SABC Board briefing on the Special Investigating Unit's Investigations Report

Meeting report

Opening Remarks
The Chairperson informed the Committee that the agenda for today was to discuss the Special Investigating Unit’s (SIU) investigation report. The Committee received the request given by Dr Ben Ngubane, Chairperson of the South African Broadcasting Corporation (SABC) Board, in relation to the sensitivity of some of the issues around the SIU’s investigation. The Committee agreed that when the SABC presented its report, the state broadcaster should not compromise the ongoing cases. The Committee just wanted to know what it was doing and what progress it had made; Members did not want it to compromise ongoing investigations.

Adv Cawe Mahlati, Member of the SABC Board, addressed the Committee saying that she had been out of the country when the SABC board met with the Committee last week. However, when she got back, she was confronted with a variety of media reports concerning her conduct and the call by the SABC chairperson, Dr Ngubane, that she be “sacked” as an SABC board director. She requested that Members give her the opportunity to address them so she could have a right of reply.

The Chairperson noted Adv Mahlati’s request. He said it was not necessary for this meeting, as the focus was on the SIU’s report. However, the Committee was reconvening at 3pm to deal with governance issues on the SABC board. The Committee would handle the matter then.

The Chairperson also informed the Committee that the matter of the appointment of the SABC board member and the ICASA council was supposed to be discussed today. However, the matter would be deferred until tomorrow. 

Briefing by the South African Broadcasting Corporation
Dr Ngubane informed the Committee that the SABC board wanted to report back to them on something they thought was a “work in progress”. Nothing has been fully finalised in terms of the recommendations from the SIU investigation.

Mr Thami Ka Plaatjie, Deputy Chairperson of the SABC Board, agreed that this was an ongoing process – a multi-faceted process because it involved other state agencies outside of the SABC’s control. Some of the things that were coming out showed shortcomings in so far as the systems the organisation used and shortcomings with control measures.

Mr Hlaudi Motsoeneng, Acting Chief Operations Officer for the SABC, and Ms Sully Motsweni, Head of the SABC Task Team, presented the report on the SIU investigations. They reminded the Committee that the Auditor-General of South Africa (AGSA) identified a number of problems within the SABC in September 2009. In order to continue the investigations, the SABC board ahad ppointed the SIU to make further investigations.

The SIU identified that the SABC incurred R9.6 million in fruitless and wasteful expenditure and R428.6 million in irregular expenditure, disciplinary action had to be taken against 300 employees, there was financial misconduct in terms of the Public Finance Management Act (PFMA), and there were nine ongoing criminal investigations and prosecutions.

Review of the Appointment of 118 Consultants
The AG’s report highlighted that R279.8 million was paid to 118 consultants. The payments were not investigated by the AGSA and the SIU was then mandated to investigate whether the appointments were carried out in accordance with SABC policies and procedures. The SIU investigated 16 of the companies to which more than R2 million was paid. It was discovered that the AGSA report had overstated the amount of R129.8 million. Non-compliance with the procurement policy was identified on all 16 matters investigated and non-compliance with the Appointment of External Consultants policy was identified for nine matters. Criminal action was recommended for all 16 matters.

The SIU identified irregular expenditure amounting to R152.9 million with reference to 16 matters. It also identified that previous SABC boards had not practiced sound corporate governance in the execution of its responsibilities and is guilty of financial misconduct. The SIU had identified financial misconduct by 22 individual board members that served on three separate boards during 1 January 2004–31 December 2009.

The Former head of procurement was found to commit acts of financial misconduct in that he failed to exercise a duty assigned to him in terms of the PFMA. The majority of non-compliance identified in the SIU report was due to lack of compliance to supply chain management policy. Further non compliance with the Delegation of Authority Framework (DAF) was due to contracts not being found for the consultants identified.

Declaration of Interests Relating to 698 Employees and 32 Board Members
It was found that 698 employees and 32 board members held interests in 1105 and 177 companies respectively. The SIU investigated further and found that 687 employees had a duty to disclose 1052 business interests in 1013 corporate entities. Of the 687, 89 declared their business interests. Only 30 of these employees obtained the approval of the Group Chief Executive or General Manager of their business unit. The SIU had recommended disciplinary action against three employees who had transgressed the SABC personnel regulations by failing to disclose their interests. Disciplinary files had been prepared for 369 employees.

In terms of board members, 26 had a duty to disclose 103 business interests in 102 business entities. Of the 26, 17 had declared their directorships in other countries. The remaining “19” (error made by SABC. to be clarified at next presentation) did not declare directorships in 73 business entities. According to the Companies Act, failure to disclose directorships by board members constituted a criminal offence. The SIU had sent letters to the board members requesting explanations for apparent non-declaration.

Potential Conflict of Interest: Employees
The SIU was mandated to investigate 16 employees and five entities to establish if a conflict of interest existed. It was found that three employees/board members had a duty to disclose their interests and duly did so, while two did not have a duty to declare theirs. 11 employees did not declare their interests. Of the five entities investigated, SIU identified non-compliance to the SABC supply chain management policy in the appointment of two service providers.

The SIU recommended that the SABC should ensure that all invoices paid complied with the VAT Act and that disciplinary action should be taken against employees who failed to comply with SABC policies. The SABC should also lodge criminal complaints against three employees for failure to declare their interests in a supplier of the SABC, whilst employed by the SABC.

Criminal Matters
The SIU report identified a number of former employees that should have undergone disciplinary procedures. However, it was not possible to discipline former employees.

In terms of international acquisitions, the acquisition process became secretive and acquisitions were made without communication of channel’s needs. As a result, the SABC ended up with high volumes of redundant inventory and impairment losses of about R170 million.

The allegations of kickbacks were still under investigation. The SIU was finalising the docket; however, the matter had been referred to the National Prosecuting Authority (NPA).

The SIU identified 23 natters that were outsourced during the period of the former head of legal’s employment at the SABC. Invoices paid by the SABC appeared to be grossly inflated or the work had not been performed. Actual losses for invoices paid to a law firm amounted to R482 594. A potentially corrupt relationship between the former head of legal and a law firm was found after payments were made to the former head of legal’s soccer club of R330 000 in exchange for work awarded to the law firm to the value of R6.1 million. An NPA prosecution was underway; however, the former head of legal and accomplice were out on bail.

Review of 20 Revenue Matters
The SIU undertook an investigation of 20 revenue matters referred by the SABC board. The review comprised of a review of the compliance with SABC policies and procedures, a financial analysis of the revenue contract, and an investigation into the specific allegations received on the contract. Non-compliance with the DAF and SABC sales policy was identified on all 20 matters. Criminal cases were opened with the Special Commercial Crimes Unit of SAPS. For five revenue matters, there was a reasonable suspicion of possible fraud and/or corruption. The SIU recommended further investigation to be undertaken by the SABC, and if necessary, institute criminal proceedings.

Review of 14 Procurement Matters
The AG’s report highlighted non-compliance with SABC procurement policy. SIU was mandated to investigate allegations further. Non-compliance with DAF and/or procurement policy was identified on nine matters investigated. Disciplinary action was recommended against two SABC employees. Civil action was also recommended against the former Executive for Content Enterprises and the former GCEO and former Head of Legal.

Allegations Received by AGSA but not Investigated
It was alleged that some tender documents went directly to the board without going through the sub-committee of the SABC board, and some went directly to the sub-committee without going through the bid adjudication committee. It was noted that the appointment of the bid adjudication committee for the current fiscal was still outstanding.

There was a lack of price targeting and various payments to clothing and promotional material companies for gift sets. There were allegations that certain sports rights were acquired although they had not yielded any return on investment. The SABC also lost the soccer rights, boxing rights and cricket rights.

Discussion
Ms J Killian (COPE) said she wanted to table a serious concern about the report that was presented to the Committee. She did not believe that the report was factual and that it addressed the critical issues that the SABC was facing. The report did not tell the Committee what the findings were and what steps the SABC were taking to correct those problems. The report spoke vaguely about “beefing up” the control environment. Last week the Committee was presented with serious allegations of misconduct by a very senior official. This was an indication of how bad the situation was. It was unacceptable that these issues had been dragging along since 2009. It seemed there was no sense of urgency from the board to fix things. The presentation was too broad and in some of the other Portfolio Committees of Parliament, this would not have been tolerated. It seemed that the Committee would have to determine how the SABC should report on the SIU report. There seemed to be a focus on 20% of the irregularities, and the possibility for vast irregularities still existed. The SIU report said that there was an allegation that some tender documents went directly to the board without going through the sub-committee of the SABC board, and some tenders went directly to the sub-committee without going through the bid adjudication committee. This was the essence of the problem that almost bankrupted the SABC. Action has not been taken against these individuals. She asked what controls the SABC had in place today. The report said that the appointment of the bid adjudication committee for the current fiscal year was still outstanding. How could this be allowed? What were the rules for this? She wondered how the Committee and the board would be able to stop the rot within the SABC if the correct systems were not put in place. An allegation was made that payments were made to service providers who were not registered on the database. The Committee had now been informed that there is a database, which she was really grateful for. After so many years, there was finally a database in place; however, it was also said that the group supply chain policy allowed for emergency and special payments to service providers who were not registered on the SABC’s database. So, there was still a possibility to circumvent this policy. What controls were in place to ensure that emergency and special payments were not granted for just any reason? She noted that an alarming number of managers had been appointed. It was said that non-renewal of contracts and special payment agreements were entered into to address the headcount matter. How was it possible to appoint people through clearly irregular Appointment procedures? And what action has the SABC taken against this? The SIU report identified a number of employees who should have undergone disciplinary proceedings but it was not possible to discipline them because they have already left. She wanted to inform the board that it was possible to charge these former employees criminally. She wondered why, if there was evidence of wrongdoing, the SABC did not charge these employees. What action had the SABC instituted for this? She wanted more clarity on potential conflict of interest with employees. The Committee asked about this before and was assured that there were proper processes in place now. Had the SABC identified people, had they charged them and had they dismissed them? If these processes were not started, the SABC would never stop the rot within the organisation. The report was too general and the Committee needed more details. She noted that various payments had been made to clothing and promotional material companies for gift sets. It was said that two suspects were arrested. She asked how this was possible and if this practice had stopped completely. There were allegations regarding the lack of price targeting and the outside interference with the tender process specifically related to the procurement of outside broadcast vans. The matter was still sub judice and had to be discussed with the legal team; however, she was disappointed that further control measures still had to be implemented. There was no opportunity for business as usual. It seemed the SABC was focusing on small issues, and the big ones were getting away. The SIU report showed that civil action was recommended against the former GCEO and former head of legal in the Siemens matter. Has this been done? The SABC had to show that it was serious about stopping the rot, and if they did not, the organisation had to stop coming to the Committee with requests for support on the renegotiation of the government guarantee.

Ms M Shinn (DA) stated that she wanted to echo the comments made by Ms Killian. It was in fact very difficult for the Committee to see if the SABC had made any progress because of the way the report was structured. The lack of detail in the report was a major hindrance and she wondered if the SABC could tabulate the content better. This would help the Committee keep track of who was being charged and if any progress was being made. The Committee needed to note serious irregularities by management and board members and Members needed to know how many board members had been charged and how many were being investigated. She understood that the SABC could not jeopardise their investigations and they could not name them until formally charged but there had to be some way the Committee could track progress on a person by person basis. Procurement seemed to be quite a problem. What action was being taken here? In terms of declaration of interest by board members, the SIU recommended that disciplinary action had to be taken against employees that had transgressed. The SIU had prepared disciplinary files for 369 employees, of which 304 were still employed by the SABC. The procurement of international content was still a matter that bothered her a lot. She wanted to know what action was taken on this matter. Was the person in charge of international content still at the SABC, earning a “fat” salary? She found it completely unacceptable that there was no bid adjudication committee. She was keen to know what the SABC was going to do about the 31 other allegations made against them since June 2012. Obviously, whatever processes were put in place were not working so it was difficult for the Committee to get a grip on what was happening. At a point, it seemed like a third of the staff at the SABC was involved in irregularities. However, only a handful of staff was being charged. There were still some SABC board members who had not declared their interests even after being on the board for so long.

Ms L van der Berg Merwe (IFP) added that it was quite difficult to interrogate the report because it had so many discrepancies. Therefore, it was difficult for the Committee to see how much progress was made since the Committee and the SABC last discussed this matter. The board said that 307 staff members were being investigated. She asked if disciplinary action was being taken against them and which positions these people were employed in within the SABC. The SIU report showed that out of 26 board members, 17 declared their directorships in other companies and 19 other members did not declare directorships. This added up to 36, not 26. She asked for clarity. She believed that the over-statements reported by the Auditor-General (AG) were actually, on several occasions, exactly double the amounts of those verified by the SIU. She asked the SABC to clarify this.

Ms A Muthambi (ANC) noted that there were still two board members that had to disclose their interests. This was disturbing. She asked who the board members were. The Committee expected board members to lead by example. She echoed the sentiments of some of her colleagues. The SABC clearly had difficulty in giving the Committee a clear report. She asked if the SABC could prepare a spreadsheet for Members showing which employees had transgressed and what action had been taken on the matter. She was very upset that the Executive Manager was not being held accountable for losing the SABC the soccer rights, boxing rights and cricket rights.

Mr C Kekane (ANC) said that he had been with the Committee for quite a while and the SABC seemed to be having the same problems as they did in the past. These problems seemed to be there forever. The SABC needed to come to the Committee with stories of progress; they could not just come back to the Committee after a year with the same story. The SABC spoke of turning around, but there did not seem to be any turnaround. The SABC needed to report with more details on the suspensions that were made.

Mr A Steyn (DA) concurred with everything his colleagues said. He clarified with the board that management was usually responsible for putting together presentations and the board modifies and approves it before it was sent out. He asked if this was the report that was tabled to the board members. If yes, the board could have foreseen the questions that the Committee was going to raise. There were a lot of questions that the report did not answer. He wanted to seriously recommend that in the future, if this happened again, that the expenses incurred for bringing management to Parliament should be deemed fruitless expenditure and the board should carry the expenditure itself. He did not understand the overstatement by the AG. Someone had to explain to him what this meant. When the board and management team followed up on issues such as the ones in the report, they had to use some kind of reporting system. He imagined that the SABC followed up on these case by case or recommendation by recommendation. This was what the Committee wanted – a spreadsheet of sorts. The report said that 687 employees had the duty to disclose. Of these, 89 declared their business interests. But the report stated that the SABC had prepared disciplinary files for 369 employees. What was going on? In terms of the allegations that discounts given to Mango Airlines and Nestle SA were irregular, the investigations was completed and handed over to the NPA who issued a nolle prosequi certificate – they shall no longer prosecute. When the SIU handed the case over to the NPA, they must have had enough evidence to prosecute. He asked if anyone had found out why the NPA decided not to prosecute. Did the board members bother to find out?

Ms S Tsebe (ANC) stated that one of the Committee’s responsibilities was to get SABC to where it was supposed to be. But, “Sjambokking” them all the time was not going to help. Ms Killian and Ms Muthambi’s statements were very helpful. The report was too general and was not formatted correctly. The Committee needed findings, steps taken, actions and timeframes. The manner in which it was presented was a problem as well.

Ms R Morutoa (ANC) agreed that the way the presentation was written was not going to assist the Committee. She agreed with all the previous speakers. The SABC has done many things but this was not clear in the report. The Committee had to indicate to the SABC how they wanted their reports to be formatted. It was not the first time that the issue of fraudulent invoicing has come up in a meeting. It made the Committee feel like nothing has been done over the past few years. It made her start questioning why the board was appointed.

Ms van der Merwe was concerned that the report was not clear to all the Members. She wondered how they would be able to assess progress if they met with the SABC again. The report had to be rectified so the Committee could perform their oversight duties.

Mr Kekane agreed with the Members saying that there could be a lot of good in the report but the Committee couldn’t see it. The report seemed to be jumping from one thing to another and did not tell the Committee how much progress the SABC has made. This was not the first time that the Committee has complained about how the SABC has structured their reports. This could be one time when the organisation should actually appoint a consultant to assist them with structuring their reports. The bad structuring of reports showed that there was a lack of skills within the SABC. He proposed that the SABC reformat the report so that it showed their progress and so Members could understand it better.

The Chairperson noted that there were a few questions that the SABC had to respond to. He did not think that it would help for them to respond at the meeting. The problem was that the SABC submitted the report from the SIU that was given to the organisation. The SABC was supposed to report on how they were responding to the SIU’s recommendations. They could not just use the SIU’s report– they had to provide a report based on the SIU’s recommendations. The report had to focus on what the issues were, what the SABC was ding about it and how far they have progressed. It would give Members a sense of peace knowing how far the SABC was in implementing the SIU’s recommendations. He suggested that this current report should be attached as an annexure to the new report that will have to be presented to the Committee. He also recommended that the SABC take note of the Committee’s questions and concerns and address them in their new presentation. He also noted that there were two board members that have not declared their interests. This was a very serious matter and the Committee needed to know why they were not conforming to the legislation. This matter could not be negotiated; it was something that the board members had to do. If they did not, they should “get out of the board” because it meant that they were not qualified to serve on the board. He said that the SABC did not have to name those board members but they had to come back with the Company Secretary to report on the matter again.

Ms Morutoa responded that if board members were not being compliant, it had to be spoken about with the Committee at the meeting. The Committee had to know which board members the SABC was talking about.

Mr G Schneemann (ANC) noted that certain members of the SABC board still have not disclosed their interests, which was in direct contravention of the law. Before they were even appointed, they had to disclose their interests. It was disturbing to know that there were two board members that had not disclosed interests.

Ms Killian agreed, saying there were far reaching financial implications for the SABC regarding this matter. The Act also said that if board members did not disclose their interests and they were participating in board meetings, the relevant proceedings would be deemed null and void. This meant that board meetings, outcomes and resolutions could be challenged, and the SABC could incur financial losses. She wanted to know where the other board members were that were not present at the meeting. She clarified that the report, which the Chairperson thought was the original report from the SIU, was probably a report on the SIU’s findings that was written by a sub-committee of the SABC. Who was the author of the report? Was the report duly presented to the board? 

The Chairperson said that the SABC had to tell the Committee more about these board members that had not declared interests, so Members could take a decision on the matter.

The SABC’s Company Secretary corrected Members saying that there was only one board member that had not declared interests. She clarified that board members were required to submit declaration of interests before all meetings. If board members declared that they had interest on the matters on the agenda, they were excused from the meeting.

The Chairperson stated that it did not matter whether there was one board member or two who had not declared. The Committee wanted to know who it was.

The Company Secretary answered that the board member who had not declared interests was Adv Cawe Mahlati.

The Chairperson stated that any matter that had to deal with the SABC’s corporate governance would be dealt with at the meeting at 3pm. He asked if Dr Ngubane wanted to say a few words.

Dr Ngubane explained that the report came from the turnaround committee of which the monitoring task team worked with. There were three big boxes of files that were given to the SABC by the SIU. These could not be brought to the Committee so the task team picked out all these important issues. There was a huge amount of detail in the original files. This could have caused the difficulty in summarising the problems. The SABC has taken to heart the important resolution of preparing a spreadsheet which would help Members understand what the issues were. The amount of work that has been done was huge and he wanted to thank the Acting Chief Operations Officer for setting up the task team. They would try to complete the spreadsheet within the month.

Adv Mahlati added that she was part of the turnaround sub-committee of the board that dealt with this report. Se had with her a copy of the report that was tabled with the sub-committee and she wanted to tell Members that the non-declaration of interests by her was not part of the discussions.

Ms Morutoa asked the Chairperson to rule that this matter would be discussed at the 3pm meeting.

The Chairperson asked Adv Mahlati to wait until the 3pm meeting where the Committee would discuss the matter. He noted the work that the SABC was doing, saying that the Committee knew that there had been progress within the organisation. However, the report had to reflect this.

The meeting was adjourned.