New Zealand Post deal makes Maltese cross

By Jock Anderson

Friday 15th February 2002

BROKEN PROMISES: NZ Post CEO Elmar Toime cements the ill-fated 1999 deal with South Africa Post Office executive chairman Max Maisela

A political brouhaha lashed Malta following last week's disclosure New Zealand Post was taking over the tiny Mediterranean island's postal service.

It was announced last week that NZ Post subsidiary Transend had bought 35% of Maltapost in a $6.5 million deal which also involved a two-year management services contract for Maltapost.

The deal has Maltese Liberal government and opposition MPs at each other's throats and comes hard on the heels of a disgraced NZ Post's dramatic eviction from South Africa last year.

Fears have been aroused in Malta (population 366,000) that Transend's abysmal failure to deliver on a $54 million promise to make the South African postal service break even may rub off on Malta.

Accusations have flown over a secret, untendered deal favouring Transend coupled with fears that Transend's management plan will mean job losses at Maltapost.

According to its agreement with Transend, Maltapost has already agreed to increase the cost of standard letter post by 1c - about 17% - by April next year.

A leaked report of an investigation and audit carried out on behalf of the South African government suggests NZ Post misled the South African government to win the controversial contract to run the country's postal service.

Prepared by international forensic auditors Kroll Associates, the leaked report contained allegations that NZ Post officials won the bid by saying they could make the massive loss-making postal service break even within three years, which they later conceded was not possible.

South Africa cancelled the $54 million contract halfway through its three-year term last June, by which time the promised breakeven point was a $228 million loss and Transend left the country with its tail between its legs.

The Kroll report described Transend's handling of the South African project as "disjointed," "unco-ordinated," in "disarray," based on "unrealistic budgets" and failing to deliver on agreed financial targets.

NZ Post and Transend have denied the claims in the Kroll report amid allegations the NZ Post board did not see the report and Act New Zealand finance spokesman Rodney Hide's claims the report was deliberately buried by officials.

Mr Hide said the Kroll report itself was bad enough and described NZ Post's attempts to cover up the failure as scandalous.

The South African fiasco still features on the NZ Post website as a successful management project.

In Malta conflicting statements have blurred the precise nature of Transend's deal with Maltapost.

The government has given the impression Maltapost will receive cash for a 35% share acquired by Transend but the opposition claims it will get services in kind, not cash.

In the wake of the South African debacle Maltese Labour opposition leader Alfred Sant described the Maltese deal with Transend - NZ Post's international postal consultancy - as a "mess."

Dr Sant raised questions over the price Transend paid and asked how Maltapost's shares were valued.

There are also questions over whether Transend gets 30% or 35% of Maltapost.

A total of 980,000 Maltapost shares are to be issued to Transend, which will also receive a yearly fee of $US660,000 for services.

Claiming Maltapost's shares were sold too cheaply, Dr Sant said the negotiations for the partial privatisation of Maltapost were carried out with only one or two companies - Transend and Canada Post - without a call for offers.

Should the Maltese government sell the rest of the shares to the public, Maltapost would end up being run by Transend, leading to uncertainty among the workers, Dr Sant warned.

Parliamentary secretary in the Maltese economic services ministry George Hyzler has been on the back foot defending his government over the deal, including not putting the contract out for public tender.

In a joint attack on the deal, Labour spokesman for finance and the economy Leo Brincat and spokesman for transport and ports Joe Debono Grech said Maltese people were still in the dark about what really led to the agreement, as well as its full implications.

Much of the concern, according to Messrs Brincat and Grech, arose mostly because of the "blots" on Transend's track record in various other countries - particularly South Africa.

Maltapost new board of directors is to include its current chairman and government representative, Frank Dimech, Mario Mizzi and Antoinette Borg.

Transend's board members are managing director Drew Stein and regional director Alan Lodge. The chief executive officer was named as Rob Macgregor, who has held various post with Transend in different countries.

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