Stringent compliance demands eat into profit margins

Rapid growth comes with challenges
JOY ORLEK
WITH THE courier industry worldwide achieving growth in the region of 20%, it’s a sector that would appear to offer attractive returns. But along with this rapid growth comes a number of challenges, says Dawn Wing chief executive Charles Fairweather. “Foremost among these is the dearth of skills. And despite the inroads made by Setas and Tetas, the industry has a long way to go to prepare the ground.” While a handful of industry majors have put time and money into learnerships, particularly for the previously disadvantaged, these by no means address the sizeable shortfall, particularly against the backdrop of increasingly stringent compliance demands. In contrast to world trends which have seen a number of post offices worldwide teaming up with private businesses in a less regulated environment, the reverse is true in South Africa where greater regulation is the order of the day. The recent Postal Regulator’s Act is evidence of this. All courier companies are now required to register with the Postal Regulator and pay an annual fee of R500. The idea is that all operators who fail to register will be closed down, but there are question marks over the ability of the Regulator to police the legislation. So far there’s been no evidence of this. Known shipper The implication of the imminent ‘known shipper’ concept is a further worry for the beleaguered industry. While it seeks to bring South Africa up to speed with the rest of the world, demanding that couriers are able to account for every package from customer hand-in to loading onto the aircraft, it will drive up costs even further. “There are valid reasons for implementation, but the costs of compliance are substantial, particularly for smaller operators,” says Fairweather. “It will require every parcel loaded onto an aircraft to be X-rayed, which means that courier companies will need to invest in costly scanning equipment – estimated by some to be up to R500 000 per unit, and some companies will require more than one unit.” Add to this the cost of manpower to operate the sophisticated equipment and you’re looking at substantial figures. Currently the implementation date is unconfirmed but it’s a cost that companies will need to factor into their future budget plans.