South African Broadcasting Corporation (SABC): hearing on 2011/12 Annual Report

Meeting report

Opening remarks
The Chairperson said an apology had been received from the Minister of Communications that morning to indicate she was attending "a global symposium". The Committee would have loved the Minister's presence or, at least, the Deputy Minister. The Director General, Ms Rosy Sekese, was nevertheless present. He explained that how the Standing Committee on Public Accounts (SCOPA) worked might be a bit different to how the Portfolio Committee handled things.

The Committee appreciated the information it had received and the additional information that had been sent. Certain Members were tasked with leading the interrogation on certain aspects of the Annual Report. It would be appreciated if the Board chairperson provided clarity on issues raised, or allowed designated individuals to do that. The engagement was merely an exchange of information.

The work of the Committee was more about what "killed the patient"; the Committee was doing a post-mortem. The intention was to prevent the things that led to failure, happen again in future. The approach was "looking forward going backward", meaning it was important to revisit how mistakes were made in order to correct them.

It was possible that all the issues the report raised might have been sorted out, but the Committee was interested in knowing what were the material aspects that allowed these failures to happen. It was important as well to ascertain whether the Department of Communications (DoC) played its role in ensuring that the South African Broadcasting Corporation (SABC) fulfilled its mandate. He requested that responses be focussed on the questions asked.

The Chairperson handed over to Mr R Ainslie (ANC) to kick-start the questioning.

Discussion
Mr Ainslie commented that the document received in the morning looked useful as it was detailed, but it was received so late. The SABC had received a qualified audit opinion for two successive financial years. A lot of details for that situation had been given, and it was important to understand the root causes if the situation was to be avoided in future. It appeared there were three root causes for the qualification: lack of leadership at both Board and management level; a weak internal audit function; and a deficient audit committee.

He pointed out that board member attendance as portrayed on page 22&23 of the Annual Report might need correction. Some members of the Board only attended two out of eight Board meetings. This was misleading because page 82 gave a better explanation about the attendance. The way figures were presented should not give rise to the impression that people were not attending Board meetings.

Parliamentary resolutions ignored
This was not the first time SCOPA had met the SABC; and when it sat for meetings the plan was to prepare for SCOPA resolutions that eventually became parliamentary resolutions that dealt with the SABC Board. He asked how the Board dealt with the resolutions; what was the process? Why were parliamentary resolutions being deliberately ignored? The Committee would be wasting its time to advise the SABC only for the resolutions to be discarded.

Mr Ben Ngubane, SABC Board Chairperson, replied the SABC did not ignore resolutions. The Board did all it could to attend to issues of internal controls; revision of policy; and creating a structured decision-making framework. A lot of work had been done in this area; there were challenges only when decisions were cascaded down the divisions. He cited an example of meeting the predetermined objectives as contained in the strategic plan. Cascading downwards there was differing capacity in the different units.

Mr Ainslie asked if his understanding that resolutions were stuck at Board level was correct, and that no effort was made to ensure that lower levels of staff were aware of SCOPA resolutions. What effort was being made by the Board to ensure lower levels of the staff establishment were aware of the resolutions?

Mr Ngubane replied the Board wanted a clean audit. It determined that by 2014 it should have a clean audit. This meant cleaning up the organisation. There was now a new cooperative company secretary who worked closely with the Board pertaining to compliance and regulations.

The Chairperson commented that his understanding of what was being said was that the Board was focussed on getting things done, but at the lower levels of the organisation the Board was not effective.

Board stability and disclosure
Mr Ainslie said this supported his view that there was a lack of leadership at Board level, especially that it was unable to cascade parliamentary resolutions downward. He asked to what extent had the parliamentary resolution on disclosures been adhered to. A Special Investigating Unit (SIU) report of September 2011, indicated that 10 out of 20 former and current members of the Board did not disclose their interests. What actions were taken against those who did not disclose? He asked if there were any Board members in the current executive that had not disclosed.

Mr Ngubane replied there was a central register of members interests kept by the company secretary. This was updated every year, and at the beginning of every meeting a register was circulated to ensure items on the agenda were not the subject of a conflict for the members. All Board members signed in on the declarations and these were kept by the company secretary. The Portfolio Committee on Communications had indicated that it was a criminal offence for any Board member not to declare their interests, and it was ground for removal from the Board.

Mr Ainslie sought clarity on the stability of the Board, and requested that the answer be contextualised in the light of contradictory statements made by the chairperson of the Board in the Annual Report that the Board had regained stability, yet at a Portfolio Committee on Communications meeting he said that the SABC had degenerated in a matter of months.

Mr Ngubane replied stability referred to a growing concern principle, which was a central issue when annual financial statements were prepared. The SABC was stable in that there was no haemorrhaging of finances, rampant criminal activity, nor a total absence of internal controls. In terms of Board relations, it was a different story. He could not have dealt with board relations in the Annual Report. The statement at the Portfolio Committee referred to “serious personality clashes” within the Board and not financial dysfunctionality.

Adv Mahlati
Mr Ainslie pointed out that at the Portfolio Committee meeting a member of the Board, Adv Cawe Mahlati, made serious allegations against the Board about maladministration and corruption at the level of the Board. What was the Board doing about that statement and had an investigation been launched?

Mr Ngubane replied a number of investigations were carried out regarding Advocate Mahlathi. She had “her own history”. The Board was open; it could have forensic investigations anytime.

The Chairperson interjected and said the House adopted a report from the Portfolio Committee that addressed some of the areas that needed to be investigated. Some of the elements raised might be elements of that investigation.

Mr Ainslie asked, given the dysfunctionality, what steps could be taken to overcome the challenges and ensure the current Board was able to lead the organisation.

Mr Ngubane replied restoring confidence was important.

The Chairperson said if the part the Member was quoting from was correct, it would be clear that the measure to overcome such challenges would be to disband the Board. If the Board admitted it was dysfunctional, then there was no reason for it to continue. Parliamentary resolutions would continue not being implemented as there was no leadership.

Mr Ngubane explained that what he had meant to inform the Portfolio Committee was that because of an individual, the Board was unable to carry out its functions.

The Chairperson interjected and stopped him as there was no contextual background to the statement that only one individual was troublesome at the Board.

Mr Ainslie commented that the view of the concerned Board member could not just be ignored.

The Chairperson explained the statement against Advocate Mahlatsi would surely be subject to investigation, as it was so serious that it impacted on the smooth functionality of the Board. Therefore the Committee needed to wait for that investigation to be finalised.

Acting positions, suspensions
Mr Ainslie agreed and asked where the Board was with the organogram as it pertained to management. There were too many acting positions and employees on suspension. He counted over ten senior management positions that were in an acting capacity; this pointed to lack of leadership at management level. People in acting positions tend to maintain things; they neither were innovative nor took the organisation forward. This was a dangerous scenario. He asked for comment on the matter, and quipped that if the Board wanted so many people to act, it might as well consider sending them to auditions for "Isidingo". This could never bring stability to the SABC. If the root causes for all the mess contained in the Annual Report could be established, then it would be easy to address them.

Mr Ngubane commented that when the current Board came in during January 2010, it found a totally dysfunctional organisation, with debt totalling well over R1 billion. The organisation was unable to pay salaries and commission new material. A number of people left and others were suspended. And sadly some of these were highly skilled people. The Board could not tolerate a situation that was detrimental to the organisation. The SABC had serious challenges. He said if it was as a result of leadership then Parliament needed to find new leadership.

The Chairperson clarified the question as wanting to ascertain the level of discomfort at board level, as a result of so many people acting in senior positions. How was the Board moving to ensure permanent people were hired? This was the concern.

Mr Ngubane replied that the Board was extremely sensitive to that, and it had tried to fill positions as quickly as possible. However the Board had made a commitment in terms of austerity measures and reducing the headcount. The principle had been to fill, wherever possible, permanent positions with internal staff. It was only in special circumstances that the SABC would go to the market and find new people. When a person was suspended, it was on the basis of sufficient evidence but one had to wait for completion of the investigation so that the disciplinary process could start. This was a long process.

Ms Lulama Mokhobo, SABC Group Chief Executive Officer (CEO), said no appointment could be made for the positions where the incumbents were on suspension. With regards to vacant positions, the SABC was going through a rightsizing exercise; some of the functions were being combined. Part of the problem had been a number of people at top-level management performing the same functions. This resulted in a lot of inefficiencies in running the company. The rightsizing was complete and a new structure had been presented to the Board. This would bring down the numbers substantially and would ensure that individuals appointed should “be rounded” such that they were able to carry an entire portfolio.

SABC Chief Financial Officer
Ms Gugu Duda, SABC Chief Financial Officer (suspended), said although the Board chairperson had explained suspensions, she still had not received charges after being suspended two months before.

The Chairperson wanted to know, if Ms Duda was suspended, why was she at the meeting.

Ms Duda replied she was a director and a member of the Board.

The Chairperson commented that he hoped her presence would help the Committee understand issues, and not just air gripes.

Mr Ainslie sought clarity on whether the official spoke as a Board or a suspended staff member. His impression had been that she was going to speak as a Board member and give some kind of overview.

Mr George commented it was important to hear out the official as she was pointing to some serious governance problems. She was bringing to the attention of the Committee that there was a serious governance failure at the SABC. The official being on suspension but not yet charged was an example, and there could be many more. This was very irregular anywhere. In the best interest of the taxpayers, it was important that attention was paid to the official. A voice that was trying to assist the Committee, should not be silenced.

The Chairperson said the issue was more relevant to the questions that would be led by Mr S Mfundisi (UCDP) on human resources. What was not required was for officials to fight personal battles at a SCOPA meeting.

Weak internal audit function
Mr Ainslie said three years ago the SABC was advised to improve its internal control environment and to update their supply chain management policy. Supply chain management was an important part of internal controls. He sought clarity on the statement that there was a supply chain management policy that was yet to be approved by the Board. Could the Committee get an update?

Mr Ngubane replied the Board had a finance investment and procurement sub-committee. It had processed a second set of proposals from Procurement and had rejected some aspects of these. In the meantime the Head of Procurement had been suspended and charged; he had appeared in court. Governance problems distracted the working processes.

Mr Ainslie commented that the recommendation was made over two years ago; why was this taking so long? Supply chain management was so vital that if there was no policy, that could give rise to fraud, corruption and irregular expenditure. The SABC procured work worth billions based on what? This was mind-boggling and unacceptable.

Mr Ngubane replied the policy was there but had to be revised. There had been several iterations of the revision. The ‘delegation of authority’ framework had just been completed. This was a very expensive exercise, but could only happen when the new company secretary, who knew what the delegation of authority framework required, was hired. Similarly, the revision of the supply chain management policy required people who understood it. The Board had been functioning on the old policy, but there were gaps.

Ms Mokhobo said the revision of the supply chain policy had gone through three phases. First phase was during the time of the suspended Group Executive for procurement; the second phase was under the acting Group Executive for procurement; it was coming in to the group executive meeting for finalisation so that it could be forwarded to the Board for final approval. The reason finalisation took long was the breakdown in the control environment. The policy had to be based on avoiding what had gone wrong.

Mr Ainslie said it was unacceptable that the policy took that long; this was vitally important, and needed to be included again in the SCOPA resolutions to be forwarded to the National Assembly. There was not an effective supply chain management policy and that brought about irregularities.

Ms Mahlati stopped from raising other issues
Adv Cawe Mahlati brought to the attention of SCOPA that the most recent suspension was that of the Chief Internal Audit executive. This was done in violation of Section 51(1)(a) of the Public Finance Management Act (PFMA). The SABC Board did not meet, and did not concur, with that suspension.

The Chairperson said there would be a serious difficulty when asking the leadership of the Board to clarify issues while individual members of the Board came up with contradictory statements. SCOPA would prefer to get responses from the Board chairperson. If there were Board members who held contrary views, it was important that they write to the Committee. Allowing people to speak as they wished was untenable and had a potential to lead to chaos. He said the situation was highly unusual, and that the Committee had never dealt with such a situation.

Mr S Thobejane (ANC) agreed that the engagement needed be with the SABC Board chairperson. The situation that the Committee was confronted with was such that it could not ignore input from different people. The Board should be sent away. It was clear that there were squabbles amongst them. The SABC should come and present as an entity, and in a unified voice. It appeared that the SABC did not prepare to come and appear before the Committee. It was clear now that these were individuals and not an entity; they should go back and prepare the information the Committee wanted.

Mr N Singh (IFP) commented that sending Board members away and trying to get them to agree was not possible, and would not happen. It appeared that differences existed amongst the Board and management. He suggested that the meeting proceed with those who had locus standi at the meeting. Others could submit written statements to the Committee.

Mr George said the Committee needed to remember that within boards there would always be different personalities. This was important if people were to hold each other accountable. It appeared there were governance issues at the SABC, and it would be ignorant of the Committee to ignore such differing voices. The Board could not be silenced.

Mr Mfundisi commented that the issues that were brought by Adv Mahlati and Ms Duda were an area for the Portfolio Committee on Communications, and with regards to Adv Mahlati the matter had been handled at the level of the National Assembly.

Ms T Chiloane (ANC) commented the meeting needed to continue, but with focus on the Board chairperson and the Group CEO. The interjections from Ms Duda and Adv Mahlati only reduced the level of the Committee – it was here to deal with the financials of the Board and not the issues as raised.

The Chairperson ruled that the meeting would engage the Board chairperson and those he delegated to answer; any other person could submit written statements to the Committee. The situation reflected badly on Parliament. How did Parliament appoint this Board, he wondered?

Weak internal audit function
Mr Ainslie said the cause of the challenges that the SABC faced was weak internal audits. Page 85 of the Annual Report vindicated his statement. He asked why the internal audit failed to evaluate quarterly reports. This failure led to the results that the entity achieved: 70% of its targets were not met. He asked if anyone had been held accountable for the dereliction of duty. Wwhat corrective measures were there to address the matter?

Mr Ngubane commented that matter had been raised with SCOPA – the SABC did not have an audit committee. The Board had recommended names to the shareholder but these were not approved. In respect of the suspended CFO, two forensic reports had been received upon which the disciplinary action was based. The process was going forward; there was no dereliction of duty. Suspension was meant to stop people from interfering with evidence.

The Chairperson wanted to know specific details. When the names were rejected, what were there reasons? And what happened subsequent to that?

Mr Ngubane replied this happened in July, and reason was that the persons were not financially qualified. He explained that the Board approximated capacity on whoever it thought would best perform the functions. The person who had the qualification was the chairperson of the previous audit committee. He said nothing had happened since then.

Mr Ainslie said he wanted to find out how the function of internal audit was performed without a head.

Mr Regan Naiker, SABC Acting Chief Audit Executive, replied it was not completely accurate to suggest that the internal audit had not functioned. Failure to evaluate quarterly reports happened way before he joined the SABC. That would be investigated and that would be replied to in writing.

Mr Ainslie said the Committee would have preferred verbal answers, as the SABC knew that questions would be asked of its 70% target failure rate.

Mr Hlaudi Motsoeneng, SABC Acting Chief Operations Officer, replied there was stability at the SABC. It was true there were challenges but the Board was addressing those. The SABC had implemented the amortisation policy and this was key. From 1 April 2013 everything would be in order. The Board was moving with speed to ensure that by the new financial year all the critical policies would be implemented. At the SABC in the past, there were lawyers fighting to be managers; this was totally wrong. Lawyers were suppose to be deployed at core business to advise.

Mr Ainslie commented that even if the internal audit committee functioned, it had to report to management. Who in management accepted the reports? What had management done about them? The part about management taking appropriate steps on the report was misleading. If this was the case there would be a supply chain management policy in place; there would not be the 70% failure rate on the predetermined objectives. Just because there was no audit committee did not mean the work should stop. Management was aware of the control deficiencies.

Ms Mokhobo replied these matters were historical.

The Chairperson interjected and said the meeting sought to deal with historical matters. All the Committee wanted to know was why things happened the way they did. The Committee was properly focussed.

Ms Mokhobo replied that in the past there was no leadership, and the person appointed in November 2011 had since been suspended. All the matters that had been dealt with, that had come from the internal audit had been addressed. The Board had now put in place a whole range of policies that sought to ensure strict controls. The SABC was addressing the historical issues although it was not sure how long the process would take. This was very difficult for an institution that had been in decline for over eight years.

Absent audit committee
Mr Ainslie sought clarity on what was happening about three Board members attending only two out of six audit committee meetings.

Mr Sembie Danana, SABC Board Member, replied the reason was because some members joined the Board later than others.

Mr Ainslie commented that the information on the Annual Report was misleading and needed to be corrected.

Mr Singh interjected and wanted to know if it was possible that four meetings of the Board could have been held in April, as he only attended two of a scheduled six, following his appointment in May 2011. He commented that although attendance of audit committee meetings was important, effectiveness was even more important.

Ms Chiloane asked for the real situation about the audit committee and if it was not there at all.

Mr Ngubane replied the Board was supposed to have a new audit committee approved at the Annual General Meeting. But it did not happen.

Ms Chiloane commented that it appeared that the audit committee, even though it sat for six meetings according to the Annual Report, ignored the Auditor-General's recommendations. She wanted to know how much the committee members were paid to sit in the meetings, given that they were not functioning.

Mr Ngubane replied this was part of the problem at the SABC; the fact that one could agree with people and yet fail to carry instructions. If the Board were to really clean up, it would have to suspend a lot of people from the Board. This was a reality and the Board tried its best to get moving.

Mr Ainslie pointed out inconsistencies in the Annual Report and said the people who prepare it needed to be honest. Members did read these reports. On page 85 contradictory statements were given, for example, it claimed that the audit committee complied with regulations and yet further down it stated that audit committee did not complete its responsibilities.

The Chairperson agreed.

Mr Ainslie said the audit committee did not consistently evaluate financial information upon which strategic decisions were based, because the quarterly reports were not presented. He asked why this happened.

There was no comment.

Mr Thobejane wanted to know why the Board removed the audit committee without having new people ready. The audit committee ought to have been released only when new people were there to fill their posts. How was this vacuum in leadership of an important structure created?

The Chairperson clarified that the question sought to establish why the audit committee was disbanded, and yet the names of those who constituted the previous audit committee were still with the Board, as per the Annual Report.

Mr Thami Plaatjie, SABC Deputy Chairperson, replied that the term of office for the audit committee ended at the AGM. The chairperson of the audit committee did not avail himself when his term ended; he had been employed in KwaZulu Natal and for that reason could not avail himself. Discussions were happening to find the relevant person for the position.

Mr Thobejane objected to Mr Plaatjie answering the question, as he had been very new to the Board around the time the Board was disbanded. The chairperson of the Board had indicated earlier that the reason there could not be quarterly evaluations was because there was not an audit committee.

Mr Ngubane replied there was a mix-up. He was responding to the issue raised that the Board did not reveal the suspension of the audit committee head. That suspension happened recently. This referred to the time when there was an audit committee; there were many lapses in terms of reporting to the Board and collecting reports from internal audit. Even Mr Morris, who was an external member of the audit committee complained.

Mr Thobejane interjected and said his question had been answered. The answer lay with the Board. This audit committee had been appointed by the Board. When it did not perform, it was the responsibility of the Board to put a new system in place; why was this not done?

Mr Ngubane replied that he had had to negotiate with the chairperson of the audit committee many times.

Mr Thobejane interjected again and said the Board appointed the audit committee members, and therefore it did not have to negotiate with people who were not performing. Why did the Board negotiate?

The Chairperson requested that the point be skipped because the answer lay with Parliament.

Mr Thobejane objected and said Parliament had put up systems (the Board), and that the Board needed to account to Parliament, hence they had to answer the question why the Board created a vacuum.

Ms Chiloane commented that money needed to be recouped from those officials who failed to perform their functions at government institutions, and yet found employment in the public service.

Basis for the qualified audit opinion
Mr Ainslie commented that the basis for the qualification was on page 83; where the internal auditors claimed they were unable to get appropriate evidence to substantiate the reconciliation of the supporting expenditure on the financial statements. The statement, at the bottom of the page, that certain amounts might affect the balance sheet, was concerning. Why was the SABC able to convince itself that the amounts were correct and yet failed to convince the auditors?

Mr Ngubane replied a lot of work was done; initially the SABC had a monitoring task team to deal with the reconciliations, the manual list, and the transfers to SAP.

Mr Tian Olivier, SABC Acting CFO, explained that the stocklists were maintained through Excel spreadsheets. There was no communication between the two finance departments at Content and Television. Also at Television, there were different finance departments; communication within the three channels was not good. The Board had since merged all the finance departments. When a programme was transmitted on SABC 1 & 3, both units would know about it; they would not write off the same programme twice.

He said the volume of work was too much for spreadsheet, this had to be done in a computerised controlled environment where there were systems and balances to ensure that one did not over amortise on a programme. There had been instances where programmes were written off more than once; there were also instances where schedules would indicate transmission of 13 episodes, but the spreadsheets would indicate one of those was not written off. The auditors were unable to get to the bottom of the extent of problem, this was the reason they could not accept the spreadsheet on the manual list that was given to them.

Mr Ainslie asked if the auditors would find the evidence now.

Mr Olivier replied he had supplied a progress report. There were three areas that the SABC had to fix: the Information Technology systems; upgrade of the television broadcast management system; and human resources. If auditors came now they would find that the SABC had worked on issues. The SABC worked on upgrading the television PBMS system. Partners from overseas were in the country to help with the upgrade. At the moment he could not give a confirmed stocklist. Additional resources had been availed to the television finance team and students would be hired in December to help with the manual stock counts of the tapes. Physical stock count was another item the auditors had raised.

Mr Ainslie commented this was not good news, and would lead to another qualification. This item was the main reason for the qualification. The Board would be making its way back to SCOPA next as a result of the prospective qualification.

The Chairperson requested a comment from the Board.

Mr Ngubane said this was the reason he had indicated that only in 2014 could the SABC expect a clean audit.

The Chairperson said the Committee needed an unqualified audit opinion "as in yesterday". This pointed needed to be emphasised; there were warm bodies at management level who should account for what it was they were doing. How far was the SABC in ensuring that it got clean books, given that the financial year would end four months from now?

Mr Olivier replied there were bits and pieces of progress. The accountants had indicated they were still busy on 2007 balances. They had to move from the old financial system to SAP. A decision was taken that the process of cleaning up be taken as far back as 2006 when the SABC changed fromMmillennium to SAP to ensure the take off balance was correct. Otherwise the problem would persist without the SABC knowing the true value of its stock and or whether it was amortising. There were multiple streams running, and one could thus not surmise the extent of progress. It was a three-level challenge that the SABC faced: people, systems and processes.

Fruitless and wasteful expenditure
Mr Ainslie said it appeared irregular expenditure had increased from R75 million the previous financial year to R136 million in the reporting year. Noticeable increases were noted in wasteful expenditure. This was not the extent of the problem; the auditors indicated there could be more because the SABC did not avail the necessary audit evidence on the two items. The report also claimed the Special Investigating Unit had uncovered various instances of irregular expenditure. He said page 128 of the Annual Report worried him, especially the "action required" on contraventions, simply because the amounts related to expenditure incurred whereby there was no contracts, with payments ratified according to the delegated authority of either the GCEO or the CFO. Was the delegation of authority being abused? This seemed to be an easy way around things. He asked for a comment.

Mr Ngubane commented that if what the Member was saying was true then there were a whole lot of irresponsible people at the SABC. This was not true. He explained that in emergency situations such as floods, freelance employees had to work fast to get to such events, and there would not be time to sign a contract. Once the material had been flighted, the SABC could enter into the process of refunds. This situation was prevalent in the newsroom, as no one could plan around news.

The Chairperson pleaded with the chairperson to assume that Members knew nothing about television programming.

Mr Ainslie said the explanation was crucial and needed to be included in the Annual Report. That information alone would have been enough to give Members an idea of how the delegation of authority functioned on the ground.

Ms Mokhobo replied this was noted and that the reporting would be different in the future.

The Chairperson asked for breakdown of details on the emergency cases that were in the Annual Report.

Mr Thobejane wanted to know if a policy that outlined reporting on emergencies existed in the SABC.

Mr Ngubane replied there was policy applying to procurement and employing people after a contract was signed, but there were exceptional circumstances at the SABC that resulted in abnormality. Policies were there and could be forward to the Committee.

Mr Plaatjie commented that the Board alerted Members that there were exceptional cases, even though the rule existed. The presentation sought to emphasise exception - uitsondering in Afrikaans - not the rule.

Mr Thobejane explained that questions were raised about the fruitless and wasteful expenditure. These were regarded as such because there were not systems in place to provide news. The Members were saying the Board needed to develop systems that would address funding of all eventualities.

The Chairperson said the Committee wanted a breakdown of the emergency events that contributed to the irregular expenditure bill.

Mr Motsoeneng replied he would provide that information. The SABC, in fact had a policy to deal with emergency matters. Policy reviews would happen only as pertaining issues of sport broadcasting. Contracts for such would have to be entered into much earlier.

Mr Thobejane retorted the Committee was not discussing strategic objectives of the SABC, but what it failed to do in the past year.

Mr Singh agreed with the Chairperson that the challenge was with Parliament, especially when it came to assessing the competence of individual Board members. What category of competency was called for when recommending board members? The audit committee had only one financial person, who had since left for KwaZulu Natal. This was the fundamental problem and Parliament needed to address competence among Board members.

He accepted the exception about irregular expenditure but not on fruitless and wasteful expenditure. However, there was no way a Bafana-Bafana match was an exception as suggested in the report. Most of the cases submitted on page 45 of the report were not exceptions, and the Committee needed answers to those.

Mr Mfundisi wanted to know if there were systems in place to deal with fruitless and wasteful expenditure.

Ms Mokhobo replied there were bids adjudication committees in place, and all purchases would follow due process. Nothing would be signed off without following the due governance process. The major contributor to fruitless and wasteful expenditure had been Content. It was therefore decided that Content would be managed normally through the normal procurement processes. All business plans had to go through the units, and depending on the amount prescribed in the ‘delegation of authority’ framework, it would go through the various stages right up to the Board of directors.

Ms Mokhobo requested that the SABC be allowed two weeks to compile the information requested and forward it to the Committee. This was agreed to.

Foreign content, evergreen contracts
Mr Ainslie sought clarity on the impact of content that was bought and never used at the SABC. He asked what the statements about written off impairment payments meant. He suspected this was wastage, and the SABC bought things it did not use.

Mr Ngubane replied that when buying foreign content, it came with a lot of useless "rubbish". The accounting policy had been wrong, and the group CEO was dealing with the matter. The SABC should account for what it bought and not the referral issues that accompanied content. People were content with adding value to peripheral things and the add-ons. This was where impairment on foreign content came in.

Mr Ainslie asked why was this not explained to the independent auditors.

Ms Mokhobo replied independent auditors worked with the information at hand. That information provided value about the content that the SABC was not using.

Mr Ainslie interjected and said the SABC was responsible to provide information to the auditor; why was incorrect information allowed to go to the auditors.

Ms Mokhobo replied the information was not incorrect, but was an accounting principle that the SABC had embraced. It had to do with RIF that a full disclosure was made of every stock piece that was in the building.

Mr Ainslie commented that the accounting principle should be changed, and he asked if the SABC still over bought content.

Ms Mokhobo replied, yes, this was what the SABC was working on. She was working with Mr Olivier to ensure that this never happened again. Over buying was no longer an issue, but previously people over bought. Included in the over purchasing of content there was extra content that was not accounted for. The SABC had come with a strict rule that it would only buy that which it would broadcast. Sadly, there were contracts that were entered into with the previous regime that forced the current administration to continue with those contracts far into the future. Those contracts came with the concern that for a while the SABC would be faced with similar problems.

The Chairperson asked where those people were.

Ms Mokhobo replied the people had gone.

The Chairperson asked what “far into the future” meant in years.

Ms Mokhobo replied that the SABC was reviewing the contracts. She did not know why the "evergreen contracts" were entered into.

The Chairperson asked what an evergreen contract was.

Ms Mokhobo replied it was a contract tagged ‘life of service’, and a typical example was the Bold and the Beautiful. In the previous years, people entered into contracts that said as long as the programme was running there was no way out. The Board was looking at the legal way for the SABC to exit those contracts. Discussions were happening.

Mr Ainslie commented that he now understood why the SABC showed so much "American nonsense" such as the Bold. The SABC was tied to these contractually.

Procurement matters
Mr Mfundisi asked if the keeping of the register of contracts had improved. What was the actual position, and how long had this been going on?

Mr Olivier replied a contractor managing the contract department was appointed, and in September he started the process of compiling all the contracts at the SABC. The process now was at loading the contracts into the subsystem.

Mr Mfundisi asked how many years back had there been this challenge around contracts.

Mr Olivier replied the challenge went back to 2009 when he was still involved with the Television division.

Mr Mfundisi asked if there was an intention to have the mess cleaned up.

Mr Olivier replied he had already started with that process, soon after he was appointed acting CFO. He reactivated the contract register. It was important he understood the commitments he had in order to workout proper cash flows. Some units were cooperative and provided correct information and others provided old information. There was a lot of information about expired contracts. The process was at the stage of cleaning up the information with the contract manager that had been appointed.

Mr Mfundisi asked if it would be proper to deduce that the SABC was at fault in terms of the PFMA; and how it hoped to redress the challenge.

Mr Olivier replied it was an issue of regular review of the contract register – that would be needed for proper cash flow.

Mr Mfundisi asked for details about those who were responsible for the irregular expenditure.

Mr Plaatjie replied that that sort of detail would form part of the submission in two weeks’ time.

Mr Mfundisi commented that the SABC was no different to Hollywood; everybody was on an acting capacity. Was there any intention to stabilise that situation, and what had happened so far? What was the long term strategy to stabilise the human resources at the SABC?

Mr Plaatjie replied some of the people had left because they found greener pastures elsewhere or were dissatisfied. In the case of the Acting COO (Mr Motsoeneng) there was litigation, but that had since been finalised and the Board would move to fill that position. Regarding the CFO matter, charges would be sent to Ms Duda this week. On the suspension of the head of the internal audit, permanent appointments would depend on the processes that would be undertaken.

Mr Singh asked if there were systems in place to evaluate suppliers.

Ms Mokhobo replied no, but she would look into it.

Mr Singh asked if the posts referred to on page 60 of the report were funded. Could the SABC clarify its vacancy rate?

Ms Mokhobo replied that every post not deleted in the system during the rightsizing exercise would be funded. The organisation was still going through the cleaning up process.

Mr Singh requested a breakdown of Board member remuneration, and if it was determined by the Board itself.

Mr Ngubane replied remuneration was determined by the shareholder (government).

Qualifications in the spotlight
Mr Thobejane sought clarity on why some Board member’s qualifications were not included in the report. He asked if it was the Board who employed senior managers, and how prevalent were claims of falsified qualifications against the senior managers? Were the qualifications of the managers checked when they were employed, either academic or otherwise? Only the Board could tell Parliament if indeed there were individuals employed without the requisite qualifications; and explain how such individuals got into SABC employment. Some of the officials’ qualifications did not reflect on the report; it was only indicated that they were journalists. And all of a sudden such individuals were elevated into top ranks. Why were there these allegations?

[The question was informed by allegations in the media, and confirmed in part at the Portfolio Committee on Communications by Ms Mahlati, that Mr Motsoeneng – Acting COO - did not have the relevant qualifications as he had not passed matric].

The Chairperson commented that he would prefer that the Committee proceed with other matters, as the mess the SABC was in was caused by people with degrees.

Mr Ngubane replied there were policies at the SABC that stipulated the qualification requirements. The Board had discretion in terms of what it wanted to achieve; it would therefore look at the business and the track record of a person in executing his duties. This was automatically a complete process.

Mr Thobejane said he accepted the explanation and would have preferred a breakdown.

Allegation about suspended employee
Ms S Mangena (ANC) asked if it was possible that at the SABC someone on suspension, could do work for another company, and still receive SABC payment. This had happened at the SABC. Someone was on suspension and had found employment elsewhere, but was being paid until February of next year.

Mr Ngubane replied a suspended person remained an employee of the SABC until a disciplinary process had established a guilty verdict. Until the process was completed, a person was not allowed to work anywhere else; that would be a further offence.

Ms Mangena said she would hate to name people, but this was happening.

The Chairperson commented that the name should be provided to the Committee as such a person was paid by the taxpayers. And if such happened, then it would result in fruitless and wasteful expenditure.

Ms Mangena replied the officials knew the person “who had been recently suspended”. The person was told by the SABC to go and stay home and the person would be paid until February 2013, and that person had found employment elsewhere.

The Chairperson insisted on knowing who the person was.

Ms Mangena replied she would tell the Chairperson the name but not at the meeting.

Asset management and liabilities
Ms Mangena said it appeared that the SABC did not stick with implementation of its audit action plan to remedy audit findings. The finding on its asset register had been raised before. She asked why? The Board was required by the PFMA to manage and safeguard the assets of the SABC. Why was the Board contravening the PFMA by not safeguarding the assets? What were the reason for not doing a full asset count in the current year? Why were the automated programmes for film and sports not being utilised fully? This amounted to wasteful expenditure.

Mr Ngubane replied that when the Board spoke of stock management at the SABC it was on the whole referring to content bought outside the country, and the content commissioned inside the country. There was total abuse in the Content enterprise era. The unit went and shopped for all sorts of things and some of this content had just been discovered. That had implications.

This was an ongoing problem; very historical, but the Board was grappling with it. The SABC spent millions on SAP accounting system; putting out contracts; getting people to fix the system, but it had not been fixed. The systems were just not being correctly aligned.

He said an ideal situation was to find a consultant with the required skill and the capacity to bring all the programmes together, to have a seamless accounting process and phase out the manual accounting system.

Ms Mangena sought clarity on whether the Board chairperson implied that “by getting in a consultant” meant there was no one qualified to do the job. And how much would the use of a consultant cost the SABC?

Mr Ngubane replied that what he meant was there were advanced technologies at the SABC that were not utilised fully, due to the capacity amongst those who used the system. It could be that the initial programmes were written wrongly.

Mr Olivier replied that in the previous financial years the SABC tried to clean up the records for that year, instead of going to the source of the problem and looking at opening balances. There was a need to go back to the start of opening balances (2007) and ensure that those opening balances were correct. One would be a need to go through the broadcast schedules of all the years and ensure that everything was amortised. This would involve going back to the production contracts of all the programmes and ensure the information was captured correctly. Television had worked hard on the matter, sadly this was not done as a team.

Ms Mangena asked if the SABC believed this matter would ever come to an end without the use of consultants.

Mr Ngubane replied the problem was “so big”, but he hoped in 2014 this would be corrected. This was huge and historical. He could not promise that it could be sorted in a matter of months, unless extra skills were sourced from outside. The SABC did not have the money for that.

Ms Mangena asked why information on liabilities management was submitted incomplete to National Treasury, in contravention of PFMA requirements.

Mr Ngubane replied this was inexcusable because it could be done. SABC knew the terms and conditions on which it borrowed. The CFO had proposed the revision of government guarantee conditions so that borrowing rates were in line with the capitalisation of the SABC. The SABC was charged exorbitant fees when it had a deficit of over a million rand. Now that there was a million rand in the bank, that interest rate needed to be revisited. These things were there; why they were not put into documentation he was not sure.

Ms Mangena asked if the chairperson of the Board did not know, who was supposed to know.

Mr Ngubane replied he was supposed to know, and that he had the documents that came through to the Board, but as to why they were not complete when submitted to National Treasury he could not say. The information was there. He did not see all the documentation that went to National Treasury, only what came through to the Board.

Ms Mangena commented that this vindicated an earlier observation by Mr Ainslie that there were no controls at the SABC. If there were, the Board would know everything happening at the entity. As the head of an institution, the Board chairperson should know everything. She asked if the chairperson was not hands-on with operational matters, how could he know anything?

Mr Ngubane replied there would be a need to get an executive chairperson in future. The non-executive Board members did not create the information but received it through documentation. When such information was submitted for evaluation to designated authorities, the Board did not even see it.

Ms Mangena said this was worrying as the chairperson needed to be hands-on. Everyone was doing as they pleased at the SABC. She voiced her displeasure at the responses provided.

The Chairperson commented that if the information left directly from management to National Treasury, then there was a deficiency in management in terms of who signed off on it. He asked if management were not aware if the information was incomplete. Not having the information was the lesser evil than submitting incomplete information whilst it was there. There should have been an engagement between the Board and management on how such lapses occurred. This talked to the interface between the two levels of leadership at the SABC.

Ms Chiloane requested comment from the DoC as the custodian Department of the SABC, especially as the Director General was present at the meeting.

Ms Mangena sought clarity on the kind of controls that were there to ensure that contraventions identified by the SIU did not happen again, especially the lack of a supply chain management policy.

Mr Ngubane replied there was a team of lawyers going through the SIU report and recommending appropriate action. Some cases had been recommended for criminal prosecution. This was an ongoing process. There was a huge pile of information and hopefully they would have dealt with it by the end of the year.

SABC staff not disclosing
Ms Mangena asked for the names of companies that were involved in contracts where SABC employees were connected to them. She asked if any of such cases had been referred to the police.

Mr Motsoeneng replied that the SABC had its own legal people and the Board had ensured credibility of the report. There were 293 staffers who did not declare their interests. The lawyers had offered opinion on the matter, and subsequent to their recommendations 119 employees were given verbal warnings; serious matters were found against 15 people. By the end of the month all the outstanding cases would be finalised. Two people had already been arrested. He could not share some of the information as legal people were busy dealing with the matters.

Ms Mangena asked if the official was ready to give out the names of those Board members who were fingered in the SIU report.

Mr Motsoeneng refused to reveal the names, saying those Board members were no longer with the SABC, and that the matter was subject to court process. The Chairperson insisted that the names be revealed. The official replied he could not give the names, but if the Chairperson insisted the names would form part of the information that the SABC would avail to the Committee in two weeks.

Ms Mangena said the Head of Procurement was also found to have committed acts of financial misconduct; where was this employee? Did the SABC sue him?

Mr Motsoeneng replied the employee had been dismissed and his name was Mabela Mathekga.

Ms Mangena said according to the report only 30 out of 698 SABC staff had declared their interests with the general manager. The report also indicated 32 Board members had failed to declare. What disciplinary measures was the SABC going to take against those who failed to declare?

Mr Motsoeneng replied the external lawyers were dealing with the matter and would avail a report by next week as to what direction to take with regards to these cases.

Ms Mangena requested the list of 19 Board members who held directorships with other companies be included with the information to be provided in two weeks.

Ms Mangena sought the details around the outcome of the case involving Clover, where the SABC lost over R249 000. What had been the outcome of this case?

Mr Naiker replied the SABC had Clover as its client. But Clover did not purchase airtime directly from the SABC; it was done through an agent. There were additional benefits to the airtime bought for Clover. The SABC was not the actual party that was defrauded. It was in fact Clover. There were discussions with Clover, as the SABC could not have laid criminal charges against the individuals, only Clover. Either for reputational damages or other reasons, Clover preferred not to lay criminal charges. The state prosecutor was interacting with Clover to try and ascertain why they did not want to get involved in the matter. The SABC was in the middle of this, but could not lay the charges.

Ms Chiloane sought clarity on the amount of money paid to suspended officials. She asked the total number of suspended officials in the Corporation.

Mr Ngubane replied he needed to ascertain this data and that would form part of the report that would be submitted in two weeks.

Ms Chiloane said she was not satisfied with the answer, especially that the chairperson had brought up the challenge of staffers who did not comply to policy.

The Chairperson clarified that the Committee was interested in the name, position, date of suspension of the person and what the issues were.

Mr Motsoeneng replied that management was encouraged to speed up the process of suspension and only do it if there was a need. In the past people were just suspended. Some cases were beyond their control because of their serious nature, but the Corporation tried its best not to have too many people on suspension. There were no more than six people on suspension.

The Chairperson interjected and said the Committee would have that information when it was sent. He sought clarity on the employees who were running businesses, and asked if they were still at the SABC.

Mr Motsoeneng replied the employees were still part of the SABC, hence the involvement of external lawyers. The package with all the outstanding questions would elaborate on this. The 293 were just those that did not declare.

Petrol cards and allowances
Mr Ainslie said he was not happy with the report on investigations; the SABC was skimming the surface. There were too many contradictory reports on matters of corruption at the SABC. To illustrate this, the previous year the Auditor-General had informed the Committee 1 465 people at the SABC had business interests, a year later they reported 293. In September the SIU indicated that about 304 people still employed at the SABC had to be charged, and two months later the number stood at 61. He was suspicious of the figures presented. Where were the other cases?

Mr Ainslie said all the cases stated in the Annual Report were not irregular expenditure, and were minor things that need not be reported on. All of the reports on investigations had to be consolidated; the picture was too confusing and there was a need to return to the heart of the matter. He wanted an update on where the SABC was with petrol cards. This was a big issue in 2011 – the Committee was told that R11 million was spent on petrol cards. The Committee was promised that the petrol cards would be done away with, as recommended by the interim Board. According to information he had, expenditure on petrol cards had more than doubled to R29 million.

Mr Ngubane replied the Board had done away with petrol cards and entered into other arrangements that had proved costly.

Mr Olivier replied management did not have petrol cards any longer, but the fleets such as the news team at the SABC used petrol cards. Management did not use petrol cards.

The Chairperson asked about the new costly measures that the Board chairperson made reference to.

Mr Olivier replied he got an allowance every month of R10 000, but after deductions he took home R6 000.

Mr Ainslie requested more details on the petrol cards; the kind of measures that were now being used; and their value. These should be included in the information provided in two weeks’ time.

Mr Singh commented that another issue that needed to be included in the report was the use of consultants. He commented that Deloitte got about R23 million.

Oversight of the entity
Ms Sekese, DoC Director-General, commented that the Department and the Minister were aware of the challenges that the SABC was faced with, and there was a concerted effort to help.

The Chairperson interjected and asked if that bore fruit.

Ms Sekese replied yes (to the Chairperson's disapproval). She said this was work in progress. There was monitoring and evaluation at the SABC.

The Chairperson asked when the rot arose at the SABC, where was the Department? Sure, the Department had a unit that was meant to monitor entities. At the SABC things went from bad to worse while the Department was there.

Ms Sekese said there were interactions to deal with the issues with both the chairperson and the GCEO.

The Chairperson asked what was happening about the audit committee. Why was there no audit committee and what was done about it?

Ms Sekese replied the Minister was trying to address the issue of the audit committee and they needed to make a report to the Committee. The composition of the audit committee should include people with financial skills.

The Chairperson commented that the point was mundane. From August until now, what had the Department been doing? Why was there a vacuum? The Department knew it was going to the AGM in August and that the term of office for the audit committee had come to an end. If the Department could not get the audit committee right, then all the other supervisory work was rendered useless.

Ms Sekese reassured the Committee there was a concerted effort by the Department to get the audit committee functioning. There was a proposal that the Minister had worked on and would be finalising soon and this would be taken to the chairperson. Almost all the matters the Committee had raised, the Department was working on together with the SABC and the Auditor-General to try and see where the Department could assist.

Concluding remarks
The Chairperson commented that continuity was a challenge for government departments and it impacted on the work of government. The matters that had been raised were fundamental. Internal controls and the audit committee needed to be attended to with urgency. Governance at the SABC needed to be attended to for the interest of the country. Active measures against those who deliberately contravened the rules were preferred. Public money needed to be used in an accountable way. The country wanted to see a stable entity.

The meeting was adjourned.