Exploring the SAPO Parcel Delivery Proposal: A Three-Part Blog Series
The South African Post Office (SAPO) is facing severe financial challenges and has proposed a legislative amendment to secure exclusive rights to deliver parcels weighing up to 1kg. This move has sparked widespread debate in the courier and logistics sector, raising critical questions about its implications for the industry.
In this three-part blog series, we dive into the key aspects of this proposal:
- Part 1: Why is SAPO seeking to enter the courier space?
- Part 2: What could happen if SAPO secures this exclusive mandate?
- Part 3: Is this a financially viable solution for SAPO’s long-term sustainability?
Join us as we unpack the complexities, assess the potential impacts, and provide insights into this critical issue shaping South Africa’s logistics landscape.
Why would the South African Post Office (SAPO) enter the courier market in South Africa?
Exclusive Rights of SAPO
Under the Postal Services Act, SAPO has exclusive rights to handle “letters” up to 1 kg in weight. The law defines a “letter” as any item containing a communication or message, which excludes printed material or parcels. Letters are typically documents, bills, invoices, official communications, etc. SAPO is the exclusive provider for handling letters under 1 kg in weight. Private courier companies are not restricted from handling parcels weighing less than 1 kg, as long as those parcels do not qualify as letters under the law.
The distinction between a “letter” and a “parcel” is not based solely on weight but also on the nature of the item. If an item is considered to be a letter (i.e., it contains a message, communication, or other similar content), it falls under SAPO’s exclusive rights, regardless of whether it weighs less than 1 kg. If the item is simply a parcel (e.g., a small electronic device, a book, clothing), it is not a letter, and therefore can be consigned by a private courier company, even if it weighs less than 1 kg.
E-Commerce and Private Couriers a contributing factor.
The rise of e-commerce has contributed to the increasing number of small parcels being delivered by private couriers, particularly for consumer goods like clothing, electronics, and other retail products. Many of these parcels weigh under 1 kg, and private courier companies such as DHL, The Courier Guy, Aramex, JKJ Express, MDS and PostNet are heavily involved in this space.
While exact, up-to-date statistics on the percentage of small parcel freight in South Africa that is below 1 kg or consists of documents only are not readily available in the public domain, some general estimates can be inferred from the broader logistics, e-commerce, and postal market trends.
1. Small Parcels and E-Commerce Growth
The growth of e-commerce in South Africa has driven an increase in demand for small parcel deliveries. Many e-commerce parcels, particularly for online retail, weigh less than 1 kg. This is especially true for items like books, electronics, clothing, and accessories.
According to industry estimates, South Africa’s e-commerce market has been growing rapidly, with platforms like Takealot, Superbalist, Zando, and others contributing to the rising volume of small parcel shipments. The South African Courier, Express and Parcel market (CEP), which encompasses e-commerce parcel deliveries, is expected to grow from USD 207.96 million in 2024 to USD 316.28 million by 2030, reflecting a compound annual growth rate of 7.24%.
Small parcels (under 1 kg) make up a significant portion of the total parcels being shipped.
2. Documents and Letters
In terms of documents or letter-sized mail (typically items that are weighing 1 kg or less), this is a traditional part of the market for SAPO and private couriers alike, though SAPO historically handles the lion’s share of this volume due to its exclusive rights to “letters” under the Postal Services Act.
Letters are still an important part of the overall parcel and mail market, although digital communication (email, etc.) has significantly reduced their volume. However, official documents, legal notices, business correspondence, and government communications often fall within this category and continue to be delivered via postal or courier services.
While there isn’t a single, precise breakdown available from a central industry body, various sources suggest the following rough estimates based on industry insights:
It’s commonly estimated that about 40-60% of the total parcel volume in South Africa, particularly driven by e-commerce, consists of parcels that weigh under 1 kg. Historically, documents and letters accounted for a significant proportion of the mail and small parcel market. In terms of volume, documents could still make up about 20-30% of total parcel and mail shipments.
Has SAPO indicated it wants to enter the courier market space?
In South Africa, the Independent Communications Authority of South Africa (ICASA) is the regulatory body responsible for overseeing the communications and postal sectors in the country, including aspects related to courier services. While ICASA’s primary focus is on telecommunications and broadcasting, it also has a role in the postal services sector, ensuring fair competition and compliance with legal and regulatory standards.
While ICASA’s direct oversight of private courier companies is minimal, it does have some responsibilities that indirectly affect the courier industry, such as promoting competition within the postal and courier sectors, ensuring fair practices and preventing monopolistic behaviours.
While this mostly pertains to SAPO, ICASA’s oversight indirectly impacts courier companies by ensuring a level playing field and preventing unfair market practices.
ICASA rules in favour of SAPO
In 2018, SAPO lodged a complaint with ICASA against PostNet and other private courier companies. SAPO asserted that these entities were infringing upon its exclusive rights, as stipulated in the Postal Services Act of 1998, to deliver parcels weighing up to 1 kilogram.
In 2019 ICASA ruled in favour of the South African Post Office (SAPO), granting it exclusive rights to deliver parcels weighing 1 kilogram or less. This decision required private courier companies to cease delivering such small parcels by March 2020.
SAPO persuaded ICASA to rule in its favour by invoking the following key arguments.
SAPO argued that its exclusive rights were protected under the Postal Services Act of 1998, which stipulates that SAPO holds a monopoly over reserved postal services, including the delivery of small parcels. SAPO maintained that private courier companies delivering such parcels were infringing on its statutory mandate.
SAPO claimed that protecting its monopoly on small parcels was essential to fulfill its universal service obligation which requires it to provide affordable postal services across South Africa, including rural and underserved areas. it argued it was acting in the Public interests.
The additional revenue from small parcel deliveries, SAPO argued, that would subsidise these universal services was crucial for its survival and to avoid further reliance on government bailouts. As further proof that it was acting in the interest of the public, SAPO contended that private couriers focused on profitable urban routes while neglecting less lucrative rural areas. By enforcing the 1 kg rule, SAPO aimed to level the playing field.
Criticisms and Opposition
However, the South African Express Parcel Association (SAEPA) chaired by Garry Marshall and PostNet challenged this ruling in court, with PostNet obtaining an interdict that allowed couriers to continue delivering small parcels pending a final decision.
The ruling faced significant opposition from private couriers and industry associations, such as the South African Express Parcel Association (SAEPA), which argued that the decision would stifle competition and harm the growing e-commerce sector.
SAPO’s inefficiency and financial instability raised concerns about its ability to handle increased parcel volumes effectively.
SAEPA further argued that consumers and businesses would face higher costs and reduced service quality.
The legal challenges against the ruling indicate that many stakeholders question whether ICASA’s decision truly serves the public interest or merely protects that of SAPO. While not formal challengers, e-commerce businesses and civil society groups also criticised the ruling, highlighting that it could stifle innovation and increase costs for small and medium enterprises (SMEs).
Status Quo
As of December 2024, the legal battle remains unresolved, with significant implications for South Africa’s e-commerce sector and consumers’ choice of delivery services. If the court ultimately upholds ICASA’s ruling, SAPO would hold a monopoly over the delivery of parcels under 1 kilogram, potentially affecting service efficiency and delivery times.
It’s important to note that SAPO has faced financial challenges, including a provisional liquidation order in April 2023, which could impact its capacity to handle an increased volume of small parcel deliveries.