South Africa axes its NZ Post contract

By SCOTT MacLEOD and SIMON HENDERY

The South African Government wants to end its major contract with New Zealand Post's flagship overseas venture.

Transend Worldwide's estimated $54 million contract to revitalise the South African Post Office (Sapo) has looked increasingly shaky over the past month, but the sudden South African move yesterday caught New Zealand officials by surprise.

The contract was the biggest in the New Zealand state-owned enterprise's international portfolio and the move comes at an embarrassing time as the company tries to enter new markets such as the Balkans and Eastern Europe.

Sapo managers claim that despite the "expensive" contract to transform its operations, Transend failed to ensure the poorly performing service broke even by March this year.

Three weeks ago it was reported to be heading for a $220 million loss.

The South African Post Office has been plagued by strikes after workers claimed they were not being paid, and scandalised by allegations of corruption.

The South African Government has also cited problems, with too little attention paid to "black empowerment" and a failure to meet a mail delivery target.

During a late cabinet session, it decided to scrap the contract.

The first inkling for Transend came at 4.30 am yesterday South African time when managers started receiving media calls.

Five hours later, Transend's South Africa manager, Doug Maclean, said he had still heard nothing from the Government.

"We, like everybody else, have heard of this only through New Zealand and South African media reports," he said.





The South African cabinet said it had authorised the Minister of Communications to take legal steps to end the contract. It said the board of the South African Post Office had asked the cabinet for the contract to be scrapped.

The cabinet also wants an investigation into compensation for any financial losses incurred by the state.

NZ Post, which last financial year made a profit of $30.2 million, has trumpeted the virtues of its subsidiary since it spurred the company's 8 per cent growth rate.

Transend's New Zealand-based general manager (marketing), Suzanne Stephenson, said her firm had met all the conditions of the contract but one, which was beyond its control.

Ms Stephenson said: "They are suffering huge financial losses and they are looking for some scapegoats."



Other parts of the contract included providing four million new addresses and 750 new postal retail outlets.



"As far as we are concerned, our contract has not been terminated and we have not been informed of any termination," she said.

"It's a commercial contract and we would expect to be advised. We'd be crazy to react otherwise."

Transend operates in 40 countries and NZ Post chairman Ross Armstrong said last month that it was exploring further business in the Balkans.

A spokesman for State Owned Enterprises Minister Mark Burton said the minister had discussed the move with NZ Post's board.

The issue was commercial, and the Government would not be taking it up with the South African cabinet.