Minister of Communications on the state of the SABC

Meeting report

After Minister of Communications, Ms Faith Muthambi, introduced her delegation, as requested to, Mr G Davis (DA) pointed out that according to the Committee meeting of 17 February 2015, it had been decided that the full board of the SABC would come before the Committee. This was not the case, only two executives and two non-executives were present. This showed division and meant the presentation would be one-sided.

 Ms Moloi-Moropa said it was the Minister who took the responsibility of inviting the Board Members. She had oversight.

 Ms Muthambi said the delegation had been chosen. There was an issue of division within the SABC Board.

 Ms Moloi-Moropa said she had not explained the nitty gritties of the invite. If the constitution of the delegation continued to be debated the Committee would not get around to the business of the day.

Mr Davis asked that the DA’s fierce objection be noted. The picture to be presented would be flawed.

Ms Moloi-Moropa handed over to the Minister to start the presentation.

Minister of Communications briefing
Very early into the presentation, Communications Minister, Ms Faith Muthambi, emphasised that the Minister was the sole shareholder in the SABC. Her relationship with the Board was governed by the provisions of the Companies Act, Shareholders Compact, Board Charter and the Memorandum of Incorporation (MoI).

 The Minister confirmed the appointments of the Chief Operating Officer and the Chief Financial Officer who were also Executive Directors of the SABC Board. The court application by the DA in respect of the Chief Operating Officer’s position was pending before the Western Cape High Court so the matter was sub judice. The appointment of the Group Executive Officer was pending and the decision would be made in due course.

The Board of Directors was resolving some of the problems which had been experienced by the previous Boards. It was resolving the Auditor-General’s queries or disclaimers, improving the ethical standard of Board members and focusing on improving good governance and stable leadership at the corporation.

Related to the Board of Directors, she said the MoI had been amended in terms of section 16(1)(ii) of the Companies Act. Upfront the MoI was a document that could be amended from time-to-time. It set out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company and other matters as contemplated in Section 15. It was a shareholders’ document and therefore entitled in terms of section 16(1)(ii) to amend during shareholders meetings if it deemed it necessary. It had been amended to empower the Management Team of the SABC to appoint and discipline staff for operational efficiency. Grammatical errors had been corrected.

 Acting Director-General Donald Liphoko outlined the audit matters raised by the Auditor-General (AG). The SABC received a qualified audit opinion. Areas of particular concern were TV licences fees, revenue and asset control. These had implications for how the SABC had accounted for its revenues and its implications for a tax point of view. At the end of the month the Department would have comprehensive reports to outline steps that had been taken to address the AG’s opinion. Skills in the financial division of the SABC were being looked at.

 SABC Chief Financial Officer Mr James Aguma expanded issues concerning the AG’s findings. Three issues were identified as key. These were TV licences, revenue and related receivables. On TV licences, the SABC was compiling a database. There were some people who were on the database and others, pirate viewers who were not. A challenge was trying to source a methodology to determine who the pirate viewers were. Alternative databases would be consulted such as the Unemployment Insurance Fund. For example if someone earned R2000 and spent R300 on his cell phone, then he should be able to pay his TV licence.

The finding on property and equipment was about not having adequate controls in the past to determine an asset register. Service providers had been appointed and there was now a fairly complete database. If the exact assets were not known then it was hard to look at revenue. Regarding VAT on TV licences, the SABC was looking at paying this on receipt of a licence as this affected revenue. At the end of February, total assets acquired for property plant and equipment as a result of government grants had been determined. 

He said the AG had raised concerns over the SABC’s assurance that third party revenue to the broadcaster was complete. This would be resolved by the end of the financial year.

In the current year, all the receipts against invoices would be reconciled. By the end of February this was about 60% to 70% completed.

On irregular, fruitless and wasteful expenditure, the AG had said there was no integrity in the figures disclosed. Mr Aguma said the issue was two-fold. There were historical disclosures. In the past there were challenges with policies and procedures. The whole policy would be overhauled. This would address the accuracy when determining irregular, fruitless and wasteful expenditure. Going forward, inaccuracies would be treated or cured by making sure supply chain management policies talked to the law and making sure monitoring of acquisitions of goods and services were properly regulated.

Another aspect was the AG's findings on predetermined objectives in the corporate plan. The targets were not realistic, SMART or achievable. Through the Chief Operating Officer, this was being done. The AG’s findings had been taken seriously. Going forward, the issues around predetermined objectives would be cured by the cautiousness to set measurable, realistic and time-bound targets.

Mr Aguma said other challenges were vacancies in the finance function of the SABC. There were certain specific capabilities needed in some areas such as tax. There was not a specific realisation of the tax risks. Human resources needed to adequately address the tax risks. The SA Revenue Service had been asked to assist in that area. In the film and radio areas, chartered accountants had been hired. By the end of this financial year or the beginning of next (April 2015) it was believed there would be a full resource base of qualified accountants to assist the SABC to adequately manage operations and report on them because the skills base was wide.

There were anomalies in the reporting architecture that affected adequate oversight over key activities. This was being reviewed.

There was inadequate assessment of tax risks. Tax was an onerous obligation if it was done wrongly. A service provider capable in that area would assist to get an overview of the tax risks.

There was limited accounting system applications. These would be reviewed. In addition there was inadequate corporate planning and reporting capabilities. The COO was looking at this.

By the end of that week or next, a service provider would be appointed to do research on TV licence revenue models.

 Discussion
Mr Davis said it was good to have the Minister there. In the previous presentation sent through the day before, it mentioned there were three vacancies in the SABC Board. It was not in today’s presentation. Who were the members who had left other than Ellen Tshabalala?

 The Minister had mentioned that letters had been sent to the Board sometime last year or earlier this year. How many had received letters threatening their removal? How many were there. Nowhere in the Broadcasting Act did it give the Minister power to threaten removal. On what legal basis then was this done? In the letter, breaches of fiduciary responsibilities were mentioned. What were these? Why was the Minister getting involved in the removal of these Board members. Quite rightly she had not been involved in the removal of Ellen Tshabalala, why had she gotten involved in the removal of others?

 He asked the Board Chairperson about a statement issued on Tuesday that the Board had resolved to remove Hope Zinde with immediate effect. Had she been removed by the Board, was it done and dusted or would the matter be handed over to the Portfolio Committee to go through due enquiry as set out in the Broadcasting Act, as was done with Ms Tshabalala?

 According to the Broadcasting Act section 13(10), nine members of the Board including the chairperson or deputy chairperson would constitute a quorum. How many were present when the decision was taken to remove Ms Zinde?

 Mr Davis said the Minister had called the SABC a state-owned company. This was fundamentally wrong. The SABC was an independent public broadcaster. The Minister’s comment coloured how she saw the broadcaster. In terms of the Act, section 11, the Board had the power to control the affairs of the corporation. This was important because the Board was made up of civilians selected by the Portfolio Committee. What the Minister was trying to do, through the MoI, turn the SABC from a public broadcaster to a state broadcaster run by a Minister.  The Minister had been fleeting when referring to the MoI. It had not been amended just to correct grammatical errors. It had been amended and fundamentally changed the character from a public broadcaster to a state broadcaster. Section 5 required the Board to seek the approval of the Minister on any rule change related to the governance of the SABC. The Minister was now in charge. That was a move towards a state broadcaster. Section 13(5)(2) gave the Minister new powers to waive the requirement by the board to advertise and shortlist candidates for the positions of CEO, COO and CFO. In other words the Minister had the power to ensure her candidates were recommended and shortlisted. This was evidenced through the appointment of Hlaudi Motsoeneng. That was illegal. Section 13(5)(7) gave the Minister sole power to decide if the CEO, COO and CFO be re-appointed. The Board was bypassed entirely in the process. Section 13(6)(3) stated that the Board could only discipline and suspend the CEO, COO and CFO with approval from the Minister. Previously the Board had to power to discipline. This prevented the Board from controlling the affairs of the SABC in contravention of the Broadcasting Act. Previously the Board was empowered to appoint an acting COO and CFO. This power had been revoked. It was then at the sole discretion of the Minister to appoint. Hlaudi Motsoeneng was an example.

 Mr M Kekana (ANC) interjected and asked respectfully that Mr Davis stop mentioning Mr Hlaudi Motsoeneng. The issue was sub judice. He should refrain from using that name.

 Ms Moloi-Moropa said the matters could not be discussed because it was sub judice.

 Mr Davis said he used Mr Motsoeneng as an example. He was present.

 The Chairperson asked for the meeting to continue.

 Mr Davis said section 14(3)(1)(3) of the MoI gave the Minister the power to remove a Board member. This was unprecedented and a contravention of the Broadcasting Act which gave only Parliament the power to remove a Board member. Did the Minister concede that the MoI contravened the Broadcasting Act? If not, why not. If so, would she undertake a process to have the MoI amended to bring it in line with the Broadcasting Act? Section 20(2)(4) of the MoI stated that the SABC must pay the legal fees of directors to defend litigation in any proceedings arising out of the director’s services to the corporation. Did this mean, that the SABC would pay the legal fees of Hlaudi Motsoeneng in the court case against him? Would it pay for Ms Tshabalala’s fees when she took the Committee to court?

Mr Davis asked the Chairman of the SABC Board, whether or not a resolution to amend the articles was approved at a general meeting between the shareholder and the Board? Did the Board fully discuss the MoI before it was passed.

 He asked about the appointment of the Chief Executive Officer. It was nine months after the Minister had promised the appointment would be made. What was causing the delay? It took only 24 hours to appoint Hlaudi Motsoeneng.

 Mr W Madisha (Cope) said there were many things that were wrong, seen from the presentation. The Minister had said things could not be responded to because of sub judice. This was worrying. The report from the Department was scant and received by Members at the last minute. Was this intentional? Members had not been given enough of a chance to look into the qualified audit report. The onus was on the SABC.

 Mr R Tseli (ANC) said the fact that the SABC had no disclaimer from the Auditor-General was good news. Regarding TV licences, in view of the digital migration rollout, was there any mechanism to ensure better compliance.

 The Minister responded that there were three vacancies on the Board. The positions left by Ellen Tshabalala, Dr Bongani Khumalo and Lulama Mokhobo.

 On the MoI, the Minister said Mr Davis had been keeping the Department busy with lots of questions posed and sent. She held up the Companies Act and differed that the SABC was not a state-owned company. Section 8A of the Broadcasting Act regulated the conversion of the SABC to a public corporation. Section 8(A)(2) stipulated that the Minister must determine the MoI and articles and register these with the registrar. The Companies Act applied to the corporation. She said the former Minister Dina Pule  did this in compliance with the provision in the Broadcasting Act. The Companies Act did not provide for the rules that Mr Davis was referring to. It was not a new MoI.

The Minister put it on record that she was the sole shareholder and had the authority to appoint the CEO, COO and CFO. She also had the responsibility to discipline and suspend.

 In view of the problems experienced by the Board of the SABC in 2014, rules provided for the most senior executive to act as COO. There was nothing wrong with that.

 The power to decide on the re-appointments was not new. The Minister could recommend the removal.

 Section 14 of the MoI was in line with requirements of section 69 and 71 of the Companies Act. It was also included in the MoI that was approved by Dina Pule. It needed to be determined if the Broadcasting Act took precedence over the Companies Act.

 Regarding the payment of legal fees, this was included in the MoI that was approved by Dina Pule.

She said it was not fair to read the one MoI without reading the MoI that was registered. Perhaps she could return to the Committee again to discuss the MoI in more detail.

It was not clear why Mr Davis felt the SABC was not a state-owned company.

The Minister referred Members to the Companies Act. Section 16 regulated the amendment of the MoI. The MoI could be amended at any other time if a special resolution to amend it was adopted at a shareholder meeting. That had been done. It was clear that in terms of the law, the Minister had the powers as the representative of the state, the sole shareholder, to amend the MoI of the SABC. Such powers were exercised in terms of section 16.

 She sent the letters to Board members as empowered to do by the MoI. The Board Charter also gave her this power.

 There was no need for her to get involved in the matter of Ms Tshabalala as this would have been a duplication. The Portfolio Committee had dealt with it.

 She agreed with Mr Madisha. His concerns were genuine. Some matters could not be discussed because they were sub judice. Mr Davis had chosen to take the legal route.

 The Department was not hiding any information.

 The report given was a progress report but it was noted that all the information should have been given earlier to Members to interrogate.

 Acting Chairman, Prof Mbulaheni Obert Magushe, said as far as the Board was concerned due process had been followed to remove Ms Zinde . The matter was closed from the Board’s side. He could not say what her next step might be but perhaps Ms Zinde would approach the courts if she felt she had a case. During the meeting that was quorate, one person had sent a message to say he would be late and a later message to say he was not coming. He did not want to get into details about who voted or abstained. There was proof, there was an attendance register.

 He said the issue of the MoI and whether it had been discussed by the Board had been dealt with by the Minister.

 SABC Acting CEO Mr Hlaudi Motsoeneng said the CFO had dealt with the issue of consultants. The consultants were dealing with historical issues. The team at the SABC was dealing with current issues. Mr Davis needed to be honourable and respect Parliament. He needed to lead by example.

 Mr Davis said: “You lead by example.”

 Mr Kekana said Mr Davis should be given a  serious warning.

 Ms Moloi-Moropa said Mr Davis needed to raise his hand to speak.

 Mr Motsoeneng said when irregular, fruitless and wasteful expenditure was mentioned, it did not mean the SABC had “chowed” that money. The information was misleading. Mr Davis was the one who said the SABC was independent but he was interfering with the staff of the SABC.

Mr Magushe reiterated that some Members of Parliament were creating divisions in the SABC. This had to come to an end. The SABC Board needed to be left alone to do its work and then it would flourish. Even if a new Board was appointed tomorrow, if there was interference, it would not survive.

Mr Davis said the Minister’s responses were smoke and mirrors and an exercise in obfuscation. It, the Broadcasting Act, a statute, made the SABC a public broadcaster by empowering the Board. The MoI removed the power of the Board. How could an MoI trump an Act of Parliament? It was irrelevant if Dina Pule signed the similar document in 2013 because that was just as secretive as the document the Minister signed in September.

He was not satisfied with the Minister’s answer that she did not intervene in the case of Ellen Tshabalala. Did she just get to pick and choose? Did she have her own agenda?

 Mr Davis questioned if the matter of Ms Zinde had been finalised. Only the appointing authority could remove a Board Member, the Acting Chairman, Mr Magushe did not have this authority. That was what the Broadcasting Act said.

 He said decisions could not be taken behind closed doors as it gave the impression that there was a purge at the SABC. How was it possible that some Board members had not even seen the MoI.

 He denied that he had told the media that there was R3 billion fruitless and wasteful expenditure. He had always said irregular expenditure. There was huge scope for corruption but there was no way to tell as the SABC could not account for what happened to the money. The financial records were in such a mess.

He took huge offence at being accused of inciting staff. He spoke to staff and he spoke to journalists. He had sent one SABC journalist a press release. Her laptop had been seized and she had been put through an enquiry. Who was interfering with who?

Mr Madisha said it was wrong that Members were attacked. It was hoped this would not be repeated in the future.

Mr Kekana commended the SABC staff and the Minister for taking the SABC out of ICU. Everything needed to be done to get the SABC on the right track. Saboteurs and lazy workers had to be fired.

He was disappointed in Mr Davis for undermining authority. He must not go the media as a spokesman for the Committee. 

The Minister said she did not write the Companies Act. The Companies Act did supersede. It was promulgated and gazetted after the Broadcasting Act. To say people were doing things secretively without public announcement; if people were doing it with compliance with the law what was wrong with it?

 As a Minister she did have an agenda; that was to stabilise the SABC.

 Regarding Hope Zinde’s removal, she had been briefed. She was satisfied in terms of section 71(3) of the Companies Act. It empowered the Board to remove one of its own provided provisions were followed. These had been. Ms Zinde was afforded opportunity to respond both verbally and in writing.   

 Mr Davis asked for clarity. Did the Companies Act supersede the Broadcasting Act?

Ms Muthambi said she did not say it superseded the Broadcasting Act. With regard to how the shareholders and board of directors are regulated by the Companies Act, only in matters related to shareholders, did the Companies Act come in.

Mr Magushe said it may have sounded like an attack on the Members, but the SABC representatives at the Committee had just been stating facts. They were defending themselves from a vicious attack.

He said the Board was trying to root out false information.

 Ms Moloi-Moropa emphasised that it helped when the Minister was present in the Committee.

She summarised that many issues raised were technical. In her opinion the Companies Act applied across all companies and she was glad the Minister had clarified her point on it superseding of the Broadcasting Act.

She would like to consult with the legal section of Parliament to see that the laws were synergised appropriately so she could engage with them properly.

 Over and over the MoI had been brought up. She agreed that the MoI needed to be discussed in detail.

 Another critical area was to deal with the audit report on the SABC. The Auditor-General would be invited.

MDDA / SABC / ICASA statutory appointments
There were initially four vacancies for ICASA Ms Moloi-Moropa then turned Members’ attention to the statutory appointments for the vacancies at the SABC, the Media Development and Diversity Agency and the Independent Communications Authority of South Africa.

There were two vacancies at the MDDA and 46 applications had been received. The CVs had all been submitted for security and qualification checks. They would be printed and bound and presented to Members.

There was one vacancy at the SABC and 97 applications had been received. Security and qualifications checks had been done and CVs would be printed and bound for Members.

The shortlisting for both the MDDA and the SABC would take place later in the week, either the 18 or 19 March.

There were initially four vacancies for ICASA councillors but the number had increased to five. Eighty five applications had been received. The CVs had been submitted for security and qualifications checks and were in the final stages of being summarised. Shortlisting of ICASA candidates would be dealt in the following week.

Ms Moloi-Moropa said interviews for the MDDA would be on 24 and 25 March. The SABC: 26 March and ICASA on 31 March, 1 and 2 April.

Mr Davis said he could see the interview dates been pushed further because of the limited time.

He also questioned, as the Minister had said there were three vacancies at the SABC, why the Committee was only shortlisting for one?

Ms Moloi-Moropa said advertising was very expensive. It was not clear about the vacancies, it was only clarified when the SABC appeared before the Committee.

She requested Members to read the legislation governing the SABC, ICASA and the MDDA as well as all relevant documents so as to be prepared for the interview processes.

The Committee adopted the minutes dated 17 February and 3 March 2015.

The meeting was adjourned.