Trouble at Posta as employees go for months without salaries

The Postal Corporation of Kenya (PCK) is facing a cash crunch as the country’s oldest parastatal fights for its survival.

Details from the institution’s financial reports indicate the corporation continues to sink into losses, with the effects of coronavirus sending it further into the red.

Today, Postal Corporation of Kenya employees are counting the second month of going without salaries, even as the State declared them essential service providers in the wake of the spread of the coronavirus pandemic.

Prisca is one of the over 2,000 PCK employees who are counting their second month without receiving their salaries. No explanation has been given by the employer.

“We have not received our March and April salaries and the company stopped remitting our contributions to the National Health Insurance Fund (NHIF) and National Social Security Fund (NSSF),” she said. “We are in a desperate situation and employee morale is low.”

Data from the Auditor General indicates PCK spends Sh2.2 billion annually on employee salaries - translating to Sh400 million for the two months that salaries have not been paid. Postmaster General Dan Kagwe, however, blamed the coronavirus pandemic for the delays in salary payments.

“The coronavirus caught us unawares and when airports closed and passenger planes were grounded, our international business was affected,” said Kagwe in a telephone interview.

“PCK ferries letters and parcels using passenger flights as unaccompanied luggage and with the cancelling of international flights, we were unable to complete orders,” he said.

However, the challenge with the PCK has more to do with a systemic revenue leakage that has persisted unexplained and unchecked over the past several years.

According to data from the industry regulator Communications Authority of Kenya, PCK boasted of Sh13.9 billion in annual revenue from letters, parcels and a nascent money transfer and banking business in 2008.

Over the last seven years, however, revenues for the postal giant have fallen by 76 per cent, and by 2014, stood at Sh3.6 billion.

In the audit for the year ended June 2016, the last audit report on the parastatal made public, the then Auditor General Edward Ouko declared PCK virtually insolvent.

“The current liabilities of Sh5.3 billion exceeded the current assets of Sh1.5 billion, resulting in negative working capital of Sh3.8 billion,” stated Edward Ouko in his audit report.

“The corporation was, therefore, unable to meet its financial obligations as and when they fall due. The corporation was technically insolvent and its financial statements have been prepared on a going concern basis on the assumption of continued financial support from the government and creditors,” stated the audit report.

According to the Auditor General, PCK also wrote off Sh1.5 billion debt to its subsidiary Kenya Post Office Savings Bank. “The trade and other payables balance of Sh5.3 billion as at June 30, 2016, includes Sh1.5 billion being outstanding debt owed to Kenya Post Office Savings Bank,” states the Auditor General in part.

“However, no reconciliation was availed to confirm the accuracy of the outstanding debts.”

In 2017, PCK announced it was laying off 1,280 employees as part of efforts to turn around the firm. Last March ICT Cabinet Secretary Joe Mucheru renewed the tenure of Chief Executive Dan Kagwe in a move that caused anger and frustration among employees and some board members.

Employees are now concerned that the company’s remaining assets and revenues will dim, leaving nothing of the once giant corporation.

Also, prime assets belonging to the PCK have been illegally privatised and risk being fully usurped.

According to the Auditor General, PCK made Sh2.9 billion in cash receipts in the 2016 financial year, down from Sh3.5 billion in 2015.

This included Sh207 million from the sale of stamps, Sh578 million in bulk postage, Sh831 million in Post Office Box Rentals and Sh383 million in EMS services. The report also indicates PCK holds assets worth Sh8 billion in property, plant and equipment.

Out of this, 16.3 hectares of land valued at Sh34.4 million is not registered under PCK’s name.

These include 28 post offices spread out across the country including in Kangundo, Kagio, Kikambala, Kithimani, Siaya, Narok and Rongai as well as underdeveloped plots in Nairobi West and Kajiado.

 Financial analysts

According to the Kenya National Bureau of Statistics, 38 of the country’s 623 post offices have been closed between 2017 and 2019.

A report by financial analysts at Citibank last year indicated that telecommunication service providers need to invest billions of shillings to build the infrastructure to facilitate payments and money transfers for a flourishing e-commerce market.

According to the report, Kenya’s e-commerce market is worth over Sh400 billion in the long term and between Sh70 billion and Sh120 billion in the short to medium term, presenting a lucrative revenue opportunity.

With a wide agency network of physical telecommunication equipment in 585 locations across the country, PCK’s agency network remains a robust and dynamic asset.

The corporation’s premises have been used as Huduma Centre and agency banking sites in remote areas that are under-served with commercial banks and mobile money services.

Last year, PCK and Safaricom launched a partnership dubbed M-Post that was attended by top management from both firms. The service allows consumers to register their mobile phones as digital post offices for Sh300 annually, with PCK saying it hopes to roll out at least five million digital Post Office Boxes in the first year.

“Today we have 450,000 physical post office boxes across the country and with 45 million mobile subscribers, there is massive opportunity to expand this footprint through M-Post,” said Post Master General during the launch.

“Posta’s logistical capabilities and Post Office branch network are well placed to meet this shift,” said Michael Joseph, then Safaricom acting chief executive. Posta boss says the company’s challenges are temporary and will be weathered out. “These are just the usual challenges every company faces but we are certain we will overcome them,” said Kagwe.

“In the current situation, we have been classified as essential service providers and there is a lot we can help the government or private sector to do in terms of providing our delivery services up to people’s homes,” he said.