Can the Post Office be saved?

“If you are riding a dead horse, it is probably best to dismount it.” That was FF Plus MP Hendrik van den Berg in the National Council of Provinces in March this year. He was urging Deputy President Paul Mashatile to stop trying to restore the struggling South African Post Office (Sapo) to health. Sapo is “being kept alive only by sentiment”, said Van den Berg.

Mashatile responded: “Before we can say it’s a dead horse that must be put down, remember it is serving the poorest of the poor, so by the time we say ‘No, this mechanism of the Post Office is not working’, we need to replace it with something that is workable.”

By the letter of the law at home and abroad, Mashatile was correct. The Universal Postal Union obliges its 192 member states to provide affordable basic postal services. This is known as the universal service obligation (USO).

The Postal Services Act of 1998 confirmed Sapo as the service provider fulfilling the new South Africa’s USO. Under this law, Sapo must provide “an acceptable level of effective and regular postal services to all areas including rural areas and small towns”.

Historically, Sapo had always performed this role. There was a post office in every city suburb, town and village, with additional “retail postal agencies” that used third-party businesses in places too small to justify a fully fledged post office. It was bureaucratic but reliable.

Yet 31 years on from the advent of democracy, Sapo is in a death spiral. It is no longer serving “the poorest of the poor”. There is a serious risk that South Africa will become the first country in the world to allow its national postal service to collapse and disappear.

Its letter and parcel deliveries are now unreliable, often not arriving at all, or taking weeks or months where once they took a few days. The worse the service gets, the fewer customers use it.

The irony is that unlike other large state-owned entities such as Transnet and Eskom, which in the early 2000s began steady declines in operational efficiency, governance and financial management, Sapo was actually getting better at that time.

In 1999 the Public Service Commission (PSC), established to monitor the government’s service delivery, lauded Sapo as an organisation “that has achieved remarkable improvements in its service delivery”.

The PSC noted that 1.99-billion pieces of ordinary mail were delivered in 1999. It found that, in the first quarter of that year, 92% of posted items arrived within the advertised time. Post offices in the US, Germany and the UK — whose Royal Mail was the model for Sapo more than a century ago — were considered peer organisations at that time.

In the early 2000s, Sapo launched, through Postbank, a “paymaster to the nation” project to enable recipients of social grants to open a Postbank account, followed by the Mzansi account for the unbanked. In 2004/2005, Sapo achieved the first operational profit in its history. In 2009/2010, it became a convenient and popular agency for renewal of vehicle licences.

However, Sapo was not sufficiently agile in adapting to the market as faxes and then e-mail replaced paper correspondence by post. In 2013 Sapo reported its first-ever net loss, with operations crippled by a series of strikes.

Private courier services such as PostNet and The Courier Guy took the gap and moved into a largely unregulated sphere, building share in a parcels market that was growing because of e-commerce deliveries from the likes of Takealot, which was founded in 2011.

Just one year into the red, Sapo received the first of many bailouts from the National Treasury.

Onto the scene of the impending train wreck stepped Mark Barnes, a charismatic former investment banker and head of treasury at Standard Bank, and founder of Purple Capital.

“The day I decided I wanted to get involved was in 2015,” he says, “when I read in the newspaper that the Post Office was going to retrench 25% of its workers and close 652 branches. I approached then deputy president Cyril Ramaphosa and said: ‘Isn’t there another way?’”

Barnes was appointed CEO in January 2016. He envisioned a unified model where Sapo and Postbank would handle mail, e‑commerce, logistics, postal banking and financial services. At the time, Postbank could only take deposits. Barnes wanted it to also offer unsecured loans, insurance, credit for SMEs and more — all delivered affordably via Sapo’s vast network.

He saw huge potential in leveraging the more than 6-million existing Postbank customers and Sapo’s extensive branch presence to serve the “unbanked masses”, particularly in rural and low-income areas. Sapo, he says, had a “commercially irreplaceable footprint”. Every post office was also a Postbank branch.

Barnes aimed to generate revenue equally from financial services, e‑commerce deliveries and traditional mail. Drawing from global postal models in China and Japan, he saw Postbank as the financial engine powering this structure. He argued that separating Postbank from Sapo risked undermining critical functions such as social grant and pension payouts.

But the government opposed his vision, insisting on separating Postbank from Sapo, apparently due to risk and governance concerns. Barnes resigned, believing that without integration, neither entity could thrive.

He points out that when he left, Postbank had R4.6bn in cash on deposit and no debt. It also already had the South African Social Security Agency contract for payment of social grants.

The separation of Postbank from Sapo was handled badly, causing operational difficulties and affecting the distribution of grants. Additionally, Sapo was not compensated for losing the substantial value of Postbank.

After resigning, Barnes made an offer — personally and via a private sector consortium — to buy a 60%-75% stake in Sapo in a public-private partnership (PPP). The offer provided that 10% of the shares would go to staff, with a controlling stake “for an international logistics player, which would have turned the Post Office into a Southern African logistics play, and a stake for the government”.

This, too, was rejected. Khumbudzo Ntshavheni, the communications minister at the time, made it clear in February 2022 that “the South African Post Office is not for sale” and confirmed that the government would retain ownership and control. In parliament in March 2022, Ntshavheni dismissed Barnes’s offer, stating: “He couldn’t fix it with R3.5bn” — referring to government funding previously provided when he was appointed CEO.

However, Barnes says the R3.5bn was a capital injection he requested as a condition for taking the job, to pay off existing debt. If the government had accepted the PPP proposal, Barnes says the state would have been paid about R5.2bn, the estimated NAV of Sapo.

“PostNet and courier companies can do the job very well,” Barnes said in an interview with Newzroom Afrika, “but how many people in Mthatha can afford to pay for a courier? So you have to have, side by side, the developmental and compulsory mandate.” In return for being forced to deliver letters uneconomically to rural areas, “you get the right to exclusively deliver packages weighing less than 1kg”.

In theory, Sapo does indeed have that potentially lucrative right. But as a 2022 parliamentary report noted, “Sapo’s monopoly on reserved services exists in law but not in the market. Private operators dominate even in categories Sapo should reserve.”

And in 2023, Sapo admitted in court papers that private companies were eating into its reserved services and that it could not compete on service quality. In short, it has been unable to enforce or defend its rights due to service collapse, poor performance and weak regulatory backing.

By the time an aggrieved creditor took Sapo to court in 2023, it had a staggering R8.7bn in liabilities, prompting provisional liquidation. The creditor was Bay City Trading 457, a property company that leased premises to Sapo.

Yet in March 2019, Sapo had no debts. After Barnes left, it received a R2.4bn capital injection. It has to be asked how Sapo burnt up more than R11bn in five years.

The then minister of communications & digital technologies, the ANC’s Mondli Gungubele, pleaded Sapo’s case against liquidation at the Pretoria high court. Gungubele (now deputy minister for the same department) said in an affidavit that the government would release an additional R3.8bn, contingent on a judgment in favour of business rescue. Judge Elmarie van der Schyff approved Sapo’s application on that condition.

In December 2023, Sapo’s creditors approved a plan put forward by business rescue practitioners (BRPs) Anoosh Rooplal and Juanito Damons. They called for rationalisation of Sapo’s footprint and workforce, a renegotiation of its debt obligations and a pivot towards a “future-proof” business model.

Creditors would have to settle for between 12c and 18c for each rand owed — better, said the BRPs, than what they’d get in the event of liquidation. Resetting the balance sheet, it was argued, would be a critical step towards achieving profitability by March 31 2027.

The BRPs reported in November 2024 that Sapo’s provisional liquidation order had been lifted. Ramaphosa assented in December to the South African Post Office SOC Ltd Amendment Bill, which opens up Sapo for full digitalisation and offering a diversity of services.

In an interview in December, communications minister Solly Malatsi (DA) was excited about the act’s potential. He told the FM he intended to leverage Sapo’s infrastructure to roll out SA Connect, “which aims to connect public facilities, traditional authorities and government buildings”.

Rather as Barnes envisaged, Malatsi imagined community hubs that “boost our efforts to enhance access to connectivity, particularly in rural communities and townships, where in the largest part of those communities, for them to access broadband connectivity, it means going outside their homes”.

Malatsi has a point. According to the 2024 General Household Survey published by Stats SA last month, only 5.6% of households in Mpumalanga have a fixed internet connection at home, compared with 17.4% nationwide and 27.2% in the country’s eight metros. At the bottom end is rural KwaZulu-Natal, where 0.4% of households have internet access. 

However, the legislation cannot be actioned while Sapo is in business rescue, and the business rescue process cannot be completed without that R3.8bn promised in court in July 2023. Two years on, it has still not been paid — and was not provided for in the 2025 national budget.

Even if the fiscus were running surpluses, and in the unlikely event that the Treasury was prepared to give further support, can Sapo be saved in the long term?

The global experience suggests it is possible, with a reduced traditional mail service supported by multiservice outlets that offer colour printing and photocopying, scanning and certification of documents, along with retail stationery — just as private sector operators such as PostNet have done successfully.

The US still has a mail culture and an excellent service. At its operational peak in 2001, the US Postal Service (USPS) delivered 103.5-billion first-class letters, shrinking to 52.6-billion in 2020 — but it remains relevant. It has the capacity to visit every address in America, six days per week, except for extremely remote areas.

James O’Rourke, a professor of management and organisation at the University of Notre Dame, affirms that post offices can make money. USPS turned a $144m profit in the first quarter of financial 2025. He attributes the success to an early and ongoing embrace of e-commerce, particularly as a contractor for last-mile delivery.

Japan and Germany have fully or significantly privatised their post offices, and privatisation has been debated in Brazil and Canada. Tony Blair’s “new” Labour government began deregulating the UK’s Royal Mail in 2000. Today, even as a private company owned by a Czech billionaire, the Royal Mail remains beholden to its USO.

O’Rourke says the loss of Sapo “would provide permission and a blueprint for nations in similar circumstances … The function of democracy depends on ordinary quotidian operations. It isn’t that you can’t afford it, you can’t afford not to have it.”

All national post offices have to deal with the challenges brought by the internet and e-commerce. But the Sapo BRPs argue that Sapo’s current crisis was more a consequence of bad management, increasing unreliability and weak security.

It is not easy to get statistics from Sapo — Malatsi’s office failed to respond to the FM’s repeated requests for comment for more detailed information. But its daily parcel deliveries peaked at more than 2-million in 2019/2020 and are now perhaps down to less than a 10th of that. With fewer vehicles and 6,000 jobs cut under business rescue, many post offices no longer offer parcel services. International parcel traffic and express mail deliveries have dropped precipitously.

Parcel hubs suffer from theft, strikes and IT failures. It is estimated that Sapo now has just 15% of the country’s parcel traffic, mainly small packages in rural areas, along with government-related mail for social grants and legal notices.

In its heyday, the bulk mail industry was driven largely by financial services companies, but revenue has declined sharply from these blue-chip customers. The major banks have migrated most customers to digital platforms, while making limited use of Sapo, mainly for registered mail in cases where physical delivery remains necessary.

Schools, universities and sports and social clubs were traditionally prolific users of traditional letter mail. Listed companies would post thousands of printed annual reports to shareholders. In South Africa, that business has gone digital.

Joburg’s Rand Club, a user of postal services since its foundation in 1887, paid its final Sapo invoice in July 2017. Accounts manager Michelle Davids tells the FM that “all communications to members are via e-mails and we don’t use the post office at all. When we send membership cards to absentee or international members, we use a courier company or they collect when visiting the club in South Africa.”

All this lost traffic will surely never return to Sapo — yet the BRPs identified luring back those customers as a key priority in the rescue plan.

Even if there were still the inclination among former customers, service capacity has steadily shrunk. The Sapo annual report for 2022 noted that its delivery fleet dropped from 1,236 vehicles to 366 — and that was before business rescue.

The loss of a capable and dedicated logistics fleet has led to a reliance on third-party service providers. However, due to arrears payments with these service providers, there are delays in service delivery. And Sapo still relies substantially on a manual paper-based logistics system.

If Sapo is to be turned around, the bulk mail revenue segment is seen as critical. This will require interventions at its mail processing centres and in the logistics value chain, which includes the “last mile” to customers.

The trouble is that Sapo’s infrastructure, rather like Transnet’s rail network, has been collapsing for more than a decade. The modernisation opportunities implicit in Barnes’s plans were squandered, while even the traditional bricks-and-mortar bedrock of the postal network has been slashed to just 540 active branches, from 2,048 in 2021.

Many of the outlets that remain are in poor repair. Malatsi admits that “some post offices have actually been taken over by vagrants. I went to visit one in Nelson Mandela Bay four weeks ago, where one of the largest branches has basically just been dismantled.”

In the major metros, old central post offices were among the grandest buildings in the city, reflecting both institutional pride and the importance of the post office in serving the social and economic needs of the country. Now many are barely functioning or are derelict.

East London’s central post office reflects bygone opulence in its greystone façade. On the inside, though, strips of water-damaged paint sag from the wall, opposite service counters built for 15 tellers, now occupied by two or three.

A Sapo branch manager in the Eastern Cape’s OR Tambo District, who spoke to the FM anonymously for fear of retaliation, says she and many of her colleagues do their best to keep things moving.

She draws R550 of her own money every month to pay for cleaning supplies, landscaping and basic maintenance. Since retrenchments began last year, it’s just her and another employee at the branch, with no phones or computers. They must buy data on their personal cellphones to track parcels and submit reports.

She claims to have been held at gunpoint five times in as many years. “It’s better to be retrenched than to have to work under these conditions,” she says, “because then you can be home with your kids instead of being shot dead.” Three women from the Bizana branch were murdered on duty in 2023, and this branch manager thinks of them often.

Still, she and her colleagues see themselves meeting critical needs every day. People from small villages in the former Transkei are sent to the bigger towns because the local branches can’t perform basic services. When they arrive, “people often sleep outside” waiting for services to come online.

Clearly it will be a huge task to restore Sapo to acceptable operational efficiency, even if on a much-reduced scale. The parcels hubs and remaining post offices need to be fixed and made safe. On top of all the obvious challenges, there is no money to address them, thus continuing the death spiral of ever worse services, fewer customers and falling revenues.

In a bleak report dated April 30 2025, the Sapo BRPs (whose fees to date are estimated to exceed R175m) say that “given the fact that no funding was allocated to the South African Post Office per the medium-term budget speech, austerity measures have been put in place by the BRPs.

“A freeze has been implemented on all capital expenditure such as leasehold improvements and maintenance, building infrastructure upgrades and IT upgrades. Only critical operational expenses are being incurred.

“The amount of R3.8bn is still required to pay the remaining dividends, provide enough working capital to the business, and to invest in certain infrastructure upgrades in order to sufficiently implement its turnaround strategy.”

Constitutional expert Hugh Corder, professor emeritus of law at the University of Cape Town, was a member of the technical team that drafted South Africa’s first Bill of Rights. In an interview with the FM, Corder cites chapter 10 of the constitution to illustrate the “set of goals and values which must characterise the public service”.

Chapter 10’s core principles call for a high standard of professional ethics, efficient resource management, development-orientated public administration and impartial service delivery, among others. 

But, he says, “it’s a standing joke in this country, because there are very few parts of the public service that measure up. This is a set of standards against which the viability of public administration as a whole can be measured.

“The demise of the Post Office is another denial of that set of basic values and principles.”