Group overview Strategy 2013/14 to 2015/16

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Group overview

Strategy 2013/14 to 2015/16

Corporate plan 2013/14 to 2015/16 and annual performance plan 2013/14

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Official signoff

• Please refer to page 1 of the Corporate and Annual Performance Plan 2013/14. Mr Mothema has subsequent to the submission on 28 Feb 2013, sign-off and the printed booklet will reflect his signature

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Foreword by the Chairman of the Board

Volatility of global and local economy

National development plan

SA Post Office’s corporate plan re-inforces the goals and priorities of government

SA Post Office primary interface between government and the consumer

Support and play key role in the digital migration project

Support and promote small businesses and entrepreneurs

Continue to invest into our human capital

Drive the Postbank Corporatisation journey

Defines 6 themes that drives the strategy

Ensure delivery through clearly defined pre-determined deliverables

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To be recognised amongst the

leading providers of postal and

related services in the world

Efficient, sustainable

business that is well defined and

well communicated to the public

Renew and design a physical network

for the future

Review internal policies and streamline processes to foster good governance

and efficient decision making

Invest in people, take them along and build capacity for the future

Attain innovation with new products and

services

Align business operations to customer needs,

shareholder priorities and government priorities


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Overview by the Group Chief Executive Officer

Mail continues to be the biggest contributor, however, technology evolution will force innovation

Challenge continue to be agile enough to meet various mandates

Business must be self-reliant and self sustainable

Embrace technology to deliver services more efficiently to our customers

Single minded and focused delivery of the defined programs of work

Significantly invest in our people to enable them to deliver the strategy

Strategy provides a roadmap for diversification

Improve levels of governance

Customer will be the centre of everything we do

Intend to deliver value to Shareholder and our other Stakeholders

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THE PLAN Efficiently connecting all South Africans with the world

We’ll focus in 5 areas…. ….and key programs…. ….to create the future

We’ll do it together

Efficient sustainable business that is well defined and well communicated to the public

Invest in people, take them along and build capacity for the future

Align business operations to customer’s needs, shareholder priorities and government priorities

Review internal policies to foster good governance, streamline processes and enhance efficient decision making

Renew and design a physical network for the future

Innovate with new products and services

AutomationCrime preventionImprove communicationCost optimisationTechnology Infrastructure RenewalEnterprise Wide Application IntegrationEnterprise Knowledge Management and MISPostbank CorporatisationIT SolutionsMulti-Channel DeploymentImprove the control environmentEnvironmental SustainabilitySupporting Government ImperativesProcess OptimisationRevenue GenerationPolicy developmentMarketingPhysical Space optimisationStandardisationCustomer Relationship ManagementTransport consolidationPhysical Infrastructure RenewalHuman Capital Capacity Building


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Vision and mission

VISION

To be recognised among the leading providers of postal and related services in the world.

MISSION

We will enable the nation to efficiently connect with the world by distributing information, goods, financial and government services; leveraging our broad reach and embracing change, technology and innovation

VALUES

We have a passion for our customers and will meet their specific needs through excellent service

We aim to contribute positively to our communities and environmentWe treat each other with respect, dignity, honesty and integrityWe recognise and reward individual contributionsWe embrace diversity in the way we conduct business


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Overview of Group

Financials Total assets : R10.3 billionPostbank deposits: R4.2 billionTurnover: R5.9 billion Profit after tax: R157.8 million

Delivery networkBranches: 1 578Mail centre: 26Agencies: 876Nr of walks: 7 712Nr of households serviced: 13.8million (Boxes, streets, businesses)Mail items delivered per year: Letters 1.4billion

Fleet Motorbikes: 257Vehicles:1 295 Trucks: 376Trailers: 532Forklifts: 66

Financials Total assets : R10.3 billionPostbank deposits: R4.2 billionTurnover: R5.9 billion Profit after tax: R157.8 million

Delivery networkBranches: 1 578Mail centre: 26Agencies: 876Nr of walks: 7 712Nr of households serviced: 13.8million (Boxes, streets, businesses)Mail items delivered per year: Letters 1.4billion

Fleet Motorbikes: 257Vehicles:1 295 Trucks: 376Trailers: 532Forklifts: 66

CustomersPostbank : 7 million accountsVisiting branch network per year: 74millionBusiness customers: 9 000 (Bulk mail & Frank mail)

4 500 (Docex)

PeopleSAPO permanent employees: 14 435SAPO non-permanent employees: 223CFG permanent employees: 792CFG non-permanent employees: 96

Products and ServicesDomestic and International mail servicesBox and private bag provisioningSavings, Investments and transactional servicesPay a BillDigital certificationCourierStamps and philately products

CustomersPostbank : 7 million accountsVisiting branch network per year: 74millionBusiness customers: 9 000 (Bulk mail & Frank mail)

4 500 (Docex)

PeopleSAPO permanent employees: 14 435SAPO non-permanent employees: 223CFG permanent employees: 792CFG non-permanent employees: 96

Products and ServicesDomestic and International mail servicesBox and private bag provisioningSavings, Investments and transactional servicesPay a BillDigital certificationCourierStamps and philately products

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Overview of Business Units

South African Post Office

Post Office:

PostbankMail BusinessRetailE-Business

CFG subsidiary

Docex subsidiary

Property subsidiaries

Corporate and support services

The Mail Business portfolio comprises six core divisions:

Mail Processing; Delivery Management;Transport & Logistics;International Business;Securemail andPhilately.

Logistics (incl CFG and Docex) is the SA Post Office’s business unit offering logistics solutions. Express courier, freight, container and value-added services are fully integrated with the objective of optimising logistics within the business. The Logistics business currently delivers to more than 200 international and 3000 domestic destinations.

Postbank’s primary function is to support Government’s objective of providing affordable banking services to all citizens that need these services. It is through the post office expansive nationwide network that Postbank will be able to provide the following services

Consumer BankingFacilitated LendingInsurance

The physical post office branches are the traditional channels used by the SA Post Office in delivering its products and services to the public. The Retail Channel is made up of 2454 outlets countrywide with 5792 counters

This E-Business Unit will operate as a Business Communication and Transaction solution provider focusing on the electronic fulfilment of communications and transactions through multiple delivery channels such as Hybrid Mail, Mobile, Internet, ICT and self-service channels. Trust and Identity Management solutions will provide the required security and authentication services.

Based on its business model, the SA Post Office will continue to operate support services on two tiers. Firstly, Corporate Services (professional services) that are responsible for Strategic direction, corporate governance, policy and procedures of the Group and secondly Shared/Support Services that are responsible for the management and provision of transactions that are repetitive by nature, to the Group.

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The group works within the following key operating principles that guides its approach to its business operations and strategic planning:

Permanent workforce supplemented by a flexible workforce depending on seasonal fluctuations

Operates with a licence agreement for reserved servicesAdhere to USO targets as published every 3 yearsReceive no funding for USO servicesPay a yearly licence fee to ICASANo cross-subsidiation, work on transfer pricing modelOperates within an approved delegation framework of authority as well as

materiality and significance framework

Operating principles


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Influence of the macro-environment

PoliticalGovernment mandate versus

commercial sustainability Impact of USO funding on

sustainabilityGovernments expectation to reduce

unemployment/create jobs

EconomicAbility to extract value whilst

economy is flatAbility to attract and retain new

customers due to perceived stabilityE-commerce growth as a driver to

parcel revenueFuel cost fluctuationsHuge innovation opportunities

Social Increase in urbanisation by 2020 Difficulty in managing reputation with growth in social mediaHigh public expectations from SOE’sHigh demand from customers for converge servicesThe need for emphasis on international labour standards and ‘decent’ work advocated by the ILO

LegalLegislative impact which includes:PFMA and regulationsCompanies ActCustomer Protection ActPostbank ActBCEAE-tollingBBEEE and PPFAFAIS, FAISAInternational lawAARTO

TechnologyAbility to keep up with latest

innovation and ICT convergenceSlow technology adoption rate

EnvironmentCost of complianceAbility and pressure to meet targetsPerception of post as being

environmentally unfriendly

Effect of industry issues

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COMPETITORS

Entry of competitors in the reserved areaLow barriers to entry in the logistics servicesStrong brands of competitors

CUSTOMERS

Alternative/ substitute products, services and channels provides customers with more optionsAbility to switch becomes easierPricing of electronic products and services relatively more affordable

SUBSITUTE PRODUCTS

Growth of e-communication and servicesCustomer loyalty to big brands

COMPETITIVE RIVARY IN INDUSTRY

Strong competitive industry in all business units

SUPPPLIERS

Supplier disinterest to bidVertical integration

GOVERNMENT

The license agreement and mandate and the ability to fund whilst ensuring sustainability

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Internal environment analysis

These shortcomings as identified in the internal environment has been assessed and key programs of work will be implemented to address them

Loss of exclusivityPossible non-compliance due to complex regulatory environmentCompetition in the traditional marketsIncreasing USO cost, loss of subsidy and license requirementsThreat of new entrants into reserved areas e.g. digital technology convergence

Corporatisation of PostbankCollaborative business partnerships for revenue generationE-based business solutionsEnhancement of government and cross border businessGrowth of new non traditional businessCustomer intelligence to create revenue opportunities

Extensive customer interface points of presenceLarge numbers of customers in key segmentsReputable (Recognised) brand with heritageMail delivery exclusivityGovernment as Shareholder

Infrastructure readiness to support innovation and operational excellenceFragmented sub-optimal product offering Business agilitySegmented business operational modelLack of agility due to protracted decision making processesMisalignment between business skill and business objectivesHigh fixed costs

SWOT analysis

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Strengths Weaknesses

Opportunities Threats


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Maximising the efficiency and effectiveness of existing processes, systems and performance systems

The introduction of new products and services designed to respond to the needs of a demanding market

Entering new lines of business through investment in new capabilities, partnerships and acquisitions

Expanding and capturing business opportunities beyond local borders

International Postal Trends

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Benchmarking with International Postal operators

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Parcels p

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service efficiency

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1 USPS (14) USA 8409 268894 2633 6.4 9 1 6 4

2 Japan Post (17) JPN 5213 103149 7975 6.8 13 5 2 1

3 Korea Post (6) SK 4065 117702 8919 6.3 16 4 1 6

4 Australia Post (15) AUS 5573 166776 6633 6.3 12 2 3 7

5 Canada Post (13) CA 1516 82547 1187 6.4 19 6 7 5

6 Deutsche Post (11) DE 6085 47670 4476 6.4 11 9 4 3

7 Royal Mail (16) UK 5146 121418 845 5.7 14 3 10 9

8 La Poste (12) FR 3638 67868 1184 6.6 17 8 8 2

9 Correios Brazil (2) BR 10278 72364 526 5.9 7 7 12 8

10 Russia Post (4) RU 3484 4295 377 4.7 18 19 15 14

11 Poste Italiane (19) IT 4227 41263 162 4.2 15 11 17 15

12 PTT (1) TU 20375 37384 230 5.4 3 14 16 11

13 Correo Argentina

(5)

AR 8910 37782 611 3.8 8 13 11 17

14 India Post (10) IN 7651 15956 438 5.2 10 17 14 12

15 Pos Indonesia (9) IND 11836 18679 2747 3.9 6 16 5 16

16 SP Mexicano (3) MX 13627 41802 45 3 5 10 19 19

17 South Africa PO

(18)

SA 19871 33420 1184 3.1 4 15 9 18

18 Saudi Post (7) SAU 39275 38196 46 4.9 1 12 18 13

19 China Post (8) CN 24828 8810 503 5.6 2 18 13 10

Various elements are rated individually and scored in terms of overall performance. The South African Post Office’s overall position has increased by one.


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Strategic imperative of mandate

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Maintain financial sustainabilityPosition SAPO to be the delivery arm of Government ServicesDelivery to all household on an equitable basis and achieve delivery standard targets of 95%Increase public’s access to postal services with an additional address target of 1 195 690 for 2012/13Reposition the branch network inline with multi-channel strategyIncrease access to financial services through PostbankAppropriate human resource management and practices including flexible labourFocussing on consolidation, diversification, innovation and growthMeet shareholder’s expectation of affordable & effective postal serviceManage and report responsibly applying triple bottom line (profit, people, planet)

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Universal Postal ServicesExtend basic letter service to all

under-services areas at charges approved by the Authority

Provide mail collection pointsProvide virtual addresses where

no box facilitiesEnsure sufficient Retail outlets to

mail basic letters and other postal items

Improve performance standardsSell postage stampsAccept and deliver COD items,

insured parcels, ordinary parcels, registered letters and SOD

Issue and pay money ordersMust render reserved postal

services by way of vending machines or other devices

Licence agreement


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5 Year Strategy

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Courier

Mail

Retail

Financial Services

Digital certificates

Integrated logistics solutions

Communication solutions

One-stop solutions

Digital solutions

Product centric Solution & customer centric

From To

2013 2014 2015 2016 2017

Physical delivery network

Digital

(New)

Strategy

Leverage physical delivery network to offer world class customised integrated logistics solutions

Leverage physical and digital networks to provide comprehensive offerings from the entire basket of SAPO solutions

Leverage physical and digital networks to offer world class comprehensive communications solutions (e.g. broadband, registered e-mail, encrypted communications)

Develop and offer digital solutions to improve quality and speed of service to customers

Real Estate solutions

Property portfolio

Leverage space utilisation to improve return on investment (e.g. store in store, advertising, warehousing)

Core competence

Pro

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Critical Success Factors

People Process Systems

Implementation of an effective Performance Management and Monitoring system

Alignment of the Delegation of Authority (DoA) and the materiality and Significance Framework with business deliverables.

Integration of systems of business intelligence in decision making and in implementing /improving business objectives.

Appropriate skills mix to drive the strategic intent

Process integration to increase delivery/value.

Institutionalise knowledge management.

Reward and recognition

Succession Planning

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SAPO’S Strategic Goals

Executing strategies

DoC STRATEGIC GOAL 1: ENABLE THE MAXIMISATION OF INVESTMENT IN THE ICT SECTOR ANDCREATE NEW COMPETITIVE BUSINESS OPPORTUNITIES FOR THE GROWTH OF ICT INDUSTRYFOR SOCIO –ECONOMIC DEVELOPMENT

DoC STRATEGIC OBJECTIVE 1.1: Contribute to creating conditions for inclusive economic growth through the development and implementation of ICT policies, legislations and strategies

SAPO STRATEGIC THEME:

• Review internal policies to foster good governance, streamline processes and enhance efficient decision making.

SAPO STRATEGIC GOAL: • Maintain good corporate governance

principle to ensure that we continuously improve as a trusted corporate citizen

SAPO STRATEGIC OBJECTIVE: • Compliance Assurance

SAPO PROGRAMME OF WORK

• Revision of the Group’s operational policies andenforcement

EXPECTED DELIVERABLE

• Approved policies that are relevant and supportive ofefficient decision making

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DoC STRATEGIC GOAL 2: ENSURE THAT ICT INFRASTRUCTURE IS ACCESSIBLE, ROBUST,RELIABLE, AFFORDABLE AND SECURE TO MEET THE NEEDS OF THE COUNTRY AND ITS PEOPLE

DoC STRATEGIC OBJECTIVE 2.1: Support and enable the provision of a multiplicity of ICT applications and services through facilitating the modernisation and deployment of the infrastructure

SAPO STRATEGIC THEME: • Renew and design a physical network

for the future and innovate with new products and services

SAPO STRATEGIC GOAL: • Provide a secure, efficient and integrated

infrastructure for better responsiveness to our stakeholders

SAPO STRATEGIC OBJECTIVE: • Provide an efficient technology platform

• Physical infrastructure renewal

• Providing a secure environment for our clients

STRATEGIC INITIATIVES

• Physical Infrastructure Renewal

• Technology infrastructure Renewal

• Reinforcement of branch security

• Distribution of set top boxes


• Improve physical condition of our buildings

• Improvement in uptime and availability of IT infrastructure systems

• Reduction of postal violent crime incidences

• Delivery of set top boxes to consumers as part of the National Broadcasters digital change over.

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DoC STRATEGIC GOAL 2: ENSURE THAT ICT INSFRASTRUCUTRE IS ACCESIBLE, ROBUST,RELIABLE,AFFORDABEL AND SECURE TO MEET THE NEEDS OF THE COUNTRY AND ITS PEOPLE

DoC STRATEGIC OBJECTIVE 2.1: Support and enable the provision of a multiplicity of ICT applications and services through facilitating the modernisation and deployment of the infrastructure


• Align business operations to customer needs, shareholder priorities and government priorities

SAPO STRATEGIC GOAL:

• Provide affordable postal and related services that meet the needs of our customers

SAPO STRATEGIC OBJECTIVE:

• Meet license and mandate obligations by increasing the accessibility of products and services


• Multi Channel deployment

• Roll out addresses as per mandate

• Roll out points of presence as per mandate


• Improved accessibility

• Provision of addresses to citizens

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DoC STRATEGIC GOAL 3: ACCELERATE THE SOCIO ECONOMIC DEVELOPMENT OF SOUTHAFRICANS AND FACILITATE THE BUILDING OF AN INCLUSIVE INFORMATION SOCIETY THROUGHPARTNERSHIPS WITH BUSINESS CIVIL SOCIETY AND THREE SPHERES OF GOVERNMENT

DoC STRATEGIC OBJECTIVE 3.1: Increasing E-Skills and uptake and usage of ICT


• Review internal policies to foster good governance, streamline processes and enhance efficient decision making


• Maintain good corporate governance principle to ensure that we continuously improve as a trusted corporate citizen


• Social Investment


• E-Rural Access via digital solutions


• Bridge the digital divide gap

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DoC STRATEGIC GOAL 5: CONTRIBUTE TO THE GLOBAL ICT AGENDA PRIORITISING AFRICA’SDEVELOPMENT

DoC STRATEGIC OBJECTIVE 5.1: Implementation of NEPAD and African Multilateral and Bilateral ICT Programmes


• Align business operations to customer needs, shareholder priorities and government priorities


• Provide affordable postal and related services that meet the needs of our customers


• Contribute in the participation in bilateral and international forums to facilitate Africa’s development


• SADC cross border interoperable money transfer services


• SADC Money transfer services implemented at targeted countries

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STRATEGIC GOAL 1: MAINTAIN GOOD CORPORATE GOVERNANCE PRINCIPLE TO CONTINUOUSLYIMPROVE AS A TRUSTED CORPORATE CITIZEN




• Improve the control environment

• Effective risk management

• Compliance Assurance

• Maintenance of ethical business practices


• Improve the control environment

• Entrenchment and improvement of the risk management maturity level


• Promotion of clean audit findings

• Reduction of residual risk profile

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STRATEGIC GOAL 3: INVEST IN OUR PEOPLE BY BUILDING CAPACITY AND IMPLEMENTINGTRANSOFRMATION PROGRAMMES


• Invest in people, take them along and build capacity for the future


• Provision of a conducive working environment that promotes a performance focused workforce

• Supporting Government Imperatives


• Promote a conducive working environment

• Human capital capacity building


• Reduction of injuries on duty

• Advancement of HDIs and women in the workplace

• Integration of people with disabilities in the workplace

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STRATEGIC GOAL 6: REMAIN ENVIRONMENTALLY CONSCIOUS BY PROMOTING GREENPRACTICES




• Environmental sustainability


• Promote good practices in environmental management


• Carbon Management by reduction of emissions

• Reduction in energy and water consumption

• Reduction in paper usage


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Sapo group (2014 – 2018) income statement – forecast

Figures in Rand ThousandActual 2012

Budget 2013

Forecast 2013

Forecast 2014

Forecast 2015

Forecast 2016

Forecast 2017

Forecast 2018

Revenue 5 934 811 6 050 188 5 936 862 6 202 048 6 584 201 6 982 913 7 435 999 7 811 996

Expenses (5 681 370) (6 003 975) (6 068 552) (6 286 627) (6 623 945) (6 984 743) (7 374 002) (7 738 802)Operating profit 253 441 46 213 (131 690) (84 579) (39 744) (1 830) 61 996 73 194

Less: Post-retirement meddical benefits (136 471) (104 868) (140 868) (105 917) (106 976) (108 046) (105 885) (103 767)Operating profit before finance costs 116 970 (58 655) (272 558) (190 496) (146 720) (109 876) (43 889) (30 574)

Net finance income 134 008 142 372 135 744 110 103 117 100 124 539 132 867 141 737

Profit before taxation 250 978 83 718 (136 814) (80 393) (29 620) 14 663 88 978 111 163

Taxation (92 271) (24 183) (4 106) (24 914) (31 126)(Loss) profit after tax before adjustments 158 707 59 535 (136 814) (80 393) (29 620) 10 557 64 064 80 038

Other comprehensive income (net of tax) (852)(Loss) profit after tax 157 855 59 535 (136 814) (80 393) (29 620) 10 557 64 064 80 038

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Sapo group (2014 – 2018) balance sheet – forecast


Budget 2013

Forecast 2013

Forecast 2014

Forecast 2015

Forecast 2016

Forecast 2017

Forecast 2018

Non current assets 2 117 289 2 142 471 2 189 164 2 239 144 2 307 628 2 369 951 2 436 823 2 508 344

Current assets 8 258 278 8 171 141 8 110 426 8 268 514 8 322 526 8 447 749 8 720 211 9 042 415Total assets 10 375 567 10 313 612 10 299 590 10 507 658 10 630 155 10 817 700 11 157 034 11 550 758

Non current liabilities 1 276 614 1 255 305 1 255 305 1 230 635 1 218 328 1 194 389 1 182 445 1 170 621

Current liabilities 6 386 756 6 285 943 6 468 270 6 585 070 6 749 501 6 950 431 7 237 645 7 563 155

Total liabilities 7 663 370 7 541 248 7 723 575 7 815 705 7 967 829 8 144 820 8 420 090 8 733 775

Equity 2 712 197 2 772 364 2 576 015 2 691 953 2 662 326 2 672 881 2 736 945 2 816 983

Total equity and liabilities 10 375 567 10 313 612 10 299 590 10 507 658 10 630 155 10 817 700 11 157 034 11 550 758

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Sapo group (2014 – 2018) cash flow – forecast


Budget 2013

Forecast 2013

Forecast 2014

Forecast 2015

Forecast 2016

Forecast 2017

Forecast 2018

Net cash from operating activities 229 623 (227 505) (128 671) 30 473 (51 794) (4 013) 145 436 171 289

Net cash (to)/from investing activities (1 839 666) (677 504) (677 504) (719 139) (764 904) (815 210) (629 483) (651 714)

Net cash from financing activities (142 856) 45 582 (67 273)

Net increase in deposits from public 273 842 230 201 230 201 269 284 285 441 302 567 320 721 339 965

Cash and cash equivalents 3 277 157 2 018 705 2 633 909 2 214 527 1 683 271 1 166 615 1 003 289 862 828

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Sapo group (2014 – 2016) capex funding requirements

Group Capex Funding Requirements amounts to R4.6bn including management initiatves to turn around the organization

Excluding Postbank corporatization requirements Capex funding requirements amount to R1,6bn.

The Group does not have the ability to fund the Postbank corporatization requirements.

Figures in Rand Thousand

Forecast 2014

Forecast 2015

Forecast 2016

Total

Postbank funding incl Corporatization and Capital Adequacy (1 214 000) (276 000) (1 581 000) (3 071 000)New capital projects (426 197) (567 747) (321 905) (1 315 849)On-going capital projects (414 714) (114 929) (19 447) (549 090)Less: amounts generated from internal cash flow 181 244 53 929 16 447 251 620

Total Group Funding Requirements (1 873 667) (904 747) (1 905 905) (4 684 319)

Figures in Rand Thousand

Forecast 2014

Forecast 2015

Forecast 2016

Total

Postbank funding incl Capital adequacy requirements 1 214 000 276 000 1 581 000 3 071 000Funding to be sourced 659 667 628 747 324 905 1 613 319

Total Group Funding To Be Sourced 1 873 667 904 747 1 905 905 4 684 319

R 363.8 R 371.6 R 383.1 R 306.1 R 180.4 R 52.0

R - R - R - R -

R 377.1 R 366.1 R 293.1

R 117.8 R 157.9

( R 272.5) ( R 289.3) ( R 333.0) ( R 428.9)

( R 572.2)

( R 735.2) ( R 1 000.0)

( R 800.0)

( R 600.0)

( R 400.0)

( R 200.0)

R -

R 200.0

R 400.0

R 600.0

R 800.0

R 1 000.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Historical and Projected Net Profit (R in millions)

Subsidy received Net profit incl. subsidy

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Sapo group net profit (2008 – 2018) before initiatives – September 2012

Initial forecast was a net loss of R272.5m against a budgeted net profit of R59m.Poor performed resulted from:

Loss of SASSA social grant business.Customer consolidation resulting in the decline in mail postings.Postbank fee and interest shortfall.Strike action and property costs.

Cost containment and optimisation initiatives implemented.

Budget 2013

R59m net profit

Before cost optimisation and initiatives

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Sapo group net profit (2008 – 2018) before interventions

13.3 (5.5) (90.0) (188.3) (22.6) (188.8)

(289.3)

(333.0)

(428.9)

(572.2)

(735.2)

363.8 371.6 383.1 306.1 180.4 52.0

- - - -

-R 800.0

-R 600.0

-R 400.0

-R 200.0

R 0.0

R 200.0

R 400.0

R 600.0

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18Subsidy received 363.8 371.6 383.1 306.1 180.4 52.0 - - - - -

Net profit excl subsidy 13.3 (5.5) (90.0) (188.3) (22.6) (188.8) (289.3) (333.0) (428.9) (572.2) (735.2)

Net profit incl. subsidy 377.1 366.1 293.1 117.8 157.9 (136.8) (289.3) (333.0) (428.9) (572.2) (735.2)


366.1377.1 293.1

117.8

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Sapo group net profit (2008 – 2018) after intervention

13.3 (5.5) (90.0)

(188.3)

(22.6)

(188.8)

(80.4) (29.6)

10.6

64.1 80.0

363.8 371.6 383.1 306.1 180.4 52.0

- -

--

-R 300.0

-R 200.0

-R 100.0

R 0.0

R 100.0

R 200.0

R 300.0

R 400.0

R 500.0


Net profit excl subsidy 13.3 (5.5) (90.0) (188.3) (22.6) (188.8) (80.4) (29.6) 10.6 64.1 80.0

Net profit incl. subsidy 377.1 366.1 293.1 117.8 157.9 (136.8) (80.4) (29.6) 10.6 64.1 80.0


366.1377.1 293.1

117.8

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Sapo group (2008 – 2018) cost structure

Operating costs forecasted to outpace revenue from 2013 until 2016.Labour, transport and property costs create a fixed cost structure of approximately 75%.

R 7 812.0

R 7 738.8

R 5 000.0 R 5 200.0 R 5 400.0 R 5 600.0 R 5 800.0 R 6 000.0 R 6 200.0 R 6 400.0 R 6 600.0 R 6 800.0 R 7 000.0 R 7 200.0 R 7 400.0 R 7 600.0 R 7 800.0 R 8 000.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue and Expenses (R in millions)

Revenue Expenses

Expenses 2008 % of OPEX 2013 % of OPEX CAGR 2018 % of OPEX CAGR

Employee benefits 2 708 537 51.7% 3 340 514 53.5% 4.5% 4 389 510 55.1% 5.6%Transport 589 985 11.3% 707 367 11.3% 4.4% 932 234 11.7% 5.7%Property 358 654 6.8% 641 454 10.3% 13.9% 807 724 10.1% 4.8%Other expenses 1 580 612 30.2% 1 552 777 24.9% -2.0% 1 838 542 23.1% 3.5%Total expenses 5 237 788 100.0% 6 242 112 100.0% 4.0% 7 968 010 100.0% 5.4%

Excludes impact of interest

Impact of initiatives 2012/13

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R272m

Initial Loss

R104m

Optimisation

R32m

Further value

R136m

Forecasted Loss

Value derived through cost

optimisation and initiatives

R136m

R168m

Initial Loss

Cost pool R'000 %

Material and services 22 077 39%

Staff expenses 13 058 23%

External service providers 6 463 11%

Communication services 3 446 6%

Marketing 3 000 5%

Cost of insurance 2 800 5%

Travel expenses 1 639 3%

Currency adjustments 1 300 2%

Interest paid 917 2%

Sundry expenses 787 1%

Property expenses 480 1%

Security services 200 0%

Transport expenses 185 0%

Cost optimisation 56 352 100%

Revenue recovery 48 000Total 104 352

Item R'000

Postbank fraud claim settled 28 000Telkom consolidation benefits 4 000

32 000

R 363.8 R 371.6 R 383.1 R 306.1 R 180.4 R 52.0

R -

R - R - R -

R 377.1 R 366.1 R 293.1

R 117.8

R 157.9

( R 136.8) ( R 80.4) ( R 29.6)

R 10.6

R 64.1 R 80.0

( R 200.0)

( R 100.0)

R -

R 100.0

R 200.0

R 300.0

R 400.0

R 500.0

R 600.0

R 700.0

R 800.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Subsidy received Net profit incl. subsidy

50

Sapo group net profit (2008 – 2018) after intervention – November 2012

Revenue remains depressed.Cost optimization to match low revenues.Net position for 2013 forecasted at a loss of R136.8m

Positive impact to bottom line

R136m improvement

51

Sapo group universal service obligation

629 post offices located in the previously under-serviced areas are marginal.Low revenues of R73 million with operating costs of R473 million.Operating costs are high at 74% being fixed costs for staff and property costs.Staff employed in these post offices are 1,693.

R 349.2 R 370.2 R 392.4

R 415.9 R 440.9

R 467.3

R - R 50.0

R 100.0 R 150.0 R 200.0 R 250.0 R 300.0 R 350.0 R 400.0 R 450.0 R 500.0

2013 2014 2015 2016 2017 2018

Fixed cost for USO network (R in millions)

Fixed costs

R 73.2

R 473.2

( R 399.9) ( R 500.0)( R 400.0)( R 300.0)( R 200.0)( R 100.0)

R - R 100.0 R 200.0 R 300.0 R 400.0 R 500.0 R 600.0

Revenue Expenses Loss

Profitability of USO network (R in millions)

Profitability 2013

52

Postbank net profit (2008 – 2018)

140.6

265.1 191.3 249.2

88.8

139.0

10.0

(141.0)

(128.0)

(102.0)

(89.0)

-R 200.0

-R 150.0

-R 100.0

-R 50.0

R 0.0

R 50.0

R 100.0

R 150.0

R 200.0

R 250.0

R 300.0

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18Net profit 140.6 265.1 191.3 249.2 88.8 139.0 10.0 (141.0) (128.0) (102.0) (89.0)


53

CFG net profit (2008 – 2018)

28.4 36.8

30.6

(3.5)

(46.7)

(51.1)

(42.5) (26.2)

0.7

40.8

97.1

-R 60.0

-R 40.0

-R 20.0

R 0.0

R 20.0

R 40.0

R 60.0

R 80.0

R 100.0

R 120.0

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18Net profit 28.4 36.8 30.6 (3.5) (46.7) (51.1) (42.5) (26.2) 0.7 40.8 97.1


54

Sapo group net profit (2008 – 2018) excluding Postbank & CFG

(155.7) (307.4) (311.9) (434.0) (64.7) (276.7) (47.9)

137.6 138.6 206.9 266.1 363.8 371.6 383.1 306.1 180.4 52.0

- -

-

-

-R 500.0

-R 400.0

-R 300.0

-R 200.0

-R 100.0

R 0.0

R 100.0

R 200.0

R 300.0

R 400.0

R 500.0


Net profit excl subsidy (155.7) (307.4) (311.9) (434.0) (64.7) (276.7) (47.9) 137.6 138.6 206.9 266.1

Net profit incl. subsidy 208.1 64.2 71.2 (127.9) 115.8 (224.7) (47.9) 137.6 138.6 206.9 266.1


64.2

208.1

71.2

(127.9)

SAPO to generate profits?


55

Example of annual scorecards (pg 43 to 55)

56

STRATEGIC THEME EFFICIENT SUSTAINABLE BUSINESS THAT IS WELL DEFINED AND WELL COMMUNICATED TO THE PUBLIC

Strategic Goal Strategic objective

Measure Strategic Plans 2014

Annual target

TargetQ1

2014

Q2

2014

Q3

2014

Q4

2014Attain financial sustainability while delivering on Government social mandate

Improve financial performance

Growth in Group revenue by 4.6%

Grow Group revenue by 4.65% on prior year base of R6.105b

Increase of R284m

Increase of R70m

Increase of R125m

Increase of R158m

Decrease of R69m

Grow Postbank non-interest revenue by 10.8% on prior year base of R359m

Increase of R38.8m

Increase of R9.7m

Increase of R9.7m

Increase of R9.7m

Increase of R9.7m

Group operating profit/(Loss) before PRMA

Deliver sustainable returns through, revenue growth, cost optimization and enhancement of efficiencies

Loss of R85m

Loss of R95m

Loss of R102m

Achieve profit of R84m

Achieve profit of R28m

57


Human Resource Plan

58

( QJDJHP HQW

WORK QUALITY OF LIFE

OPPORTUNITIES TOTAL REWARDS

PEOPLE COMPANY PRACTICE

• Physical Work Environment • Work/Life Balance

• People/HR Practices

• Managing Performance

• Brand Alignment • Organizational

Reputation • Diversity • Communication

• Pay • Benefits • Recognition

• Work Tasks • Work Processes • Resources • Sense of

Accomplishment

• Senior Leadership

• Manager • Co-workers • People

Focus • Customers

• Career Opportunities

• Learning and Development

Representationof Africans

Representationof Whites

Representationof WhiteFemales

Representationof Females

Represenatationof Black Females

Disability

Target 75.00% 12.00% 5.34% 47.00% 42.00% 2.00%

Mar-10 63.00% 18.00% 11.21% 43.00% 32.00% 4.00%

Mar-11 64.00% 18.00% 10.78% 44.00% 34.00% 4.00%

Mar-12 65.48% 17.00% 10.28% 45.16% 35.19% 0.44%

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%

Employment Equity

Focus on the complete human capital investment

Focus on disability and women

59


Communication Plan

60

GOAL STRATEGY

Inform and motivate the employee base

Create a message calendar Create pre-determined message themes which are linked to external messages Channel management - create and maintain a variety of informative, engaging communication platforms Support training and developmentContent management

Strategically position business imperatives staff

Keep the organisation abreast with latest corporate plan developmentsEnsure that BU messages align with overall company objectives Ensure that all business imperatives have an equitable and relevant share of voice internally

Build and protect the reputation of the SA Post Office with internal audiences.

Manage content dissemination to ensure that content is relevantFast turnaround times to counter reputational risks and crises

Position the key leadership in the SA Post Office

Strategically position the Board, GCEO and Exco members to employees Ensure two-way engaging communications

61


Fraud Prevention Plan

Comprehensive plan that covers:Fraud and corruptions strategies including controls and detection

Governance committee

Employee awareness

Pre-employee screening

Recruitment procedures

Internal audit

Declaration of interest

Disciplinary processes

62

Corporate plan and annual performance plan 2013/14 to 2015/16

63

Corporate Social Investment Plan

64

Programme Investment Area Partners Outcomes achieved during 2012/13E-Rural Access Digital Inclusion Department of Rural

Development and Land Affairs.

More than 12 000 community members have access to computers and free access to the internet.

Student to Government

Seminar Series

End User training

Digital Inclusion

Poverty Alleviation

Microsoft SA

SALGA

DBSA

LG SETA

Twenty six students have been trained in IT and are doing internships at municipalities across the country. Benefitting not only the students but also thousands of community members being serviced by those municipalities because of better service. More than 10 000 community members benefitted from this programme.

1 900 municipality workers received IT training resulting in better more efficient services being rendered to the communities.

Poverty Alleviation in Tubatse municipality

Poverty Alleviation

HIV/AIDS management

Digital Inclusion

Humana People to People More than 30 000 community members benefit from various skills training and HIV and AIDS awareness programmes.

Trees for schools Alleviating the impact of environmental changes on vulnerable citizens

Food and Trees for Africa

Humana People to People

More than 9 000 people benefit from the planting of trees across the country.

65


Green Strategy / Environmental Plan

66

Ele

ctric

al s

co

ote

rs

Pa

pe

r an

d c

artrid

ge

rec

yc

ling

En

erg

y s

av

ing

glo

be

s

Ca

ns

/gla

ss

an

d p

las

tic

re

cy

cli

ng

67


SAPO Governance Model

68

Shareholder

Board

Board Committees

EXCO

ALCO

Audit

Risk

EOC

DoC

Labour

Customers & Suppliers

Employees

Parliamentary Portfolio Committee

Acts

PFMA

Protocols & Codes of Conduct/Good

Practice

King III

Regulations

AccountabilityInternal Stakeholders

69


Risk Dashboard

70

No Risk Inherent

Risk Control Rating

Residual Risk

1 Inadequate IT infrastructure to support business processes

Very Hugh Weak Very High

2 Insufficient revenue growth Very High Weak Very High

3 High operational cost increases High Weak Very High

4 Poor condition of building infrastructure High Weak Very High

5 Lack of leadership continuity High Weak Very High

6 Disruption of SAPO operations with limited capability to restore operations swiftly

High Weak Very High

7 Poor employee life cycle management (Attraction, development, retention, etc.)

High Weak High

8 Failure to extract group synergies High Weak High

9 Conflicting or unreasonable expectations by the postal regulator

High Satisfactory Moderate

10 Poor employee relations environment Moderate Satisfactory Moderate

11 Regulatory non-compliance Moderate Satisfactory Moderate

12 Criminal Activities Moderate Satisfactory Good

End of presentationEnd of presentationEnd of presentationEnd of presentation

71

Documents

Group overview Strategy 2013/14 to 2015/16