South African State Theatre 2012 Annual Report
Arts and Culture
14 November 2012
Chairperson: Ms L Moss (ANC)
The South African State Theatre (the Theatre) presented its Annual Report for 2011/12. The presentation commenced with presentation of statistics, the mandate, vision, mission and values, before the Chairperson of the Council mentioned that the key focus area had been strengthening of corporate governance, as well as ensuring compliance with regulation, and enhancing the ability of the Theatre to generate funding. The Chief Executive Officer presented an artistic report that spoke to the numbers of performers, dancers and technicians, the number of performances, audience attendance, tickets sold, complimentary tickets and Naledi Awards. Whilst a number of free tickets had been offered in this financial year, to try to boost audience attendance, it was actually found that this did not promote the culture of communities being willing to pay for artistic efforts, which were expensive to stage, and in any event only about 60% of the free tickets were used. For this reason, the Theatre was trying to come up with new strategies, to boost audience awareness and participation, and by increasing sponsorship. The artistic programmes offered in the Opera, Drama, Arena, Rendezvous and Momentum Theatres was outlined, and some explanation was given of audiences. Most audiences showed a preference for musical productions, but white audiences preferred opera (although the State Theatre tended not to stage too many, because of the cost), and black audiences preferred jazz. There was little support from those in the industry, and little response from audiences, to developmental theatre at the moment.
The strategic objectives included development and maintenance of long term relationships, increasing the diversity of products, increasing diversity of the audience, promoting enterprise culture, increasing self-generated income, development and maintenance of buildings and the provision of excellent customer care. The presentation covered the operational indicators. Grants formed a part of the income, and the Theatre generated about 36% of revenue from operations, and 1% from investment, and spent about 46% on administration. In this financial year, although there was a lower figure of irregular expenditure, the audit report had been qualified. It was clear that the procurement processes needed to be centralised, and the report was qualified not only because of recurrent instances of irregular expenditure but substantial weaknesses in the control environment, which led to other irregularities, including non-payment of invoices in the correct time frames. There had been compliance with labour laws and labour disputes were minimised. At the moment, the Chief Financial Officer was suspended pending a disciplinary investigation into irregular expenditure. The human resource structure was set out, but Members commented that this was the old structure. There was a problem with an ageing workforce and failure, as yet, to pass on skills, and because the staff turnover was low and most promotions were internal, the employment and disability equity had not improved. The key focus areas for the future were described.
Members asked if the State Theatre was trying to develop theatre in all provinces, or took programmes on tour, and how it intended to develop communities. They asked what the solution might be to promote audiences, for a further explanation about the complimentary tickets, and whether the facilities catered for audiences with disabilities. They wanted more information about the appointment of the Council, the organogram, whether performance bonuses were offered, whether the management team had performance contracts. They questioned whether the Theatre was available to all, and asked the Department of Arts and Culture how it intended to assist the Theatre to overcome its problems, particularly in regard to funding, and promote its aims. Members were disappointed that the presentation was not more clear, commenting that more information was needed on time frames for several plans, the Auditor-General’s report, the policies that were in place, and explanation on the figures and graphs. They urged that the State Theatre should reduce its reliance on state funding.
South African State Theatre Annual Report 2011/12
Mr Quinton Simpson, Chief Executive Officer, South African State Theatre (State Theatre), presented on the overview to the presentation, set out some vital statistics for the period 2011-12, the mandate and role of the State Theatre, the vision, missions and values (see attached presentation for full details).
Ms Naledi Gallant, Chairperson, South African State Theatre, delivered the Chairperson’s report. She spoke to the financial results, saying that the State Theatre had managed to meet its financial objectives and increase its self-generated income, with further increases projected through to 2015. Systems upgrades were being made and controls were being put in place to monitor performance and make continuous improvements. The strengthening of corporate governance practices continued to be a key focus of the Council and Management. The State Theatre was confident that progress was being made and risks were identified and mitigated in a timely and efficient manner. The State Theatre continued to periodically review the Strategic Plan and take actions consistent with meeting its core business objectives and responding to the changing business environment. It did monitoring and measurement to ensure compliance with regulatory bodies, and enable the State Theatre to achieve its financial and strategic objectives for the 2012/13 year.
Mr Simpson then outlined the CEO’s Report. The theatre facility remained the main income driver. He highlighted that the artistic report spoke to the numbers of performers, dancers and technicians, the number of performances, audience attendance, tickets sold, complimentary tickets and Naledi Awards won (see attached presentation). It had been decided that free tickets was not the way to fill theatres up, as only 60% of these tickets would be used. Instead, the State Theatre preferred to use schools programmes and educate people about the value of theatre. He set out the artistic programme in terms of the Opera, Drama, Arena, Rendezvous and Momentum theatres. The Opera and Drama theatres were mainly used by external producers, due to their size and capabilities. Under the development programme there were two programmes. The 52 Seasons programme was supported by the National Lottery, and the Tshwane University of Technology field work programme worked with 19 community groups. There was no support from people within the industry for development theatre, which was a problem.
Mr Simpson then outlined the strategic objectives, which included development and maintenance of long term relationships, increasing the diversity of products, increasing diversity of the audience, promoting enterprise culture, increasing self-generated income, development and maintenance of buildings, and the provision of excellent customer care. Compliance with legislation was of great importance for the State Theatre. There had been an indication, in the audit report, that the State Theatre fell short in respect of the accrual and credit payments and irregular expenditure. In the previous financial year, there had been more irregular expenditure but the audit report had been unqualified. In the year under review, the Auditor-General (AG) had given a qualified audit. It had indicated that the procurement process needed to be centralised, and he conceded that there were weaknesses here, which led to invoices not being paid in the correct period. The State Theatre had managed to comply with labour laws and minimise disputes.
He noted that other objectives related to the development and training of staff and the enhancement cost efficiency within the organisation. He noted that the State Theatre had an ‘ageing work force’, with many close to retirement.
The majority of productions were music and drama, followed by festivals. There had not been much investment in opera, due to the high costs of staging operas, so the State Theatre had instead offered its facilities to outsiders to put on their own opera productions. Both black and white audiences attended musical concerts, but the preferences tended to opera for white audiences, and jazz for the black audiences. White audiences were less sensitive to pricing. Neither black nor white audiences were drawn to developmental theatre.
He then set out the operational indicators. 36% of the State Theatre revenue came from operations, and 1% from investments. It received some grants. 46% of expenditure went to administration. H outlined the historical indicators in terms of revenue and expenditure. He also tabled the organisational structure, the human resources strategy and the employment equity programme. The human resources strategy included minimising industrial disputes, ensuring compliance with the labour law, efficiency of recruitment processes, Customer Care training, improving internal communications, developing a learning culture, maintaining a high level of skill and care in administration, striving for awards for good practice, and transforming the staffing with competent individuals. At the moment, there were no disabled people working for the State Theatre.
He then outlined the areas of information technology.
Mr Simpson returned to the qualifications on the audit report. The first reason was that there was no system of control over the recording of outstanding invoices at year-end and no reasonable assurance that all outstanding invoices had been accrued or provided for. Secondly, there had been payments made in contravention of the supply chain management requirements. IN the previous financial year, the irregular expenditure amounted to R8.8 million, and in this financial year to R1.56 million. There was no system of control over irregular expenditure.
The former Chief Financial Officer had been suspended, and there had been an investigation around the control environment, because there was concern around the number of recurring findings, since 2008, when the State Theatre had also received a qualified audit. The State Theatre wanted to ensure changes in the environment, and in the meantime it had also centralised procurement.
He then spoke to the financial performance, in terms of the statement of financial performance, statement of financial position, statement of changes in net assets, cash flow statement and statement of comparison of actual and budget amounts (see attached presentation).
Mr Simpson summarised that the key focus areas included achieving clean administration, through the centralisation of procurement and implementation of compliant asset management processes and controls. The State Theatre intended to implement the Audience Development Programme, in partnership with external stakeholders. It was hoping to improve income from self-generated productions and to expand its efforts in development, as well as introduce a partnership approach. It also wanted to introduce a human resources grading and performance management system, offer career development programmes for staff. Finally its compliance management must improve.
Ms F Mushwana (ANC) noted the mission statement, and said that this encompassed development of the unique theatre facilities. She asked if this envisaged development in all the provinces, and whether there were branches in all provinces. She felt that seeking to learn and improve, and make best use of resources, might not happen if the State Theatre was concentrating on one place only, and once again she waned to know if there was a plan to expand elsewhere.
Mr Simpson replied that the State Theatre did have community outreach and had a large truck which took performances to rural areas. The offering of products and shows in other areas would be continued. In areas around Johannesburg and Pretoria, there was an Outskirts Programme, and some items were run in an external environment.
Ms Mushwana said that the State Theatre tended to rely on once-off events and maybe it was good to ‘depend on the provinces’, as the provinces were here to stay.
Mr Simpson replied that this was something that needed to be managed. The State Theatre did not want to increase dependency on the Department of Arts and Culture (DAC) or government funding. The State Theatre sought the right type of offering that could earn money from the private sector.
Ms P Daniels (ANC) questioned the comment around the complimentary tickets, saying that presumably it had at one stage been a business decision to offer them. She asked what the outcome of offering these tickets was supposed to be, and to whom they were offered, and what was the reason for people not taking advantage of them.
Mr D Mavunda (ANC) also asked about the criteria for identifying those who should receive complimentary tickets.
Mr Simpson replied that during 2011/12, these had been seen as a means of bringing previously disadvantaged communities into the State Theatre. However, if the free tickets were not properly distributed, the people would still not attend, and the cost of taking free tickets to where the disadvantaged people were found increased the costs of the ticket to the Theatre. In principle, free tickets should not be given, as they devalued the State Theatre’s offering. His own view was that it would be preferable to reduce the pricing, and ensure that communities were well informed. Communities had to be educated into paying for theatre offerings, as theatre did not come cheap. However, this must also be seen against the mandate to providing theatre access to previously disadvantaged communities and people who otherwise would not have been able to access the theatre. The criteria for the award of the tickets in this year had also included people who would be able to generate a market, as well as the media.
Ms Daniels questioned the way in which the strategic objectives were noted.
Mr Simpson replied that there were Key Performance Indicators at all the State Theatre’s levels. These must be implemented fully so that by the end of 2014/15, all salary increases would be based on performance reviews.
Ms Gallant added that the State Theatre had indeed identified areas that needed attention and there were plans to tackle those issues.
Ms Daniels was worried about the comment on financial malpractices. She pointed out that the Chief Executive Officer (CEO) was the final Accounting Authority and she would have thought that any payments should be run past the CEO before being made by the Chief Financial Officer (CFO).
Mr Simpson replied that within any government institution the Chief Financial Officer was regarded as the Accounting Officer who must take full responsibility for compliance. The control environment and the management of finances was delegated to the CFO, and the control environment in which the CFO was responsible had to be tested.
The Acting Chairperson asked if there had been any disciplinary procedures taken against the CFO, and what the outcome was.
Mr Simpson replied the disciplinary process had not been completed.
Mr D Mavunda (ANC) commented that the presentation had been difficult to follow. It had addressed a number of matters, and the figures sometimes were not self-explanatory, but needed more explanation. He wanted more clarity on the figures and percentages derived from them.
Mr Simpson replied that what he had done was to generate interesting discussion. The vital statistics portion of the presentation all related to the common denominator, which was the self generated income. This was then benchmarked against total income and CAPEX. Revenue was R25 million and total income was R67 million, and the State Theatre thus self-generated 37% of the total income.
The Acting Chairperson agreed that she too had found the presentation difficult to understand. She felt that not enough information was given about the Council and the internal work, and did not feel that the responses were particularly helpful. She pointed out that the Committee was asking these questions to assist the State Theatre eliminate its shortcomings.
Mr van den Berg had a problem reading charts, as he was colour-blind, and said that figures would be more helpful.
The Acting Chairperson asked for an explanation of some acronyms.
Mr Simpson said that LSM was an income category that, for instance, referred to income from R1000 to R2000. ACI referred to ‘Indian African and Coloured’.
Ms H Van Schalkwyk (DA) asked if there had been no budget for performance bonuses for personnel.
Mr Mavunda questioned where performances bonuses were reflected.
Mr Simpson replied that the State Theatre offered no medical aid or performance bonuses. There were some incentives, which were not performance bonuses, to reward staff members for good performance. There would be a need to increase the self-generated income greatly, if performance bonuses were to be paid. Senior staff members, whilst not having performance bonuses, still had key performance indicators.
Mr Mavunda asked if there were figures to show audience members who had disabilities.
Mr Mavunda said he did not find a full account of the Auditor General’s report in the Annual Report presentation, and asked what the opinion was of the AG.
Mr Simpson replied that what the State Theatre reported on was the credit framework and that was why the information that had been given in the report was the only information available. If additional information was required, then it could be provided. He had indicated that there had been an increase in adverse findings since 2008. These spoke to the asset register, the procurement processes and the performance management.
The Acting Chairperson urged that the State Theatre must ensure full compliance with the Public Finance Management Act (PFMA). There was a need to pay service providers within 30 days, as failing to do this would frustrate entrepreneurs and those trying to raise the economy of the country.
Mr Simpson said that the AG had not raised anything related to corruption. However, he was concerned that the control environment was weak, and therefore the controls were inadequate to prevent fraud and the like occurring. The State Theatre was serious about correcting the control environment.
Mr Sibusiso Xaba, Director General, Department of Arts and Culture, added that the Annual Report referred to finding a balance between full reporting and descriptive writing. It was, for practical purposes, impossible to include entire plans and policies in reports, but he agreed that the information provided perhaps needed to be put into context.
Mr P Ntshiqela (COPE) commented that nothing was said on governance within the State Theatre.
Mr Simpson replied that the governance structure was not indicated in the presentation. However, he could tell the Committee that there was a CEO, and four directors (technical, artistic, marketing and CFO). The CEO reported to a Council, which who reported to the Department and the Minister. The Council had an official document setting out the CEO’s job specifications.
The Acting Chairperson asked when the Council would be appointed, as it must assist in providing leadership.
Ms Naledi said the new Council had been appointed in August 2011. The previous CEO’s contract had been due to end in December 2011. The Council had asked that she extend her contract for another six months, to allow for an opportunity to recruit a new CEO, and have a proper hand-over. This was done, with a one month hand over period, which had been sufficient, and the Council was happy with the manner in which Mr Simpson settled into the role. He was providing full information and was not withholding anything.
The Acting Chairperson said the State Theatre needed a skills policy, and questioned whether policies and plans were in existence, whether it had done a skills audit, and whether there was skills transfer taking place to those who would rising in the ranks.
Mr Simpson replied that there were a number of people on the verge of retiring and the unfortunate part of this was that other staff were not skilled.
The Acting Chairperson asked again what the skills plan was.
Mr Simpson replied that all related policies and procedures and plans spoke to governance. There had been a number of policies and plans put in place in the current financial year. The control environment had been in a good place, and the issues the Acting Chairperson raised would be attended to in the future.
The Acting Chairperson spoke to raising of revenue and funds. She cautioned that the State Theatre should not become over-dependent on state subsidies. She asked what the time frames were for its plans to become less dependant on State grants, and overcome shortfalls in funding.
The Acting Chairperson asked how the Department of Arts and Culture (DAC or the Department) planned to assist the State Theatre with its financial challenges, and asked for comment on the qualified audit report.
Mr Xaba did not think the State Theatre had major problems and said that the qualification was due to a technicality in the financial statements, rather than deep financial problems. However, as was the case with all entities, DAC would be closely monitoring the situation, and would ensure close communication. He was not sure that the State Theatre had any major financial problems. In the following year, as part of the Mzansi Golden Economy, the DAC intended to incentivise institutions to develop their own productions, through the touring venture. Greater benefits could be reaped if all productions were taken on tour, as they would reach greater audiences, and there were drives especially to take some productions to community art centres, as there were some provinces that lacked theatres.
The Acting Chairperson was disappointed that the State Theatre had not complied with the employment equity provisions for the disabled.
Mr Simpson replied that although the State Theatre would ideally like to provide opportunities for the disabled, it was the reality that its staff turnover was low. It would be focusing on this in the future.
Ms Mushwana said that the appointment of Council members also did not display gender equity.
Ms D Msweli (IFP) asked what would be done to ensure that Indians were employed.
Ms Simpson reiterated that, as with all arts institutions, this again had to do with small staff and low turnover. The State Theatre preferred to provide internal opportunities for promotion, rather than bringing in those from outside, and this meant that some employees had been at the Theatre for some time.
Mr Ntshiqela asked how the State Theatre recognised the participation of the public in its programmes, and said that no partnerships were apparent to him.
Mr Simpson replied that the sponsorship programme would only be successful if the right type of offerings were provided in the popular sector. The State Theatre had hired a specialist to assess the value of the State Theatre’s building, to create sponsorship packages for corporate organisation. The main focus was to increase self generating income.
Ms Van Schalkwyk asked for clarification on what percentage of the budget went to the salaries of employees.
Mr Simpson replied that 45% went to salaries.
Ms Van Schalkwyk asked if the senior officials such as the CFO and CEO had performance agreements and whether they knew of their targets.
(This question was partially answered earlier, when it was confirmed that there was a performance contract for the CEO).
Mr N Van Den Berg (DA) noted there had been 508 performances, but said that the Committee was not told of the genre, nor the titles. The State Theatre needed to explain the notion that the Theatre was currently being opened up to all diverse audiences, and he wondered to what extent its own productions had achieved this. There were some complaints that “populist” theatre was offered by private companies, but he said that business decisions would drive decisions on productions that would draw audiences. The Committee needed to have more information on the shows, and what was popular, and what was not. The percentage of fully paid-for tickets was low.
The Acting Chairperson said the opening up of the Theatre would aid with nation building and cohesion, if people felt they were a part of the entity.
Mr Simpson replied that whatever was staged spoke to a national audience. However, the State Theatre did not actively go out to seek attendance from the country, but operated within Gauteng and related areas. This was largely because of the cost. Outside producers might create offerings for a greater audience. The State Theatre provided access to all South African citizens, but due to the historical growth, some people had a greater appreciation of the offerings, or were better able to afford to attend. There were huge economic gaps, and he agreed that more work was needed to create an appetite for theatre, in the previously disadvantaged communities. This was not something that was easy, nor that would happen overnight. In reality, the Afrikaans market and businesses were investing in theatre through sponsorships. Afrikaans productions would fill the theatre, whereas offerings geared to previously-disadvantaged communities would not. There was no sponsorship at all for development theatre, and there was poor uptake of tickets by African people; even when they were given free tickets, only 65% took advantage of that opportunity. This was a serious issue requiring serious action. There were simply not enough funds to spend generating interest in the previously-disadvantaged communities, as most of the funds went to maintenance. Partnerships with the corporate sector were important. He reiterated that both black and white audiences tended to prefer musicals, although of a different genre. There were differences also in the markets for shows staged by the State Theatre itself, and by other companies. Research had indicated that, due to the nature of the technical facilities, the State Theatre had been compared to the Monte Casino. However, the latter put on one show that might equate to the entire annual budget of the State Theatre, and it also had the advantage of accommodation facilities, and international shows. The Department, however, was busy with trying to create joint projects between several arts institutions, which might allow for shows to tour and to compete with the likes of the Monte Casino.
Mr Ntshiqela noted that once again, no time frames appeared for the reviews.
Ms Gallant replied that quarterly reviews were done.
Mr van den Berg returned to the earlier concerns that the report had been difficult to follow, and added that the Arts and Culture reports generally tended to use jargon and acronyms that were not explained, and ambiguous wording that was open to interpretation. There was a need for far more clarity. It was difficult to understand exactly how the environment in which the State Theatre operated was different from others.
Ms Naledi noted this comment, and said that attempts would be made to be more specific in future.
The Acting Chairperson commented that the structure of the State Theatre presented at this meeting reflected the old structure, and enquired what the time frames were for restructuring. She was worried that the Marketing Director was created as a temporary position, which did not provide for continuity. Fuller information would help the Committee to make greater input.
The meeting was adjourned.
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