….as management struggles to reduce costs of operations
State owned postal service entity Botswana Post continues to record high financial losses and demands high number of subsidies from government, with the recent annual results showing that it lost P27.5 million last year.
According to the latest results released last week, BotswanaPost which recorded P34 million and P36 million financial losses in 2014 and 2015 respectively, is failing to record profits due to high costs of doing business in the postal industry. Financial highlights in the report show that BotswanaPost costs increased from around P 277 million in 2015 to around P366 million in 2016 and added that after achieving a 17% growth in overall revenue, cost of sales grew faster than revenues.
Commenting on the results, BotswanaPost CEO Cornelius Ramatlhakwane said “We are still making a loss and we’re still at risk of insolvency. Our biggest challenge is still around our cost of sales, which increased by 21% and administrative expenses which grew by around 4%.” He stated that besides the cost of sales, another biggest challenge is finance costs. “The current loan structure is a burden on the company’s financials. Due to that, the good operating profit that we’ve made this year, resulted in a P27 million loss before tax,” said the CEO.
The Botswana Post board chairperson Polokoetsile Motau has indicated that because of its history of loss making, the company has eroded its capital and capital base and requires funding to alleviate this problem. “Our capital continues to be eaten away by the losses we make,” he said, adding that under the current model of providing services, it is difficult for Botswana Post to be profitable.
“Ordinarily, a business would not want to provide services in unprofitable areas, but there is an obligation placed on us by the government to provide universal access to our services. This is what makes us bleed,” Motau explained.
Botswana Post has indicated that to control costs of operation, it is targeting certain costs that have been troublesome and all staff members are working hard to drive these costs down. “Management indicated that on a weekly basis, they track performance of the entity by reviewing cost-reduction targets and we are looking forward to reduce telephone, cleaning and security costs. “By managing people better so that they are able to take their leave and work less overtime, we are also making sure staff costs are contained,” management noted.
The company also stated that to improve its capital, management continues to implement a working capital management strategy: “In the reporting year, through the Operational Efficiency and Performance Improvement Scan, we streamlined the business after discovering that 18% of the workforce (head office) was consuming 44% of the payroll. The norm in the services industry is that a head office consumes 20% to 30% of the payroll. This process also saw 174 people (38 temporary employees, 95 part-time employees and 41 interns.”
When providing an outlook for its business, Botswana Post stated that there is potential for growth following increase in online trade. The entity said as the mail business is in decline, largely because of technological developments, the company decided to move into e-business and e-gov space, “We’ve seen a trend in Botswana where people are buying online and, going forward, our parcels-delivery business will be the engine for growth of our mail business. Further, we are moving into the electronic and the financial services space to meet the growing demand for these types of services from our customers.”