NamPost on the roll …Ready for commercial bank status

NamPost on the roll …Ready for commercial bank status

Namibia Post Limited (NamPost) this year celebrates its 25th anniversary. During the last 25 years, NamPost had to adapt to changing times, specifically with the advent of the information age. NamPost has, in fact, stayed abreast of the evolution of the digital age and recently signed an agreement with Standard Bank to enable its clients to access the National Payment System. New Era (NE) Senior Business Journalist, Edgar Brandt, sat down with CEO of NamPost, Festus Hangula (FH) to discuss how the company has evolved to remain relevant in these ever-changing times.

NE: With the decline in mail postal services around the world how is NamPost reinventing itself for the digital age? What measures has NamPost put in place to ensure its continuity and relevance for the short-, medium- and long-term?

FH: It is true world-wide mail is declining. We have been fortunate for the past few years that growth in mail in Namibia has been relatively steady. There is no other way around for a postal company to survive and remain relevant other than diversifying its revenue base. NamPost has realised that need and put in place a diversification strategy hinged on its core strength — namely, postal infrastructure and logistics capacity. Three focus areas that were deemed important in this respect are: expansion of financial services, introduction of agency services to use postal infrastructure, and strengthening the logistics component of the business.

That path was followed and the fruits of diversification are visible today. As an example, postal services contribution to the profitability of NamPost has declined from 98 percent in 2009 to 41 percent in 2016. Financial services increased from -1 percent (loss making) in 2009 to 42 percent in 2016 while courier services increased from 3 percent in 2009 to 17 percent in 2016. Indeed, a tremendous success story, which significantly reduced the company’s reliance on mail as the main driver of profitability.

NE: how has NamPost transitioned from selling postage stamps and facilitating mail services to connecting individual communications around the world, to what is today’s NamPost?

FH: Customer preferences are constantly changing and that dictates that NamPost product offering must equally change. NamPost has gone through this process over the past 25 years in particular. There was a time when mail was the main means of communication in the world — that is no longer the case. We fully understand the new modes of communication, but we are also cognisant of the fact that mail volumes remain strong even though the long-term future is bleak. For example, we have mail volumes in the region of 100 million pieces per year. Coincidentally, that is more or less what we were handling in 1993/4. Over the years, we preserved the core of the business; namely, mail. But we also built on the other areas of business using technology.

Money transfer became instant; you deposit or request money to be transferred at any post office in Namibia and it is immediately available for withdrawal at another Post Office, thanks to technology. Today, NamPost can facilitate communication via e-mail (send e-statements) or SMS to customer in as much as it can also deliver a physical letter or parcel. Moreover, letters and parcels are available at most post offices within two days from the date of mailing, thanks to the utilisation of our courier to also deliver mail overnight. For couriers express items, parcels are available overnight and, dependent on the customer needs, delivered to your door.

NE: Is Philately still a lucrative business venture for NamPost in this digital era?
FH: Well, the Philately market is still exciting for the dedicated stamp collector. Unfortunately, the number of collectors is declining fast. Therefore, it is difficult to make money out of this section of the market these days. It follows that Philately, as a business, is struggling.

NE: NamPost had 140 Post Offices and 119 010 post boxes across the country, as of the 2016 financial year. How many of these Post Offices are loss making or not self-funded, and are there plans to cut back on the number of Post Offices?

FH: We are very proud of our postal infrastructure. Indeed, in as much as they contribute to the cost of doing business, they are also one of our most important strategic assets. NamPost is a commercial entity. But it also has an obligation of providing postal services to every Namibian, which is a social obligation. It is from that angle that post offices are at times established or maintained in areas where we know there is very little chance of making profit. For example, Tsumkwe, Grunau, Gochas, and Omitara, to mention a few — we are not there for profit but for social services provision, financial inclusion and by extension social inclusion.

That said, yes, we have 140 Post Offices and of those 92 (about 66 percent) were profit making during 2016. Our aim, as a business, is to ensure that we are able to make money where there is a money-making opportunity to be able to subsidise the provision of services in the areas where we cannot make profit. This model has worked for us successfully for the past 25 years. Therefore, I am pleased to state that during the previous year (2016) collectively post offices were profitable.

NE: The 2016 financial report shows a three percent decrease in the number of letters received (versus eight percent increase in letters sent), is this an indication of a stagnation – and eventual decline – in the posting of letters or is it merely a standard trend in the global mail service industry?

FH: Globally, mail is declining. Namibia mail hints at a declining trend now and then but no clear trend was established. I most sincerely hope that what we observed last year is not a start of a consistent mail decline. Let us observe what happens during the 2017 financial year and beyond.

NE: The NamPost Group reported revenue of N$1.04 billion in 2016, with its first profit of N$2.106 million after making losses the previous year, while NamPost registered losses of N$5.5 million, higher than the N$3.3 million registered in 2015. NamPost’s business side also performed very well, with NamPost’s joint venture with SmartSwitch, NamPost Financial Brokers, bringing in good money for the year 2016. Going forward, what are the financial projections for the year?

FH: Yes, NamPost Group produced a revenue of N$1.04 billion but the Group made a loss before tax of N$1.11m and a loss before tax of N$11.04m, as a company. However, the financials of NamPost must be understood within the context of the business it is in. If one looks through the financials, you will notice a line labelled “fair value adjustments” with a value of N$20.97m. This line is made up of revaluation of financial assets. The assumption made is, what would be the impact if the financial assets were sold at that time and at the prevailing market prices. The answer was, NamPost will lose N$20.97m. However, the truth is the assets were not sold. Therefore, there is no real loss — it is merely an accounting treatment to give one a feel of what could have been. To get the best feel of the performance of NamPost in 2016, one must adjust the performance by removing the unrealised fair value loss of N$20.97 since it is not an actual loss. Adjusted for that, it is clear that NamPost, as a company, made a profit of N$9m and as a Group made a profit of N$20m, which is not bad in an economically challenging year.

I am very proud to notice the contribution of the NamPost joint venture (SmartSwitch Namibia) and the NamPost subsidiary (PostFin) to the profitability of NamPost Group. Their profitability vindicates NamPost’s strategy to establish such a venture and subsidiary as a right decision, which is bearing good fruits.
Going forward, we expect 2017 to be difficult but should be an improvement from the previous year.”

NE: What are the major milestones NamPost has achieved during the last 25 years.

FH: It has been 25 excitement years; let me highlight a few achievements:
1995: NamPost computerised its operations and never looked back since then. Today, all 140 NamPost Post Offices are online and use of technology is entrenched in NamPost.

2006: NamPost converted the savings books into smartcards. That was a big jump from pen and paper to mouse and clicks. The smartcard technology was well ahead of the game in the card payment arena in Namibia. When this was introduced in the market, no other banking institution had a card with a chip. Indeed, it is only roughly two years ago that the rest of the market started catching up on the idea of using a chip! At the same time, we introduced biometrics as a means of identity verification. To date, no other banking institution in Namibia has yet caught up with the idea. But I am sure it is coming — ljust listen on the ground; they have started testing that technology in South Africa. So, they are likely to follow.

2011: NamPost rebranded and modernised its logo to what it is today; modern but rooted in its tradition.

2015: NamPost significantly revamped its IT infrastructure and started a journey towards the next stage in the evolution of the smartcard and payment services under NamPost. Next year we should see a new generation of smartcards and enhanced payment facilities.

2016: NamPost revamped its insurance offering and signed a joint venture with Hollard to underwrite the insurance. To date, well over 140 000 individuals primarily at the low end of the market have insurance via NamPost — indeed, a great step in financial inclusion.

In the same year, the revenue of NamPost exceeded the N$1 billion mark; 24 years ago, the revenue was a mere N$38m!
2017: NamPost signed a bank sponsoring agreement with Standard Bank to facility NamPost entering the main stream of payment in the Namibian financial market. This is good news not only to our customers but also to all Namibians, as it enhances our ability to further impact or reduce financial exclusion.
A few more pointers may be helpful as NamPost came a very long way:

Assets increased from N$97m in 1993 to N$4.3 billion in 2016.
Equity and reserves increased from N$6.4m in 1993 to N$229m in 2016 of which N$224m is made up of retained earnings, which indicates that the company has been consistently profitable and significant value (both financially and socially) has been created and accumulated for the shareholder.

As for Post Office outlets, in 1993, we had 84 post offices but today we have 140.
Meanwhile, employment was relatively steady with 721 employees in 1993 and today 820 employees. NamPost maintained a fairly high level of employment.

NE: Post Offices such as Singapore Postal Services (SingPost) and Japan Post have ventured into e-commerce, does NamPost have similar plans for self-preservation? 

FH: One cannot ignore the opportunities presented by e-commerce and internet proliferation. Yes, indeed we see opportunities in this area and wish at one point to exploit them fully; but perhaps not in the way that Japan or Singapore has approached it. But surely, we would like to position ourselves in a way that will allow NamPost to use its presence and infrastructure to make all Namibian residents able to benefit and access goods and services from other countries and within Namibia with ease.

NE: How has NamPost Savings Bank evolved to become a force to be reckoned with in the country’s banking industry?
FH: The Savings Bank has grown tremendously. Looking back in 1993, savings bank deposits amounted to N$55m. Today, that number has grown to N$3.8 billion at the end of 2016. This is testimony to the fact that Namibians trust NamPost as a safe destination for their investments. It is a strong brand, has the right reputation in handling deposits, and offers competitive services.

NE: Are the plans to transform NamPost Savings Bank into a fully-fledged commercial bank? If so, what are the timelines on this?

FH: Naturally, commercial banking should be the next step for NamPost financial services provision. There is no doubt that NamPost is making a significant dent in financial exclusion and becoming a commercial bank will accelerate the pace at which marginalised communities and people get access to financial services. I will say, the stage is set for that eventuality. Let me highlight what we have: NamPost already has 140 branches, close to N$4 billion in deposits and 820 staff members to run the bank and other operations. It has credit exposure and experience through PostFin its subsidiary, over N$220m in capital, over 500 000 customers, and a proven bancassurance model. It also boasts a tried and tested payment infrastructure, good well-established ICT infrastructure, a strong trusted brand and the envious list of supportive issues supporting the status of readiness to be a bank goes
on.

Well, there is very little further investment required from NamPost to become a bank. However, crossing that bridge is a decision to be made by the shareholder of NamPost or more directly by the Government of the Republic of Namibia. On our side, we are ready to roll out as a full commercial bank as soon as a go ahead is given and the legal framework is
cleared.

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