Friday, March 5, 2021

BotswanaPost in quandary over universal service obligation

The BotswanaPost top line presents an interesting read, but it is the
P76 million losses that catches the eye of someone reading the
corporation’s 2013 annual report.

The state owned parastatal is in a quandary as a Universal Service
Obligation (USO) designated provider on the one hand and operating as
a business on the other.

Its management argues that if it was a privately owned enterprise it would close some of its post offices around the country.

“If we were running the post office as a business, we would have
shutdown 60 post offices,” declared Pele Moleta, BotswanaPost’s Chief
Executive Officer. “What we are asking for is not a bailout, but (payment) for the services rendered. This is a universal obligation.”

Botswana is one of the few countries in the world that does not
provide subsidies for universal access and this looks unlikely to change in
the near future as the Minister of Finance has highlighted in 2014/15
budget speech. This has left the post office to fend for itself.
BotswanaPost is undergoing a major transformation in its quest to
become a half a billion Pula company by 2016. In the process it
faces hurdles.

Its Chairman, Martin Makgatlhe says they were forced to review the
universal service in a bid to make the business sustainable and
sustainable.

“The lack of government subsidy has put immense pressure on
BotswanaPost’s financial situation. This is as we remain obliged to
deliver on our universal service commitment without funding,” he
pointed out.

Previous estimates have shown that the universal service mandate
accounted for 65 percent of BotswanaPost’s costs as post office has to
continue providing a service and enduring costs in the process.

Therefore, the cost of providing universal service access is evidently
impeding majorly on its ability to effectively execute its corporate
strategy, the Icon of Excellence.

The lack of subsidy has dug a P60 million hole into the parastatal’s
books, meaning Moleta and his board have to look at ways of funding the
expansion projects.

Key projects undertook by the parastatal include
modernising the head office, Poso House and upgrading of some
branches.

A suite of solutions of financial solutions include a loan with
Botswana Insurance Fund Management (Bifm) in which BotswanaPost paid a
P15 million interest in the 2013 financial year, which burdens its
finances.

Universal access or Universal Service Obligation (USO) is used mostly
in regulated industries, referring to the practice of providing a
baseline level of services to every resident of a country, according
to Wikipedia. Most countries fund their USO by requiring the incumbent
operator to be the designated USO provider (here BotswanaPost), which
previously held monopoly protections in the absence of a regulator.

But there is hope with the coming of a regulator at the back of
parliament passing of the Communications Regulatory Authority (CRA),
which came in the inflow of Botswana Communications Regulatory
Authority (BOCRA).

The Act will amongst others liberalise the postal sector like the
telecommunications sector that was liberalised in the late 1990s with
the coming of more robust competitors to BTC.

“Significantly, the post services will become a regulated sector and
universal service obligation will be defined, potentially allowing for
funding for universal service access,” revealed Makgatlhe.

Reading the latest Auditor General’s report, BotswanaPost is one of
the government owned entities that are in the red and will need a
bailout to return to black. It is grouped in the same league as
troubled Botswana Meat Commission (BMC) and bleeding Botswana Power
Corporation (BPC) and it is said they will need P3 billion to clear
their debts.

But looking at BotswanaPost books, the parastatal will break even or
even make a marginal profit in the financial year 2014.

In the year ended March 31, 2013, the corporation’s revenues were up 7
percent to P214 million while gross profit rose from P92 million to
P102 million. It is the loss of P76 million that will keep taxpayers
and government worried.

“The significant contributor to this loss is the staff rationalisation
that we undertook as part of efforts to streamline operations, improve
efficiencies and attract new skills critical to the company’s
transformation. The cost to the company was P50 million,” stated
Makgatlhe.

The rationalisation exercise was concluded and 444 employees out of
1100 have left the corporation. At the start of the programme, 660
staff members had applied for exit but after thorough screening of the
applications, 238 were rejected because it was found that their
service and skills were still needed by BotswanaPost.

The P50 million is a once off cost and with the coming of the
calculation of impact of the corporation being a BPC Super Vendor, a
suggested P80 million could be added to poso’s coffers. But this will
not be good news for BotswanaPost, as the government is belt
tightening and wants parastatals to be on its own.

Finance Minister Kenneth Matambo warned of new measures to curb
government’s involvement in the parastatal sector.

“Given theincreased budgetary pressures, Government will be applying strict
criteria for the creation of new parastatals, as a measure to contain
growth in grant subventions to these organisations,” Matambo warned at
the time.

“In addition, Government will continue with its efforts to reform the
governance structures of these organisations to give accountability to
both their Boards and management with clear performance targets. All
these measures will allow Government, as a shareholder, to contain
costs and demand reasonable returns on equity invested in these
organisations, as well as in terms of their contributions to economic
growth and employment creation.”

This means government is watching BotswanaPost with keen interest to
see its progression. Moleta and his team have weathered a number of
storms and they are likely to turn the corner.

“The P40 million universal cost obligation; it must be paid by
government, but it has not been funded in Botswana unfortunately. With
the coming of regulator, this will be a contracted obligation,” says
Moleta.

BotswanaPost has to continue providing services even if government
does not want to pay. “Even if people do not come to the post office
on a daily basis, we have to keep it open. We still have to provide
the service”.

If the corporation decides to close some post offices, the decision
has to be taken by the board and consult the government that does not
want to close any post office.

The other dilemma for BotswanaPost is that if it turns the corner and
reports better results, it could also mean government holding back on
paying for services as it is the case in South Africa. The success of
the postman, maybe his undoing, but his failure means scrutiny from
taxpayers who argue that BotswanaPost is becoming a monster and
competing with a small man.

“Everyone who wants to take services to the people, they can partner
with us,” says Moleta. “The future of the postoffice is in mail
combined with technology….that is why we continue to partner with
organisations that want to go out”.

As another way of maximising on income, Poso House has accommodated
the Red Cross and the Internal Audit of Ministry of Finance as a way
of unlocking value.

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