Courier charges set to rise over Xmas as regulator protects Posta monopoly
Customers seek services at a Postal Corporation of Kenya branch in Nakuru. The CCK has directed private courier firms to raise their charges in a move that could protect the corporation from competition. Photo/FILE
What you need to know:
CCK has established Sh150 as the minimum fee chargeable by courier companies for parcels weighing under 350 grammes.
The drop of the rates to below set minimum has been attributed to competition within the sector and from telecommunication operators with more efficient and faster means of communication.
Those who breach the pricing requirement risk prosecution and a fine of up to Sh300,000.
The Communications Commission of Kenya (CCK) has ordered courier firms to raise their prices to the regulatory minimum in a move seen as meant to protect the troubled State-owned Postal Corporation of Kenya (PCK).
The industry regulator has established Sh150 as the minimum fee chargeable by courier companies for parcels weighing under 350 grammes.
“CCK has noted with concern that a number of courier service operators are violating the law in respect to the rates chargeable for basic letter services. It is therefore notified for information that those breaching this tariff are required to revert to the correct rates or risk legal action,” read the public notice by the CCK.
Communication is considered a basic service and governments are obliged to support or protect institutions that offer the service in a bid to ensure they reach areas that are not commercially viable.
In Kenya, Postal Corporation is charged with offering the universal service and is protected in the distribution of letters by being granted the privilege of the market tariffs.
Other service providers are mandated to charge a minimum of five times the PCK fee. Currently, PCK is charging Sh30, implying that the others must charge above Sh150. Parcels above 350 grammes are open to competitive pricing.
Some companies with distribution networks across the country have opted to ride on this network to offer courier services.
Owing to the nature of their business, they are able to record faster delivery times and charge more competitively as this is not their core business.
Such firms include transport firms 2NK, Mololine, Easy Coach buses and the Nation Media Group, among others.
The drop of the rates to below set minimum has been attributed to competition within the sector and from telecommunication operators with more efficient and faster means of communication.
Those who breach the pricing requirement risk prosecution and a fine of up to Sh300,000.
“CCK has communicated the rate but we wonder why they have to do it yet it is a liberalised market. For our regular customers we charge them Sh100, there is so much competition,” said a matatu operator, who sought anonymity. There are about 130 licensed operating courier firms.
With ongoing national examinations, the volume of letters being dispatched is expected to go up as relatives and friends send success cards to the candidates.
The volume of letters sent domestically has been on a decline with the increased usage of mobile phones and electronic mail.
According to CCK data, the volume of letters sent locally dropped by 32.2 per cent in the year ending June to 74 million compared to 109 million in a similar period last year. At the same time, the volume of courier items sent dropped by 22 per cent to 1.6 million.
Despite the drop in volumes, the sector has continued to enjoy improved revenues, indicating that it is charging the existing customers a premium so as to keep afloat. CCK data shows that the revenues this year rose to Sh5.6 billion from Sh5.2 billion last year.
The good revenues have attracted other players into the sector who have increased their outlets and network at a time when PCK has been cutting jobs and closing some of its branches.
Unlike the PCK rates which are at a flat rate, other courier services have graduated rates depending on the ease of accessibility. This allows them to be more commercially efficient.
Courier firms contacted charged between Sh200 to Sh600 with North Eastern attracting the highest rate.
Owing to their existing structures, the new companies are not making huge investments with most of them relying on their existing travelling staff.
This has seen the value of investments being made in the sector drop over a four year period to Sh148 million as at end of June compared to Sh798 million invested in 2008.
Though the courier services are not the core business of some of the new entrants they have to factor staff costs, rent expenses and annual licensing fees in their price structure.
