DMA Slams Post Office Price Hike

22 Jan 2002

The Direct Marketing Association (DMA) has accused the SA Post Office of acting unconstitutionally by not consulting the industry before asking the Regulator to approve a 15% tariff increase for 2002, along with the withdrawal of other business rebates and discounts, and mass based tariffs.

In stark contrast with previous years where discussion and negotiation with leading industry bodies were normal business practice prior to price hikes, this time the Post Office has made no attempt to consult with its clients until after they have the Regulator's approval, a move which the Direct Marketing Association (DMA) has slammed as unconstitutional.

Although the new tariffs are only scheduled to come into affect on the 1 April 2002, in terms of the Act, the tariffs have to be gazetted two months prior to implementation. To achieve a 1 April implementation date the tariffs must be gazetted
by 1 February. And, given the timeframes, it is unlikely that the DMA will have the time to persuade the Post Office to withdraw its proposed tariff increases, says Davy Ivins, Executive Director of the DMA.

The DMA is arguing that the Post Office has acted unconstitutionally, through its lack of transparency in failing to consult the industry.

Other arguments include:

The tariff increase will impact on the cost to business, who will be forced to cut postal volumes this year and into the future. Ivins believes that the long term affect of severe price increases will be to drive away postal business and entrench the decline in mail volumes. Their short term gain derived from a price hike will merely cement the continued loss of business.

The DMA will urge the Minister to enforce the terms of the Post Office license. It restricts increases to CPI (4.3% year on year to November 2001, and targeted by government itself at between 3 and 6% for 2002).

One of Post Offices arguments is that transport costs have risen dramatically. However, the DMA maintains that the transport cost is a component of CPI and Post Office cannot consider only one element of the CPI basket in isolation

It is grossly unfair and an administrative injustice to transfer Post Office financial problems to its clients when SAPO has done nothing apparent to reduce their internal costs, argues Ivins. Their major cost is staff and they admit to 40% overcapacity.

According to government's White Paper on Postal Policy business and marketing mail account for some 85% of volumes. Without this income they will never be able to fund the badly needed expansion of postal infrastructure to previously disadvantaged areas. This view is espoused by the Universal Postal Union, a United Nations body which represents post offices around the world - including SAPO.

SAPO believe that the increased tariffs will not lead to a reduction in volumes because they are improving their service. In their opinion business should be willing to pay the inflated prices for the better service. But says Ivins, business has not yet achieved that level of assurance of service and delivery to warrant such an increase.

Although the Regulator is legally unable to provide details of the SAPO proposals, she has confirmed that the proposals were filed on 6 December, and are being considered in terms of the Post Office licence, which states that increases in tariffs and charges shall be limited by a price cap, where the increase may not exceed the forecast CPI (consumer price index), less a productivity factor, plus a capital expenditure factor.

The DMA will be holding urgent talks with the regulator in an attempt to withdraw or decrease the proposed tariff structure.

Source: DMA

Industries

Features

In the news

Subscribe & Follow

Trending

Jobs

DMA Slams Post Office Price Hike

Share this article