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South Africa's postal service has announced plans for a massive overhaul aimed at improving and expanding its range of services through a three-year investment programme that will see a major boost to the organisation's infrastructure.



On September 4, South Africa Post Office (SAPO) chairperson Vuyo Mahlati unveiled a $360m capital expenditure programme aimed at building on the recent turn around of fortunes of the national mail carrier.



"We are happy to announce we will increase capex from $41m in the last financial year to $123m [this year]," Mahlati told a press conference in Johannesburg, announcing year-end results. Spending would increase to $128m in 2009 and then drop to $111m in 2010.



Under the plan, 60% of the funds are to be spent on building new facilities and improving property infrastructure, with the remaining 40% to be used to increase access to information and communications technology.



Acting CEO Motshoanetsi Lefoka said that in the past year, SAPO has built 47 new post offices and upgraded 48. Each branch serves just under 14,000 customers, with the optimum figure being closer to 10,000.



According to Mahlati, this year's state support will be directed into the capital expenditure programme, rather than as in the past, in shoring up operations, with a further $27m coming from SAPO's own cash resources, which currently stand at around $625m. The balance is expected to be raised through loans.



The state still provides $41m a year to SAPO, though this has been reduced from the $82m it received just four years ago.



Nick Buick, SAPO's chief financial officer, said there are plans to further reduce the level of state assistance, but it will remain at its present level for the next two years as the post office carries out its investment programme.



The new investments were not the only glad tidings announced this week. The release of the year-end financial results for South Africa Post saw the continued resurgence of the once ailing service.



Having recorded profits of just $3.75m in 2003, SAPO's results for the financial year ending March 31 showed a trading profit of $65m, an 85% increase on the previous year's returns.



Part of the reason for the turnaround has been the post office's efforts to diversify its operations, launching a banking service through its branches, as well as starting up specialised courier and logistics services.



SAPO has also modernised its operations, introducing electronic billing services and upgrading its technology, resulting in a strong increase in the volume of traditional mail services, which saw 7% growth, well up on the global average of 3.3%.



Overall, the post office's revenue for the year rose by 8% to $680.5m, due to increased mail volumes and strengthening performance of some of its subsidiary units, with SAPO's banking operation Postbank seeing a 21% rise in the number of new accounts over the 12-month period.



The post office had been a loss maker right up until 2000, when it started to record modest profits.



The post office needed to deliver some good news, having been embroiled in a damaging controversy that is now headed to the courts. SAPO is facing a defamation lawsuit lodged by its former CEO, Maanda Manyatshe, who is suing the post office for $38m after being accused by his successor, Khutso Mampeule, of involvement in irregularities over tenders. Communications Minister Ivy Matsepe-Casaburri removed Manyatshe from his post earlier this year.



There is also an ongoing investigation into claims that SAPO paid out $833,000 to a legal firm for services that were not delivered.



According to Mahlati, SAPO has faced problems over how it conducted tender processes, mainly regarding procurement and recruitment, but this was being addressed.



"At this point we understand where the main problems are," she told a press conference on August 29. "We won't sit here and say we are clean (but) we have an understanding and a grip on it."



Buick acknowledged that SAPO has had problems in the past but was in the process of turning itself around.



"We were indeed a sick organisation then," Buick said at the same press conference. "But we then decided to vigorously drive profit growth. We have since seen our profits soar to $34.7m and turnover reach $695m. We are leaner and meaner. We are debt free."



Having embarked on its large-scale restructuring, SAPO has not only avoided red ink in the ledger but is well on the way to becoming a highly successful venture that the state does not need to prop up. If it can resolve its legal disputes and deliver on Mahlati's promises of a total overhaul of procedures and structures, it will continue to post handsome returns.
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