Mr Khutso Mampeule: Group CEO

Agenda  What we promised to deliver on 04 March 2005  Synopsis : SAPO Strategic Focus  Alignment with Government’s Programme of Action : Review of 2005/06 & 2006/07 Focus  Group Budget 2006/07  Living our Vision  Conclusion

Building the Linkages : Our March 2005 Focus Areas

1. Corporatisation of Postbank 2. Reorganisation of Post Office Recapitalisation and resolution of Major Liabilities Realignment of businesses for financial performance. 3. Development of PPP framework Courier, Transport and Financial Services 4. Enhancement of retail business (upgrade of infrastructure to allow ICT connectivity & security) What we promised in 2005/06

5. Alliance with governmental departments and other parastatal for delivery of services Pension business 6. Improvement of market share Grow parcels and Financial Services Efficiency improvements & Cost Control Service Delivery – Currently at 94% Customer Service Excellence USO mandate What we promised in 2005/06

7.Investment in further IT infrastucture 8. Implementation of Human Resource Strategy Human Resource Capital Development Talent Retention and Attraction Succession Planning 9. Sustainable Profitability What we promised in 2005/06

Synopsis : SAPO Strategic Focus

  Vision   Key strategic themes Drive operational excellence to achieve top-quality at benchmark cost Be government’s preferred partner for economic enablement within the scope of our product and service offerings and in the delivery of government services Achieve customer intimacy and leverage this for growth in Communication, Logistics and Financial Services Build a high performance culture and develop capabilities throughout the organisation Key strategic themes, Vision & Mission Strengthen the public perception of the Post Office as a trusted brand top 10 in the world ‘To be recognised among the top 10 providers of postal and related services in the world ’   Mission enable the nation government services technology and innovation’ ‘We will enable the nation to efficiently connect with the world by distributing information, goods, financial and government services ; leveraging our broad reach and embracing change, technology and innovation’

Post Office Network

Post Office branches are a unique national asset Source:SAPO Points of Contact 2,550 Unrivalled reach Enables us to leverage this reach to provide access to Financial Services and Government Services Best placed to connect previously disadvantaged areas to the global economy ABSA675 Standard Bank670 First Rand650 Nedcor450

Mail growth opportunity exists Different factors point to the opportunity of growing mail volumes in SA Source:SAPO, McKinsey analysis

Market The new organisation value delivery system Source:Management workshops; McKinsey analysis Operations Strategy & Marketing Customer service Mail Logistics Retail Postbank Group Support Functions

Financial recovery Reduction in Operating losses over the past years Profit Loss Million

Review of 2005/06 & Alignment with Government Programme of Action

Alignment with Government National Objectives Government National Objectives   Improve state capacity to deliver   Broadening participation in the second economy   Increasing competitiveness of the South African economy   Contribute to a better world Government Key Performance Areas Access to finance Access to financial services Increasing levels of savings Extracting efficiencies from State Owned Enterprises (SOEs) Positioning SOEs as vehicles for delivery Less financial support from Treasury for SOEs

Improving Capacity of the State to Deliver Focus AreaKey Performance Areas Target 2005/6 Actual 2005/6  Retail Infrastructure Expansion of retail network Connectivity of the retail networks No. of outlets No. of outlets connected fully functional 71  Mail Centre Upgrades No. of Mail Centres upgraded 20  IT Infrastructure New Point of Sales Biometric Solutions for social grants Pilot the solution No. of Beneficiaries Grant budget R50 billion Post Office Share = 7% December Completed 517,000 beneficiaries registered

Broadening the Participation in the Economy Focus AreaKey Performance Areas Target 2005/6 Actual 2005/6  Facilitation of access to financial services Mzanzi Savings and Money transfer No. of accounts opened Income generated ,000 opened R Million  Participation in the National Savings Drive Visa branded Postbank Card Retail Bonds sold Implement Visa in 2006Launch March On target R 1.4 Billion  Address Expansion No. of addresses rolled out1.5 Million addresses 1.8 addresses  SMME Development Programme BEE spend Set asides for BEE % of total spend45%36%

Increasing Competitiveness of the SA Economy Focus AreaKey Performance Areas Target 2005/6 Actual 2005/6  Broadening the ICT skills base Implement Learnership Placement of graduates Development of e-Cadres No. of learners No. of graduates No. of e-Cadres  Investment in Technology (IT infrastructure) Financial Data Switch Implement Data SwitchEnd 2005Completed  Mail Automation Install site machinesEnd Installed  Implementation of new technologies Electronic Bill presentment (Truebill) Hybrid Mail Implement Truebill boxes Pilot Hybrid Mail June March 2006 Completed On target

As a result… Focus AreaKey Performance Areas Target 2005/6 Actual 2005/6  Department of Home Affairs Signing of Memorandum of Understanding Delivery of ID’sCommenced 2005 and ongoing  Provincial Departments of Transport Eastern Cape Kwazulu Natal Free State  Renewals and registration of motor vehicles  License Renewals only  Expansion of Public Internet Terminals (PIT)  Additional number roll out  Collaboration with Universal Services Agency on connectivity 700 Leadership Discussions underway  Partnership with Local Municipalities for payment of services 33% of municipalities captured

Transport ADDITIONAL GOVERNMENT OPPORTUNITIES FOR SAPO Source:SAPO Government Dept Opportunities for SAPO Car registration Traffic fines Home Affairs Passport Work permits Health Medicines Education Welfare Maintenance grants Others Address verification/certification SAPO

Contribution to a better world Focus AreaKey Performance Areas Target 2005/6 Actual 2005/6  Contribution to SADC development Participation in SAPOA activities Focus on 3 priorities as outlined in the compact for assistance Ministers conference SAPOA Workshop July Feb 2005 Completed  Chair of Strategic Board of the Pan African Postal Union (PAPU) 2008 Ongoing  Participation in the Universal Postal Union (UPU) activities Ongoing

2006/2007 : Continuing to Fulfill the Mandate

2006/7 – Improving Capacity of the State to Deliver Focus AreaKey Performance Areas TargetQ1Q2Q3Q4  Retail Infrastructure Expansion of retail network No. of outlets  62 New  44 Relocations XXX X  Partnership with GCIS on building of Multi Purpose Community Centres Number of Multi- Purpose Community Centre built To be determined by discussion currently in progress with GCIS  IT Infrastructure New Point of Sales Biometric Solutions for social grants National roll out Number of beneficiaries registered  1350 Outlets  Dependency- negotiations with SASSA XXXX

2006/7 – Broadening the Participation in the Ecomony Focus AreaKey Performance Areas TargetQ1Q2Q3Q4  Address Expansion No. of addresses rolled out 1.5 Million addresses XXXX  Facilitation of access to financial services Introduction of e- Financial Services: Mobile & Internet banking Corporatisation of PostBank Alternative channels implemented Develop implementation plan X2 additional channels Ongoing XX  SMME Development Programme BEE spend Set asides for BEE % of total spend 45%XXXX

2006/7 – Increasing Competitiveness of the SA Economy Focus AreaKey Performance Areas TargetQ1Q2Q3Q4  Broadening the ICT skills base Implement Learnership Placement of graduates Development of e-Cadres No. of learners No. of graduates No. of e-Cadres XXXXXX XXXXXX XXXXXX XXXXXX

2006/7 – Contribution to a better world Focus AreaKey Performance Areas TargetQ1Q2Q3Q4  Contribution to SADC development Participation in SAPOA activities Focus on 3 priorities as outlined in the Agreements from the Minister’s Conference  Hosting the Council of Commonwealth Postal Administrators Council To be outlined after SAPOA workshop Implement intiatives Successful Conference July 2006 To be finalised July 2006 X XXXX

2006/07 Group Budget : Fixing Eyes on the Prize

2006/7 FY Outlook   Financial profitability & profit margin of 7.1% 2005/06 FY - Forecast 5.8 %   Target is 15% (Australian Post : 14%)   Cash and short terms investment of R400 million 2005/06 FY - R270 million   Forecasted GDP 2006 : %.   Volume growth 3%.

2006/7 FY Budget assumptions expenses   Staff costs increase at 4%.   Aggressively reduce operational costs & staff costs.   Reduction in support costs.   Reduction of regional business unit support costs.   To pay company tax from 2005/2006 FY.

Income distribution Diversifying Revenue Streams

7% 5% 7% 2006/7 FY Revenues (billions)

2006/7 FY PostBank depositors funds (Rm)

85% 97% 33% 2006/7 FY Operating Profit – Pretax (Rm)

CFG Docex Post Office R5 million operating profit Capex R1 m R343 million operating profit Capex R517 million R6 million operating profit Capex R12 M Group R354 million operating Profit Capex R530 million 2006/7FY Budget

2006/7FY Operating Profit Margin (%)

2006/7FY Debtors Days target

2006/7 FY Application of funds

Living the Vision Preliminary Benchmarking

Key ratios 2006/7 FY Key ratio indicators

2006/7 FY Staff costs % of revenue

2006/7 FY Support costs as Percentage of Revenue

IN CONCLUSION  SAPO’s 2005/2006 Performance remains cause for Celebration  Rapid technological changes poses huge future challenges  SAPO is ready to Embrace Change & strive towards the New Vision