures as well as well
and appropriately developed employees)
? Enhanced governance and efficiencies (Including an automated human capital management system)
? Embedding a High Performance Culture through the inculcating the organisational values and
effective management of the Post Office
? Development of the required competencies and skills to enable the organisation to meet current and
future business needs
? Developing the management capability to ensure compliance and implementation of best practices
in the HCM field
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? Re-engineering and /or improving HR practices, processes and systems to ensure operational
excellence in alignment with business requirements.
These focused initiatives in HCM must be underpinned by continuous programmes to empower managers
with the required knowledge and skills to manage the organisations maintaining human capital to enable
higher levels of productivity and performance within relevant industry frameworks and ensuring legislative
compliance e.g. FAIS, AARTO, South Africa’s labour law transformation, etc.
Stakeholder management and expectations will be considered and addressed through various Human
Capital Management initiatives amongst others; The Government’s annual programme of national
imperatives provides an opportunity for HCM to contribute to particularly education and training; and
employment creation through various programmes such as graduate programmes and learnerships. The
increased commitment from government departments such as the DTPS, to increase e-skills and the uptake
and usage of ICTs creates an opportunity for HCM to make a contribution through the company’s CSI
programme for e-literacy. Further to this the South African Post Office is committed to support initiative such
as the National Development Plan (NDP) through various initiatives, such as: gainful employment for people
who are differently abled, ensuring gender equity, especially at leadership level, building capacity through
the youth of South Africa e.g. take a girl child to work initiatives and others.
The evolving Employee –Employer value proposition must balance the needs and aspirations of the
different categories of the workforce through a more customised approach to the design of employee
offerings such as remuneration and benefits, etc., balanced with organisation requirements for increased
human capital efficiencies to ensure higher productivity and efficiencies.
The Communications strategy is included in Appendix H and the Environmental Strategy is included in
Appendix I.
Strategic Review: Regulation
The purpose of the regulatory stream was to advance SAPO’s position on how the regulatory regime should
be reviewed to enable sustainability. One of the most contentious issues for SAPO with respect to the
regulatory regime is the definition and funding model for universal service in a digital era with particular
emphasis on the Universal Service Obligations (USO). The USO is underpinned by the Constitution of the
Republic as every citizen’s right to access basic postal services especially in the underserviced and rural
areas.
In broad terms universal service means the rolling out of infrastructure and postal services whilst
guaranteeing a postal point of presence within 3kms walking distance where citizens can access a basket of
basic postal service or a group of services e.g. money transfer, parcel, and ordinary mail at a uniform cost
irrespective of their geographical location. Access to a postal point is fundamental to participation in
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economic and social activities. Postal services ensure access through the movement of articles for economic
and social participation. Social participation in the South African context is linked to the fact that this is a
developmental state with a lot of social imbalances and discrepancies and cost implications. The
developmental objective is to ensure that every citizen is afforded access to and inclusion into economic
activity.
Notwithstanding the above mentioned socio-economic development objectives of Government and its
concurrent universal service obligation to South Africans, the challenge is that the increasing cost of rolling
out the USO in its current form, that is roll-out through physical infrastructure in a low margin and declining
mail volume environment has lowered SAPO's profitability for reinvestment in under serviced areas and to
roll out future infrastructure expansion projects. In fact, the physical retail network is a loss leader in SAPO’s
business.
In the South African context this social mandate given to SAPO was funded through both a Reserved Market
and a state subsidy until recently where it was decreased with the view to phase it out. The phasing out of
the subsidy came at a time where the world was going digital and mail volumes were going down, bearing a
financial strain on SAPO.
The South African fiscus is under pressure from competing and increasing developmental needs in a
shrinking economy, consequently funding of the USO through the subsidy allocation is not sustainable.
The current legislative definition of the USO is now incongruous with the developments in the ICT industry -
specifically liberalisation and convergence. The definition is a barrier to finding innovative solutions to the
funding of the USO and identification of suitable execution agencies other than SAPO. The regulatory space
therefore is not moving with the technological changes- within a digitised era.
Policy makers must recognise the converging nature of communications, SAPO’s proposed role in ICT and
the rapid congruence of the physical and digital mail domains to review the Postal Services Act including
defining a sustainable mechanism for funding the USO. A number of sources must be explored including:
? Ring-fencing underserviced and uneconomic areas to subsidise SAPO’s retail branches, to cover
both capital investment and on-going operating losses via a direct government subsidy;
? SAPO as an ECNS and ECS licensee, can access the Universal Service Fund that was established
through the Electronic Communications Act, under the custodianship of USAASA, provided that
these licences are being utilised, and a contribution into the Fund is made. The Strategic Turnaround
Plan proposes an offering that SAPO will launch to the market, using its ECS and ECNS licences.
At that point SAPO will be eligible to contribute to the USF and also access funds for specific
universal access projects.
? The recent Cabinet Decision on a 30% set aside from government business will become a key
funding mechanism for SAPO’s Universal Service Obligation upon implementation.
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? The DTPS must co-ordinate the strengthening of the enforcement role of the Regulator to protect
SAPO’s reserved area.
? Initiatives to reduce the cost of the USO including the proposed retail branch remodelling must be
supported.
Engagements have commenced with the Regulator and a task team has been formulated, consisting of
participants from the DTPS, National Treasury, ICASA and SAPO, to move the regulatory matters forward.
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9. Financial Projections
Group Financial Overview for the 2014/15 Financial Year
The South African Post Office (SAPO) continues to face challenges such as increasing digitisation, stronger
competition and weaker economic conditions. These trends continue to drive structural declines in letter mail
volume. The financial performance has further been impacted by the four-month industrial action resulting in
direct loss of revenue of R358 million during this period. The industrial action has also resulted in loss of key
customers.
The forecasted revenue of R5 292 million is projected to decline by R680 million (11%) in comparison to prior
year due to lower revenue for mail (decline of 11%), e-business (decline of 20%) and logistics revenue
(decline of 30%).
The main contributors to operating expenditure are staff (59%), transport (10%), and property expenditure
(10%).
The operating expenditure of R6 483 million will increase by 3%:
? Higher staff costs - increase of 8% due to annual salary increase for the bargaining unit and
conversion of casual staff to permanent staff.
? Material & services costs - increase of 4% due the increase in software costs, maintenance of mail
sorting equipment and uniform costs.
? Interest costs - increase of 13% due to the interest paid on Postbank depositors funds which is off
set by the higher interest income received for Postbank investments.
? Also contributing is the interest paid on the overdraft facility.
Cost containment initiatives implemented limited the operating expenditure increase to 3%; transport costs
will reduce by 12% on prior year (due to lower national line haul and airline cost), property costs will reduce
by 7% on prior year (due to lower maintenance cost) and travel costs will reduce by 37% on prior year.
The forecasted net loss for the 2014/2015 financial year is R1 155 million in comparison to a net loss of
R359 million for the previous financial year and budget net loss of R249 million.
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Group Financial Projections 2015/16 to 2017/18
As mail volumes decline and parcel volumes continue to grow internationally, the focus over the medium
term is to transform the business operations by re-aligning and streamlining operations and expanding into
new areas of growth through product diversification. The implementation of the revised business-operating
model over medium term will be another key area of focus. The cost reduction initiatives for the primary cost
drivers (staff, transport and property costs) will remain key focus areas over the medium term to drive
business operations to acceptable net profit margin of 16%.
The realization of the Strategic Turnaround Plan initiatives reduces net loss to R102 million for the
2015/2016 financial year and significant improvement in the net profit position for the 2016/2017 and
2017/2018 financial years.
SAPO Group Income Statement
Figure 16: SAPO Group income statement
Actuals
2013/2014
Forecast
2014/2015
Budget
2015/2016
Budget
2016/2017
Budget
2017/2018
R'000 R'000 R'000 R'000 R'000
Revenue 5 972 505 5 292 080 6 732 978 8 365 401 8 855 879
Mail revenue 3 863 158 3 444 152 4 531 912 5 631 414 5 863 044
E-Business revenue 222 461 178 188 294 032 323 435 355 779
Logistics revenue 724 749 508 065 617 902 802 450 939 940
Postbank revenue 256 549 221 499 252 760 299 482 303 256
Retail revenue 389 421 392 593 469 095 734 050 788 296
Interest revenue 407 033 457 905 487 538 511 652 537 235
Sundry revenue 109 135 89 677 79 738 62 918 68 330
Expenses 6 319 246 6 482 965 6 856 584 6 448 287 6 561 338
Staff expenses 3 537 402 3 835 491 3 911 637 3 674 213 3 824 864
Transport expenses 713 413 628 547 629 205 538 853 553 390
Property expenses 697 017 651 261 684 049 592 036 608 785
Material and services 278 646 288 601 353 821 371 512 390 087
Interest paid 74 338 83 839 313 384 317 984 322 815
Depreciation 166 928 164 571 196 201 267 481 293 471
Other operating expenditure 851 502 830 655 768 288 686 208 567 927
Operating (loss) / profit (346 741) (1 190 885) (123 606) 1 917 114 2 294 541
Non ops item (162 198) (49 486) (50 942) (50 271) (49 294)
Subsidy 0 85 305 56 888 0 0
Taxation 150 062 0 15 207 (569 339) (705 456)
Net (Loss) / Profit (358 877) (1 155 065) (102 453) 1 297 504 1 539 791
SA Post Office Group
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SAPO Group Statement of Financial Position
The salient points of the SAPO Group Statement of Financial Position:
? The forecasted net loss position for the 2014/2015 financial year has reduced the retained earnings.
? The consequence of the business operations not generating positive cash flows resulted in the
overdraft position being maintained.
? A 3 year term loan of R1 200 million will secured in the 2015/2016 financial year to fund the Strategic
Turnaround Plan implementation.
? The Postbank short-term investments and cash surplus over depositor’s funds is maintained over the
medium term.
Figure 17: SAPO Group statement of financial position
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 2,954,225 3,424,187 3,868,653 4,029,882 4,215,369
Property, plant and equipment 1,367,609 1,345,194 1,407,268 1,444,260 1,511,769
Investments and other financial assets 653,485 1,010,904 1,074,379 1,144,202 1,221,007
Deferred tax 800,568 800,685 800,685 800,685 800,685
Other non current assets 132,563 267,404 586,320 640,734 681,909
Current Assets 8,337,216 7,377,737 8,423,880 9,700,566 11,519,559
Trade and other receivables 600,618 528,238 522,338 516,496 510,713
Cash & short term investments 7,659,095 6,775,979 7,831,699 9,117,719 10,945,812
Other current assets 77,503 73,520 69,844 66,351 63,034
11,291,441 10,801,924 12,292,533 13,730,448 15,734,928
Equity 2,438,296 1,319,398 1,492,944 2,790,448 4,330,240
Share capital 200,940 200,940 200,940 200,940 200,940
Non-distributable reserves 1,313,470 1,329,637 1,605,637 1,605,637 1,605,637
Retained income 923,886 (211,179) (313,633) 983,871 2,523,663
Non- current liabilities 2,028,192 2,003,576 3,291,642 3,384,117 3,481,222
Operating lease liability 76,491 84,052 88,255 92,669 97,304
Retirement benefit obligation 1,308,066 1,395,952 1,465,850 1,539,248 1,616,322
Deferred tax 244,287 244,287 244,287 244,287 244,287
Provisions 399,348 279,286 293,250 307,912 323,308
3 year term loan 0 0 1,200,000 1,200,000 1,200,000
Current liabilities 6,824,953 7,478,950 7,507,947 7,555,883 7,923,467
Subsidy unutilised 85,305 0 0 0 0
Trade and other payables 809,000 1,565,409 1,337,270 1,116,557 1,201,519
Retirement benefit obligation 131,243 146,755 154,183 161,988 170,188
Unearned revenue 324,631 318,138 311,776 305,540 299,429
Provisions 330,109 257,347 262,494 267,744 273,098
Deposits from the public 4,737,610 4,820,446 5,061,468 5,314,542 5,580,269
Funds collected on behalf of third parties 92,040 96,642 106,306 114,811 123,996
Bank overdraft 311,378 270,000 270,000 270,000 270,000
Other current liabilities 3,637 4,212 4,450 4,701 4,968
11,291,441 10,801,924 12,292,533 13,730,448 15,734,928
SA Post Office Group
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SAPO Group Statement of Cash Flows
The salient points of the SAPO Group Statement of Cash Flows:
? The business operations not generating positive cash flows resulting in serious cash flow challenges.
? A 3 year term loan of R1 200 million will be secured in the 2015/2016 financial year to fund the
Strategic Turnaround Plan implementation.
? Allocation of R56,888 million (after payment of vat) subsidy allocation for the 2015/2016 financial
year.
? Postbank depositors’ funds is projected to growth annually by 5%.
? Capital expenditure for Postbank over the medium term amounts to R453 million.
? Capital expenditure of Post Office over the medium term amounts to R707 million which is
depended on the availability of funding.
Figure 18: SAPO Group statement of cash flows
SAPO Group excluding Postbank
Income Statement
The forecasted net loss for the 2014/2015 financial year was impacted by the industrial action and
continuation of Mail volume decline of 5% annually. Revenue is forecasted to decline by 14% to R4 633
million due to decline in mail revenue by 11%, E-Business by 20% and Logistics by 30%. The investment
reserves have been depleted resulting in no further interest revenue.
Operating expenditure of R6 528 million for the 2014/2015 financial year is forecasted to increase by 2% due
to cost optimization initiatives implemented during the year. Transport and property costs is forecasted to
decline by 12% and 7%; whilst staff costs will increase by 8% due to the annual inflationary increase and
conversion of casual employees to permanent employees.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Net cash from operating activities (333 969) (639 019) (188 016) 1 333 305 1 892 082
Net cash (to)/ from investing activities 306 551 (1 375 051) (771 196) (553 432) (595 443)
Proceeds from subsidy 0 0 56 888 0 0
Movement in overdraft facility 311 378 (41 378) 0 0 0
3 year term loan 0 0 1 200 000 0 0
Movement in deposits from the public 245 399 82 836 241 022 253 073 265 727
Funds from National Treasury - Postbank 205 000 276 000 0 0
Total cash movement for the year 734 359 (1 972 612) 814 698 1 032 946 1 562 367
Cash at the beginning of the year 3 276 755 4 011 114 2 038 502 2 853 200 3 886 146
4 011 114 2 038 502 2 853 200 3 886 146 5 448 513
SA Post Office Group
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The realization of the Strategic Turnaround Plan initiatives reduces net loss to R256 million for the
2015/2016 financial year and significant improvement in the net profit position for the 2016/2017 and
2017/2018 financial years.
Figure 19: SAPO Group (excluding Postbank) income statement
Statement of Financial Position
The salient points of the Statement of Financial Position:
? The net losses have reduced the retained earnings.
? The consequence of the business operations not generating positive cash flows resulted in the
overdraft position being maintained.
? A 3-year term loan of R1 200 million will be secured in the 2015/2016 financial year to fund
implementation of the Strategic Turnaround Plan.
? The Postbank short-term investments and cash surplus over depositor’s funds is maintained over the
medium term.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 194,845 246,542 529,351 559,824 585,188
Property, plant and equipment 18,421 18,184 18,007 17,892 17,841
Other non current assets 176,424 228,358 511,345 541,932 567,347
Current Assets 6,529,744 6,770,081 7,131,061 7,468,513 7,828,439
Trade and other receivables 123,045 104,831 106,927 109,066 111,247
Cash & short term investments 6,406,699 6,665,251 7,024,133 7,359,447 7,717,191
6,724,589 7,016,624 7,660,412 8,028,337 8,413,627
Equity 1,911,867 2,122,608 2,521,674 2,632,639 2,748,121
Non-distributable reserves 314,057 314,057 590,057 590,057 590,057
Retained income 1,597,810 1,808,551 1,931,617 2,042,582 2,158,064
Non- current liabilities
Current liabilities 4,812,722 4,894,016 5,138,738 5,395,697 5,665,506
Trade and other payables 23,215 19,177 20,136 21,143 22,200
Retirement benefit obligation 2,008 2,128 2,256 2,392 2,535
Intercompany loans 49,775 52,264 54,877 57,621 60,502
Deposits from the public 4,737,724 4,820,446 5,061,468 5,314,542 5,580,269
6,724,589 7,016,624 7,660,412 8,028,337 8,413,627
Postbank
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Figure 20: SAPO Group (excluding Postbank) statement of financial position
Statement of Cash Flows
The salient points of the Statement of Cash Flows:
? The business operations not generating positive cash flows resulted in serious cash flow challenges.
? Allocation of R56, 888 million (after payment of vat) subsidy allocation for the 2015/2016 financial
year.
? A 3-year term loan of R1 200 million will be secured in the 2015/2016 financial year to fund the
Strategic Turnaround Plan implementation.
? Capital expenditure of Post Office over the medium term amounts to R707 million which depends on
the availability of funding.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 2,897,164 3,315,429 3,477,085 3,607,842 3,767,965
Property, plant and equipment 1,349,188 1,327,010 1,389,261 1,426,369 1,493,927
Investments and other financial assets 653,485 1,010,904 1,074,379 1,144,202 1,221,007
Deferred tax 800,568 800,685 800,685 800,685 800,685
Other non current assets 93,923 176,830 212,760 236,586 252,346
Current Assets 1,807,472 607,655 1,292,820 2,232,053 3,691,120
Trade and other receivables 477,573 423,408 415,410 407,430 399,465
Cash & short term investments 1,252,396 110,728 807,566 1,758,272 3,228,621
Other current assets 77,503 73,520 69,844 66,351 63,034
4,704,636 3,923,084 4,769,905 5,839,895 7,459,085
Equity 526,429 (803,210) (1,028,730) 157,809 1,582,119
Share capital 200,940 200,940 200,940 200,940 200,940
Non-distributable reserves 999,413 1,015,580 1,015,580 1,015,580 1,015,580
Retained income (673,924) (2,019,730) (2,245,250) (1,058,711) 365,599
Non- current liabilities 2,028,192 2,003,576 3,291,642 3,384,117 3,481,222
Operating lease liability 76,491 84,052 88,255 92,669 97,304
Retirement benefit obligation 1,308,066 1,395,952 1,465,850 1,539,248 1,616,322
Deferred tax 244,287 244,287 244,287 244,287 244,287
Provisions 399,348 279,286 293,250 307,912 323,308
3 year term loan 0 0 1,200,000 1,200,000 1,200,000
Current liabilities 2,150,015 2,722,718 2,506,993 2,297,970 2,395,745
Subsidy unutilised 85,305 0 0 0 0
Trade and other payables 785,785 1,546,232 1,317,134 1,095,415 1,179,319
Retirement benefit obligation 129,235 144,627 151,927 159,596 167,653
Unearned revenue 324,631 318,138 311,776 305,540 299,429
Provisions 330,109 257,347 262,494 267,744 273,098
Funds collected on behalf of third parties 92,040 96,642 106,306 114,811 123,996
Bank overdraft 311,378 270,000 270,000 270,000 270,000
Other current liabilities 91,646 89,732 87,357 84,865 82,250
4,704,636 3,923,084 4,769,905 5,839,895 7,459,085
SA Post Office Group excluding Postbank
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Figure 21: SAPO Group (excluding Postbank) statement of cash flows
Postbank
Income Statement
The forecasted net profit for the 2014/2015 financial year will increase by 52% to R211 million due to a 23%
increase in interest income; whilst the increase of 22% increase in staff costs is due to the filling of critical
positions and increase in interest paid by 59%.
The reduced net profit of the medium terms is due to the increase in staff costs (continuation of populating
the structure), increase in marketing costs, material services (replacement of Postbank cards), depreciation
and marketing costs.
Figure 22: Postbank income statement
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Net cash from operating activities (433,942) (867,389) (311,737) 1,169,250 1,719,130
Net cash (to)/ from investing activities (89,690) (230,412) (245,700) (215,800) (245,900)
Proceeds from subsidy 0 0 56,888 0 0
Movement in overdraft facility 311,378 (41,378) 0 0 0
3 year term loan 0 0 1,200,000 0 0
Movement in intercompany trading account 200,466 (2,489) (2,613) (2,744) (2,881)
Total cash movement for the year (11,789) (1,141,668) 696,838 950,706 1,470,349
Cash at the beginning of the year 1,264,185 1,252,396 110,728 807,566 1,758,272
1,252,396 110,728 807,566 1,758,272 3,228,621
SA Post Office Group excluding Postbank
Actuals
2013/2014
Forecast
2014/2015
Budget
2015/2016
Budget
2016/2017
Budget
2017/2018
R'000 R'000 R'000 R'000 R'000
Revenue 612 159 658 624 739 083 810 121 851 256
Postbank revenue 256 549 221 499 252 760 299 482 315 085
Interest revenue 354 087 436 573 486 306 510 621 536 152
Sundry revenue 1 523 553 17 18 19
Expenses 114 419 169 306 328 751 397 527 419 064
Staff expenses 50 644 61 917 111 604 117 184 123 043
Transport expenses 668 471 3 110 3 265 3 429
Property expenses 4 994 6 512 6 424 6 746 7 083
Material and services 4 418 3 794 35 524 37 300 39 165
Interest paid 35 588 56 571 79 056 83 009 87 160
Depreciation 4 379 3 446 1 665 54 086 58 451
Other operating expenditure 13 727 36 595 91 369 95 937 100 734
Operating (loss) / profit 497 739 489 318 410 332 412 594 432 192
Non ops item (359 289) (278 577) (287 266) (301 629) (316 710)
Subsidy 0 0 0 0 0
Taxation 0 0 0 0 0
Net (Loss) / Profit 138 450 210 741 123 067 110 965 115 481
Postbank
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Statement of Financial Position
The salient points of the Statement of Financial Position:
? The Postbank balance continues to improve due to the growth in the Postbank depositors and short
term investments.
? The depositor’s funds is projected to growth by 5% annually.
? The short-term investment and cash surplus over depositors’ funds is maintained in the medium
term.
? The increase in non-current assets is due capital expenditure of R453 million over the medium term.
Figure 23: Postbank Statement of financial position
Statement of Cash Flows
The salient points of the Statement of Cash Flows:
? The business operations are generating positive cash flows.
? National Treasury funding of R252 million allocated for the 2014/2015 financial year has been rolled
over to the 2015/2016 financial year.
? Postbank depositors’ funds is projected to growth annually by 5%.
? Capital expenditure for Postbank over the medium term amounts to R453 million.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Non-Current Assets 194 845 246 542 529 351 559 824 585 188
Property, plant and equipment 18 421 18 184 18 007 17 892 17 841
Other non current assets 176 424 228 358 511 345 541 932 567 347
Current Assets 6 529 744 6 770 081 7 131 061 7 468 513 7 828 439
Trade and other receivables 123 045 104 831 106 927 109 066 111 247
Cash & short term investments 6 406 699 6 665 251 7 024 133 7 359 447 7 717 191
6 724 589 7 016 624 7 660 412 8 028 337 8 413 627
Equity & Liabilities 1 911 867 2 122 608 2 521 674 2 632 639 2 748 121
Non-distributable reserves 314 057 314 057 590 057 590 057 590 057
Retained income 1 597 810 1 808 551 1 931 617 2 042 582 2 158 064
Non- current liabilities
Current liabilities 4 812 722 4 894 016 5 138 738 5 395 697 5 665 506
Trade and other payables 23 215 19 177 20 136 21 143 22 200
Retirement benefit obligation 2 008 2 128 2 256 2 392 2 535
Intercompany loans 49 775 52 264 54 877 57 621 60 502
Deposits from the public 4 737 724 4 820 446 5 061 468 5 314 542 5 580 269
6 724 589 7 016 624 7 660 412 8 028 337 8 413 627
Postbank
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Figure 24: Postbank Statement of cash flows
Capital Investment
The plan capital requirements for the MTEF period amounts to R1 160 million and includes an amount of
R453 million for Postbank corporatisation. The capital program of R707 million for the Post Office excluding
Postbank will have to be reprioritised during the year. The capital projects that improves business efficiency
or generate positive cash flows will have to be accelerated.
Actuals Forecast Budget Budget Budget
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
R'000 R'000 R'000 R'000 R'000
Net cash from operating activities 99 973 228 484 123 721 164 055 172 952
Net cash (to)/ from investing activities 396 241 (1 144 639) (525 496) (337 632) (349 543)
Movement in intercompany loans (200 466) 2 489 2 613 2 744 2 881
Movement in deposits from the public 245 399 82 722 241 022 253 073 265 727
Funds from National Treasury - Postbank 205 000 0 276 000 0 0
Total cash movement for the year 746 148 (830 944) 117 860 82 240 92 017
Cash at the beginning of the year 2 012 570 2 758 718 1 927 774 2 045 634 2 127 874
2 758 718 1 927 774 2 045 634 2 127 874 2 219 892
Postbank
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10. Borrowings and Funding Plan
Borrowings
SAPO has an approved overdraft facility of R270 million and National Treasury has issued a guarantee for
the overdraft facility.
A finance bridging facility of R200 million for a period three months has been approved during April 2015.
The bridging facility has been secured against the R1,67 billion National Treasury guarantee.
SAPO is in the process of securing proposals for borrowings for an amount of R1,2 billion. The borrowing
proposals will be submitted to the Department of Telecommunications and Postal Services for consideration
and the requisite approvals.
Funding Plan
The SA Post Office has approached the market to raise debt funding in the amount R1.2 billion to support
the implementation of the Strategic Turnaround Plan and address delayed creditor settlements.
Significant transactions
The implementation of the new business model will require a re-organization of the subsidiaries (Courier
Freight Group and Docex). This will require the necessary Ministerial approvals by the Department of
Telecommunications and Postal Services and Department of Finance.
Dividend Policy
The company’s dividend policy is to consider an interim and a final dividend in respect of each financial year.
Depending on the perceived need to retain funds for expansion or operating purposes, the board of directors
may pass a resolution for the payment of dividends, subject to the provisions of paragraph 22.1 of the SA
Post Office Memorandum of Incorporation (MOI).
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11. Corporate Governance
Appointment of Administrator
On 7 November 2014, all the non-executive members of the Board resigned and all of its committees
dissolved. Dr Simo Lushaba was appointed as administrator in terms of Section 25 of the South African Post
Office Act No 22 of 2011 (as amended). The Administrator is charged with the responsibility of bringing
stability within SAPO and to finalise the Strategic Turnaround Plan (STP) to improve the financial
performance.
The process to appoint a new Board of Directors has been initiated by the Department of
Telecommunications and Postal Services.
SAPO Board of Directors
The function of board and its committees is to effect good corporate governance through oversight, directing,
controlling and monitoring SAPO to achieve its Strategic Corporate Plan and fulfil its mandate. It is
responsible for overseeing, on behalf of the Shareholder, the performance of the South African Post Office
against its corporate plan. In carrying out its oversight role, the Board holds management accountable for
business performance as well as achievement of the South African Post Office’s strategic objectives.
The function of board committees is generally to allow more attention to be given to certain oversight
matters. Committees are not intended to replace management nor for the board to abdicate its
responsibilities. They exist rather to facilitate a more efficient operation of the board. The Board and its
Committees can only work if supported by management who are adequately skilled, delegated with the
appropriate authority and responsibility and trusted to deliver on the Board requests (refer Appendix G for the
detailed Materiality Framework). This will allow the Board to focus on its primary function, which is to offer
strategic direction, to monitor and to take timeous corrective action.
The Minister of Telecommunications and Postal Services in accordance with section 11 of the SA Post Office
Act appoints the non-executive directors of the Board. The SA Post Office Board has executive directors,
appointed by Cabinet on the recommendation of the Minister of Telecommunications and Postal Services.
The Board has delegated certain functions without abdicating its own responsibilities to the following
committees:
? Audit Committee,
? Risk Management Committee,
? Postbank Committee,
? Human Resources, Remuneration and Performance Management Committee and
? Social, Ethics and Transformation Committee
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Committees of the board
Audit committee
The SAPO Audit committee was established in terms of Companies Act No. 71 of 2008 (as amended) and
the Public Finance Management Act as amended and relevant Treasury Regulations and in accordance with
section 19.1.1.3 of the SAPO MOI. As a major public entity in terms of Schedule 2 of the PFMA and the
Company’s Act, SAPO is required to, establish an Audit Committee. The Audit Committee is responsible for,
evaluating the Group’s financial statements which will be provided to Parliament and other stakeholders, the
systems of internal control which management and the Board have established, the audit processes, the risk
management framework and assesses the Group’s financial performance against its Corporate Plan.
Representatives of external and internal audit have direct access to the Chairperson of the Committee. The
Audit Committee meets at least four times a year.
Risk Management Committee
The SAPO Risk Management Committee was established in terms of section 51 (1) (a) (i) of the Public
Finance Management Act No. 1 of 1999 as amended. The committee monitors, evaluates and advises the
Board on the adequacy of risk management processes and strategies within the Group and recommends the
approval of risk policies to the Board. It further reviews significant risks facing the company and reports these
to the Board. The scope of the Risk Management Committee extends across the Company to include the
subsidiary companies whose products and processes expose the Group to Credit Risk, Liquidity Risk,
Market Risk, Balance Sheet Risk and Operational Risk within the legislative and regulatory framework that
governs the SAPO Group. Representatives of Group Risk Management, Internal Audit, the Security and
Investigations division and all core Business Units attend all meetings of the Committee. The committee
meets four times a year.
Postbank Committee
The Postbank Committee was established with an oversight role over the Postbank to ensure that the
Postbank operates within all the applicable legislation, monitors the performance of the investment portfolio
of depositors’ funds as well as ensuring that these funds are invested appropriately. It also recommends the
approval of ledger fees and bank charges to the Board. The committee meets four times a year. The
Postbank Act which came into operation in late 2010, now provides for the establishment of a Board of
Directors for the Postbank when it starts operating as a licensed bank.
Human Resources, Remuneration and Performance Management Committee
The Human Resources Remuneration and Performance Management Committee was established in
accordance with the Company’s Memorandum of Incorporation. The committee reviews all aspects relating
to human resources and remuneration within the Group. It also monitors compliance with relevant labour and
employment legislative matters and recommends approval of significant human resources related policies to
the Board. This committee’s mandate includes remuneration and performance management issues. The
committee meets at least four times a year.
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Social, Ethics and Transformation Committee
The committee was established to monitor the Group’s socio-economic development and transformation
activities, its adherence to generally accepted ethics standards, and to ensure it is seen as a good corporate
citizen through its strategies to combat corruption, protect the environment, and labour and employment
practices. The Group CEO and key representatives from management attend meetings of the committee.
The committee meets at least four times a year.
IT Governance Committee
The IT committee is responsible for overseeing on behalf of the Board, the execution of IT governance
across the Group. The committee reports to the Board and is responsible for the governance of IT across the
Group, which includes monitoring and reviewing IT policies and practices to ensure that the required IT
support is provided and that IT is positioned as a key enabler for business. The Group CEO, the CIO and
relevant representatives from management attend meetings of the committee. The committee meets at least
four times a year.
Internal Control
Internal control is a framework designed to provide reasonable assurance regarding the achievement of
organisational objectives. The system of internal control, which is embedded in all key operations, provides
reasonable rather than absolute assurance that the Group’s strategic objectives will be achieved. The Board
has the overall responsibility for internal control.
The executive management, as mandated by the Board, has established an organisation-wide system of
internal control to manage significant risks. There is on-going monitoring and reporting processes by
Business Unit heads to provide feedback on the status of internal controls.
The Board also receives assurance from the Audit Committee, which derives some of the information from
regular internal and external audit reports.
Internal Audit and Assurance
Internal control is a framework designed to provide reasonable assurance regarding the achievement of
organizational objectives. The system of internal control, which is embedded in all key operations, provides
reasonable rather than absolute assurance that the Group’s strategic objectives will be achieved. The Board
has the overall responsibility for internal control.
Management prepares the company’s financial statements and the auditors examine the underlying
accounting assumptions, principles and procedures management has adopted, with Board approval. To
make the comparisons required by an audit, the auditor must examine not only the financial statements
themselves by the records on which they have been based and the company’s system of internal controls,
including internal audit.
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The executive management, as mandated by the Board, has established an organisation-wide system of
internal control to manage significant risks. There is on-going monitoring and reporting processes by
Business Unit heads to provide feedback on the status of internal controls.
The Board also receives assurance from the Audit Committee, which derives some of the information from
regular internal and external audit reports.
The detailed Internal Audit Strategy are included in Appendix F.
Risk Management Strategy
The Board acknowledges the legislative requirements which define and direct the risk management
responsibilities of the Board, the executive management, management and employees as pertained in the
PFMA and King III.
The Group’s risk management methodology has been formalised and aligned to Par.14 of the National
Treasury Practice Note 4 of 2009/2010 issued in terms of Section 52 of the Public Finance Management Act
as well that of King III principles. The Board through the Risk Management Policy and Framework has duly
accepted accountability for risk management across the Group and has additionally established risk
governance structures e.g. Board Committees and other management structures to monitor risk and
compliance levels within the organisation.
The Risk Management Policy and Framework is aimed at ensuring the deployment of a common and
systematic risk management-operating standard in accordance with international best practices across all
operational activities within the South African Post Office. This will ensure the appropriate management of
risks, enhance sound corporate governance and to effect regulatory compliance, strategic management,
leadership efficiency and performance.
The Board requires management to reinforce effective control measures, continuous improvement strategies
and compliance. All Group Executives, Business/Support unit heads and management at all levels have
been duly mandated and are required to develop, implement and maintain risk management plans for their
respective areas of responsibility and accountability with regards to:
? Achieving an optimal and cost effective balance between risk exposure and risk mitigation;
? Monitoring and maintaining sound business operating environments in order to ensure that these
remain within the operational risk appetite;
? Enhancing management decisions with regards to newly identified risks; and
? Reinforcing effective control measures, continuous improvement strategies and compliance.
As a State Owned Company, the Group also has a risk management plan, which is aligned to King III and
the ISO 31000 requirements and is inter alia directed at:
? The systematic identification and documenting of key risks that may impact negatively on the ability
to achieve the strategic objectives;
? The identification of relevant control failures;
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? The identification and implementation of risk mitigation strategies;
? Provide timely information to all relevant stakeholders in order to enhance the decision making
process;
? Safeguarding the Group’s resources against loss due to fraud, misuse, damage and fruitless and
wasteful expenditure;
? Safeguarding the availability, confidentiality and integrity of information systems;
? Ensuring conformance to with applicable legislation, regulations, policies, procedures and operating
standards;
? Enhancing policies and procedures for the management of operational risk, financial risk and
treasury operations; and
? Ensuring compliance to the Group’s Code of Ethics.
The Risk Register and mitigation plan is included in Appendix E.
Fraud Prevention Strategy
The South African Post Office Group operates through the retail network, which processes numerous
banking and non-banking financial transactions on a daily basis, therefore presenting potential opportunities
for fraud. To mitigate this risk of fraud, numerous systems of internal controls have been designed and
implemented. Furthermore, the Group also operates according to the defined and approved Fraud
Prevention Plan. The Audit Committee also assumes enhanced responsibility to consider fraud and error in
the Group’s financial statements.
The detailed Fraud Prevention Strategy is included in Appendix D.
Governance Framework
SA Post Office Group Shareholding Structure
The SA Post Office operates in terms of a Group holding structure, with the SA Post Office as the Group
holding company, with two operating subsidiaries and several property companies. The subsidiary
companies have their own boards comprising SA Post Office non-executive directors, executive directors
and the holding company executives who are appointed in a non-executive capacity to the subsidiary
boards. The managing director of the subsidiary company acts as the executive director of the subsidiary.
The relationship between the subsidiary companies and the SA Post Office, as the shareholder, is governed
by the individual shareholders’ compacts between the holding company and the subsidiary. The shareholder
compact, as well as spelling out the roles and responsibilities of the parties, outlines the performance targets
to be met by the subsidiary in terms of the overall annual strategic plan for the Group.
The Postbank Act has allowed for the creation of the Postbank Company (SOC) Limited as part of the
process of corporatizing Postbank. The processes to register Postbank as a fully-fledged commercial bank
with a banking license and as a SOC are currently underway and will result in changes in the current Group
structure.
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The Group structure is illustrated below.
Figure 25: SAPO Group structure
SHAREHOLDER:
MINISTER OF
TELECOMMUNICATIONS &
POSTAL SERVICES
SAPO BOARD of
DIRECTORS
STAMP ADVISORY
COMMITTEE
SUBSIDIARY
BOARDS
DOCEX
PROPERTY
COMPANIES
CFG
EXCO
GROUP AUDIT
COMMITTEE
RISK MANAGEMENT
COMMITTEE
HUMAN RESOURCES,
REMUNERATION AND
PERFORMANCE
MANAGEMENT
COMMITTEE
POSTBANK
COMMITTEE
IT GOVERNANCE
STEERING
COMMITTEE
SOCIAL ETHICS AND
TRANSFORMATION
COMMITTEE
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PART III:
Strategic Outcomes
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12. Performance Measures
The key performance measures sets out targets to facilitate the realisation of SAPO goals and objectives as
outlined in the Strategic Plan. The achievement of the key performance measures will be closely monitored
by the Executive management team and reported quarterly to the SAPO Board of Directors and other
relevant stakeholders. SAPO aims its hold itself accountable for the delivery and achievement of the key
performance measures. The key performance measures will be cascade to individual performance
management levels.
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Deliver sustainable
developmental
obligations funded from
reserved market
Financial
performance of the
reserved market
Revenue
Develop the
financial model
Implement
model
Implement
model
Develop the
financial model
Develop the
financial model
Develop the
financial model
Develop the
financial model
Cost
Net income
Financial
requirements of
the reserved
market
Capex
Opex
Subsidy
Create a commercially
viable business from the
unreserved markets
Competitive and
Profitable
Market share
Conduct a
market analysis
Implement
strategies
Implement
strategies
N/A N/A N/A
Conduct a
market analysis
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Achieve operational
efficiency and
effectiveness
Profitability
Conduct a
market analysis
Implement
strategies
Implement
strategies
N/A N/A N/A
Conduct a
market analysis
Service standards
Mail delivery
standards
92% 92% 92% 92% 92% 92% 92%
Retail queue
waiting times
7 minutes 7 minutes 7 minutes 7 minutes 7 minutes 7 minutes 7 minutes
Productivity
People
(Mail processing)
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
1800 standard
letters per hour
per person
Transport
Develop and
implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Develop
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Property
(Retail revenue per
square metre)
R791 per square
metre
R910 per square
metre
R1046 per
square metre
R688 per square
metre
R713 per square
metre
R738 per square
metre
R791 per square
metre
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Achieve Leadership
stability that ensures
continuity and
accountability
Vacancies
% staff turnover 10%
5%
5%
3% 5% 7% 10%
Time to fill
vacancies
90 days 90 days 90 days 90 days 90 days 90 days 90 days
Performance
management
Contracts in place 100% 100% 100% 100% 100% 100% 100%
% of organisational
scorecard target
achieved
90% 95% 95% 90% 90% 90% 90%
Achieve labour stability
and improve labour
relations,
Effective Labour
forums
Lost hours due to
industrial action
0 0 0 0 0 0 0
Compliance to
labour agreements
100% 100% 100% 100% 100% 100% 100%
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Time to conclude
agreements
90 days 60 days 45 days 90 days 90 days 90 days 90 days
Achieve financial
sustainability
Profitability
Product
Develop and
implement
model
Implement Implement Develop Develop Implement
Develop and
implement
model
Customer segment
Channels
Revenue R6.733bn R8.365bn R8.856 To be aligned To be aligned To be aligned R6.733bn
Expenses R6.857bn R6.448bn R6.561bn To be aligned To be aligned To be aligned R6.857bn
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Net loss / net profit
Net loss
(R102m)
Net Profit
R1.298bn
Net Profit
R1.540bn
To be aligned
Net loss
(R102m)
Debtors days
Debtors days
outstanding of
20 days
Debtors days
outstanding of
15 days
Debtors days
outstanding of
15 days
Debtors days
outstanding of
45 days
Debtors days
outstanding of
30 days
Debtors days
outstanding of
25 days
Debtors days
outstanding of
20 days
Creditors days
Creditors days
outstanding of
45 days
Creditors days
outstanding of
30 days
Creditors days
outstanding of
30 days
Creditors days
outstanding of
90 days
Creditors days
outstanding of
75 days
Creditors days
outstanding of
60 days
Creditors days
outstanding of
45 days
Stock days
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Develop
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Stock turnover
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Develop
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Implement
efficiency ratios
Balance sheet
SAPO Group
excluding
Postbank)
Solvency <1
Total assets to
exceed total
liabilities
Total assets to
exceed total
liabilities
<1 <1 <1 <1
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Strategic Goal 1: Implement the Strategic Turnaround Plan to achieve a sustainable organisation
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Liquidity
Current assets /
current liabilities
1:1 1:1 1:1 <1 <1 <1 1:1
Gearing ratios
(Debt /equity)
-143% 932% 93% N/A N/A N/A -143%
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Strategic Goal 2: Create a customer centric organisation to restore customer confidence
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual
Target
2016/17
Annual
Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Improve the
customer
experience to
achieve customer
loyalty
Customers Customer satisfaction
Customer
satisfaction
index
40% 50% 60% N/A N/A 40%
Strategic Goal 3: Position SAPO as a key service partner that delivers government services
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Grow to levels of 50
- 55% of SAPO
revenue per annum
Government business
Implementation of
cabinet memo
30% of
Government
business
40% of
Government
business
55% of
Government
business
10% of
Government
business
20% of
Government
business
25% of
Government
business
30% of
Government
business
Number of accounts
Develop and
implement
Implement Implement
Develop and
implement
Implement Implement Implement
Revenue from
Government
Develop and
implement
Implement Implement
Develop and
implement
Implement Implement Implement
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Strategic Goal 4: Corporatisation of Postbank and increase access to financial services,
Strategic Objective
Key Performance
Areas
Key Performance
Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Facilitate the
corporatization of
Postbank
Bank registration
Obtain section 16
approval to register a
bank
50% 75%
100% 10% 20% 30%
50%
Increase access of
financial services to
the unbanked
Provide banking
services
Growth the Postbank
depositors
5% 5% 5% 5% 5% 5% 5%
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Strategic Goal 5: Ensure good corporate citizenship and corporate governance
Strategic
Objective
Key Performance
Areas Key Performance Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Ethical
Leadership
Improving the
ethical
environment of
the organisation
Effective ethics office
Establish the
ethics office
Effective
monitoring and
reporting
Effective
monitoring and
reporting
N/A N/A N/A
Establish the
ethics office
Sustainability
targets
Environmental
sustainability
Reduce electricity
consumption
Reduce electricity
consumption by
3% over prior
year
Reduce electricity
consumption by
3% over prior
year
Reduce electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce
electricity
consumption by
3% over prior
year
Reduce total carbon
emissions
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Reduce 2.5% of
total emissions
from prior year
Legal
compliance
Adherence to
PFMA
Elimination of Irregular
expenditure
Reduction of
100%
Reduction of
100%
Reduction of
100%
Reduction of
50%
Reduction of
75%
Reduction of
100%
Reduction of
100%
Minimise fruitless and
wasteful expenditure
Reduction of
100%
Reduction of
100%
Reduction of
100%
Reduction of
50%
Reduction of
75%
Reduction of
100%
Reduction of
100%
Effective risk
and
governance
Risk management
Implementation of the Risk
Mitigation Plan to support
the STP
100% 100% 100% 100% 100% 100% 100%
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Strategic Goal 5: Ensure good corporate citizenship and corporate governance
Strategic
Objective
Key Performance
Areas Key Performance Indicator
2015/16
Annual Target
2016/17
Annual Target
2017/18
Annual Target
2015/16
Quarter 1
2015/16
Quarter 2
2015/16
Quarter 3
2015/16
Quarter 4
Internal control
environment
Operational audit issues to
be resolved in a timely and
effective manner to
maintain a sustainable
control and governance
framework
zero operational
audit issues
outstanding
longer than 90
days
zero operational
audit issues
outstanding
longer than 60
days
zero operational
audit issues
outstanding
longer than 30
days
0 > 120 days 0 > 100 days 0 > 90 days 0 > 90 days
Effective
stakeholder
management
Stakeholder
relations
Stakeholder satisfaction
survey
Develop and
Implement survey
80% 90% N/A N/A N/A
Develop and
Implement
survey
Timely submissions of
statutory reporting
requirements
100% 100% 100%
100% 100% 100% 100%
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PART IV:
Appendices
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13. A – Strategic Turnaround Plan
Attached in a separate document
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14. B – List of Products and Services
Product Lines Product and service
Letter Mail Bulk mail (Ordinary letter mail statements; Invoices; accounts)
Direct Mail (addressed and unaddressed)
Registered letters
Postage included envelopes
Distribution of parcels (e.g. research docs; valuable items such as
credit cards and legal docs)
Box & Private Bag rentals
Promotional Mail & Advertising Mail
Product: Magazine Mail
Product: Infomail
Secure Mail
Safe Mail
Postage-Included Envelopes
Hybrid Mail
Mailroom services
Messenger Service
Franking
Postage stamps & philately items
Commemorative stamps and envelopes
e-Registered Mail
Database Management
List provision services
Geo-mapping services
Banking Savings accounts (Smart Save, Bonus Save)
Group savings accounts (Bakgotsi)
Debit cards (Flexi, Pension Flexi, Mzansi)
Investment accounts (Term Save, Term Save Plus)
Non-banking Financial
Services
Pay a bill (payments to Corporates)
Prepaid airtime
Lottery
Money transfers
Government bonds
Corporate share issues
Business solutions Mobile Based Solutions – Bulk & Premium Rated SMS
Notifications & USSD Applications
Internet Based Solutions – Electronic Bill Presentment &
Payments Solution. Web Based Online Payments Solutions
Personal Certificate Class 1, 2,3 and 4
SSL Certificate
Certificate Authorities
Registration Authorities
Software Customisation
PKI Training
Secure Fax
Fax and Photocopier
Parcels
Overnight Express to doors
Overnight Express to counters
Counter to Door
Door to Counter
Economy Service
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Product Lines Product and service
Home Deliveries
Brokerage – drive-aways
Same day delivery
Saturday delivery
After hour service
Customised solutions (safe-hands, red bin, closed loop)
International service
Access to the back offices of the courts
Door to Door
Point to Point
International Brokerage
Semi Consolidated and Bulk Freight
International Clearing and Forwarding
Customised solutions – closed loop, safe hands
Warehousing
Standard 3 ton container
Shelved Container
Ventilated/Insulated Container
Half Container
VALUE ADDED SERVICE (SURCHARGE)
CG Guaranteed Service – applicable to all above
De-stuffing Service – applicable to all
Storage
Cross Border Brokerage
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15. C – List of related legislation
No Legislation impact SAPO
1
Administrative Adjudication of Road Traffic Offences Act, No. 46 of 1998
2
Banks Act, No. 94 of 1990
3
Basic Conditions of Employment Act,75 of 1997
4
Broad Based Black Economic Empowerment Act, No. 53 of 2003
5
Compensation for Occupational Injuries and Diseases Act, No. 130 of 1993
6
Customs and Excise Act, No. 91 of 1964
7
Criminal Procedure Act, 51 of 1977
8
Consumer Protection Act, No. 68 of 2008
9
Drugs and Drug Trafficking Act, No. 140 of 1992
10
Electronic Communications Act ,36 of 2005
11
Electronic Communications and Transactions Act, No. 25 of 2002
12
Employment Equity Act, No. 55 of 1998
13
Financial Advisory and Intermediary Services Act, No. 37 of 2002
14
Financial Intelligence Centre Act, No. 38 of 2001
15
Income Tax Act, No. 28 of 1997
16
Labour Relations Act, No. 66 of 1995
17
National Environmental Management - Air Quality Act, No. 39 of 2004
18
National Energy Act, No. 34 2008
19
National Environmental Management - Waste Act 59 of 2008
20
National Payment System Act, No. 78 of 1998
21
Occupational Health and Safety Act, No. 85 of 1993
22
Preferential Procurement Policy Framework Act, No. 5 of 2000
23
Prevention and Combating of Corrupt Activities Act, No. 12 of 2004
24
Prevention of Organised Crime Act, No. 121 of 1998
25
Promotion of Access to Information Act, No. 2 of 2000 - Public Bodies
26
Protected Disclosures Act, No. 26 of 2000
27
Post Office Licence (ICASA)
28
Protection of Constitutional Democracy Against Terrorist and Related Activities Act, No. 33 of 2004
29
Regulation of Interception of Communications and Provision of Communication-related information
Act, No. 70 of 2002
30
Short-Term Insurance Act, No. 53 of 1998
31
Skills Development Act, No. 97 of 1998
32
Skills Development Levies Act, No. 9 of 1999
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33
Trade Marks Act, No. 194 of 1993
34
Trade Metrology Act, No. 77 of 1973
35
Unemployment Insurance Contributions Act, No. 4 of 2002
36
Value-Added Tax Act, No. 89 of 1991
37
Long-Term Insurance Act, No. 52 of 1998
38
Copyright Act, No. 98 of 1978
39
Constitution of the Republic of South Africa, No. 108 of 1996
40
South African Post Office SOC Limited Amendment Bill
41
Protection of Personal Information Act
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16. D – Fraud Prevention Strategy
Group Crime Prevention Strategy and Plan
Apart from the direct losses stemming from fraud, theft, mail violation and corruption, acts of crime and
dishonesty a secondary effect and equally damaging, is the impact on the Company’s image and brand.
Individuals and syndicate elements continually vary their initiatives and modus operandi in targeting specific
products/assets as well as reengineering their ways and means to overcome operational and financial
processes, in fulfilling their criminal objectives.
The single key factor that most negatively impacts upon security and subsequent financial loss is the lack of
compliance by employees to the instructions, procedures and systems that govern business operations. This
is compounded by the failure of supervisory staff and operational management, to effectively apply and
ensure the relevant control measures.
The ability of the South African Post Office to maintain a competitive advantage within an environment of
direct competition, ensuring customer trust and service reliability is positively influenced by the Company’s
ability to effectively detect and prevent incidents of criminality, financial misconduct and dishonesty. It
remains an ever challenging objective to identify those areas where human behaviour in conjunction with
system and product weaknesses create the opportunities and environment for irregularities to be committed,
which contribute to financial loss.
Accountability and control which will enable the prevention of criminality, financial misconduct and
dishonesty, is vested within management and all its employees, with the Security and Investigation Services
fulfilling an internal preventative and investigative responsibility.
The sustainable detection and prevention of incidents of criminality, financial misconduct and dishonesty can
only be achieved through a multi-faceted approach that includes the following:-
? Adopting a preventative style of investigating irregularities with an emphasis upon cause analysis
? The development and deployment of strategic crime prevention strategies
? Directing the integration of physical and electronic security into Business Unit planning
? Overt and covert crime intelligence collection techniques
? The implementation of an effective crime information management system
? Establishment of internal and external partnerships
The investigation and prevention of acts of criminality within the Post Office and its subsidiaries are focussed
upon the following:-
? Postal Crime and Offences relating to:-
? Theft, secretion, wrongful diversion and a unauthorised disposal of mailbags and postal articles
? Violation, damage, destruction, unauthorised opening of mail and postal articles
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? Postal Revenue Offences relating to:-
? Forgery of postage stamps and money orders
? Re-usage of postage stamps with the intent to defraud
? Theft, misappropriation and embezzlement of money and postage stamps
? Bulkmail and franking machine fraud
? Commercial Offences relating to:-
? Fraud with the inclusion of postal order -, cheques -, credit card -, savings bank and
? Pension fraud
? Corruption and collusive tendering for contracts
? Unauthorised expenditure of postal money
? Theft of equipment and post office assets
? Cyber crime
? Crimes Against Postal Property and Identity relating to:-
? Armed robberies at post office premises
? Hi-jacking of postal vehicles
? Housebreaking (burglary)
? Malicious damage to property
? Crime through the Mail, Postal Financial Systems and IT Infrastructure relating to:-
? Illicit prohibited substance trafficking
? West African Fraud Schemes (Nigerian “419” scams)
? Dangerous Goods and Mail Bombs
? Child pornography
? Money laundering
? Mail fraud
? Cyber crime
National Fraud Prevention Plan:-
The Group’s Fraud Prevention Plan (NFPP) is aligned in accordance to Par.14 of the National Treasury
Practice Note 4 of 2009/2010 issued in terms of Section 52 of the Public Finance Management Act as
well that of King III principles.
The National Fraud Prevention Plan (NFPP) of the South African Post Office is not only limited to
compliance to the Public Finance Management Act (PFMA) and the Treasury Regulation 29.1.1. The
Company considers the Plan as imperative to the business, but is also aware of prevalent fraud and
corruption risks that its businesses are exposed to.
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In doing business, the Post Office expects all its employees and organizations that are in any way
associated with it to be honest and fair in their dealings with and on behalf of the organization, its clients and
customers.
The main objective of the NFPP is to create a culture which is intolerant of fraud and corruption, by
regulating an ethical conduct of its personnel, clients and customers. The Plan seeks to implement response
mechanisms in all its businesses to deter any form of fraudulent or corrupt activities. It also places
responsibility on the personnel of the S.A. Post Office to conduct their business in a manner that is
conscious of the values of the organization.
The effectiveness of the FPP would be ensured by an all-round approach to fraud and corruption, covering
elements of fraud prevention, detection, response to fraud and raising personnel awareness on fraudulent
and corrupt activities.
There will be a concerted drive to develop and foster a climate within the South African Post Office where all
employees strive for the ultimate eradication of fraud, corruption and theft as well as re-enforcing existing
regulations aimed at preventing, reacting to and reducing the impact of fraud, corruption, theft, and
misadministration where these dishonest acts subsist.
The Group’s Crime Prevention Strategy will continue to focus upon the physical and electronic security of
premises and business operations at post office outlets, agencies and pension pay-out points, as well as the
current focus on products, systems and processes which are targeted by criminal and dishonest elements.
The deployment of the Crime Prevention Strategy will be Business Unit specific to reinforce the current
strategies relating to:
? The prevention of fraud, theft and corruption across all Business Units
? The Mail Violation Prevention Strategy
? Regularization and managing the contracts of security service providers such as guarding armed
response and CIT
? The deployment of cost effective electronic security systems to reduce reliance on physical security
and its associated cost and
? The deployment of a dedicated project management focus with an increased level of crime and
cause analysis, project evaluation and impact.
Its zero tolerance approach towards crime is directly in support of the National Crime Prevention Strategy
(1995) of the South African Government and is deployed in close co-operation and partnership with other
policing and intelligence agencies.
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
1 Electronic Fraud The risk of electronic fraudulent for the purpose of information theft, fraud,
releasing of spyware, viruses, or destruction of files and information due to:
** Unauthorized access to Sapo systems
** Destruction of information
** System errors
** Manipulation of data
** Databse access failures
** Inadequate system administration, etc
10.0 10.00 Improved control requirements:
** Firewalls
** Dedicated access and not shared access
** Access to servers to be controlled
** Improved user name authentication
** Improved password administration
** Database and sytem administration
** Ensuring proper audit trail log analysis
** Database access protocols
- security level segregation & authorisation
** Termination of access to systems
** Remote access control management
2 Postbank Account Opening Procedures Postbank account fraud regarding:
Existing Accounts: Account take over of existing Debit Cards & SB6
Savings Bank Books against fraudulent applications & documentation
or
New Accounts: Application of new Postbank Debit Card & SB6 Savings
Bank Book against fraudulent applications & documentation for the purpose
money laundering
Key causes:
** FICA Non-compliance:
Fraudsters present false ID documents as well as FICA documents by which
new accounts are opened or new cards or savings bank books are issued
** Non-validation of Documents:
FICA documents presented on opening Post Bank Accounts or re-issuing of
cards/saving books at Retail outlets are not validated for authenticity by Retail
and or Postbank.
** Poor Client Verification & Identification:
Teller staff does not have the tools to distinguish between a fraudulent ID and
a genuine ID.
Identity theft is therefore prevalent.
Collusion:
Collusion between SAPO Retail staff and external syndicates
10.0 10.00 Enforcing procedures to ensure that original ID documents are presented at account
opening or re-issuing of new cards or saving books
Online transmitting of all FICA documents to Postbank where a dedicated team
confirms/validates authenticity of documents provided.
Regular scrutiny of account history especially with large amounts circulating through the
account
Implementation of Online Finger Print Verification.
Introduction of the HANIS verification system linking Post Bank to Department of Home
Affairs.
SMS notification to clients of transactions
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
3 Procurement Fraud Procurement fraud resulting in corrupt activities
Manipulation of quotes and or supplying information to service providers that
will assist potential suppliers in winning tenders with kick back to
employees.
Inadequate minuting of PC, EXCO and Board discussions and decisions
(Minutes do not reflect reasons for decisions)
8.0 6.40 Enhance control, transparency and documenting of decisions regarding bids across all
levels of the process
Ensure the following:
** Bid specifications: Document approvals
** CFST: Fulfillment of CFST Charter
** PC: Transparency of discussions & decisions
** EXCO: Transparency of discussions & decisions
** Board: Transparency of discussions & decisions
4 Postage Fraud
(Post Office, Speed Services & XPS)
Losses incurred by the SAPO Group due to:
The understating of mail and parcel volumes & weigths at Branches and Mail
Centres
Corrupt relationsship between teller, client and mail houses.
Inadequate costing models (weight vs volumetrics - SWADDING at PO's and
Logistics)
Pricing - open to interpretation
7.5 6.00 Income Protection to improve role and visibility at specifically at Branches and Logistics
Ensure the availability of Rate Cards at Branches for Speed Services & XPS
Ensure payment against correct weight & volumetrics costing models (SWADDING at
PO's and Logistics)
Improved Mail House inspections by Income Protection
Supervisors to conduct inspections at counter points
Product development must include all affected stake holders
5 Banking Deposit Fraud Inconsistent application of banking procedures at Retail Outlets resulting in
shortage of cash when the deposit is processed at the banking institution.
Banking prepared by one person without a witness present.
Risk of deposit bag and slip being disposed off and unavailable for further
investigations.
While banks have their process of opening and counting the cash under
camera, SAPO Retail does not have this ability and therefore SIS is
dependent on the statements furnished by the SAPO staff responsible for
making up the banking.
Current reconciliation takes between 48 hours to 4 days
Inadequate and reactive monitoring of delayed banking
7.5 6.00 Adequate internal controls should be defined and implemented to effectively detect and
prevent incidents of banking fraud
Management to monitor overnight cash volmues and daily banking reports more
rigorously and institute consequence management for procedural non compliance
The banking Section should improve the reconciliation turn around times. Banking
section to notify Area office immediately in terms of discrepancies.
A witness to be present when banking is prepared
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
6 Property Fraud The potential of corrupting practices due to the manipulation of processes
pertaining to new or extention of lease agreements between SAPO and
Landlords
Non-compliance to the PFMA and Constitution relating to the property
procurement procedures
Disfunctional and fragmented approach pertaining to property management in
SAPO - Dual management of the property portfolio across 2 Business Units:
Infrastructure and Properties
5.0 4.00 Develop and establsih a dedicated Property Lease Procurement Policy in accordance
with the requirements of Law. This should also provide for exceptions with regards to the
leasing of properties in the Rural areas ito USO and ICASA requirements
Centralised Properties section with vetted employees to perform the agreements on
rentals.
7 Qualification Fraud Supplying false qualification documents when applying for vacant positions.
Inadequate criminal record verification
Inconsistent qualifications checks being done by Recruitment and Selection
prior to appointments.
After the fact qualification assessments (Undertaken after an employee has
been appointed - perception that this is delberately delayed until an employee
is appointed)
3.8 3.00 Consistent application of Qualifications Screening Process prior to employment.
Proper checks performed with institutions of issuing qualifications.
8 Pat Label Fraud The Webripos system duplicates Pat Labels when printing and the duplicate
label doesn’t register on the system
3.8 3.00 Re-engineering of system to overcome the duplication
9 Petrol Card Fraud Overstated First Auto statements compared to vehicle fuel capacity and
usage
Corrupt relationships between company employee and petrol
attendants/management/owners.
Inconsistent control and management of petrol cards and transactions
scrutinised by a Logistics co-ordinator.
3.8 3.00 Regular reconciliations and checks (daily) of fuel usage and petrol card expenditure by
line management
Fraud Awareness training
Line Management to stringently apply control measures for the use and allocation of
petrol cards.
SIS to incorporate inspections of the Logistics control process into their risk audits.
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No Risks Risk Description Inherent
Risk
Residual
Risk
Required enhancement of management actions to improve the current risk
management process
10 Receipt Manipulation Tellers and agencies reissue paid receipts of clients to other clients and
enrich themselves with the corresponding amount
Clients issued with duplicate receipts and payments not accounted
Postbox renewal, POS refunds, Third Party Payments, BRS receipting,
Bulkmail receipting, photocopy receip[ts, etc
3.8 3.00 PO Outlets to request next level of authorisation when teller requests point of sale
system to print a duplicate receipt at branch level
Supervisors to conduct regular inspection of payment records
Crime Awareness Sessions, including public education
11 Remuneration Fraud Casual labour: Overstated hours claimed by casuals
Overstated overtime and night shift allowance payments
Claims for overtime and night shift allowance which was not worked
3.8 2.25 Cost Centre Manager to pre-approve hours / additional hours to be worked / additional
hours
12 Leave Fraud Subbmission of fraudulent sick leave applications
Non completion, submission and approval of leave forms/LAS applications for
leave
3.8 2.25 Proper management of leave/absenteeism by cost centre manager
Consequent management
All offices to have access to LAS
13 Payroll Manipulation Financial loss due to the payment of non-existent employees
Appointment of family members or friends who do not work but receive a
monthly salary
3.8 2.25 DoA in terms of the payroll approval processes
Proper employee audit to be conducted (TK 31's to be analysed regularily by responsible
management)
2015/2016 SAPO Group Fraud Risk Assessment (As at 20 April 2015)
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No. Risks Risk Description Inherent
Risk
Residual
Risk
Additional/enhancement management actions required to improve the current
risk management process
1 Governance: BU Accountability Failure by BU's at the operational levels specifically to take ownership of fraud
prevention and detection
Fraud resulting from the failure by management & employees to apply,
enforce and comply with operating standards as well as security and
prevention standards at their respective workplaces
Failure by BU's to adequately address non-compliance to policies and
proceduresmonitor due to the lack of analysing key causes
7.5 6.00 Management & employees to apply, enforce and comply with operating standards as
well as security and prevention standards at their respective workplaces in order to
prevent incidents of crime and dishonesty
Increased consequence management for failure to apply, enforce and comply with
operating procedures
BU's to establish adequate processes to monitor and analyse fraud related incidents in
order to ensure that mitigation actions are implemented
4 Governance: S&I Fraud Prevention Inadequate and ineffective fraud prevention and awareness initiatives by S&I 3.8 3.00 In support of BU's to prevent fraud, S&I is to ensure that it deploys effective fraud
prevention and awareness initiatives across BU levels
Security audits to include farud risk assessments
2 Governance: SAPS Reporting Failure to report fraud related incidents to the SAPS for external investigation
and thereby developing a tolerance for crime within SAPO.
3.8 2.25 BU's in coordination with the S&I to report fraud related incidents more vigilantly to the
SAPS for external investigation.
3 Governance: S&I Incident Analysis Inadequate analysis of fraud related incidents in order to determine causes,
non-compliance to policies and procedures as well as determining modus
operandi
3.8 2.25 S&I to improve on existing processes during investigations that are directed at determing
causes, non-compliance to policies and procedures as well as determining modus
operandi and to share such information with BU's
5 Governance: BU Incident Reporting Failure by management and employees to ensure that all fraud related
incidents are in a timely manner reported to Security and Investigation
Services for investigation. Lack of reporting will influence effective analysis of
fraud incidents
3.8 1.50 Management and employees need to ensure that all fraud related incidents are in a
timely manner reported to Security and Investigation Services for investigation
6 Governance: S&I Investigation Reports Final Investigation Reports submitted to management, are not of an
acceptable quality and do not adequately contain the investigation findings as
well as realistic recommendations in order for management to deploy
preventative actions.
2.5 1.00 Final Investigation Reports by S&I are to be submitted to management timely, and are to
be at an acceptable quality and should contain the investigation findings as well as
realistic recommendations in order for management to deploy preventative actions.
7 Governance: S&I Incident Registration Failure by the Security and Investigation Services to ensure that all fraud
related incidents reported for investigation, are individually registered on the
RUBI system and to inform the reporter of the RUBI Ref No as well as the
particulars of the investigation officer.
2.5 0.50 Security and Investigation Services is responsible to ensure that all fraud related
incidents reported for investigation, are individually registered on the RUBI system and to
inform the reporter of the RUBI Ref No as well as the particulars of the investigation
officer.
Legend - Inherent and residual Risk
Level Description Factor
High Disaster with potential to lead to collapse of business and is fundamental to
the achievement of objects.
>5 <=10
Medium Critical event which can be endured but which may have a prolonged negative
impact and extensive consequences. Major events which can be managed
but requires additional resources and management effort.
>2<=5
Low Event which can be managed under normal operating conditions. >=1<=2
2015/2016 Fraud Governance Assessment (As at 20 April 2015)
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17. E – Risk Register
The Risk Register is included in this section and must be referenced to the legend below.
The Risk Register follows.
No Strategic Goals No Strategic Objectives
1.1 Deliver sustainable developmental obligations funded from reserved market
1.2 Create a commercially viable business from the unreserved markets
1.3 Achieve operational efficiency and effectiveness
1.4 Achieve Leadership stability that ensures continuity and accountability
1.5 Achieve labour stability and improve labour relations,
1.6 Achieve financial sustainability
2 Create a customer centric organisation to restore customer
confidence
2.1 Improve the customer experience to achieve customer loyalty
3 Position SAPO as a key service partner that delivers government
services
3.1 Grow to levels of 50 - 55% of SAPO revenue per annum
4.1 Facilitate the corporatization of Postbank
4.2 Increase access of financial services to the unbanked
5.1 Ethical Leadership
5.2 Sustainability targets
5.3 Legal compliance
5.4 Effective risk and IT governance
5.5 Effective stakeholder management
Implement the Strategic Turnaround Plan to achieve a sustainable
organisation
1
Ensure good corporate citizenship and corporate governance
5
Corporatisation of Postbank and increase access to financial
services,
4
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18. F – Internal Audit Strategy
Internal Audit Statement of Intent:
To provide a professional, independent, objective assurance and consulting service designed to add value
and contribute to the improvement of the SAPO operations.
Functions:
? Development of a risk based, three year rolling audit plan for the entire SAPO Group
? Provision of assurance to all key stakeholders in respect of internal control, risk management and
corporate governance
? Carrying out of appropriate consultancy service and ad hoc investigations at the request of key
stakeholders
? Provision of written reports on the results of the assurance audit work and other services to the
SAPO Executive management and the Board Audit Committee
? Liaison with external audit and other key assurance providers with regard to ensuring an overall
effective, combined audit plan to stakeholders
? Training and development of internal audit staff
Key Strategic Initiatives:
Initiatives 2015/2016 2016/2017 2017/18
1. Maintaining a formal
quality assurance
programme for
Internal Audit
Internal QA
programme
Plan for an External
Independent QA
assessment ito of the
IIA Standards
Continue with internal,
annual peer QA
assessment
programme
2. Maintain an
Internal Technical
Committee within
Internal Audit to
ensure ongoing
assessment of new
and improvement
audit methodologies,
technologies and
review of new
standards from the IIA
and appropriate
application to the
discipline
Internal QA
programme
Continuous review of
audit methodology and
compliance
Ongoing technical
assessment
programme
Ongoing technical
assessment
programme
3. Re-establish the
Information
Technology audit
team
Re Assess the IT audit
strategy based on the
new SAPO business
model and its impact
on the revised IT
strategy of the Group
Develop the
appropriate IT audit
plan with concomitant
IT audit skills – in
conjunction with the
External Auditors
Ongoing
4. Re Assess the overall
audit strategy and
Re assess current
skills and
Maintain and evolve
quality internal audit
Maintain and evolve
quality internal audit
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Initiatives 2015/2016 2016/2017 2017/18
assurance focus
within a new SAPO
business model
competencies and re
alignment of audit
structure and team
focus areas, wrt to risk
management,
governance and
internal control
assurance to all
stakeholders as
relevant to the new
SAPO
assurance to all
stakeholders as
relevant to the new
SAPO
Capital investment programme – NONE
Key performance Indicators:
Indicator 2015/2016 2016/2017 2017/18
Maintain the risk based
effectiveness and
assurance focus of the 3
year rolling audit coverage
plan
Ongoing ongoing Ongoing
Provision of independent,
relevant quality assurance
with regard to internal
control, risk management
and corporate governance
90% achievement of
the BAC approved
plan
Achieve 80% in the
Audit Committee
Satisfaction Survey
90% achievement of
the BAC approved
plan
Achieve 80% in the
Audit Committee
Satisfaction Survey
90% achievement of
the BAC approved plan
Achieve 80% in the
Audit Committee
Satisfaction Survey
Ensure that all planned
audit projects are
completed and reported to
management within an
established benchmark
target of productivity time
planned
90% achievement of
targets as determined
within the Approved
detailed audit plan
90% achievement of
targets as determined
within the Approved
detailed audit plan
90% achievement of
targets as determined
within the Approved
detailed audit plan
Ensure that Internal Audit
appropriately complies
with the SAPO audit
methodology and the
standards of the IIA - this
will be achieved through
the establishment of an
effective QA process
within audit:
(1) annually - satisfactory
results of an internal peer
review
(2) satisfaction levels of
external audit reliance
(3) generally compliant
assessment with 4 yearly
independent review
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
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Indicator 2015/2016 2016/2017 2017/18
Maintain effective
productivity levels so that
the approved risk based
audit plan is
comprehensively
completed in a timely
manner, to ensure
effective assurance is
provided to all
stakeholders
Productivity
Target: 80%
Non Productive time:
20%
Productivity
Target: 80%
Non Productive time:
20%
Productivity
Target: 80%
Non Productive time:
20%
Effectively manage
employment equity targets
of the SAPO within the
audit discipline
Aim to achieve or
better the established
SAPO targets within
IA discipline
Aim to achieve or
better the established
SAPO targets within
IA discipline
Sustain SAPO targets
within IA discipline
(1) Develop a skills matrix
which can be used to
assess any skills and
competency gaps
within Internal Audit
(2) Ensure PD Training
programme are
strategically
established and
qualitatively beneficial
to improving overall
standards in audit
(3) Effective and timeous
management of the
PMS process within
IA dept.
(4) Establish and ensure
effective succession
strategies for the
discipline
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
Generally Compliant
with international IIA
standards
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19. G – Materiality Framework
Materiality and Significance
Treasury Regulation No. 28.3.1 of the PFMA requires a public entity to develop and agree a significance
framework with the relevant entity’s Executive authority. The PFMA prescribes that levels of materiality
(section 55) and significance (section 54) be determined for the purposes of interpretation and compliance.
Practice Notes are issued by National Treasury from time to time to further provide guiding principles on
determining qualitative and quantitative parameters for significance:
? Material disclosure as per section 55 of the PFMA: Disclosure is prescribed in terms of:
? Losses due criminal conduct;
? Irregular expenditure; and
? Fruitless and wasteful expenditure.
Please Note: The above are dependent on the expense categories involved, e.g. if the loss or irregular
expenditure relating to salaries constitutes at least 1% of staff expenses, it will be disclosed in the Annual
Report. However, the disclosure requirements with regard to fruitless and wasteful expenditure is not value/
amount dependent, i.e. any amount qualifies for disclosure.
Transactions are deemed to be “significant” where the rand value exceeds any of the following:
? 1% - 2% of the value of total assets;
? 0.5% - 1% of total revenue; and
? 2% - 5% profit after tax.
The framework of acceptable levels of materiality and significance, applied by the SA Post Office Board of
directors during the 2013/14, for the purpose of the interpretation of and compliance with the Public PFMA is
the following:
? Qualifying transactions are considered to be of an operational nature where they are concluded as part
of the normal business of the South African Post Office, and are concluded within the framework of the
South African Post Office Act, its mandate and delegations of authority, as well as the agreements with
the Shareholder contained in the Shareholder’s Compact and Corporate Plan; and Qualifying
transactions are considered to be of a strategic nature where they are not part of the normal business of
the South African Post Office, are concluded outside the framework detailed above or when they link to
national priorities.
The SA Post Office Group Materiality and Significance Framework for 2013 – 2014 was approved by the SA
Post Office Board of directors as follows:
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? Material transactions and capital expenditure from R50 million and above to be submitted to the Minister
for noting;
? Material transactions and capital expenditure above R100 million to be submitted to the Minister for
approval;
? Material transactions and capital expenditure above R20 million to be approved by the SA Post Office
Board of directors;
? The CEO or his/her appointed designate delegated to approve all transactions across the Group from
R50 million and below;
? The CFG Board delegated to approve material transactions and capital projects within CFG up to R12,5
million and transactions above R12,5 million to be submitted to the SA Post Office Board for approval as
the shareholder; and
? The DOCEX Board delegated to approve material transactions and capital projects within DOCEX up to
R5 million and all transactions above R5 million to be submitted to the SA Post Office Board for approval
as the shareholder.
Should any changes be required in respect of the current Group delegation of authority the Board will make
the relevant submissions to the Minister in this regard.
Materiality Framework 2015/16
Type of transaction
Materiality
Framework
Approved
financial
thresholds for
for 2014/15
Underlying
Principles
Material for Section
55 of the PFMA :
Disclosure in the
annual report,
? Losses due to
criminal conduct;
? The following
should be
disclosed
irrespective of the
amounts involved;
? Irregular
expenditure; and
? Fruitless and
wasteful
expenditure.
Quantitative
? Capital expenditure:
10% of the capital
expenditure budget
line item;
? Other expenditure:
10% of the related
operating expenditure
budget line item,
except for the
following key cost
drivers:
o 1% of staff
expenses; and
o 5% of transport
costs.
Depends on the
related
expenditure
budget line item.
? Section 55: Evaluation of
each loss due to criminal
conduct, in the context of
the expense category to
which it relates to
determine whether it
qualifies for disclosure in
the annual report as
required;
? The value of any
identified fruitless or
wasteful expenditure will
also be reported; and
? In line with good
business practice, as
well as the requirements
of the Act, the South
African Post Office is
committed to the
prevention, detection of
and taking appropriate
action on all irregular
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Type of transaction
Materiality
Framework
Approved
financial
thresholds for
for 2014/15
Underlying
Principles
expenditure, fruitless
and wasteful
expenditure, losses
resulting from criminal
conduct and expenditure
not complying with the
operational policies of
the South African Post
Office. To this end the
South African Post
Office’s systems and
processes are designed
and continually reviewed
to ensure the prevention
and detection of all such
expenditure, irrespective
the size thereof.
Significant for Section
54 of the PFMA:
Notice to the
shareholder and
approval by the
Minister of Finance of
the following
“qualifying
transactions” i.e.:
? Establishment or
participation in
the establishment
of a company;
? Participation in a
significant
partnership, trust,
unincorporated
joint venture or
similar
arrangement;
? Acquisition or
disposal of a
significant
shareholding in a
company;
? Acquisition or
disposal of a
significant asset;
? Commencement
or cessation of a
significant
business activity;
and
Quantitative:
Qualifying transactions of
an operational nature:
? 2.5% of total asset
category;
? Qualifying
transactions of a
strategic nature;
? 5% of asset category;
? Qualitative:
A qualifying
transaction may also
be considered
significant based on
considerations other
than financial when,
in the opinion of the
Board, it is
considered to be
significant for the
application of section
54;
? The decision on
which non-financial
issues may be
considered at any
time requires careful
judgement at a
strategic level, and
should therefore rest
with the Board as
? Maximum
R100 million
however all
expenditure
above R50
million
approved by
the Board
must be
submitted to
the Minister
for noting.
? The PFMA is not
intended to affect the
autonomy of the
organisation, but its
stated objectives are to
ensure transparency,
accountability and sound
management of revenue,
expenditure, assets and
liabilities of the
institutions to which the
Act applies. Therefore,
the legislature could not
have intended for the
public entities to report
and seek approval on
matters of a daily basis;
? The business of the
South African Post
Office is conducted
within the framework of
the mandate, objects
and powers contained in
the South African Post
Office Act, as well as the
business and financial
direction set out in the
corporate plan;
? The South African Post
Office also has defined
accountability and
approval structures from
the Board, as the
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Type of transaction
Materiality
Framework
Approved
financial
thresholds for
for 2014/15
Underlying
Principles
? A significant
change in the
nature or extent
of its interest in a
significant
partnership, trust,
unincorporated
joint venture or
similar
arrangement.
representative body
of the Shareholder.
As an example, the
Board may consider a
qualifying transaction
as significant when it
could impact
significantly on a
decision or action by
the Minister such as a
large retrenchment of
less than R100
million.
shareholder
representative, to the
Group CEO and
management;
? The responsibility for the
day-to-day management
of the South African Post
Office vests in line
management through a
clearly defined
organisational structure
and through formally
delegated authorities.
Delegation of Authority
The SA Post Office Board as the accounting authority, has unfettered powers to direct and control the
business of the company and may delegate the day to day management to the executive management, but
at all times retain full and effective control over the direction and performance.
Although the Board’s ultimate accountability is to lead and manage the Group, some of the responsibilities
are delegated to executive management. In this regard, to manage the business affairs of the South African
Post Office Group, the delegated responsibilities are managed through established governance structures at
Board and Executive Committee level. The Board has delegated certain of its powers to management but
has retained some powers to itself to control the management and strategic direction of the SA Post Office.
The Board may, in instances of crises within the company, revoke any powers granted to management in
order to stabilise the organisation. The Board may also revoke any powers conferred to any official in line
with the role of the Board as the Accounting Authority.
The SA Post Office Board has developed a clear definition of the levels of materiality and significance in
order to determine the scope of delegation of authority and to ensure that the Board reserves specific
powers and authority to itself. The delegated authority from the Board to its subsidiary Boards and to
management is in writing and is reviewed and regulated on a regular basis.
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20. H - Communication Strategy
Objective
The objective of this communication plan is to provide a holistic communications support of the Corporate
Plan and build the reputation of the SA Post Office reputation in the market. The holistic management of the
SA Post Office’s reputation, both internally and externally, is essential in helping the organisation reach the
targets set out in this document. The synergy of the internal and external communications is necessary for
optimal positioning of the SA Post Office as articulated in the Strategic Plan. This will assist in achieving
strong sentiments amongst internal and external stakeholders, motivated and informed employees, a strong
media share of voice, positive image and showcasing the intellectual ‘horsepower’ of the organisation are
key ingredients in building a leading edge company.
Reputation management is not an isolated exercise driven through marketing communications efforts; it is
something that requires the entire organisation to appreciate that our individual behaviours have a material
impact on the group’s reputation. Reputation management is not the sole preserve of communication but
rather belongs to everyone. Through a clear, focused and synergised communications strategy, the SA Post
Office will look to grow and enhance its reputation both internally and externally. Therefore, reputation
management is an exercise of externalising positive organisational developments.
External communications
The purpose of external communication will be to leverage existing platforms to position the SA Post Office
brand as elicited in the Corporate Plan pillars. In this regard, attention will be placed on public influence
media platforms to position the SA Post Office brand as top of mind entity in the eyes of the public. In this
regard, the following external communications areas, which continue from the previous plan, will be
embarked upon:
Segmentation and identifying of targeted media: strong emphasis will be placed on identifying relevant media
who have the ability to shape reputation with audiences nationally, locally and to an extent globally. This will
be cross-referenced against where marketing spend is directed to (paid and unpaid media efforts will be
aimed at the same media platforms as far as possible).
Brand positioning and company reputation management efforts: understanding the mechanics of managing
the SA Post Office’s reputation and leveraging this.
Continuous and systematic communication: based on national and organisational milestones, newsworthy
proactive and reputation-enhancing messages will be developed.
By way of the media strategy, key objectives (in line with the overall company objective) will be helping the
SA Post Office be recognised as a world-class innovative and diversified service provider. In realising this
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objective, there will largely be three primary goals: protecting the reputation of the SA Post Office,
building the reputation of the SA Post Office and strengthening media relations.
Media relations goals linked to KPIs:
GOAL STRATEGY
Protect the
reputation of the
SA Post Office
- Pre-empt issues
- Create and maintain standard operating procedures for communications (crisis)
Build the
reputation of the
SA Post Office
- Leverage media engagement for the key audiences
- Maintain strong visibility in the industry
- Showcase SA Post Office’s expertise (thought leadership)
Strengthen
media relations
- Media engagement optimized based on a segmented approach
-Spokespeople to be well managed and trained
- Be the first port-of-call for the media
- Synergy with advertising
Internal communications
The purpose of internal communications is to lobby internal stakeholders on the company vision and
mission, including soliciting their buy-in on tactical and strategic thrust of key corporate plans. Therefore, the
role of internal communications is to support the organisational objectives of the SA Post Office inwardly,
while also this is synergises with media communications to reflect a holistic picture of an organisation that is
optimal internal as it would be seen externally by public stakeholders (such as customers). Therefore, all
internal communications, as is the case with external communications efforts, are aimed at driving the efforts
of achieving the company vision and mission as outlined in the Corporate Plan pillars. In this regard, the
internal communications efforts will be geared at ‘taking the company’s internal stakeholders (employees,
unions, etc.) along the journey’ of the company as outlined in the Corporate Plan. Additionally, the aim of
internal communications will be retain critical talent, employee goodwill and high moral by positioning the SA
Post Office as ‘the company to work for’. In addition, alongside other internal departments, the internal
communications function will seek to play a greater role in training and development in so far as performance
issues are concerned, and to strategically position business units and the strategic corporate plan amongst
internal stakeholders.
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Based on previous research and the last employee climate survey, 48.5% of employees are not familiar with
a high performance culture whilst 32% of employees are not familiar with customer intimacy and operational
excellence strategic themes. Key observations about the gaps in internal communication include:
Literacy levels – limited at the lower levels of SA Post Office.
Geographical Spread – the SA Post Office locations/offices vary in respect of geographical locations, as
well as infrastructure within each branch.
Numbers – approximately 17,000 employees poses a difficult logistical challenge to meet.
Casual labour – problems around casual labour resulted in unprotected strikes previously. Negative
sentiments often permeate this section of the employee base.
Computer literacy and penetration – a large proportion of the SA Post Office population do not have PCs,
which in effect, translates to a substantial cross-section of the employee base being excluded from electronic
communication.
Communications platforms:
Staff newsletters
Electronic communications platforms (Takenote and Touchingbase)
Notice boards
Meetings
Teleconferences
Video conferences
Podcasts, and
Executive regional roadshows (networking sessions, town-hall meetings, social events and regular
leadership engagement sessions).
It is recommended that the messaging of the Corporate Plan be simplified to reach the diversity of all
employees of the SA Post Office.
Internal communication goals linked to KPIs:
GOAL STRATEGY
Inform and motivate the
employee base
Create a message calendar
Create pre-determined message themes which are linked to external
messages
Channel management - create and maintain a variety of informative,
engaging communication platforms
Support training and development
Content management
Strategically position
business imperatives staff
Keep the organisation abreast with latest corporate plan
developments
Ensure that BU messages align with overall company objectives
Ensure that all business imperatives have an equitable and relevant
share of voice internally
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GOAL STRATEGY
Build and protect the
reputation of the SA Post
Office with internal
audiences.
Manage content dissemination to ensure that content is relevant
Fast turnaround times to counter reputational risks and crises
Position the key
leadership in the SA Post
Office
Strategically position the Board, GCEO and Exco members to
employees
Ensure two-way engaging communications
Key message framework
As indicated earlier, it is vital that internal and external messages synergise to minimise confusion and
maximise on impact when targeting stakeholders proactively. All proactive internal and external should link to
the following, simple core themes for the business:
Business sustainability
? Business sustainability through systems and processes
? the SA Post Office has a core team to wrong-foot competitors and deliver solutions
? A systematic approach being key to business delivery
? If change has to be sustainable, it has to be systematic
? The SA Post Office is facing challenges which are not dissimilar to those faced by other operators;
but we don’t take these for granted
? We need to take advantage of technological changes to provide efficient solutions to our customers
? Execution and focus being key tenets for improved delivery
? Nationwide network is a launching pad for competitive advantage
? Postbank’s value is intrinsically linked to the SA Post Office’s unrivalled network across provinces,
villages and towns
? The rolling-out of the alphanumerical postal codes is a game-changer for the SA Post Office, as it
enables the delivery of mail/parcels to the recipient, affords our customers an economic opportunity,
etc.
? Investment in our people/employees is fundamentally important
? Meticulous distilling of the role of the shareholder is vital – we should add tangible value to the
shareholder
Corporate governance
? Accountability regarding public funds
? Transparency key in how business in conducted at the SA Post Office
Taking the SA Post Office into the future
? The need to view technological enhancements as something to embrace (versus viewing this as a
competitor)
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? The needs of all our customers (including commercial and private customers) will be central in the
development of future product and service offerings
? The SA Post Office will be involved in the roll-out of set-top boxes for instance
? Given the SA Post Office’s unrivalled footprint in South Africa, the organisation will leverage this to
offer customers a variety of postal, communication and transactional services
? Money transfer, financial services, delivery, logistics, STB roll outs will offer a full bouquet of services
to customers that go beyond the traditional mailing services
? The intention is to ultimately create an organisation that is agile, adaptable and reflective of its
significance to the SA economy
? Delivery of our customer promise will be central to the SA Post Office going forward
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21. I - Environmental Strategy
Overview
The South African Post Office recognize that to move beyond greening quick, an immediate paradigm shift
must happen and the focus move from pollution control to pollution prevention, clean technologies, service
stewardship in support of the environmental sustainability vision.
SAW is chosen to represent the impacts we have on the natural environment and represents:
? S (Soil): Buildings, road networks, biodiversity and energy
? A (Air): Fleet and buildings Greenhouse Gas (GHG) emissions
? W (Water): consumption and monitoring
Environmental measurements
The environmental monitoring and measurement tools are key in achieving the environmental objectives, the
indicators below are a tool for measuring performance and a guide for continuous improvement.
Indicators 2015/16 2016/17 2017/18
Energy
Management
Reduce electricity
consumption by 3% from 34,
847, 796.42 kWh to 33, 802,
362.53 kWh
A
Reduce electricity
consumption by 3% over
prior year
Reduce electricity
consumption by 3% over prior
year
Retrofit buildings with energy
efficient lights
Retrofit buildings with
energy efficient lights
Retrofit buildings with energy
efficient lights
Install sensor in buildings Install sensor in buildings Install sensor in buildings
Install 30% of electricity smart
metering system in buildings.
Install 60% of electricity
smart metering system in
buildings.
Install 80% of electricity smart
metering system in buildings
Install 1% of renewable energy
technology on SAPO buildings
Install 2% of renewable
energy technology on
SAPO buildings
Install 2.5% of renewable
energy technology on SAPO
buildings
Carbon
management
Reduce 2.5% of total
emissions for scope 1 from
12,569.69 to 12,255.45 tCO2e
and for Scope 2 from 30,
909.85 to 30, 137.10 tCO2e
B
Reduce 2.5% of total
emissions from prior year
Reduce 2.5% of total
emissions from prior year
Offset 10% of total emissions
Offset 15% of total
emissions
Offset 20% of total emissions
Introduce 0.5% of alternative
energy
Introduce 0.5% of
alternative energy
Introduce 1% of alternative
energy
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Water
Consumption
Reduce water consumption by
3% from 202, 585.06 Kl to
196,507.57 Kl
C
Reduce water consumption
by 3% over prior year
Reduce water consumption by
3% over prior year
Waste
management
Reduce paper consumption by
2.5% from 146.08 tons to
142.43 tons
D
Reduce paper consumption
by 2.5% over prior year
Reduce paper consumption by
2.5% over prior year
Recycle 95% of used paper
E
Recycle 95% of used paper Recycle 95% of used paper
Recycle all waste electronics
Recycle all waste
electronics
Recycle all waste electronics
Recycle all waste cartridge
Recycle all waste
cartridge
Recycle all waste cartridge
Pollution
Prevention
Ensure that 60% of all material
procured by SAPO is
biodegradable
Ensure that 80% of all
material procured by SAPO
is biodegradable
Ensure that 100% of all
material procured by SAPO is
biodegradable
A
Electricity reduction is dependent on the overall number of buildings that are billed. This number may
increase due to fact that SAPO does not currently collect 100% of the bills every month.
B
Scope 2 carbon emissions is dependent on the number of buildings which are reported on, this number
changes with increase in number of buildings reported on.
C
Water reduction reporting is also dependant on the number of buildings that are billed. Currently SAPO
does not collect 100% of data on the buildings that consume water.
D
Paper consumption reporting is dependent on statistics of all papers that is purchased and consumed.
Currently, there is paper purchased that is not accounted for. This number will increase with an improvement
in the data collection systems.
E
There is not target set for the paper recycled following that this aspect is not condoning paper consumption,
rather aims to reduce impact of paper to the landfill by recycling all unwanted scrap and paper, respectively.
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22. J - Abbreviations
Abbreviation Explanation
AARTO Administrative Adjudication of Road Traffic Offences
ATMs Automatic teller machines
BBBEE Broad Based Black Economic Empowerment
BOD Board of Directors
BU Business Unit
CAT1B Category 1B
CFG The Courier Freight Group
CEO Chief Executive Officer
CFO Chief Financial Officer
CIO Chief Information Officer
COO Chief Operations Officer
CFST Cross functional sourcing team
COBIT Control Objectives for Information and Related Technology
CMMI Capability Maturity Model Institute
CPI Consumer Price Index
CSI Corporate Social Investment
DOA Delegation of Authority
DR Disaster Recovery
DTPS Department of Telecommunications and Postal Services
DTT Digital terrestrial television
ED Enterprise Development
ERP Enterprise Resource Planning system
EU European Union
EXCO Executive Committee
FSB Financial Services Board
FAIS Financial Advisory and Intermediary Services
GNI Gross National Income
HCM Human Capital Management
HR Human Resources
ICASA Independent Communications Association of South Africa
ICT Information and Communications Technology
IT Information Technology
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ITIL Information Technology Infrastructure Library
ITU International Telecommunication Union
MOI Memorandum of Incorporation
MoU Memorandum of Understanding
MQ Message Queue
MTEF Medium Term Expenditure Framework
MTO Money Transit Office
OHS Occupational Health and Safety
OHSA Occupational Health and Safety Act
PaaS Platform as a Service
PFMA Public Finance Management Act
PPP Purchasing power parity
RPA Retail Postal Agency
SaaS Software as a service
SADC Southern African Development Community
SAP Systems, Applications & Products
SAPO South African Post Office
SCM Supply Chain Management
SDC Supply and Distribution Centre
SOE State Owned Entity
SOC State Owned Company
SMME’s Small, medium and micro enterprises
STP Strategic Turnaround Plan
SWOT Strengths, weaknesses, Opportunities, Threats
TBVC Transkei, Bophuthatswana, Venda, Ciskei
TOGAF The Open Group Architecture Framework
USO Universal Service Obligation
US
United States
UBS Universal Banking Solution
WRE Webriposte
doc_335167878.pdf