The SA Post Office (SAPO) will issue tenders to the value of R249 million, before the end of the financial year in March 2011, to upgrade its IT network infrastructure, it told Parliament yesterday.
SAPO CFO Nick Buick said he hopes the tenders would be issued and awarded, and are part of the state-owned entity's plans to diversify its business streams in the face of difficult economic times.
“Mail volumes have a direct link with growth in GDP [gross domestic product]. However, that trend has changed as clients start using more and more electronic means to deliver mail.”
Buick also noted that IT now makes up 52% of the Post Office's annual capital expenditure of R500 million. This is funded from its own revenue, he explained, while the R302 million subsidy it receives from government is used to meet its social and developmental obligations, such as establishing outlets in rural areas.
The government subsidy is due to decline to around R52 million in the medium-term expenditure framework period of the next three years.
He also pointed out that SAPO revenue had been hit with a “double whammy” as the postal business took a fall, along with a drop in interest rates - the primary source of income for SAPO's banking arm - the Post Bank. The banking unit will become a separate, ring-fenced business, within SAPO.
SAPO COO John Wentzel said the upgrade to IT infrastructure will include the “nuts and bolts” of the network, such as fibre-optic cables, routers and other equipment. The project will also look for technologies that the Post Office can use to build other systems in the future, he added.
Wentzel said the Post Office had to find a more efficient way to do business, become a trusted source of delivery to its clients and adapt to the new market conditions.
“We have spent a lot of money on crime reduction methods, including the installation of CCTV in our parcel sorting rooms, and this has paid off. However, there still remains a problem where criminals steal small amounts, such as R100 at a time, and that is very difficult to contain.”
The IT systems will also support the function of Post Bank and have to be robust enough to meet SA Reserve Bank requirements, Wentzel noted.
Encouraging online retailers to make greater use of SAPO would be difficult, as Wentzel said this market had certain needs that were unique to it.
“Online retail customers want an end-to-end experience with their purchases and parcels. Ideally, they want a single tracking number and status of that parcel during its progress. Right now, we cannot offer that.”
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