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December 5, 2013

The postal services of developing countries are in some ways as diverse as the countries and regions that they serve, although they tend to share certain characteristics common among institutions that have lacked long-term investment. 

Chief among these is inadequate infrastructure, says Mansour Gueye, the UPU’s programme manager for African and least-developed countries, reflecting the general environment inside developing countries, “characterised by deficiencies in basic infrastructure, such as poor roads, no street names, failure in the supply of electricity, and low penetration of information technology and communication infrastructure”.

With regards to the postal sector, challenges start with the regulatory environment, which is “marked by the absence of a clear vision of states through a clear definition of postal sector policy and the absence of, or poorly organised, regulation”, Gueye says. “Postal operators are facing huge investment needs and the postal sector is not always a priority for states,” he points out. “The problems are the same in Asia and Latin America, except that in these areas the state is much more involved in the running of the postal sector.”

Walter Trezek, owner and CEO of Document Exchange Network, a consultancy that has worked with posts in Asia, Africa and Latin America, agrees that the fundamental challenge facing posts in developing countries relates to infrastructure. “Most don’t have a specified postal address, so it starts with the basics: to identify a receiver of a postal item is already a challenge,” he observes. For example, within certain countries in Asia, including within the Commonwealth of Independent States, you can have a situation where postal items are delivered to the chief of a clan or somebody who is responsible for a rural community, and that postal item is then later passed on or collected by the recipient.

Trezek says there are several development paths for posts in this kind of environment, including via the UPU’s ‘Addressing the world’ initiative. “But there are almost 200 member states of the UPU, and we only have about 50 of those who have a specified postal address system, so there you see the gap,” he says.

This gap, and also the challenge and opportunity for posts in developing markets, is reflected in the fact that around 90% of all postal items worldwide are handled by countries that have a specified address system, observes Trezek. This also highlights the challenge governments in developing countries face, and the potential opportunity for posts.

“If you don’t have a postal address system, then also government doesn’t function: you can’t hand out money to people in need; it is quite difficult to identify certain places; and banking and insurance and all those kind of utility services are lacking as well,” he says.


Is a postal address system needed?

While some of these identity issues for governments and posts are being tackled by initiatives from the UPU, Trezek says one big question is whether developing countries without a specified postal address system, or lacking an infrastructure enabling deliveries to residential addresses, will be able to leapfrog this stage, thanks to new technological developments and market trends. “Obviously, looking at letter mail volumes, they are declining sharply, so why should they establish post boxes? There’s not a real need for that,” says Trezek.

Alexander Shyla, director of Colvir Software Solutions, says that PO Box delivery models, where the customer has to collect mail from a post office, are often used in sub-Saharan African (SSA) countries, as well as other developing countries, although these also have their own challenges. The boxes can
be expensive to rent, making them an unaffordable option in many cases, and they still also require recipients to be able to access them. In Sudan, Mali, Niger and the Central African Republic, for example, there are fewer than one post office per 10,000km2, suggesting that some inhabitants would have to travel for at least a day to reach their nearest post office.

Low population densities also mean that delivery to all residential addresses in developing countries is an unlikely distant vision. However, Festus Hangula, CEO of Namibia’s national postal operator NamPost, believes the development of a specified address system would help improve the efficiency and consistency of deliveries in urban areas even for a post in an emerging economy such as Namibia. He says NamPost has been looking at this, with research support from the UPU. 

“Some basic work has already been done and we are looking at how we can build on that to finalise it,” he says. “But going on to the next stage, to deliver to individual houses, that is cost intensive, and if you take an example of a country like Namibia, a very big country but very sparsely populated, as you go out into the rural areas, the distance from one house to another is quite considerable and the road infrastructure may not be good. You could do it in cities and towns, but as you go out further, it is simply not practical.”


The importance of international mail

Right: NamPost’s post office in Lüderitz, Nambia


Gueye points out that whereas
in industrialised countries, domestic mail, postal domestic parcels and e-commerce are predominant; in the least-developed countries,
international mail is the most important segment.

Hangula believes there is still
a strong future for NamPost’s letters business, which has continued to see growth over the past few years of around 4-5% annually. This is almost exclusively B2B and B2C, with almost no C2C letter traffic in Namibia. “I believe that if you give it another 10 or 15 years, it should still be a relatively good business,” Hangula predicts. “But that said, I fully understand that if you look at the worldwide postal industry, the volumes are going down, and therefore there is no way that we can sustain the growth in
the industry worldwide.

“That being the case, we have for the past 10 years or so worked very seriously in terms of diversifying our income. If one looks back at about seven years ago, you would have found that 85% of our income was coming from mail, and today we are at 22% – notwithstanding the fact that mail has continued to grow.” Financial Services (see Financial Inclusion in Namibia, page 34) now make up 33% of revenues, and Other Services – essentially agency work – accounts for more than 30%.

This agency work includes partnerships and cooperation agreements with public bodies and private businesses, enabling them to make use of NamPost’s branch network and infrastructure around the country. Partners include the City of Windhoek; the Namibian Broadcasting Corporation; Telecom Namibia; Namibia’s National Housing Enterprise; and MobiPay, an electronic money service licensed by the Bank of Namibia. The agreement with MobiPay, for example, allows MobiPay customers to deposit, withdraw and transfer money from 184 NamPost branches, while allowing NamPost to deliver some services through mobile phones in Windhoek. MobiPay clients are also able to register at post offices and make use of the facilities to conduct transactions such as paying utility bills, and pay for goods at certain retail partners.

"So we have succeeded in terms of diversifying, and the good thing is that we are diversifying while the core business, which is mail, is still growing,” says Hangula. “The fact that it’s reducing in terms of its contribution is because other areas are growing more quickly.”


Overcoming hurdles

Shyla says that in developing countries, where low levels of income, a lack of infrastructure and less-developed financial services are common challenges, posts can provide a trusted partner in order to help the economy improve. However, he observes that owing to a lack of trust in some SSA-designated postal operators, for example, many utility companies and banks deliver and collect their mail themselves, despite the much higher costs involved.

Another challenge faced by posts in some developing countries is an infrastructure problem when it comes to electricity, observes Trezek. “So, looking to postal access points, financial services and remittance services might be a problem for those countries. All of that is linked to infrastructure services, and those services are linked to counter systems,
or at least to an electricity supply,” he says.

“Of course there are certain development paths in that, for example, photovoltaic-driven counter solutions in certain countries in Africa and Asia,” Trezek adds. Many of these solutions are supported by the World Bank’s development funds.

Gueye points to a project recently launched by the UPU in partnership with PlaNet Finance that aims to improve money transfers and financial inclusion in Africa. Using funding from the European Union, the project is equipping 200 post offices in Burkina Faso, Cameroon, Côte d’Ivoire and Mali with the capability to adapt their postal financial services “to circumvent the constraints of the electricity supply and the continuous availability of the internet”, says Gueye. “Rural people will be better served in terms of quality, cost and proximity. After the pilot phase, the solution will be extended to all post offices of member countries of the African continent who wish to participate.”

Hangula says the varying availability of electricity has posed a bit of a limitation on the development of NamPost’s network, “but for most of the centres, they do have electricity. For us, the challenge is the communication lines, to get the post offices online. The consistency in terms of connectivity, that we try to get around by making sure our existing point of sales can operate off-line, so we can do the transactions even though there is no connection with the server, and when the connection comes back, it updates.”


Going mobile

Trezek says we should not forget that one of the best distributed communication networks in Africa and Asia, and also in South America, is the mobile telephone. “There is obviously a certain link between SIM cards, personal identification and certain kinds of secured ways to communicate,” he says. Trezek believes that mobile technology will also bring a solution for addressing systems, with postal addresses in less-developed countries in the future likely to be based upon GPS-based geo-location indicators.

“There are certain Google addressing services already available, and certain initiatives already in India to give an address to less-developed areas such as slums. So there is this bridging happening between a lack of infrastructure and the necessary support reaching people. As we move into a more mobile-based communication environment, the mobile device, our mobile telephone, will be something linked to people. And it seems that we are moving to the next generation of SIM cards that will be somehow linked to an electronic identification,” Trezek adds.

 

Left: NamPost’s letters business has continued to see growth over the past few years of around 4-5% annually

 

Trezek also points to the work being carried out by the UPU’s Postal Technology Centre, a cooperation of member states of the UPU. “It is developing an e-commerce platform, combining and integrating physical delivery of documents and items and services with customs functionalities and postal financial, remittance-based services. Then you can see what value this can bring to posts anywhere – especially also to those postal services leapfrogging in least-developed countries.”

December 5, 2013

 

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