Posta eyes over Sh2.5bn capital from e-commerce giants

Postmaster-General and CEO John Tonui told the Business Daily that while Posta is still working with the Treasury to structure the sale and decide on the total stake it will cede in EMS, the government will likely retain a majority stake of at least 51 percent.

The State-owned corporation is banking on the capital injection to revitalise its operations through a business restructuring centred on new revenue streams after years of dwindling earnings, mounting losses, and a shrinking role in a digital-first economy.

The money will mostly help it build an e-commerce delivery system that will enable it to capitalise on growing online shopping habits across the globe for a new revenue stream through nationwide deliveries.

"E-commerce is the future of the post and the future of every Kenyan. That's why it's at the centre of our restructuring strategy. We need a new system for that, and it needs enormous investments. And that's why we're seeking a strategic partner," said Mr Tonui in an interview.

A Cabinet memo—a letter with the proposals—has already been drafted and sent through the ICT ministry. According to Tonui, it should receive the cabinet's nod within three months allowing it to begin the process of finding the strategic investor.

The partnership is not restricted to a local or international firm, but the final investor or group of investors settled on must be able to raise the required amount within the shortest time possible and have the capacity to advise on e-commerce, Tonui said.

Ultimately, the new e-commerce delivery business is expected to generate up to 66 percent of Posta's revenues, making up for the dwindling mail and financial service segments.

"We're looking at a percentage of about 66 percent in terms of the investment that we really want to come in from e-commerce alone," Mr Tonui told the Business Daily.

"We're already cooperating so much. We have the Amazons of this world, we have DHL, Kilimall, and all the other private sectors that are already getting some funds through us, but we really want to open it up by allowing them to invest, giving them some of our shares."

Currently, the bulk of Posta's revenues, about 55 percent, still come from mail delivery, but it has been declining. Its courier division accounts for about 35 percent of its revenues and has been growing.

In the year to June 2024, its revenues totalled about Sh2.4 billion, with Sh1.2 billion coming from mail delivery; Sh690 million from courier; Sh245 million from assets, and about one percent from its financial services division, which has also been declining.

In the current financial year – ending June – Posta expects its revenues to grow to about Sh4.1 billion, largely driven by growth in revenues from courier services, which will be boosted by the e-commerce shift.

Currently, Posta's partnering with e-commerce firms in the country — including Jumia and Kilimall — is limited to delivery of items ordered on the different platforms. Now, Posta wants to have a system of its own, in partnership with one of the giants.

The proposed privatisation of EMS would mirror the model used by DHL, the global courier firm owned by Deutsche Post – the German equivalent of Posta—which derives more than 82 percent of its total revenue from logistics. DHL is run as an independent arm of the German Post, which had sunk into losses before acquiring a stake in the private firm.

It is part of a broader restructuring programme ordered by the Cabinet in January when it ordered the dissolution of nine State corporations, merging 42 others, and restructuring six — among them Posta.

The corporation was also allocated Sh3 billion in the current financial year to support the implementation of a new corporate structure and modernisation of its ICT infrastructure as part of the turnaround plan.

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