State-owned Postal Corporation of Kenya (PCK) has revealed plans to lay off at least 600 employees as part of a radical shake-up of the business, which has been hurt by new technology.
The corporation, popular as Posta, is also seeking a strategic partner for its courier and financial services division, suggesting that it is exploring a potential spin-off or sale of shares in the two units.
The lay-offs come as part of a sweeping restructuring as the corporation looks to a future beyond the traditional sending of letters and sale of stamps.
PCK Chief Executive John Tonui said that a Cabinet memo on review of the business, the layoffs and how to handle liabilities like unpaid pensions and salaries is ready for tabling.
“We are three months (salary arrears) and handling restructuring. We are restructuring our business by getting a strategic partner for courier and financial services and shedding excess staff of 600. Cabinet memo done to liquidate liabilities for pension, reduce staff costs and reengineer our fleet,” said Mr Tonui in a brief interview without giving details.
Besides unpaid salaries, it owes the Kenya Revenue Authority (KRA) Sh1 billion from income tax deducted from employees and failed to remit Sh326 million to banks after docking the loan repayments from workers’ payslips.
This is in breach of the law that demands timely remittances of staff deductions.
The 600 jobs account for about a quarter or 25.3 percent of PCK’s workforce of 2, 371 as at June 2023.
Under its five-year plan running to 2027, PCK seeks to attain a lean workforce and plans to lay off 145 senior managers from 511 and 504 rank-and-file staff.
“To attain a lean and effective workforce and manage the staff cost to achieve a 50 percent wage bill ratio. Reduce management positions from 511 to 336 positions and address the excess 504 staff through an exit plan package,” the corporation says in its corporate plan.
It faces a host of challenges, such as stiff competition from rival agile parcel operators like bus companies and security firms like G4S as fewer people send letters, with revenues for its branches being hit as a result.
In the past two decades, Internet service providers and the entry of giant telecoms operator Safaricom have drastically cut reliance on PCK for the physical delivery of letters.
Its fortunes have dwindled following an uptake of email, calls, SMS and social media, which has resulted in a major decline in mail correspondence, especially among individuals.
The number of letters sent declined from 11.8 million in 2019 to 1.2 million in 2023. Kenyans have also been less eager to send money orders and inland parcels in a market dominated by mobile money transfer service M-Pesa.
The ailing State corporation reported a Sh50 million profit in the financial year ended June 2023, down from Sh291 million in 2022.
Last year, the firm received a Sh3 billion cash boost from Parliament to aid its turnaround strategy.
PCK is currently struggling to meet its obligations, including payments of salaries and remittance of statutory deductions such as pensions, Paye and bank loans for employees, with the company’s accumulated losses standing at Sh6.23 billion in the financial year ended June 30, 2023.
In addition, it failed to remit Sh1.97 billion in pension and gratuity deductions.
“This is contrary to Section 19(4) of the Employment Act 2007, which requires an employer who deducts an amount from an employee’s remuneration to pay the amount deducted and remit within the stipulated time,” said Auditor-General Nancy Gathungu in a report dated April 30, 2024.
The report also showed PCK incurred interest costs of Sh146.32 million on unpaid pension, with the Auditor General saying the accumulated interest would have been avoided had the corporation remitted the pension dues in time.
The surplus marginally reduced the accumulated losses to Sh6.23 billion from Sh6.28 billion in the financial year ended June 2022, with the company having a negative working capital of Sh6.73 billion.
In the financial year ended June 2023, revenues from the courier business increased to Sh2.04 billion from Sh999.29 million in the 2021/2022 financial year, while revenues from the financial services business declined to Sh29.85 million from Sh41.89 million.
Revenues from the mail business declined to Sh1.23 billion from Sh1.29 billion, while rental income increased marginally to Sh201.55 million from Sh200.84 million.
Courier business is the largest contributor to the company’s revenues at 56 percent, followed by mail (37 percent) and rent (6.0percent). Financial services is the least contributor to the revenues at one percent.
Staff costs declined to Sh1.71 billion from Sh1.77 billion and account for the largest share of spending, taking 48 percent of expenditures. It lost the opportunity to host a digital platform that would allow for cashless payment of government payment services like land rates, passport fees and driving licences.
The government initially sought to ride on PCK’s system as the national electronic payments gateway for the cashless payments.
The PCK system, dubbed Posta Pesa, was to integrate other modes of payments such as M-Pesa and Airtel Money to collect payments.
The cashless system is now under eCitizen, whose platform was developed by a private firm known as Webmasters.
