Kodak moment for postal corporation as State firm

It is a Thursday morning. A number of desks at Posta’s Ronald Ngala branch, Nairobi have no attendants. 

The only one present is seated behind a glass counter at the far end and appears already tired not for being overworked but for have next to nothing on her hands.

Hundreds of letter boxes outside the post offices remain undisturbed, gathering the Nairobi dust. They create a beautiful column of blue rectangular boxes. But none of its owners is checking them today and they don’t appear to have been bothered for long.

Guards manning them are resting their backs on the boxes idling the morning away.

Inside the post office, we enquire how long it would take to send a parcel containing shoes from Nairobi to Eldoret. Being a Thursday the attendant said the parcel would reach Eldoret on Saturday.

Other courier and logistics companies would deliver the parcel on the same day or at worst case scenario the following morning. We leave, promising to return with the parcel, although we knew that would never happen.

It is no wonder that out of the 623 post offices owned by the Postal Corporation of Kenya (PCK) across the country, 250 cannot make enough money to just sustain their operations.

Self-destruction

Posta has remained on a self-destruction path for over a decade, unable to help itself.

It started with the State corporation failing to remit employees’ deductions to the National Hospital Insurance Fund (NHIF), National Social Security Fund (NSSF), Kenya Revenue Authority (KRA) and banks.

PCK’s management would budget for employees’ net salaries only, but on the outside create the impression that they were catering for workers’ gross salaries, eventually hiding the business’ internal bleeding while unpaid dues were piling.

Then as time went by, the corporation started failing to pay suppliers and delaying payments when it did.

When the world was evolving with the internet and mobile services coming to change the way of things, its management remained rigid, insisting on staying on the traditional model of business of mail deliveries, even turning away proposals to run some of the best technologies such as M-Pesa.

“We lost an opportunity when M-Pesa started. PCK had been contracted by Safaricom to be their sole super dealer but it refused. We lost the opportunity of being the biggest money distributor,” PCK Postmaster General Dan Kagwe told Smart Business.

And then when the internet was penetrating across the world, it was the belief of the corporation’s management that it had come to fight its traditional business, again refusing to re-strategise and re-focus its key business lines.

“Over time, we’ve been passed over by technology, we’ve not taken advantage of the technology. We thought it was fighting us instead of thinking how we could have used it to be a player in it.

“There is a disconnect between the traditional post office and what the current generation is asking for,” Mr Kagwe says.

Failure by PCK to embrace change eventually tarmacked its road to the grave, as it lost the trust of clients and partners.

Unskilled workforce

Today the corporation lies bedridden, choked by a bloated ageing and unskilled workforce it is unable to lay off due to cash crises and pilferage as its own workers loot the little that is left. It is also grappling with billions of shillings in unpaid debt and unable to transform its services to the current models on its own. PCK has failed in all aspects of its vision and mission and has killed the trust it had on clients.

Most of its outlets are idle because customers are no longer using their services, after technology replaced most of what it offers.

When we visited some postal offices within Nairobi, many had only attendants and with no clients to serve, while those that had, were a handful.

Mr Kagwe said PCK has been spending Sh600 million to sustain its operations. The corporation has also requested for Sh1 billion from government to facilitate the running of such loss-making postal offices.

As at June, PCK’s pending bills had piled up to Sh5.9 billion, largely owed to unremitted staff deductions, debts owed to suppliers, and Ministries, Departments and Agencies (MDAs).

“Staff cost consume 75 percent of the corporation’s annual turnover. Efforts to rationalise this workforce have proved a challenge given the current financial and cash flow status,” Mr Kagwe said.

Its clients and partners took off long ago when it proved unreliable, and government agencies would rather procure the services of private courier and logistics companies.

“This technically presents an insolvent state of PCK since it cannot meet its obligations as and when they fall due,” Mr Kagwe told parliament on September 22.

2,550 workers

The corporation has a workforce of 2,550 workers with an estimated wage bill of Sh2 billion annually, eating into over 75 percent of its revenues.

When the Covid-19 pandemic hit the country in March, it could only expose the corporation’s weak side as it failed to pay workers almost immediately.

“The losses reported in 2019/2020 can be equated to five months reported over the Covid-19 period, this means the loss for the year 2020/2021 is projected to be more than Sh1 billion, therefore leaving the corporation in an almost deathbed position,” Mr Kagwe told the parliamentary committee on labour.

By July when the corporation started the new financial year, it had less than Sh100 million in its accounts, yet it needed a minimum of Sh300 million to run optimally.

Workers who had not been paid for six months had to petition parliament, to secure a Sh810 million bailout from Treasury to settle the salary arrears.

Its inability to change with times has led it to the mess it is currently in, and getting out without the government’s intervention has proven impossible.

“The failure by PCK to embrace the changes fast enough to withstand the new developments in the sector has affected its revenue and operations,” Broadcasting Principal Secretary Esther Koimett told parliament.

She listed the rapid conversion to digital communications, competition in the postal and courier sub-sector, high costs of infrastructure and the heavy public mandate of providing the Universal Postal Services to all citizens as the main challenges threatening the survival of PCK.

But the organisation had the time to change and let go of all the opportunities, leaving it at a Kodak moment.

Loss-making ventures

“The management has not attempted to get out of their comfort zone and look at the other areas they can exploit,” said PCK’s workers’ union General Secretary Ben Okwaro.

Now, it is unable to purchase infrastructure to enable it provide services the current client needs and is running loss-making ventures. 

ICT Cabinet Secretary Joe Mucheru told parliament the corporation has been living hand to mouth, forcing a situation where Treasury must intervene to save it.

“The current challenge has been that PCK does not have funds even to fulfill some of its obligations. As government, for instance, gives them money sometimes they spend it for their own internal use,” CS Mucheru said.

And now, the corporation together with Treasury and ministry of ICT want it favoured by the government in delivery of its logistics, courier and mail services, as the only solution to inject life back to the dying business.

“You build an institution to serve you as a government. Why would you not use it and instead provide business to somebody else?” Mr Kagwe posed.

Among the things they recommended to the government is that PCK be appointed the preferred clearing and forwarding agent for the government to enforce regulation protecting PCK reserved services of mails weighing up to 350 grammes and letter box services, and it be appointed the preferred logistics service provider, mails and courier delivery institution.

Cash transfers

The ministries also want PCK given back the role to facilitate cash transfers for the elderly, orphaned and vulnerable children, be officially incorporated in the newly formed Kenya Transport and Logistics Network to provide the last mile delivery from the railways and the ports and the government to extend installation of fibre optics to every postal outlet to support rollout postal digital services and transformation.

But it is waking up to the reality too late, since private companies already captured almost the entire markets in courier, logistics and telecommunication services.

An expected restructuring of the corporation as a way to revamp it back to business, will also see it purchase modern infrastructure, lay off about 1,000 workers in a redundancy programme and focus on the key business lines. The government will foot the costs for this exercise.

PCK believes that by moving fully to digital services, it will increase its revenues by about 30 percent, which has been lost to pilferage by workers in the past.

“The ministry will request government support and facilitation to upgrade infrastructure network, debt restructuring, staff rationalization and capital injection for PCK among others,” Ms Koimett said.

Some people, however, believe the efforts to resuscitate the corporation may not bear fruit judging by similar scenes witnessed in the past.

“The government used to give Mumias Sugar company money to pay farmers and workers in the form of arrears. The government would give the company money for bailout until now it is dead. Now I’m seeing a similar case here,” said Malava MP Malulu Injendi.

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