SABC: Irregular, Fruitless and Wasteful Expenditure, in presence of Department of Communications

Meeting report

SABC: Irregular, fruitless and wasteful expenditure

Chairperson's opening remarks
The Chairperson welcomed Robert Munzhelele, Acting Director General, Department of Communications, as well as the leadership of the SABC. The delegation from the SABC included:

James Aguma, Acting Group Chief Executive Officer (GCEO), SABC. 

Audrey Raphele, Acting Chief Financial Officer, SABC.

Bessie Tugwana, Acting Chief Operating Officer, SABC
Kaizer Kanyago, Spokesperson, SABC. 

Lindiwe Bayi, Company Secretary, SABC
Teresa Geldenhuys, Group Executive: Corporate Governance and Assurance, SABC. 

Representatives for the Department and Minister of Communications included:

Sandile Nene, Special Advisor, Minister of Communications.

Elvis Makamu, Administrative Secretary, Department of Communications.

 

The Chairperson noted that the issues facing the SABC as a whole had been well publicised and did not require repeating. The background to the invitation was the report of the Auditor General conducted in 2016, which focused on irregular, fruitless and wasteful expenditure at the SABC. He stressed that this engagement at SCOPA was not related to the other issues and enquiries which had been conducted thus far into the SABC generally, since SCOPA had already decided to call in the SABC in October 2016.

The Chairperson noted that the figures spoke for themselves and painted a poor picture. By all indications, there was lack of accountability, adherence to processes, a culture of impunity and non-compliance with the provisions of the Public Finance Management Act (PFMA).

 

The Chairperson noted that the presentation had been made available to the Committee only on the previous afternoon. The opening paragraph of the presentation explained what was requested in relation to irregular expenditure, the amounts and the individuals involved, but failed to state what action had been taken when those cases where discovered. It added that the SABC is currently engaged in various investigations to determine the root causes of that expenditure and that it is impractical to recommend such remedial action until those investigations have been completed.

The Chairperson pointed out that this seemed to suggest that no meeting with the SABC should even take place until those investigations had been completed. However, a sizeable document had in fact been sent to the Committee late the previous evening, couched in complex terminology. Committee Members had clearly not been given adequate time to properly engage with its contents. This was not a good note on which to begin the engagement.

The Chairperson then addressed the question of who was the accounting authority. The SABC was without a Board. However, the PFMA stated that in the absence of the Board, the Acting Group Chief Executive Officer, Mr James Aguma, assumes a role as the accounting authority of the SABC. The shareholder in the SABC was government, and so the Acting Director General of the Department of Communications had been requested to assist the Committee in making proper sense of the issues of SABC and interpretation of documentation.

Department of Communications opening remarks
Mr Robert Munzhelele, Acting Director General, Department of Communications, said that he also had difficulties with the conduct of the SABC in relation to the presentation and its delay. The presentation itself was extremely long and complicated with various complex terms and financial aspects. It was both unfair and unrealistic of the SABC to expect either himself or the Committee to do proper justice to the presentation, when it had been provided on such short notice. This reflected poorly on the SABC and prevented the Committee and the Director General from executing their mandate properly and in a manner that would inspire confidence. He agreed with the comments of the Chairperson regarding the SABC's claims that it would be impractical to recommend remedial action pending the finalisation of the investigations currently under way. The effect is that the basis of departure is essentially a grey area, which appears to indicate that the SABC is simply engaging in a box ticking exercise. His personal belief was the SABC was not taking the process seriously or in good faith. He was thus doubtful whether the engagement would actually achieve any of its intended consequences.

 

SABC response on preliminary issues raised
Mr James Aguma, Acting Group CEO, SABC, answering the request of the Chairperson to respond on issues raised thus far, firstly apologised for the late submission of the presentation.

 

The Chairperson stated that rather than apologies, he wanted to hear a proper explanation why the presentation was delivered so late.

 

Mr Aguma replied that he would be able to explain the reasons for the lateness by covering the background and history of the current issues. He started to say that the SABC received its first qualification for wasteful expenditure in the 2008/9 year.

 

Mr M Booi (ANC) interjected to say that the Committee was merely seeking an explanation, not a lecture. On the previous day, 28 February 2017, the SABC had appeared before the Portfolio Committee on Communications, and the media reports asserted that the SABC had shown a cavalier attitude towards questions about fruitless and wasteful expenditure.

 

The Chairperson agreed, and wanted Mr Aguma to deal with two issues only: why the presentation was late, and what was meant by the comment that it would be impractical at present to recommend and implement remedial action.

 

Mr Aguma replied that the reason for the late information was that the SABC had to work through a large amount of financial amount to determine the amount of irregular expenditure for the financial year 2016. The opening balance contained a large amount of information, and he had requested the various officials to compartmentalise the information in a format that the Committee would be to understand and properly engage with.

 

Mr M Hlengwa (IFP) raised issues with the opening paragraph regarding the status of the investigation. If the investigation was under way, then the information should have been prepared regardless, in order for the investigation to have a proper substance and framework. He could not accept that information was still being collected on the previous night, for that called into question the status of the investigation. The closing balance was 31 March 2016. That was eleven months ago, and he could not believe that eleven months after the fact, the SABC was still collecting information and now using that as a justification for the failure to provide information on time. The implication is that the SABC is in fact attempting to undermine the authority of the Committee.

 

Mr Booi requested that the SABC engage properly and openly with the Committee. This issue had begun in 2014. The SABC appeared to have little regard for how it utilised public funds. Since 2014 reports had been indicating irregular expenditure at the broadcaster. The figure was now cited as ,approximately R5 billion of irregular expenditure. The Committee wanted to know the value of the expenditure, rand for rand. He could not accept that since 2014 that information was still being collected and he thus said the explanation was unacceptable.

 

Ms N Mente (EFF) gave her opinion that there were no reasonable grounds to continue the current meeting. According to Mr Aguma’s own explanation, these issues had a historical background since 2008. This meant that surely the cases and outcomes of the various investigations must exist at the SABC. It should not be that difficult to consolidate that information, as it would simply require approaching the person who had conducted those investigations. The only other possibility was that the SABC had done nothing to deal with those issues until the Committee had requested SABC to remedy the R5.1 billion irregular expenditure. After the AG announced his findings, Mr Aguma had bragged that the R5 billion was “nothing” in terms of irregular expenditure. In her view, this was a deliberate move to frustrate the oversight of the Committee and those kinds of acts should not be condoned by the Committee. The Committee needed to get to the root of the problem and would be unable to do so unless proper and full information is provided.

 

Mr D Ross (DA) stated that the annual financial statements are subjected to annual audit. Irregular expenditure, where present, must be presented to Parliament. It would be senseless to simply collate all information since 2008, as issues surrounding irregular expenditure have to be addressed on a yearly basis. The R5.1 billion figure from March 2016 was a horrific figure, and this indicated that the intervention should have started earlier as far back as the 2008/9 financial year. He asked when did the investigation actually start, and he too urged the SABC to be honest, as had his colleagues Mr Booi and Ms Mente.

Mr C Kekana (ANC) said he could not fully understand the implications of what the SABC had said so far. He asked if it was suggesting that when the audit outcomes were given by the Auditor-General (AG)  the SABC did nothing to address the concerns? He agreed with the comments of Mr Ross in relation to the need to implement all recommendations on a yearly basis, and to provide the information year on year. There were indeed serious concerns if the SABC was, at this late stage, saying that it was still collecting information that should have been available for each year.

Ms V Khunou (ANC) asked when the officials had begun acting in their positions. She pointed out that she served on other committees where the entity who failed to submit documents timeously could be sent away, and required to report at a later date when the documents had been properly studied. The Member was tempted to agree with Ms Mente that the SABC should rather report at a later date. Mr Aguma had stated that the SABC had had a qualified audit opinion since 2008 and the figures clearly indicated that since 2008 to the present the financial health of the broadcaster is very poor. The implication is that no person had been held accountable. That figure is unacceptably high, especially since there appeared to have been nothing done.

Ms T Chiloane (ANC) agreed with other Committee Members. The annual reports clearly indicate that the same audit qualifications had arisen year after year, indicating a total lack of consequence management and a failure to adhere to the provisions of the PFMA. She was inclined to agree with the suggestions of Ms Khunou and Ms Mente to send the SABC back to properly calculate the figures and prepare adequately, However, public money had been spent in getting the delegation to Parliament, and for this reason she suggested that the Committee should engage, with further engagement if necessary to take the issues further.

Mr Booi stressed that it was imperative for the SABC to be honest and not to mislead the Committee, pointing out that it would be an offence if the officials did attempt to mislead. Various issues regarding procurement, poor filing and the loss of paperwork had been raised by the AG as frustrations, and the Committee was equally frustrated. It was embarrassing when institutions such as SABC would frustrate the work of credible bodies such as the AG. This had been recurring for many years. The SABC has consistently hidden information from the public, despite preaching a culture of transparency. He was doubtful then that even if the SABC was sent away it would even provide the requested information at a later meeting. Therefore he suggested that the Committee continue now, and deal with the issues at the SABC even if that required that the officials attend weekly engagements before the Committee.

 

Ms Khunou suggested that it would preferable to physically go to the SABC offices to collect the requested documents and information.

 

Mr Kekana agreed with the comments raised thus far. He agreed that whilst a fruitful discussion could not take place without all the requested documents, he would prefer to engage with what was currently before the Committee rather than simply adjourning, but also agreed with Mr Booi that the SABC should continue to be called back at a later date to further engage with outstanding issues, even if that required weekly engagements. Sending the SABC away at this point without engaging at all would itself constitute wasteful expenditure.

 

Mr Hlengwa said that it appeared that the SABC had adopted the approach that it was exempt from the usual rules which applied to public finance and accountability. He reiterated that R5 billion is an unacceptably high figure and that neither he nor his colleagues would allow it to adopt such a lacklustre approach to this issue. Overall, this spoke to a severe lack of proper system management and leadership. The provisions of the PFMA, particularly section 51(1)(b)(ii),  and the various National Treasury regulations, spoke about irregular, fruitless and wasteful expenditure. Those provisions constituted the most basic requirements of public leadership and accountability and any person in such a position who failed to adhere to those provisions was not taking his or her job seriously and would be making a fool of themselves for failing to so adhere to those requirements. He felt that the document now presented had clearly been produced at the last minute and did not engage with those issues in a serious and timeous manner.

The Chairperson noted that the attitude of the Committee overall was that a long term engagement process was needed to deal with the issue of the SABC. This may require various engagements over a long period of time, requiring the broadcaster to report periodically to the Committee on what steps have been taken to deal with the concerns raised. The contents of the document presented would be engaged upon by the Committee, but not today. Various forms of careless and wasteful expenditure are indicated in the document. As raised by Mr Hlengwa, this included various traffic fines, and SABC members missing flights booked, unreasonable car rental charges (although there was no information who had actually rented those vehicles and should then be accountable for that expenditure). Mr Aguma had previously worked at the AG and these issues should not be foreign to him. He asked that Mr Aguma and Mr Munzhelele should both speak to those issues.

Mr Booi suggested that the forensic experts of the Hawks be engaged to provide the necessary capacity and expertise to engage with the report. His feeling was that any explanation provided by the SABC itself would simply result in the Committee being misled by the broadcaster. He suggested that the Chairperson send an official letter to the Hawks requesting that assistance. R5 billion cannot be treated as a joke and is an unacceptable waste of tax payer’s money.

Specific questions raised to the SABC

Mr Hlengwa asked how long the SABC investigation into irregular, wasteful and fruitless expenditure had been ongoing, and when it was thought it would be completed.

Mr Aguma replied that the SABC had tried to comprehensively deal with the qualification on irregular expenditure since the 2014 financial year. The plan was to finalise the investigation and then achieve an unqualified audit later this year.

 

Mr Hlengwa replied that the issue of a clean audit is a completely separate matter, and the SABC should be trying to obtain a clean audit regardless of anything else. He asked when the current investigation would be complete?

 

Mr Aguma replied that the completion of the investigation was dependent on two elements. Firstly, SABC had to correct various issues regarding disclosure. Secondly, it must identify the root causes of the problem. It was envisaged that issues around disclosure should be completed by 31 March 2017.

 

Mr Hlengwa noted that the issues are of a recurring nature, having been identified as far back as 2014. What role has the internal Audit Committee at the SABC played in this regard? Is the Audit Committee functional, has it been advising the SABC and who sits on that Committee? He stressed that the SABC could not adopt the stance that these issues are only dealt with by the AG, when an internal Audit Committee should be providing continuous advice in this regard.

He added that this suggested two possibilities. Either the SABC is not adhering to the advice given by its internal Audit Committee, making the officials personally guilty of irregular, fruitless and wasteful expenditure. Alternatively, the internal Audit Committee itself is incompetent and gives incorrect advice.

 

Mr Aguma replied that the internal Audit Committee had picked up several of the issues which had been raised. As part of the SABC interventions ,monthly disclaimer meetings had been conducted to deal with these matters. Historical issues had been raised, which then resulted in issues from 2012 up until the current year being ring fenced. Prior to those years, documentation was not an issue. It was in 2013, when the first qualification was issued, that the SABC first took steps to deal with those matters.

 

Mr Hlengwa had various difficulties with the response of Mr Aguma. If it was true that the audit Committee was having monthly meetings where these issues were raised, how then did the wasteful expenditure reach the figure of R5 billion? At what point did the SABC actually realise that there was a problem, and when did it take preventative steps, to prevent that unacceptably high figure then resulting? The management report indicated that 44 alleged cases of management fraud and corruption were reported through internal mechanisms in prior years. In the current year, 13 had been reported. In the prior year, 19 cases resulted in disciplinary action in the prior year. In the current year there were 13 cases, but only three from both the previous and current financial year were referred to law enforcement agencies. In terms of consequence management this indicated that of the 44 cases, proper enforcement action was taken in only eight.

Mr Hlengwa therefore did not believe Mr Aguma’s reassurance that the reporting would be completed by 31 March 2017, particularly when considering that the information before the Committee was still being compiled two days previously. He doubted that the SABC was actually taking the R5 billion rand issue seriously. If it was, then its conduct should demonstrate that it was taking serious steps to remedy the various problems.

 

The Chairperson summarised Mr Hlengwa’s questions into two points. Firstly, is the SABC taking the various issues raised thus far seriously? Secondly, are the necessary internal mechanisms present to enable the SABC to deal with legislative compliance?

 

Mr Aguma replied that he took these issues very seriously. The mechanisms for the identification and reporting of irregular, fruitless and wasteful expenditure were definitely very weak, but those systems were now being strengthened. In the 2012/13 financial year the policies of the SABC regarding procurement were not aligned to National Treasury regulations.

 

The Chairperson interjected to ask why the policies were not reviewed and therefore not aligned with Treasury regulations?

 

Mr Aguma replied that the most likely explanation was that the board failed to review those policies. Even if the board did review the majority of the policies, there was a possibility that they either missed or failed to incorrectly deal with various items. A particular issue of concern was the requirement that all service providers produce original tax certificates. Between 2008 and 2013, when the policy was changed, services were acquired from suppliers without receiving original tax certificates. That had cost about R1 billion per year, and if the suppliers failed to produce the original certificate, expenditure relating to them would be classified as irregular expenditure. The reason for the increasing amount was because an independent audit firm had been retained to investigate the SABC finances, and any additional payments would be added to the irregular totals figure. He noted that although the Treasury regulation existed, SABC did not have a matching policy to request an original tax certificate. That meant that it had done requisitions that did not comply with that regulation. Only in 2013 was a policy then implemented to require the tax clearance certificate to be produced, which remedied that issue. However, any historical procurements that did not comply with the regulation would be classified as irregular expenditure.

 

Mr Hlengwa was not satisfied with the response of Mr Aguma that the reason for the irregular expenditure was due to a failure of the board to align the SABC policy with the Treasury regulations. He pointed out that the financial statements were not submitted in accordance with the prescribed in terms of both the PFMA and the Companies Act. If that is the case, then he questioned how the Committee could have any confidence that the internal Audit Committee was dealing with issues. The final statements indicated that it was not. If the Audit Committee was doing its job properly, as stated by Mr Aguma, then these issues should not have arisen – either to the value, or the frequency – that they did. He asked how an organisation with the resources and size of the SABC could not have the proper capacity to simply ensure that its financial statements comply with the basic provisions of the law?

 

Mr Aguma replied that there were various reasons for the non-compliance with the auditing provisions in the 2016 financial year.  The SABC had an audit disclaimer in the 2014 financial year 

 

The Chairperson interjected to say that he would not allow Mr Aguma to attempt to explain the reasons for non-compliance with the applicable legal provisions and regulations. The appropriate response is to acknowledge responsibility and not attempt to mislead the Committee by raising various historical issues. Various qualified financial officials worked for the SABC and they should have ensured that the legal provisions are complied with. There is a legitimate expectation that public officials will do the right thing to comply with the various prescriptions and guidelines imposed.

 

Mr Aguma replied the reason for the lack of compliance was because the broadcaster was then in the process of making various adjustments in relation to TV licenses. He reminded the Committee that if the AG identifies a material matter that requires adjustment after the financial statements have been submitted, he requires the entity in question to take remedial steps. In 2012 the SABC received a qualification on TV licenses, which was then the reason that the comment appeared. The final financial statements did comply with the regulations.

Mr Hlengwa noted that in 2014/15 there were various audit findings such as a lack of proper asset management which was in violation of section 51(a) of the PFMA. That provision requires the accounting authority to exercise reasonable care and diligence in maintaining various financial records, which is the very minimum imposed by the Act. He asked if those concerns were properly remedied in order to ensure that they will not arise again in the current financial year. He also wanted to know if the same comments and findings did arise in the 2015/16 financial year? 

 

Mr Booi said he was not impressed with the manner in which Mr Aguma had replied to the questions raised thus far. The Committee was not interested in his personal opinion and the various excuses which he had raised for the poor performance of the broadcaster. He expressed his frustration and reiterated that all the Committee wanted was proper and honest responses to the questions and concerns which Members had raised. Mr Hlengwa had wanted to know the current state of asset management and the SABC.

 

Mr Aguma replied that SABC was currently in the process of finalising the asset management verification, in order to ensure assets are complete. He stressed that it would be very difficult to give answers to a number of questions if the historical context of those matters was not first explained. Specifically in relation to this matter, assets had not been properly counted and quantified at the SABC for the past six to seven years, as there was no asset register. As part of its action plan an external team of service providers had been hired to assist in the counting of the assets. The AG did make the finding that the process of the asset management counting was problematic, as SABC did not even have an asset team to count. An asset team had since been appointed to deal with that issue and policy had been subsequently appropriately adjusted.

 

Mr Hlengwa wanted to know who had been auditing the SABC from 2009 to the present date.

 

Mr Aguma stated that since the 2012/13 financial year, the AG audited the entity. Prior to then, the auditing was done by private audit firms.

 

Mr Hlengwa wanted a detailed breakdown, in writing, of the various corporations to which the SABC had been paying extremely high amounts of public money. If those auditors had not been raising these issues, that in itself would have been wasteful expenditure. He struggled to understand why entities did not trust the AG, whom he believed to do a very competent job. The hiring of private auditing companies can be problematic, as their interests are to maximise profits, which is an issue not faced by the AG.

 

The Chairperson requested that the written information be provided to the Committee by Wednesday 8 March 2017.

 

Mr Hlengwa further noted that where audit findings were qualified, then surely consequence management should be applied in order to remedy those issues. One particular qualification by the AG had stated that consequence management was not being properly implemented, due to the delay in various processes of investigating alleged transgressions. Findings had also been made in the 2014/15 financial year. He asked whether investigations were still being conducted on those findings, before proper remedial action will be taken? If a qualification is made, with a directive for fixing the qualification, then proper consequence management must be immediately implemented. A failure to do so then allows those guilty of transgressions to continue in their position despite having been the cause of such qualifications. Punishment for those guilty of transgressions will give effect to proper consequence management.

 

The Chairperson noted that the comments of Mr Hlengwa had driven home his central point, which was that there was a lack of consequence management. He requested that this issue be put aside for the moment, and that further information be sought.

Mr Hlengwa agreed with the Chairperson. It would not be helpful to clump all of the issues together without a proper breakdown, which, according to Mr Aguma, should be completed by 31 March 2017. Mr Hlengwa had identified various repeat offenders through reading the document presented to the Committee, and proper measures must be taken against them. The SABC cannot act as though its finances were the exclusive domain of leadership. SABC is financed by public money and SABC management must be held accountable for how it was spending those funds. A failure to properly use those funds could lead to taxpayers refusing to pay. The SABC should be prioritised as a special case for the Committee, and a personal inspection of its offices should be undertaken in the future. He asked then what decisions had been taken by the Audit Committee and what recommendations were made.

Mr Booi also wanted the figure of R5.1 billion to be broken down properly. He was aware of the fact that proper systems management and documentation processes had not been adhered to. He noted an attempt to condone an amount of around R1.1. billion. He asked what had happened in the SABC on those amounts?

He added that the Committee researchers had noted that there was a poor assessment of the people employed by the SABC; some employees had previous criminal convictions, and others did not hold proper certification or degrees. The SABC also had a record of intimidating those who spoke out against the organisation, which is highly disturbing. He cautioned the SABC that that approach would not work when dealing with the Committee. The Hawks were available to the Committee, to get to the bottom of the various issues. The R5.1 billion figure indicated corruption and the Committee would get to the bottom of this issue. He asked the SABC to explain the recruitment process, pointing out that the types of people employed had contributed towards irregular expenditure.

 

Mr Aguma replied that the concerns raised by Mr Booi refer to the up-scaling of the supply chain management system currently employed at the SABC. A weakness that SABC did pick up was that various employees had not been properly vetted, as required by the PFMA. This issue was currently being raised by the unions who did not want vetting to take place after a person had already been employed. Historically the supply chain system was a dumping ground for various officials.
 

Mr Booi stated that the AG had also observed that the SABC did not have a culture of respect for the law. He asked how it could turn itself around if it did not have respect for the law. This was illustrated by the fact that various other employees of the SABC had been personally threatened for raising concerns with SABC's current manner of operation?

 

Mr Aguma did not agree with the AG’s claim that the SABC did not respect the law. He said that supply chain had been altered to properly adhere to the provisions of the law now, in cases where it had not done so previously.

 

Mr Booi reiterated that the SABC did not have proper respect for the law. Management , in particular, did not respect the law or constitutional institutions such as the Public Protector or the AG. The attitude of the SABC was one of total disregard for the law. The SABC also had a history of not filling vacancies – and he asked who was responsible for that matter and why? The AG had also stated that there was no verification of citizenship status in their system, and again he asked why? Failure to adhere to those requirements again indicated a disregard for the law. Finally, he asked for an explanation of the appointment process at the SABC.

Mr Aguma said that he was a little uneasy with the questions, which were quite vague. A person could be employed by the SABC in one of two ways. Firstly, an  advertisement could be placed and applicants are allowed to apply for the position. An external verification company is retained to vet those applicants, although it is true that in certain cases proper vetting did not occur.

 

The Chairperson wanted to know why the vetting was not always properly done.

 

Mr Aguma replied that lack of coherent and consistent vetting was due to an internal policy which did not require comprehensive vetting. That had subsequently been changed. Verifications are now done through private employment agencies who check qualifications etc.

 

Mr Booi reiterated that Mr Aguma must be properly honest; he was not satisfied with Mr Aguma’s answer. It was not good enough to blame the lack of vetting on policy defects and employment agencies. Proper vetting should always be done. That gives rise to the further issues raised by the AG regarding improper vetting of employees – and that problem was then related to lack of accountability. He asked to whom the defective policies had been reported. They were never reported to Parliament, and that had implications for various other issues such as Treasury regulations and procurement.

 

Mr Aguma replied that a compliance division was established in 2013. This had then reviewed all of the policies and procedures at the SABC. One of the issues raised was that policies were not consistently reviewed. Priority had been given to resolving Human Resource policies, but some aspects of those policies could only be rolled out slowly, due to issues with unions. The supply chain management policy had also been subsequently reviewed. Having a policy is a one form of ensuring proper spending. Any remedying of policies had been reported.

Mr Booi stated that he wanted to see a written document detailing answers to his concerns with policy and any other defects in the applicable legislation. He asked if the HR division would not have records of the previous criminal convictions of SABC employees and he asked how far did those records go back? How many employees within the institution had criminal records?

 

Mr Aguma stated that he could only establish those figures after consulting his HR division, but would provide further written information.

Mr Booi stated that as the SABC audits had always been completed by private auditing firms it appeared that there had been collusion between the private sector and the SABC to engage in that wasteful expenditure. The AG is a strong and independent institution. Since the AG’s interventions, it had been discovered that various employees had criminal records, and he wanted to know more. If the SABC was unable to provide that information, the forensic experts of the Hawks would provide assistance to the Committee to get to the bottom of that issue.

 

Mr Aguma reiterated that he did not have those figures on hand. A criminal record status could change also, for instance a person might be convicted after already being employed.
 

Mr Booi stated that he was dissatisfied with that answer, and this seemed to corroborate that information was submitted so late to the Committee to frustrate the work of the Committee. Senior management seemed to have no idea about what was currently occurring at the SABC.

 

Mr Aguma reiterated that this was not the impression which he wanted to create. He himself is also an auditor. He confirmed that vetting for criminal records occurred only at the actual recruitment process. The reason why subsequent vetting did not take place, after the recruitment and hiring, was because that did not form part of the SABC policy. The AG’s concern was that there was a lack of proper record-keeping on important information, despite other issues, and that raised the question what had gone wrong that proper documentation was not being kept.

The Chairperson reiterated that the issues at the SABC would have to be solved through a process of continuous engagement, in which each of the issues could be properly isolated and dealt with over a period of time. This would not be the last time that the Committee would call upon the SABC in order to engage on these issues.

 

Ms Chiloane asked the Chairperson to clarify whether he was suggesting that the Committee should now focus, during this engagement, on irregular and wasteful expenditure?

 

The Chairperson stated that the Committee was permitted to raise additional issues but the focus should be on irregular and wasteful expenditure, which had been the reason for requesting the original engagement.

 

Ms Chiloane then wanted to raise questions on irregular expenditure. As part of the R5.1 billion figure for irregular expenditure, there was an amount of R250 million incurred through inadequate monitoring of contracts. Who was responsible for monitoring those contracts and what happened to that particular official? Secondly, why did that official fail to do the work as expected, and what consequence management steps were then taken against them?

She added that in relation to declaration of interests there were a number of discrepancies which added to the irregular expenditure. Two officials failed to declare their interests. Who were those officials, what happened to them and what was the amount they contributed to irregular expenditure?

The Annual Report indicated that various investigations had not been completed. She wanted to know the reasons behind these various investigations not being timeously concluded? She was aware that one issue was still under investigation, due to issues raised by the Public Protector as late as 2014. There was also a second investigation being done by the National Treasury into a contravention of the supply chain management, and she requested a progress report on that investigation.
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Ms Chiloane noted that, under the commitments on page 133 of the Annual Report, the SABC had committed a figure of R1.9 billion for the present financial year. The past financial year had a commitment of R1.6 billion. She asked if the SABC was suggesting that this increase will then raised internally, how would it be financed, and could that increase be justified on a yearly basis.

 

Mr Aguma stated that the R250 million figure was caused by the various buyers in the procurement department. In relation to the declaration of interests, two officials who trade with the SABC had been identified by the AG. He did not have the exact figures on their irregular expenditure contribution overall, but the exact figures could be provided in writing at a later date. In terms of the Treasury investigation, letters had been received by the SABC which enquired about various transactions such as action view and lonar vision. There are reporting protocols currently in place with the Department of Communications to deal with those issues. The SABC had subsequently written back to the Treasury, informing Treasury that since the SABC falls under the Department of Communications, that request should be directed to that Department or the Minister of Communications. Treasury had not replied.

He added that the figure of rR1.9 billion refers to long term contracts which the SABC has entered into. That figure is calculated according to both future and current commitments, because it is common business practice to disclose those commitments in that manner. He said that, as explained to the Portfolio Committee on Communications, the reason for the increase in expenditure and commitments was determined largely by the schedule of television programme viewing.

 

Ms Chiloane asked again if there had been any concrete management steps taken in relation to the official responsible for the expenditure of R250 million. She also wanted to know if any part of the open ended contract which the SABC had entered into had been renegotiated. The open nature of those contracts had cost the SABC dearly, so she asked whether those contracts had increased the cost of commitments?

 

Mr Aguma responded that the person responsible for the R250 million figure is the person responsible for split orders; namely, the Head: Supply Chain Management of the SABC. However, he did not have with him any information that dealt with what consequence management was applied in relation to that official. This official had subsequently left the organisation. Various open ended contracts had been terminated, but the evergreen contracts could not be terminated at an election of either the SABC or the supplier. However, during the investigation some old order contracts had been brought to his attention, and he would deal with them.

Ms Chiloane was disappointed with Mr Aguma’s answer. If the Head of supply chain management has left, then she wanted to know whether a new person had been appointed, to act in that position instead? A major issue with the SABC is that it did not follow due process when dealing with supply chain management. Mr Aguma's answer had simply opened up another question, which was unsatisfactory.

 

Ms Khunou wanted to know whether Mr Aguma received a performance bonus. His answers appeared to indicate a high degree of non-commitment and also negligence in managing the entity. The asset register showed that the SABC had employed private consultants to remedy the issues at the broadcaster. The Committee had had a number of discussions with various departments regarding the employment of private consultants. The vacancy rate is quite high and she wanted to know how much SABC had paid those private consultants for their services. She asked if SABC was continuing to employ any consultants presently? Noting that approximately R150 million was made available to close relatives and associates of employees of the SABC. She asked who were the employees whose relatives benefited from those contracts with the state . She also asked what Mr Aguma had done to deal with those transgressions?

 

Ms Mente stated that Mr Aguma had stated that the regulations and policy was deficient in certain respects as SABC did not require vetting, which she found unacceptable. The basics of the employment of any manager in a state managed entity is compliance with the PFMA and the various Treasury regulations. It cannot be accepted that a person would be employed by the SABC in terms of its own policy, which is contrary to that legislation. It is unacceptable for the SABC to state that the reason for a lack of compliance with the law is the lack of policies that would underpin the basic legislative requirements. That is unacceptable and the SABC cannot choose if and when its policy should comply with the law; the law is mandatory.

Ms Mente continued that Mr Aguma had stated that the SABC had hired an independent audit firm to look into the finer details on the audit findings and qualifications at the SABC. He had, however, indicated that prior to hiring external private consultants, the internal auditors at the SABC had highlighted various issues already, which were subsequently confirmed by the AG. Given this comment Ms Mente could not accept the claim of Mr Aguma that the SABC lacked capacity to determine basic issues such as who had hired cars irregularly, or for what amount. Independent auditors did not have to be hired at taxpayers’ expense, utilising public money to determine such a basic issue. The AG is also one of the most credible institutions in government – and that made it even more unacceptable that the SABC thought it appropriate to hire external private auditors without making use of the AG services.

 

Mr Aguma responded that the SABC would submit an asset register to the Committee. It would also confirm in writing the cost of the hiring of private auditing consultants. The SABC had not yet paid any bonuses to staff members as of yet, and the 13th cheque, which was listed in the annual financial statement, had also not been paid to staff members, as the board had recognised that senior staff members had contributed a lot towards the turn around of the SABC.

 

The Chairperson interjected to clarify that Mr Aguma was saying that bonuses paid then went to .senior and middle level management. He asked if this was then implying that lower level management did not contribute anything towards the turnaround of the SABC, as determined by the board?

Mr Aguma replied that this level of management did contribute to the turnaround, but were required to sacrifice bonus payments as a result of austerity measures. They did, however, still receive their 13th cheque. He did not have the exact figures of the amount of money which had been paid to employees, due to cancellation of contracts, but that figure would be submitted to the Committee in due course, as well as how many employees had faced disciplinary and other proceedings for various transgressions.

 

In relation to the issue of hiring of SABC staff who not have the necessary skills, he agreed that this was an issue. SANC had conducted a skills audit which had picked up numerous issues in that regard. The supply chain systems had since been strengthened and the SABC had subsequently hired different personnel with the required skills for the broadcaster. He agreed that the failure to request SARS tax certificates had indeed been an issue, but SABC had now acknowledged that this was a historical issue and was, presently, being properly dealt with. At present the head of supply chain management is a highly capable individual, and other individuals were being recruited to fill vacancies and other positions with appropriately qualified personnel.

 

In relation to the question regarding the hiring of private audit firms, Mr Aguma stated that this was a deliberate decision. In the 2013/14 year SABC had taken a deliberate decision to hire external private firms, as it had recognised that it would be a problem to send out the very people who had failed as the internal auditors within the SABC, to do audits that asked them to recognise the very issues which had arisen and then to remedy those very issues. In addition, the SABC wanted to create more impression of independence around the auditing process.

 

The Chairperson interjected, stating that this largely came down to an issue of appropriate qualifications and skills. If the employees and internal auditors had proper skills  then there would be no need to hire external firms as the internal audit employees would be able to conduct the auditing process properly and objectively.

 

Mr Khunou reiterated her question on how much had been paid for the cancellation of contracts. She also asked whether any official had been sanctioned or punished for that irregular expenditure?

 

Mr Aguma replied that he would tabulate and submit that information in writing.

 

Ms Mente wanted the same assurance that had been given in relation to the skills audit, to be given to human resources management. It had been picked up some time ago that the HR management function was also not functioning properly.

 

Mr Aguma replied that the SABC  had discovered the same issues with human resources management. Recruitment of people with the necessary skills had been done to strengthen the human resources function within the SABC.

 

Mr T Brauteseth (DA) was concerned that the presentation had included statements that all instances of irregular and wasteful expenditure would be further investigated, and then criteria would be used to make those determinations. One page indicated that some of the irregular expenditure relating to issues such as car rentals and missed flights had originally been classified as irregular expenditure but had subsequently been condoned, due to the nature of the business of the SABC. He cautioned Mr Aguma that it would be unacceptable if the SABC were to return to the Committee later and say that missed flights and other forms of wasteful expenditure could be justified. All such issues must be properly corrected prior to the next meeting with the Committee.

Mr Brauteseth then raised concerns about HR. An undertaking had been given to give a full report on 31 March 2017. There were various human resources vacancies at the broadcaster. He asked then if the SABC was, realistically, in a position to provide a full report within a month that would cover six year of irregular and wasteful expenditure. The additional information which had been provided to the Committee indicated various increases in the SABC’s vacancy rate, particularly in terms of human resources. SABC was showing an increased vacancy rate, from 3.1% to 7.4%, senior management vacancies had increased from 8% to 14.7%, whilst in finance the vacancy rate is 5% and the internal audit is 4%. He asked that the percentages be translated into real numbers. He asked also if the percentage was relating to the SABC overall, or simply to each of the departments.

Mr Ross asked if there had been any cost analysis estimating what those investigations would be likely to cost to the broadcaster? A number of the investigations had been outsourced , and he wanted further information on the actual expenditure. He wanted comment from Mr Aguma on the suggestion of Mr Booi that forensic experts at the Hawks be engaged to assist in addressing the Committee's concerns, particularly since that was likely to minimise the costs. Thirdly, he wanted the leadership issues identified by the AG to be dealt with by allocating specific time frames. He asked that a detailed list of the delegation be sent to the Committee, along with the dates on which the implementation of the AG’s recommendations on leadership concerns had been implemented. Finally, since irregular expenditure is an issue with a serious impact on the fiscus, he asked if any guarantees were made in relation to that expenditure, and what effect did that have on the overall amount identified?

 

Mr Aguma replied that all of the information regarding further irregular and wasteful expenditure would be sent to the Committee. He agreed that 31 March will be a tight deadline for completion of the investigations but that is the date that SABC agreed upon with its service providers. Once all of the figures had been compiled and verified for disclosure, then proper action would be taken. The nature of the remedial action would depend on the type of infringements identified. If cases of fraud were identified they would be referred to the SAPS. He noted that SABC had, in the previous year, terminated the employment of 120 staff members due to medical aid fraud, and some of those cases had also now been listed with SAPS. The conduct of the previous supply chain manager had also been listed with the police.

 

Mr Aguma did not have an exact cost analysis of the investigation as requested by Mr Ross, but said that figure could be provided in writing to the Committee at a later date. He would also provide the names of the delegation.

 

No guarantees had been provided in relation to the irregular and wasteful expenditure figures. However as a part of the National Treasury process facilities had been opened with various banks, and these were currently around R90 million.

 

The Chairperson stated that the Committee would also engage with National Treasury as well as the Department of Communications, on the information submitted by the SABC.

 

Mr Kekana stated that he had several additional questions to ask but would leave them over to the next engagements with the SABC. However, the two questions he wanted to put today both related to human resources. The AG had noted that appointments had been made to posts which had not been advertised. He wanted the SABC to submit a report on which posts they were, as well as a quantification of the salaries involved. He also noted that apparently no investigation had been conducted in relation to suspended officials and he asked for their names.

Mr Booi noted that the engagement today had been severely weakened due to what he perceived as false information provided to the Committee. He would not allow this to compromise the work of the Committee and he reiterated that the Committee would be taking a special interest in the SABC until Members were satisfied that all of their issues had been properly sorted out. The document presented was also very inconsistent and did not accord with the issues which had been identified by the AG. This is a gross violation of the PFMA. It appeared to him that Mr Aguma and the SABC had no respect for the process of auditing and the institution of the AG. Misleading Parliament is a serious offence and disturbing issue.

Mr Booi requested that Mr Aguma send a comprehensive report to the Committee on the SABC turnaround strategy, as well as the condonations requested from the Treasury. He said it was disingenuous of the SABC to now request condonation, when documentation had been lacking. He was also concerned that there was a possibility of kickbacks and other issues of mismanagement in relation to various outsourcing conducted by the SABC. He also had particular concerns regarding the various deals and breakfast shows with ANN7. He asked how much was the SABC spending on those shows, and what bearing that had on the finances of the SABC. It had been publicly stated that the SABC was spending a sizeable amount on those shows but nowhere in the document was that expenditure mentioned. This again suggested that the SABC was deliberately misleading the Committee, which was confirmed by the AG’s report.

 

Ms Khunou had concerns with the number of jobs which had been outsourced. This is a grave concern as some of the root causes for issues in the SABC is that a number of its sub-departments are not functional. It may be that incompetent employees need to be fired; but the issue at the SABC cannot be addressed simply by outsourcing all of its functions. If the SABC continued on its current path, then it would almost certainly receive another qualified audit opinion.

A National Treasury representative said that various documents had been requested in 2015 when  Mr Madlala was the GCEO of the SABC. A day before the documents were due to be submitted he was suspended. Mr Mathews was then appointed as the Acting GCEO and gave new reasons as to why he would not submit those documents. He had then left the SABC. All of the correspondence would be submitted to the Committee, to enable it to make its determination.

Mr Aguma replied to the questions raised by Mr Kekana. He did not have a note on appointments made without advertising, nor the figures for the packages offered. He would, however, collect that information and send it to the Committee in a written format. He would also submit a list of who was suspended from the SABC and the reasons.

 

The Chairperson then asked for input from the Department of Communications on issues at the SABC.

The Chief Financial Officer responded that the Department had requested the SABC to implement an action plan to address the issues raised by the AG from the 2013/14 year. In its last session, the AG stated that in addition to focusing on the AG issues, the management action plan also had to be implemented. A focus just on the qualifications would mean that only those matters identified by the AG would be actioned. This posed the risk that other internal processes that also have to be properly remedied may not be properly attended to. Hopefully, an assurance could be given that the issues identified would not be repeated.

The latest report did indicate a reduction in the number of qualifications which had previously been identified in the  audit findings. It was a positive development that the SABC was called upon to personally account before this Committee. It would hopefully make the SABC recognise that assistance would be required from all entities, going forward, to remedy the issues.

She added that the AG raised concerns that the SABC targets were not “SMART”, which then raised further issues. A strategy planning forum had been implemented which used various indicators to make it easier for the AG to conduct his annual audits of the AG. Once the plans had been implemented it was envisaged that they would first be submitted to the AG before being sent to Parliament for adoption, and that would also lead to more improvements. She had raised concerns with the management of the SABC that there were issues in the internal systems management and that a theft and losses committee must be established, to meet on a regular basis. That committee would be able to dispose of various issues relating to irregular expenditure before the AG’s intervention would be externally required. However, there were serious leadership accountability problems – both in regard to the competency of the board, and the organisation's policies overall. The Board would always be required to first approve policy, which meant that recommendations for the appointment of suitable board members should be vetted more strictly. Another issue related to records management. She was surprised that the SABC did not receive a disclaimer in that regard, but it appeared that the AG had given the SABC the benefit of the doubt due to the processes they had put in place to deal with that issue. The National Archives had also been engaged to assist the SABC with its documentation. Mr Aguma had given an assurance that moving forward they would be able to properly account in that regard. However, the Department of Communications was still waiting for the final report in relation to irregular and wasteful expenditure before further steps and recommendations would be taken. If the qualification is not properly dealt with, then it will be perpetual as it will continuously affect the opening balance of the SABC, and the root causes of the issue will not be resolved.

She noted that further information would be provided to the Committee in relation to the SABC as further engagements are scheduled.

 

Mr Booi stated that Department should examine the accruals and liabilities of the SABC in its further interventions with the broadcaster. In his experience various entities had altered those figures when the annual audit opinions were done, to satisfy the requirements. This cannot be ignored. The same had been apparent in the Department of Water Affairs and Sanitation.

Mr Hlengwa stated that the Committee should ensure that only those members of entities which are properly required should be summoned before Parliament. The delegation of the SABC was far larger than was necessary in order to answer the questions of the Committee.

Mr Munzhelele said that a key goal of the Department is for all of the entities to achieve clean audits. It would also share the experiences of those entities who performed well in the audits with those entities that performed poorly. The Department had also established a Director General and Chief Financial Officer Forum, which he chaired, with all CFOs to share experiences in that regard. This is part of a larger governance oversight entity policy framework which had been implemented. An assurance was made that the Department of Communications would follow up and ensure that all of the documentation which had been promised to the Committee by the SABC would be submitted timeously.

 

Mr M Gungubele (ANC), Chairperson, Portfolio Committee on Communications made a few final remarks. His meeting with the SABC yesterday dealt with the annual report of the broadcaster. The Portfolio Committee on Communications was dealing with a number of issues pertaining to the SABC and irregular and wasteful expenditure was a significant problem. He agreed with the Committee that there are specific issues which require specific attention which had also been raised in the AG’s report.

The Chairperson reiterated that the Committee wants the SABC to perform well and improve its performance. It was however unacceptable for the SABC to submit its document at the last minute and this must not happen again; the Committee could not be set up to fail.

The meeting was adjourned.