The government asked Mark Barnes to fix the South African Post Office and make it profitable but is not honouring its commitments to give it business, he says. The parastatal posted a R1.1-billion loss in the 2015-16 financial year ended March.It will lose more than that in the current financial year if the government doesn't step up to the plate like it said it would, says the former investment banker and founder of investing and trading solutions company Purple Group, who began his rescue mission at the post office in January.When he started, he was told that there was a cabinet resolution that 30% of government business would be awarded to the post office.Although R600-million has been budgeted, none of the promised government business has materialised, Barnes told parliament this week.Having told him to prepare the post office to compete with the private sector, the government now refuses to believe him when he says it is ready to do just that."There's a trust deficit," says Barnes. He acknowledges there are good reasons for it given the post office's legacy."To be fair, there are levels of operational competence which the post office needs to demonstrate before it can validly place that demand [for government business] on record."Government has made a commitment that 30% of its business will be with the post office. But I get that that service must be dependable, competitive and resilient. There is an argument to be made that in some of those areas we are not there."story_article_left1The "conundrum we find ourselves in" is that government business is needed to provide the cash flows for the post office to invest in the technology it needs to be more competitive.A case in point are social grants. Barnes says that handling social grants for the government would alone make the post office profitable.But the South African Social Security Agency doesn't trust the post office to do the job properly.It has told him: "We can't have social grants not being paid because the post office is not working." He is not impressed."There's no bank in South Africa which tomorrow could do the Sassa grants unless they're given so many months' notice to tailor their systems. We can do that, we can deliver it."But it would require a significant investment in technology."If you ask us to spend R300-million fine-tuning our technology - without getting that contract we'd be hesitant to do it. We're not going to do it on spec."The current private sector contract with Sassa expires in March next year. "We say we'd be able to offer a competitive service." But first the government needs to come to the party. "You do at some point as government have to say: 'What is our role, what is the role of the post office, what is its mandate?'"The lack of government confidence in the post office will ensure that the decay continues, he says."Government is not doing business with us and it is critical, for the time being at least, that they do do business with us. If we're left to our own devices we will not survive."It is time for the cabinet to step up, says Barnes."Give us a mandate. The constitution says we've got to be competitive. OK, fine. Then at least let us compete."He says the government agrees with his vision of the way forward."The big-picture stuff is agreed. The strategy is right. The revenue mix is right - one-third e-commerce, one-third financial services, one-third mail."block_quotes_start We're going to government and saying: 'We have the infrastructure to deliver medicines, for example. Don't use the private sector block_quotes_endIt's a model that has been validated in all countries where post offices have been successful."Post offices around the world are intimately involved with government. Whether in a state-owned-enterprise way or private-sector-combination way, the government is the key player in what is a socioeconomic mandate, not an entirely economic mandate."In spite of admitting that the post office has met only 21% of its targets, Barnes says things at the post office have "vastly improved".Staff morale, for instance, which was "defeatist" when he arrived, has "turned".Union relations have improved. There's been a settlement, and agreement has been reached on the way forward."We think we've resolved 10 years' of labour disputes in the settlement that is enduring."But memories of the four-month strike in 2014 persist."When you sit down with one of the major corporates, which is a big piece of our mail business, they ask: 'Can we sign a three-year contract or are you going to have strikes again?'"An indicator of returning confidence is the number of businesses that are signing mail-delivery contracts. Volumes are up. "Now the question is, is there sufficient volume to not only keep the engine ticking over but to kick-start it to the cash flows that will enable us to afford the modern-economy demands of our infrastructure?"story_article_right2With 2,400 branches across the country, its physical infrastructure is the biggest thing the post office has going for it. It's a massive built-in advantage over any competitor in the private sector.But first it needs to overcome its terrible legacy.For instance, it is now common knowledge that e-commerce cannot operate without an efficient physical delivery infrastructure.This is why Amazon bought 30% of United Postal Services. It is why Barnes was so upbeat when he arrived at the post office about the prospects of securing a lucrative partnership deal with Amazon.How far has he got with that?"Nowhere. We don't have a sufficiently demonstrable ability for them to let us be the last leg of their promise."While the post office is seeing a big rise in its mail business with corporates, it is not enough to compensate for the absence of government business.The really big potential profits are in e-commerce and its courier business, which - in spite of the massive competitive advantage its geographical infrastructure should give it - is, right now, "nowhere".The courier and logistics market is worth R10-billion in South Africa, and the post office has less than 1% of it.Barnes admits this is well below his expectations when he took over. He wants a market share of at least 20%."That is not a big ask for the post office. Go to the rest of the world and the share of the post office is much, much higher. It's dominant."His plan for now is to improve confidence levels among clients, including the government, incrementally, and gradually claw back the market share the post office lost to the private sector."Give us a little bit now, and if we deliver give us a bit more."But the key player in this has to be the government."We're going to government and saying: 'We have the infrastructure to deliver medicines, for example. Don't use the private sector.'story_article_left3"The post office used to have two-thirds of that business. It has a fraction of it now."The government needs to stop seeing the post office as a government service and financial burden and understand that it is a competitive business, he says."We can compete," he says confidently, but quickly qualifies this.The post office has to comply with the Public Finance Management Act, he says, "which runs contrary to operating a competitive business". It makes its contest with the private sector, which has no such compliance obligations, distinctly uneven, he says."So it's not a matter of whether I can cope, it's whether the system will allow me to."The government needs to see the post office as "an interesting investment" rather than a necessary expense."Whether government budgeting processes will allow for that in what is already a challenging environment I'm still debating. Or whether we'll need to go to other sources of capital to meet those challenges."Partial privatisation and a listing, as with Telkom, might be an option. Anything more than this and the country would rue the day, he says.He says at a policy level the government understands that the post office is an integral part of the solution for the country. For instance, he reckons that by expanding into e-commerce, the post office could add 2% to GDP."The problems are with officials at below policy level."Sometimes he thinks they have vested interests in continuing to give business to the private sector rather than the post office.Whatever the reason, they're "taking their time to be convinced that they need to give us another chance", he says...