SABC on its 2009 Annual Report

Meeting report

South African Broadcasting Corporation (SABC) Annual Report 2009 presentation
Mr Ben Ngubane, Chairperson of the Board, SABC, said that the SABC Board (the Board) was due to meet on 24 February 2010 to consider its three-year corporate plan. According to the hand over report of the Interim Board, the SABC had been in a “state of financial crisis, which [was] a symptom of long-term capacity and governance crisis”. The Board had therefore been left to assume responsibility for an institution that was troubled financially and had seen failures of governance and competence – all of which had resulted in a lack of public faith in it. The Board’s immediate strategy over the past six weeks of its existence was to ensure a turnaround of the SABC. This would include a clean-up of all audit queries and other lapses in corporate governance reporting and accountability, stabilising the organisation, and initiating a process of financial sustainability. As this presented the Board with a mammoth task, it would need to work together with the Department of Communications (the Department or DOC) towards achieving these goals. The Board’s relationship with Mr Solly Mokoetle, Group Chief Executive Officer of SABC, was developing into a productive one. The Board had several sub-committees, which had been designed to improve the efficiency of its functioning.

Mr Solly Mokoetle, Group Chief Executive Officer, SABC, added that on 18 February 2010, the Board approved a high-level strategic framework, which would serve as a guideline for SABC’s corporate plan. Once the Board had approved it, the plan would be submitted to the Department of Communications. The SABC would then flesh this plan out into a fully-fledged operational plan (to be submitted to the DOC as well as National Treasury).

As these activities had imposed a major additional workload on the organisation, the Board had approved the establishment of a temporary Turnaround Planning Unit within the Group Chief Executive Officer’s office. He listed the strategic priorities of this Unit. They included the need to identify and develop proposals on cost-containment and cost-cutting targets for the entire SABC, to drive the re-organisation of the SABC’s sales and marketing unit and its license fee collections, and to identify and develop strategies to retain and increase television and radio audiences (which, although presently relatively healthy at 60%, still needed improvement) Although the Unit would selectively draw on existing skills within the organisation it would also source these skills through temporary contracts from outside the SABC. While the SABC had many hard-working and loyal employees, it had lacked the ability to turn itself around without the introduction of alternative capacity. The Board had realised that the introduction of a small top-tier leadership core was not enough to address this capacity crisis. The use of external expertise was, however, a short-term measure with relatively minor implications.

The SABC’s head count and wage bill were currently under consideration by the Board as part of its Turnaround Strategy. Concrete details around these should be available within the following six weeks. The Board was also reviewing the various vacancies within the organisation. The position of Head of News and Current Affairs had been referred to a sub-committee for consideration and recommendation.

News-reading was done on a freelance basis by full-time SABC employees. Payment received for this was therefore not included as a salary,  but was fee-based with the rates being reviewed annually. Although the majority of newsreaders accepted the lowered rate, there was a minority who refused it.

The current state of equipment in the SABC’s News Division had been affected largely by the move from analogue to digital. Although SABC had initiated this move in 2005, the financial crisis served as a stumbling block to a smooth transition.

Payment of content producers had also been affected by the organisation’s financial crisis. It had, as a result of this crisis, failed to settle outstanding liabilities amounting to R60 million. The bulk of these liabilities had subsequently been settled.

Ms Felleng Sekha, Deputy Chairperson, SABC Board, discussed the Auditor-General’s recommendations regarding disciplinary actions to be taken. She reported that disciplinary action against the Chief Financial Officer had been concluded, with a final written warning being imposed. The disciplinary hearing against the Group Executive for Content Enterprises was still ongoing. He still remained under suspension. The disciplinary hearing against the Head of Audience Services had been concluded, with a final written warning being imposed. The disciplinary procedure against the Head of Procurement still continued. The Board requested the assistance of the Committee in getting the Auditor-General to return and conduct a more comprehensive forensic audit of the organisation.

The Gobodo Report was submitted to the then Board and subsequently acted upon. These actions included disciplinary action being taken against the current Group Chief Executive Officer. Although Mr Mokoetle was found guilty and charged, he successfully challenged the validity of the findings and the sentence. A single copy of the Gobodo Report resided in a safe at the SABC and the then-Board issued an instruction that, in order to access this report, approval had to be sought from the Board before it could be signed out. This was due to the ‘explosive’ nature of its contents. The Board had initiated an investigation into how parts of that Report had been leaked to the media.

Mr Mokoetle added that, since the SABC’s 2008/09 Annual Report was tabled to Parliament on 11 December 2009, the current Board had no idea of the issues addressed in this report. A statement released by the Minister prior to the report being tabled noted a total comprehensive loss of R910 million, while revenue increased by 0.9% to R4.7 billion and expenditure increased by 19%. Notable rises in expenditure included a 15.3% rise in employee costs, unbudgeted foreign expenditure -due to the expansion of foreign bureaus and SABC International,  a 15.3% increase in investment in programme, film and sports rights, a 38.6% increase in depreciation and impairment of property, and a 38.2% increase in consultant and management fees.

Discussion
Mr N Van Den Bergh (DA) asked what plan the Board had in place to ensure competency of SABC employees. He asked what was to happen with SABC International.

Mr Mokoetle answered that issues related to capacity and competency were the biggest challenges with which the turnaround team had been confronted, but were being addressed. SABC International might soon be closing down. There were, however, certain strategic and national issues to take into account before this could be done.

Mr L Mkhize (ANC) asked why the necessary expertise was not first sourced internally as this would save costs. He felt that those found guilty in disciplinary hearings should be dealt with in a harsher fashion. The Board needed to deal more decisively with the issue of the leaked Gobodo Report.

Mr Ngubane replied that this issue needed sensitivity and a clear plan. It was, however, being dealt with. Staff needed to be encouraged in order to create better capacity. The turnaround team was working together with an internal audit unit. There was a major investigation into how the Gobodo Report was leaked. Appropriate action would be taken in this regard.

Mr Mokoetle added that the turnaround team included people from SABC in it. As the industry was a specialised one, it was not easy to source the necessary skills. SABC had been “consulted to death”, but certain skills were needed and these were found only outside the organisation. People from inside the organisation were, however, not ignored.

Ms P De Lille (ID) asked whether there was any monitoring and evaluation of the Board and Executive Management. She asked if any further irregularities were uncovered which necessitated the request for the Auditor-General’s return. She also asked if there was any record of who signed out the Gobodo report. She asked if any of those who faced disciplinary action benefited from the process. Ms de Lille asked what SABC was going to do to address the issue of the public’s lack of faith in the organisation.

Mr Ngubane said that that there was no evidence of personal gain, as a result of facing disciplinary action.

Mr Mokoetle answered that monitoring and evaluation formed part of the Auditor-General’s recommendations. This would be a part of the restructured SABC.

Mr Ngubane added that the issue of reputational risk was important to the Board and would form part of risk management. To this end it was trying create respectability and trust. The Group CEO had done a lot of work in terms of content.

Ms de Lille asked how much was outstanding in terms of payments to independent producers.
 
Mr Mokoetle noted that as at end January there was approximately R7 million outstanding. The bulk of outstanding payments had subsequently however been paid out. Meetings with these producers’ representatives were being held in order to address this issue.

Ms de Lille enquired if there were any programmes in place to build on the relationship between the Board and Executive Management.

Mr Mokoetle said that the relationship between the Board and Executive management was sound.
 
Ms de Lille asked why the newsreaders’ rates had been cut.

Mr Mokoetle said that newsreaders’ rates were cut in an attempt to ensure efficiency and cost-effectiveness. The unions had been involved throughout the process.

Ms de Lille enquired how the issue of license fee collection would be tackled.

Mr Mokoetle said that although there had been a decline in collections, there had not been a deficit. Viewership tended to shift within the network. While SABC 3’s viewership declined, the viewership figures for SABC 1 had nearly doubled.

Mr Ngubane added that the Licensing Division had exceeded expectations over the past financial year. This showed that South Africans were willing to pay their TV licence fees. The Board was confident that, with enough publicity and information campaigns, the organisation would regain payments here.

Ms de Lille asked for further explanations on the sub-committees and what they dealt with.

Mr Mokoetle described the sub-committees. The Public Broadcasting and Public Commercial Service sub-committees, in addition to dealing with issues relevant to each, also combined to deal with issues of programming. There was an Audit and Risk Committee, which was to be anchored by outside expertise. A Finance, Investment and Procurement Committee addressed all the audit issues around procurement and supply-chain management. There were also a News sub-committee, the Governance, Remuneration and Nomination sub-committee, the 2010 sub-committee and the Technology sub-committee.
 
Ms J Kilian (COPE) asked how the viewership figures were tallied.

Ms Charlotte Mampane, Acting Chief Executive Officer, SABC, said that the organisation relied on information from the South African Advertising Research Foundation (SAARF), a credible research company which conducted research for all media houses. With regard to television ratings, SAARF recorded information on a daily basis, and released it a week later.

Ms Kilian asked if the wage bill would be implemented more evenly across all levels of employment. She asked what plans were in place to address the skewed organisational structure of the SABC.

Mr Nicholson added that the general rule was that all employees received the same wage increase, with the only difference being when it came to bonuses and commissions.

Mr Mokoetle added that problems with the SABC’s organisational structure stemmed from the Broadcasting Act, as the SABC’s structure was laid out in this Act. It was hoped that the new Bill would address this issue.

Ms Kilian asked if the Gobodo Report would be made available to the Auditor-General.

Ms Dina Pule, Deputy Minister of Communications, noted that she had asked the Group CEO to submit a more comprehensive report. Before requesting that the Auditor-General conduct a follow-up audit, it should be considered that both the Auditor-General’s office as well as the Minister’s Task Team had made recommendations that needed to be implemented.

Ms L Mazibuko (DA) asked whether, in requesting a follow-up audit by the Auditor-General, the Board was requesting a whole new remit or a completion of the previous audit.

Mr Ngubane answered that, although a lot of work had been done in this regard, it needed to be completed.

Ms Mazibuko asked how much had been borrowed against the National Treasury’s guarantee loan, and how soon was it likely that SABC could turn a profit.

Mr Ngubane said that of the R1 billion raised, R473 million remained. This money, however, had to be locked into the corporate plan. If SABC could stimulate revenue there would be no need to use this remaining amount. Consolidation and stabilisation of the Corporation should be complete by 31 March 2011.

Ms Mazibuko asked how far along was the SABC with the process of filling the Head of News position.
Mr Ngubane said that there had been no appointment as yet.  The Board had referred this appointment to the Governance, Remuneration and Nomination sub-committee. The new process would start once the Group CEO had set up a new interview process.

The Chairperson asked for a comprehensive report around the disciplinary cases. SABC should also provide a report as to what plans it had in place regarding the Auditor-General’s recommendations. It should also table a formal request as to which specific areas it needed to have further investigated by the Auditor-General.
 
The meeting was adjourned.