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MPs, regulator clash over Sh1b Posta bailout plan

BUSINESS
By Frankline Sunday | February 14th 2021

Acting Director-General Communications Authority of Kenya Mercy Wanjau during World Post Day celebrations in Nairobi. [Jonah Onyango, Standard]

The Communication Authority of Kenya (CA) and the National Assembly are at loggerheads over a proposal to inject Sh1 billion annually into the Postal Corporation of Kenya (PCK), dealing a blow to the efforts to revive the ailing parastatal.

The National Assembly had recommended that CA injects Sh1 billion annually into PCK from proceeds of the Universal Service Fund (USF), the authority’s kitty to finance network infrastructure development in marginalised areas.

The proposals are contained in a report by Parliament’s Labour and Social Welfare Committee, following hearings on PCK’s failure to pay employee salaries between March and August last year.

“The financial performance of the institution continued to decline given the adverse effects of Covid-19 as experienced in the economy,” said the report. “Disruption in logistics and supply chain systems adversely affected postal business on global mail conveyance that accounts for 60 per cent of the annual turnover.”

In a rejoinder, CA Acting Director General Ms Mercy Wanjau told The Standard that the proposal to pay out Sh1 billion annually from the USF was not tenable in the near-term.

“The USF is a consultative project and we do plug in to support projects as needed across the ICT sector and this is a commitment we continue to make,” she explained.

Wanjau said the Sh1 billion annual payout was currently untenable and instead the corporation will be supported through a long-term plan.

“PCK needs support as a player in the communication sector yes, but we see it more as a long-term intervention and our five-year plan factors in this support,” she said. “We are also going to enforce the requirement that PCK has exclusive rights to deliver letters below 350g which is currently not the case because of the influx of private courier operators.”

Last year, PCK’s employees through the Communication Workers Union (COWU) wrote to the National Treasury and National Assembly to protest salary arrears, with the government eventually yielding to a Sh810 million bailout that was released in October.

In the submissions made through COWU Secretary-General Benson Okwaro, PCK employees said the Postmaster General and board members are political appointees who serve their own interests and have abandoned their oversight role.

“It has been difficult for PCK to do business for many reasons including lack of foresight by both the board and management to look outside the box and explore new horizons,” says the report.

PCK was also accused of using clients’ money as opposed to only keeping the commissions, with clients like Kenya Power, Nairobi Water, Ministry of Labour and Absa Banklisted as having been affected.

“The union was of the opinion that procurement of services by PCK should be checked,” explains the report. “For example, PCK acquired the services of an enterprise resource planning (ERP) which to date is not complete and the computers serving the ERP are leased instead of being bought which is very expensive.”

The management was also accused of irregular leasing of PCK’s prime properties across the country. “PCK has many assets which include plots and buildings,” states the report.

“There is a new approach of leasing them out in a questionable manner e.g City Square, Kisumu plot, Naivasha Post Office, Tom Mboya Post Office.”

PCK management however defended the move to lease out its premises arguing that the corporation was experimenting with new revenue streams and avenues of reducing costs.

“We signed agreements to lease the postal outlets to operators and this gives Kenyans an opportunity to run the post offices in a sort of franchise model and it also gives us more reach,” explained postmaster Dan Kagwe during an interview last year. Mr Kagwe also said the salary arrears that necessitated the bailout from Treasury were occasioned by the Covid-19, and that PCK could still be a large player in the communications sector if given an annual cash injection of Sh1 billion.

Parliament’s Labour and Social Welfare Committee agreed that the Sh1 billion bailout was necessary alongside other policy reforms.

“PCK has the potential to turnaround and pay dividends to the exchequer by…review of the policy on access to Universal Service Fund in support of the Universal Service Obligation by PCK,” explains the committee’s report in part.

“The corporation urgently requires annual funding of Sh1 billion to support the non-profitable offices in line with revised National ICT Policy 2020.”

The committee recommended that PCK be incorporated in the newly formed Kenya Transport and Logistics Network to provide the last mile delivery from the railway and ports. 

“The government should appoint PCK as the preferred clearing and forwarding agent and logistics service provider, restore payment of the orphaned and vulnerable children and older persons stipend through the post and extend the installation of the National Optic Fibre Backbone to every postal outlet,” says the report.

The last public audit report on the parastatal dating back to the 2016/2017 financial year paints a picture of an entity whose revenues have been declining as costs rise. According to the report, PCK made Sh2.5 billion in revenues for the 2016/2017 financial year, down from Sh2.6 billion in 2015/2016 and Sh3.3 billion in 2014/2015.

The bulk of the parastatal’s revenues (65 per cent) is derived from mail business with 24 per cent from courier services. Five and six per cent of the revenues come from rent and financial agency services. 

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