The South African Post Office Group

Strategic Business Plan 2007/8 to 2009/10

Presentation to Communications Portfolio Committee

2 March 2007

Agenda

Strategy 2006-2010: Reminder Strategic focus 2007 Financial outlook 2007 Conclusion

Recap 5 Strategic Plan

2006 -2010

Background information

Support

Services

• Staff nr’s: 15 923 (exl contracts 1035)• Support services: Risk, Security, Audit, IT,• Legal, Supply Chain, Properties and• Financial management• Procurement spent: R 1.5 bn

Mail•Volumes: > 6 million items pd•Delivery: >10m addresses

Postbank

• Saving accounts: 1.3m • Deposits: R1.52bn• Transactional accounts: 2.8m• Deposits: R874m• Total assets: R3.59bn

Retail

• Outlets: 2 589 • Counter points: 5 800• Transaction customer ratio: 1.4 • Citizens per outlet ratio: 1.18 000 (1.10 000)

Logistics• Parcels p/ d: 75 000• Containers: 900 tons p/ d• International destinations: > 200

Strategic Choices

Traditional Post Offices – Typical

Government owned and operated. Primary focus on USO delivery

1Commercial driven

Post Offices – Primary focus on

Shareholders enhancement and only positive ROI

2Business

enterprise –Focus on both

(financial viability required to

sustain USO)

3

Financial targets as per original strategic plan

1180

677

429

203134

994

20

05

/6

20

06

/7

'20

07

/8

'20

08

/9

'20

09

/10

'20

10

/20

11

Business environment

RetailLogisticsFinancial

ServicesMail

SPEED SERVICES COURIERS

Postbank POST OFFICE SAVINGS BANK

Challenges facing the postal services industry

Expansion into financial services requiring skill

upgrade

Mail volumes stagnating globally

Customers demanding more

Market becoming more competitive

Government continuing to reinforce branch infra-

structure reach mandate

• Deregulation is decreasing the monopoly landscape

• Dominant competitors offering complete services/ product portfolio

• Postal organisations pursuing Financial Services for growth

• All of them forced to upgrade staff skills significantly

• Global mail volume growth of 0.43%(1999-2003*)

• Electronic substitutes growth

• Access provision mandate reinforced by government

• More sophisticated solutions• Targeted approach to serve

Legislative environmentActs Postal Act Financial Services

Acts: FAIS, FICA and NPS

Electronic and communications Act: Preferred Authenticated Service Provider

PFMA Occupational

Safety Acts

Current Bills Credit Bill

Regulations• Postal and

Courier - ICASA• Financial

Regulations – FSB, PASA and Savings Bank Regulations

International • Universal Postal

Regulations• Kyoto convention• World Customs

standards & convention

Support Government Projects Broadening the Participation in

the Economy Facilitation of access to financial

services Participation in the National

Savings Drive Improving Capacity of the State

to Deliver IT Infrastructure

Contribution to a better world Contribution to SADC

development Participation in the Universal

Postal Union (UPU) activities

South African Post Office Mandate

Strategic roadmap

20062007

2008

Operational excellence

Customer intimacy and growth

Government preferred partner

Performance culture

Brand

Strengthen

the Business Platform

HarvestHigh Performance

Organisation

LeverageWorld-Class Performance

Design the future business

platforms

Leverage past performance

achievements to expand beyond the boundaries of traditional

business

Kick-start organisational transformation

Secure profitability

levels

Harvest the benefits from new

platforms and strengthened organisation

Roll out newly designed business platforms

Strategic Focus 2007

Strategic roadmap 2007

Operational excellence

Customer intimacy and growth

Government preferred partner

Performance culture

Brand

Harvest

High Performance

OrganisationHarvest the benefits from new

platforms and strengthened organisation

Roll out newly designed business platforms

Strategic Objectives

Achieving top-line growth through diversification of non traditional revenue

Continuing the focus on operational excellence

Re-establishing SAPO as a trusted brand and therefore becoming government’s preferred partner in providing access to government services

Building a high-performance organisation through skilled and motivated staff.

Key Business Unit priorities Mail

(Click)

Key Business Unit priorities Retail

(Click)

(Click)

(Click)

Key Business Unit priorities Postbank

(Click)

Key Business Unit priorities Logistics

Key Business Unit Priorities Shared Services

Key Business Unit – Support Services

(Click)

(Click)

(Click)

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Key Focus Areas

Technology

Properties

Other

50%

12%

33%

Financial focus 2007

Outlook for 2007

Interest rates increased in 2006 to contain inflation.

Thereafter interest rates to remain stable in 2007.

Continued acceleration of CPIX in 2006, peak on December 2006 and thereafter decline.

CPIX forecastedforecasted 4.9% for December 4.9% for December 2006, actual 5%2006, actual 5% and 4.7% for 2007.4.7% for 2007.

Crude oil $65 . Salary increase 6.8%.Salary increase 6.8%. GDP 4.4%.GDP 4.4%.

Revenue

CPIX forecast for December 4,9%, actual 5%.

Postal service 4,1% tariff increase GDP forecast 4,4%. Volume growth required 4.0%.

Retail revenue growth of 13%. Growth on Postbank depositors

book of R430m

Revenue (R‘b)

+8%

+7%

R 4.631

R 5.004R 5.374

R 4.200

R 4.400

R 4.600

R 4.800

R 5.000

R 5.200

R 5.400

'2005/06 '2006/07 '2007/08

Revenue split (%)

66

34

65

35

65

35

0

10

20

30

40

50

60

70

'2005/06 '2006/07 '2007/08

Postal services

Non traditionalincome

Expenses

Staff costs should not increase by more than 6%

Transport costs – group consolidation and synergies

All other operational costs should not increase by more than 6% Unless higher increase in revenue

is shown.

Expenses (R’b)

R 4.375

R 4.614

R 4.891

R 4.100

R 4.200

R 4.300

R 4.400

R 4.500

R 4.600

R 4.700

R 4.800

R 4.900

'2005/06 '2006/07 '2007/08

+5%

+6%

Capital investment

Investment funding

Sources funding Subsidy Own funds Total

Cash generated from operations 539,347 539,347Subsidy received 308,280 308,280Subsidy brought forward 150,000 150,000

458,280 539,347 997,627

Application of funds

Capital expenditure 310,280 444,720 755,000USO and GSP expenses 148,000 148,000Build up of cash reserve 94,627 94,627

458,280 539,347 997,627

Operational profit margin

6%

8%

9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

'2005/06 '2006/07 '2007/08

Operational profit margin benchmark

14%

6% 5%

4% 4%

9%

0%

2%

4%

6%

8%

10%

12%

14%

Australia NZ Post USPS Royal mail Canada Post '2007/08

Operating surplus

R10 million

R425 million

R50million CFG incl SSC

2005/06 (R40m)2006/7 R30m

Docex2005/06 R5m

Y/end estimate R8m

Post Office2005/06 R291 m

Y/end estimate R352m

Group2005/06 R256 m

Y/end estimate R390 mR485 million

Financial Ratio analysis

Subsidiaries

Contribution to Government Programmes

World Cup 2010 Stamp launch Mail & Courier services

ASGISA Retail Infrastructure Mail Centre Upgrades SMME Development Programme Address Expansion

Conclusion Continue to navigate a dynamic market

environment and communications landscape successfully

Innovation, ease of use and accessibility must be synonymous to our product offerings

Continue to reduce cost & increase productivity

Service performance & customer satisfaction to reach new records

Continue to stay focus on core activities whilst diversifying rapidly

We will continue to use technology to achieve our goals

We will achieve all of this with an energized, customer-focused workforce

We deliver whatever it takes!

Thank you