Consolidating the Strategic View of SAPO

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embracing new frontiers

• Mr Khutso Mampeule Group CEO

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Agenda

• What we promised to deliver on 04 March 2005
• Synopsis SAPO Strategic Focus
• Alignment with Governments Programme of Action
  Review of 2005/06 2006/07 Focus
• Group Budget 2006/07
• Living our Vision
• Conclusion

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Building the Linkages Our March 2005 Focus
Areas
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What we promised in 2005/06

• Corporatisation of Postbank
• Reorganisation of Post Office
• Recapitalisation and resolution of Major
  Liabilities
• Realignment of businesses for financial
  performance.
• Development of PPP framework
• Courier, Transport and Financial Services
• Enhancement of retail business (upgrade of
  infrastructure to allow ICT connectivity
  security)

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What we promised in 2005/06

• 5. Alliance with governmental departments and
  other parastatal for delivery of services
• Pension business
• 6. Improvement of market share
• Grow parcels and Financial Services
• Efficiency improvements Cost Control
• Service Delivery Currently at 94
• Customer Service Excellence
• USO mandate

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What we promised in 2005/06

• 7. Investment in further IT infrastucture
• 8. Implementation of Human Resource Strategy
• Human Resource Capital Development
• Talent Retention and Attraction
• Succession Planning
• 9. Sustainable Profitability

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Synopsis SAPO Strategic Focus
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5 Key strategic themes, Vision Mission

• Vision

• Key strategic themes

To be recognised among the top 10 providers of
postal and related services in the world
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Drive operational excellence to achieve
top-quality at benchmark cost
Achieve customer intimacy and leverage this for
growth in Communication, Logistics and Financial
Services
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• 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
Be governments preferred partner for economic
enablement within the scope of our product and
service offerings and in the delivery of
government services
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Build a high performance culture and develop
capabilities throughout the organisation
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Strengthen the public perception of the Post
Office as a trusted brand
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Post Office Network
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Post Office branches are a unique national asset
Points of Contact Points of Contact

2,550




Unrivalled reach
?
Enables us to leverage this reach to provide
access to Financial Services and Government
Services

ABSA 675
Standard Bank 670
First Rand 650
Nedcor 450
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Best placed to connect previously disadvantaged
areas to the global economy
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Source SAPO
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Mail growth opportunity exists
Different factors point to the opportunity of
growing mail volumes in SA
Source SAPO, McKinsey analysis
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The new organisation value delivery system
Market
Mail
Logistics
Operations
Strategy Marketing
Customer service
Group Support Functions
Retail
Postbank
Source Management workshops McKinsey analysis
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Financial recovery
Reduction in Operating losses over the past years
Million
Profit
Million
Million
Loss
Million
Million
Million
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Review of 2005/06 Alignment with Government
Programme of Action
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Alignment with Government National Objectives
Government National Objectives
Government Key Performance Areas

• Improve state capacity to deliver
• Broadening participation in the second economy
• Increasing competitiveness of the South African
  economy
• Contribute to a better world

• Access to finance
• Access to financial services
• Increasing levels of savings
• Extracting efficiencies from State Owned
  Enterprises (SOEs)
• Positioning SOEs as vehicles for delivery
• Less financial support from Treasury for SOEs

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Improving Capacity of the State to Deliver
Focus Area Key Performance Areas Target 2005/6 Actual 2005/6
Retail Infrastructure Expansion of retail network Connectivity of the retail networks No. of outlets No. of outlets connected 55 71 14 fully functional 71
Mail Centre Upgrades No. of Mail Centres upgraded 2 0
IT Infrastructure New Point of Sales Biometric Solutions for social grants Pilot the solution No. of Beneficiaries Grant budget R50 billion Post Office Share 7 December 2005 0 Completed 517,000 beneficiaries registered
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Broadening the Participation in the Economy
Focus Area Key Performance Areas Target 2005/6 Actual 2005/6
Facilitation of access to financial services Mzanzi Savings and Money transfer No. of accounts opened Income generated 0 0 730,000 opened R 220.5 Million
Participation in the National Savings Drive Visa branded Postbank Card Retail Bonds sold Implement Visa in 2006 Launch March 2006 0 On target R 1.4 Billion
Address Expansion No. of addresses rolled out 1.5 Million addresses 1.8 addresses
SMME Development Programme BEE spend Set asides for BEE of total spend 45 36
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Increasing Competitiveness of the SA Economy
Focus Area Key Performance Areas Target 2005/6 Actual 2005/6
Broadening the ICT skills base Implement Learnership Placement of graduates Development of e-Cadres No. of learners No. of graduates No. of e-Cadres 1500 0 0 1018 0 0
Investment in Technology (IT infrastructure) Financial Data Switch Implement Data Switch End 2005 Completed
Mail Automation Install site machines End 2005 3 Installed
Implementation of new technologies Electronic Bill presentment (Truebill) Hybrid Mail Implement Truebill boxes Pilot Hybrid Mail June 2005 31 March 2006 Completed On target
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As a result
Focus Area Key Performance Areas Target 2005/6 Actual 2005/6
Department of Home Affairs Signing of Memorandum of Understanding Delivery of IDs Commenced 2005 and ongoing
Provincial Departments of Transport Eastern Cape Kwazulu Natal Free State Renewals and registration of motor vehicles Renewals and registration of motor vehicles License Renewals only 0 0 0 31 25 31
Expansion of Public Internet Terminals (PIT) Additional number roll out Collaboration with Universal Services Agency on connectivity 700 700 Leadership Discussions underway
Partnership with Local Municipalities for payment of services 33 of municipalities captured
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ADDITIONAL GOVERNMENT OPPORTUNITIES FOR SAPO
Government Dept
Opportunities for SAPO

• Transport

• Car registration
• Traffic fines

• Home Affairs

• Passport
• Work permits

• Health

• Medicines

• Education

• Welfare

• Maintenance grants

• Others

• Address verification/certification

Source SAPO
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Contribution to a better world
Focus Area Key Performance Areas Target 2005/6 Actual 2005/6
Contribution to SADC development Participation in SAPOA activities Focus on 3 priorities as outlined in the compact for assistance Ministers conference SAPOA Workshop July 2005 24 Feb 2005 Completed Completed
Chair of Strategic Board of the Pan African Postal Union (PAPU) 2008 Ongoing
Participation in the Universal Postal Union (UPU) activities Ongoing
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2006/2007 Continuing to Fulfill the Mandate
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2006/7 Improving Capacity of the State to
Deliver
Focus Area Key Performance Areas Target Q1 Q2 Q3 Q4
Retail Infrastructure Expansion of retail network No. of outlets 62 New 44 Relocations X X X X
Partnership with GCIS on building of Multi Purpose Community Centres Number of Multi-Purpose Community Centre built To be determined by discussion currently in progress with GCIS
IT Infrastructure New Point of Sales Biometric Solutions for social grants National roll out Number of beneficiaries registered 1350 Outlets Dependency- negotiations with SASSA X X X X
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2006/7 Broadening the Participation in the
Ecomony
Focus Area Key Performance Areas Target Q1 Q2 Q3 Q4
Address Expansion No. of addresses rolled out 1.5 Million addresses X X X X
Facilitation of access to financial services Introduction of e-Financial Services Mobile Internet banking Corporatisation of PostBank Alternative channels implemented Develop implementation plan X2 additional channels Ongoing X X
SMME Development Programme BEE spend Set asides for BEE of total spend 45 X X X X
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2006/7 Increasing Competitiveness of the SA
Economy
Focus Area Key Performance Areas Target Q1 Q2 Q3 Q4
Broadening the ICT skills base Implement Learnership Placement of graduates Development of e-Cadres No. of learners No. of graduates No. of e-Cadres 1500 6 100 X X X X X X X X X X X X
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2006/7 Contribution to a better world
Focus Area Key Performance Areas Target Q1 Q2 Q3 Q4
Contribution to SADC development Participation in SAPOA activities Focus on 3 priorities as outlined in the Agreements from the Ministers Conference Hosting the Council of Commonwealth Postal Administrators Council To be outlined after SAPOA workshop Implement intiatives Successful Conference July 2006 To be finalised July 2006 X X X
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2006/07 Group Budget Fixing Eyes on the Prize
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2006/7 FY Outlook

• Financial profitability profit margin of 7.1
  2005/06 FY - Forecast 5.8
• Target is 15 (Australian Post 14)
• Cash and short terms investment of R400 million
  2005/06 FY - R270 million
• Forecasted GDP 2006 4.0 - 4.5.
• Volume growth 3.

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2006/7 FY Budget assumptions expenses

• Staff costs increase at 4.
• Aggressively reduce operational costs staff
  costs.
• Reduction in support costs.
• Reduction of regional business unit support
  costs.
• To pay company tax from 2005/2006 FY.

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Diversifying Revenue Streams
Income distribution
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2006/7 FY Revenues (billions)
7
5
7
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2006/7 FY PostBank depositors funds (Rm)
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2006/7 FY Operating Profit Pretax (Rm)
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97
85
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2006/7FY Budget
R6 million operating profit Capex R12 M
CFG
Group R354 million operating Profit Capex R530
million
Docex
R5 million operating profit Capex R1 m
Post Office
R343 million operating profit Capex R517 million
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2006/7FY Operating Profit Margin ()
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2006/7FY Debtors Days target
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2006/7 FY Application of funds
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Living the VisionPreliminary Benchmarking
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2006/7 FY Key ratio indicators
Key ratios
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2006/7 FY Staff costs of revenue
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2006/7 FY Support costs as Percentage of Revenue
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IN CONCLUSION

• SAPOs 2005/2006 Performance remains cause for
  Celebration
• Rapid technological changes poses huge future
  challenges
• SAPO is ready to Embrace Change strive towards
  the New Vision

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