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SAPO lawsuit against couriers could shatter e-commerce sector

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E-commerce players have expressed concern that the South African Post Office’s (SAPO’s) court bid to block courier companies from distributing small items could result in disaster for SA’s e-commerce industry.

This after SAPO launched court action against PostNet and the SA Express Parcel Association, aiming to make the post office the only operator that can deliver packages weighing 1kg and less.

The renewed court battle, which stems from 2018, is informed by the Postal Service Act, which stipulates the government entity has the exclusive right to provide delivery services for all letters, postcards, printed matter, small parcels and other postal parcels up to and including 1kg.

If the court rules in favour of the embattled state-owned entity, e-commerce partners believe the impact on courier companies and online retailers would have immense financial and logistics consequences, which could result in long waiting periods for customers receiving small parcels.

Peter Harvey, MD of payment gateway DPO SA, believes that placing limitations on the private courier industry, which is valued at around R20 billion, could have a negative impact on SA’s budding e-commerce sector.

Many smaller e-commerce businesses, which are already dealing with the complexities of competing against larger and even international companies, rely on their courier partners to ensure reliable, secure and fast delivery.

Many of these courier companies are members of the SA Express Parcel Association, with some online retailers and couriers forming part of PostNet’s partnership network.

“There is a strong argument for a robust, well-funded and effective post office. Unfortunately, the track record of SAPO has shown long delivery times and an increasing number of lost, damaged or stolen packages.

“Forcing retailers to use the post office could result in fewer people using this channel and could result in many thousands of online retailers closing their doors,” notes Harvey.

The COVID-19 pandemic has accelerated SA’s e-commerce uptake, with online retailers competing in an extremely competitive landscape – with some consumers choosing this retail channel because of its convenience, and safe and quick turnaround delivery times, he adds.

Peter Harvey, MD of DPO SA.
Peter Harvey, MD of DPO SA.

While SAPO’s delivery turnaround times can take up to weeks on end, private couriers such as DHL,The Courier Guy, FedEx, UPS, CourierIT, Droppa and Globeflight generally complete their local deliveries within two to three working days.

“What’s more, parcel delivery will be mostly to post office branches, which are poorly staffed, have limited trading hours and often have long queues. This is the antithesis of e-commerce,” adds Harvey.

Khathu Mufamadi, founder and CEO of courier services app Droppa, says his company entered the courier industry due to customers’ frustration with the local post office, and if the court rules in favour of the state-owned entity, history could repeat itself.

“This could be yet again a situation of an inefficient national postal service, driven by SAPO’s monopoly in trying to take control of an industry where other small businesses like Droppa are able to provide the service at a cheaper and more efficient manner,” notes Mufamadi.

“Courier parcels less than 1kg contribute to between 5% to10% of our total revenue, and this will have a negative impact on our business.”

Droppa, which also has online retail customers, has a business model premised on owner driver partners who fulfil the company’s deliveries to customers.

“If SAPO wins this case, it could mean that some driver partners will have to lose their income.”

Takealot Group declined to comment on the matter.

Defending the Constitution

The Postal Services Act regulates the operation of unreserved postal services, which applies to all private courier companies in SA. SAPO is the only licensed reserved postal services operator in SA.

In 2018, SAPO filed a complaint against PostNet, arguing it was in contravention of the Postal Services Act.

The Independent Communication Authority of South Africa’s (ICASA’s) Complaints and Compliance Committee later ruled in favour of SAPO, giving PostNet an ultimatum to cease delivering small parcels by March 2020.

A few weeks before the deadline, PostNet obtained an interdict from the High Court, supported by the SA Express Parcel Association.

This resulted in both SAPO and ICASA filing dispute papers to defend their original stance, which supports the Postal Service Act.

In a recent tweet, ICASA explained that the perception it is backing SAPO in the courier delivery push is wrong, as: “ICASA’s mandate is to implement what the law requires.”

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