1. (Add your Business Unit name here) Financial Results 2004/05 By Mr Khutso IMampeule Group CEO SOUTH AFRICAN POST OFFICE

2. Highlights Solid 2 nd Year of Profitability Solid 2 nd Year of Profitability Healthy Balance Sheet Healthy Balance Sheet Positive Capital and Reserves Position Positive Capital and Reserves Position Best Practice Solvency & Liquidity State Best Practice Solvency & Liquidity State Strong Cash Generated from Operations Strong Cash Generated from Operations Sizeable Investment in Infrastructure & Technology Sizeable Investment in Infrastructure & Technology Postbank Powers on (Leading in Mzansi Accounts) Postbank Powers on (Leading in Mzansi Accounts) Passionately fulfills its Universal Service Obligation Passionately fulfills its Universal Service Obligation Rewards & Recognition in Innovation & Technology Application Rewards & Recognition in Innovation & Technology Application Remains an Overall Good Corporate Citizen Remains an Overall Good Corporate Citizen Embraces Change and Looks Forward to a Brighter Future Embraces Change and Looks Forward to a Brighter Future

3. Financial overview 2004/2005 SAPO Group

5. Profit / (Loss) from trading operations history

6.  Turnover up 6% on previous year  Postal services increase of 3.5% on prior year.  Operating expenses increased by only 3%.  PRMA Liability reduced from R2.3 billion to R929 million  Income Statement Recognitions  Deferred tax R287m  PRMA : R512 million  R135m Profit from trading operations (2003/04 R27m)  Once-off Net profit of R1,068m Key Achievements Improved Financial Performance

7. Postbank depositors funds (Rm)

8. Key achievements – Postbank accounts (’000)

9. Review 2004/05 Financial year

10. Income Statement

11. Financial overview 2004/2005 SAPO Group

12. Balance sheet

13. Financial overview Balance Sheet

15. Financial overview Statement changes in equity

16. Capital expenditure

17.  Improvement in working capital.  Total debtors days  SAPO - 19 days, achieved target, as a result R100 million improvement in cash flow.  CFG – 57 days.  Cash generated from operations R371 million (2003/04 R283 million).  Post Office excluding Postbank has R333m in short term investment. Key achievements – Working capital

18.  Deferred tax of R287 million.  Funding level the pension fund is 127% as at 31 December 2004. Conversion from defined benefit to defined contribution.  R750 million increase in share capital.  Increase in capital & reserves of R1.8 billion.  Cash & cash equivalents increased by R1 billion. Key achievements – Balance sheet

19. Financial Overview PAST 5 YEARS

20. Net Profit / Loss history (R’000)

21. Balance sheet

22. Net cash inflow/(outflow) from operations (R’000)

23. Employee ratios

24. Solvency and liquidity

25. The Way Forward Focus Areas:2005/06

26. * Average of selected countries Source: Pitney Bowes; McKinsey analysis AFTER THE TURNAROUND SAPO IS WELL POSITIONED TO FACE ADDITIONAL PRESSURE FROM TRENDS IN THE POSTAL INDUSTRY Market becoming more competitive Deregulation is decreasing the monopoly landscape – incumbents have to manage this Large players are emerging as dominant competitors offering complete services/product portfolio Expansion into financial services requiring skill upgrade Several postal organisations pursuing Financial Services as growth opportunities All of them forced to upgrade staff skills significantly Mail volumes stagnating globally Global mail volume growth of 0.43% from 1999-2003* Electronic substitutes growth (per capita) of 46.7% from 1999-2003 Government continuing to reinforce branch infra-structure reach mandate Access provision mandate through branch network will continue to be reinforced by government Customers demanding more Large customers demanding more sophisticated solutions Targeted approach to serve the market required... but therein lie opportunities Additional challenges...

27. SAPO strategic posture Be the premier commercial organisation enabling the South African economy with integrated solutions in the areas of Communications Logistics Financial Services Access to Government Services Create a great customer experience through targeted products and high-quality customer service Competently and diligently advance USO in partnership with the government Build a high-performing organisation, which respects, develops, recognises, and rewards its employees Key strategic themes for SAPO Group Source:Management workshops; McKinsey analysis FUTURE ASPIRATIONS SUPPORTED BY STRATEGIC POSTURE AND 5 KEY STRATEGIC THEMES FOR THE GROUP 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 1 2 3 4 5 Strengthen the public perception of SAPO as a trusted brand

28. 28 Service provided Service not provided  - Country/Postal operator Public ‘universal’ services besides mail Germany/Deutsche Post UK/Consignia Italy/Poste Italiane France/La Poste Spain/Correos Switzerland/Swiss Post Belgium/La Poste Portugal/CTT Post Poland/Poczta Polska Czech Repulic/Ceska Posta Hungary/Magyar Posta Austria/Post AG Ireland/An Post Sweden/Posten Netherlands/TPG Norway/Posten Finland/Suomen Posty Oy Denmark/Post Turkey/PTT Greece/Hellenic Post Pensions/ benefits payment Utilities bill payment Tax collection  - - Everyone interacts with the Postal Operators several times in a year SAPO should consider opportunities in public services, such as Pensions and benefits represents a huge untapped potential Utilities’ bills are a lost opportunity that should be regained Tax collection is another path to be explored Other opportunities should be explored (e.g. payment of traffic fines) Data not available? … AS THEY CAN BE THE BASE FOR A STRONG RELATIONSHIP WITH RETAIL CUSTOMERS THROUGH ‘PUBLIC SERVICES’ *Belgian Post provides a deposit service onto any bank account which is in practice used mostly for bill payment Source:McKinsey analysis - - - - - -* ? ? ? ? ? - Example: postal operators services beside mail NOT EXHAUSTIVE

29. Transport ADDITIONAL GOVERNMENT OPPORTUNITIES FOR SAPO [PMG note: graphics not included, please email info@pmg.org.za] Source:SAPO Government department Opportunities for SAPO Car registration Traffic fines Drivers licences Home Affairs ID books Passport Work permits Health Birth/death certificates Distribution of medicines Education Student textbooks Distribution of exam papers Welfare Child grants Maintenance grants Others Address verification/certification

30. Source:Management workshops; McKinsey analysis SAPO VISION AND MISSION NEED TO BE REVISED TO REFLECT THE NEW STRATEGIC POSTURE FOR DISCUSSION Mission Vision From To ‘To be the leading provider of postal and related services in Africa’ ‘To be recognised among the top 10 providers of postal and related services in the world’ Measures of success Profitability – operating margin/ROIC Efficiency – operational KPIs Customer Ratings Employee Satisfaction Corporate social responsibility ‘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’ ‘We will connect people through the distribution of information, goods, and financial services; building on our strengths as a provider of postal services and by embracing change …’

31. THE ASPIRED NEW POST OFFICE Retail Queue control ATM [PMG note: graphics not included, please email info@pmg.org.za] Counter Back office Source:ExCo meeting 12 September Communication centre Business centre

32. Th ank you

33. (Add your Business Unit name here) Post Retirement Medical Aid HR 7 November 2005 SOUTH AFRICAN POST OFFICE

34. Post Retirement Medical Assistance Prior to collective agreement, liability in balance sheet = R2.6 billion – rule AC 116, to report in the balance sheet – placed Post Office in a liquid position Approximately R967 million constituted pensioner liability The remaining approx R1.6 billion constituted Active employee liability.

35. Agreement reached on 10 th May 2005, to remove the benefit of PRMA for active employees (future pensioners) This resulted in a positive impact on the balance sheet of approximately R1.6 billion (R1.6 billion of the medical aid liability removed) The above came into effect from 1 July 2005 Pensioner liability of approximately R967 million in the process of being corrected  Utilise partly the contribution reserve (in process of acquiring a portion through a commercial settlement with Board of Trustees)  The balance – long term government bond with consent of Treasury  Cost to remove liability of current pensioners – approx R420 million  Benefit of removing the liability – R967 million liability removed from the balance sheet  Medical Aid Liability reduced to zero Post Retirement Medical Assistance

36. Assistance Note: Exits since 2000, that qualified for PRMA = 1198 out of a total exits of 11498 – this is a mere 10%.

37. SAPO’S DELIVERY SYSTEM SHOULD ALSO BE RESHAPED – FUTURE VALUE DELIVERY SYSTEM Source:Management workshops; McKinsey analysis Market Group strategy Transaction centre (branch network, call centres, Truebill, Trust Centre, etc.) Support functions (Finance, HR, IT, S&I, Internal Audit, Risk Mgmt, Legal, SCM, Properties,…; tailored to users where required) OpsS&M Customer service Mail OpsS&M Customer service Logistics OpsS&M Customer service Retail OpsS&M Customer service Postbank Government and international relationships Group marketing and communications Key account management FOR DISCUSSION

38. Mail THE FOCUS ON OPERATIONAL EXCELLENCE SHOULD BE PURSUED BY BUs AND SFs ADDRESSING THEIR SPECIFIC ISSUES OVER TIME (1/2) Source:Management workshops; McKinsey analysis Optimise mail operations to lower cost and grow volume through improved operations 1 Logistics Postbank Retail Support functions Build an efficient nationwide logistics network (set stage for/explore international alliance) Achieve benchmark cost levels for Postbank operations Optimise counters operating branches as efficient distribution channel Refocus to operate as value-adding, cost effective and reliable internal service providers Overall strategic priority Area

39. 39 REFINING THE DISTRIBUTION MODEL SHOULD INCLUDE A NEW SERVICE LEVEL FOR SAPO ‘CURRENT ACCOUNT’ HOLDERS: PRIORITY LINE Source: McKinsey analysis POST OFFICE/MAIL SERVICES POSTBANK Current SAPO clients are still served by the single queue Idle teller calls first client in the single queue Current account holders have dedicated service line Postbank “By the way Mr Tema, have you heard about our new life policy? If you wish, you could talk to your account manager”