Posta strategy shifts signal heightened pain of disruptions

From dangling tax exemption on rental postal boxes to entering the logistics and customs business, 2018 has so far been eventful for the Postal Corporation of Kenya —summing up the ripple effects of an escalated battle for survival facing postal service providers globally.

In a radical shift that has rattled the traditional universal postal services, instant, electronic communications are increasingly dislodging the material exchange of documents at a speedy pace, while e-payments are deposing the once popular cheques and postal orders.

Internet penetration has been fuelling this shift as well as a decline of the business, which were first created to provide the communications infrastructure and services essential for socio-economic growth.

Physical delivery networks for letters and parcels largely fulfilled these objectives until recently.

The upsurge of contact-free communications has left the traditional postal services in a turbulent phase.

A debate on whether the once giant empires would crumble is also rife.

As the World Post Day is marked today, attention stays on players such as Posta as they navigate the waters of the fast-changing business environment.

The focus of on historical mandate — delivery of letters and parcels — is tumbling as well as stiff competition from private service providers offering similar services.

Globally, most universal postal services are expected to weather the storm and remain afloat albeit, for now, thanks to close ties with governments and wide geographical footprint.

Posta has this year made business shifts, which reflected its battles to stay afloat in these uncertain times.

Barely a fortnight ago, the corporation announced it had ventured into clearing and forwarding business with an eye on jobs by state agencies including the National Oil Corporation of Kenya and the Central Bank of Kenya (CBK) as well as individuals, mostly car importers.

“Clearing and forwarding is not a cost to implement, it is just manpower that we need and we have the manpower.

“We have 3,000 employees and instead of thinking of redundancy or retrenchments we want to create work for our staff,” postmaster-general Dan Kagwe said on October 27 when he flagged off of a fleet of new motor vehicles for mail and courier services in Nairobi.

In September, Posta effected an exemption of its rental postal boxes from value-added tax in an attempt to woo customers, effectively making it cheaper to rent postal boxes.

wooing customers

The move, aimed at attracting customers to the struggling firm’s services, was part of a proposal in the Finance Bill 2018 to exclude postal and subsidiary services the parastatal currently offers from the levy.

“The First Schedule to the Value-Added Tax Act 2013 is amended in Part II [for exempt supplies] by adding the following new paragraph…Postal services provided through the supply of postage stamps, including rental of post boxes or mail bags and any subsidiary services thereto,” Finance Bill 2018, that has since been signed into law.

Under the revised price regime, an individual post office box now costs Sh2,027 annually compared to the previous Sh2,320.

Posta has been going through difficult financial times, posting a Sh1.5 billion loss last year as its private letter boxes, courier operations and expedited mail service business stagnated.

For example, the total number of money orders issued by Posta decreased by 18.7 per cent from 870,000 in 2016 to 707,000 in 2017, according to the Economic Survey 2018.

Back in 2014 money orders issued were 1.3 million and 1.2 million in 2015.

On the contrary, the CBK data showed that cash transacted through mobile phones hit the Sh3.7 trillion mark in the year to March 2018, lifted by increased uptake of mobile loans.

The CBK data further indicated that volumes transacted between April 2017 and March 2018 grew by Sh219 billion from Sh3.48 trillion in a similar period a year earlier.

Separately, data by the Kenya National Bureau of Statistics report indicates that posted registered and insured items dropped by 4.3 per cent from 921,000 in 2016 to 881,000 in 2017, partly attributable to a 17.2 per cent drop in domestic unregistered correspondences.

In 2013 and 2014 the same items were about one million each. Moreover, parcels handled decreased by 15 per cent from 80,000 in 2016 to 68,000 in 2017.

This decline is attributed to competition from Posta’s more technologically adept rivals and Internet affiliated devices.