SABC & ICASA Quarter 2 performance; ICASA Council Chairperson legal opinion, with Deputy Minister

Meeting report

Committee programme

The Chairperson said a draft Committee programme for the first quarter of the new financial year would be circulated by Friday so that it reflected that quarter’s programme. One of the items deferred to that quarter was the planned oversight to the Media Development and Diversity Agency (MDDA) and the Film and Publication Board (FPB), which was to take place in the last week of March 2018. Second was the state capture communication by the Deputy Speaker, Mr Lechesa Tsenoli, on the inquiry into Faith Muthambi. He reminded the Committee that when the inquiry got under way, the Committee had to be prepared, as it would be all consuming and would be in the public domain, as had been happening with the inquiry into Eskom. There would surely be a dedicated person from Parliament’s legal services to perform duties similar to Advocate Thamsanqa Vanara in the Eskom inquiry. Therefore the Committee would return in the first quarter of the new financial year, which was Parliament’s second calendar quarter to discuss the Committee’s plan on whether it would take the inquiry route, start investigations or follow processes differently.
 
As the Committee engaged on the South African Broadcasting Corporation’s (SABC’s) quarter 2 performance, both the SABC and the Department of Communication (DoC) would also have to elaborate more on what had been in the print media regarding changes at the public broadcaster. Additionally the SABC would have to ventilate the vehicle which had been gathering dust in the SABCs parking lot.

Deputy Minister’s introduction

Ms Pinky Kekana, Deputy Minister (DM), DoC, introduced the SABC delegation, and said that following the DoC’s engagement with the SABC she was confident that through the appointment of executive senior managers and board members, there were credible people who could be relied upon to lead the broadcaster. The financial situation of the SABC had been reviewed, including its proposed funding model, current challenges facing it, its performance in the previous financial year and how it would address the disclaimed audit opinion. Its annual performance plan (APP) contained targets which seemed to be a challenge to achieve, which the SABC leadership would address in their presentation. The SABC would also be speaking to alternative revenue streams which it had proposed to the DoC, to get the organisation back to being self sufficient. The overriding emphasis, however, had been in dealing with the “low-hanging fruit,” like having the capacity to collect TV licence fees, improvements in advertising, and an issue which had had unintended consequences.
 
She hoped the SABC board chairperson would address the media reports to which the Chairperson had alluded to, as she and the DoC had not engaged the SABC on those matters yet. Alternatively if the SABC was not ready to discuss those matters, she requested that the DoC be allowed time to engage the SABC so that it could return to the Committee with answers to those two issues.
 
SABC: Second quarter performance

Mr Bongumusa Makhathini, Board Chairperson, SABC, said that as the SABC would be presenting its second quarter performance report, it would give the Committee its year to date numbers as well.
After the presentation, the SABC would deal with all the remaining concerns, including the allegations in the media.

Ms Nomsa Philiso, Acting Group Chief Executive Officer (AGCEO): SABC, said the organisation remained cash constrained as it awaited formal feedback on its application for a government guarantee. The underperformance of 4% had been due to a shrinking advertising environment and also because the SABC had been overly optimistic in developing its budget. The R308 million under-expenditure which had been incurred had been a saving that would have long term effects. The action had constrained the SABC, as the under-expenditure had been because the cash had not been there. Therefore there were certain things that had been compromised by the savings.

Because the Auditor-General South Africa (AGSA) had pointed out that the SABC would possibly cease to be a going concern through its disclaimed audit opinion, the SABC had been seized with turning things around, as its bank balance would show in its cash flow statement. The net loss before income and tax for the 2nd Quarter was an accounting explanation, in that one could not have had a net profit of R102 million in a performance against budget in the absence of cash. The SABC owed essentially six creditors on the R557 million debts it had, the bulk of which was owed to Sentech.

The 2nd Quarter saw the celebration of birthdays, with X-K FM celebrating 17 years. The SABC was looking at improving the reach of the community radio station, as it had complained about not being supported though it represented one of the marginalised languages in the country.  

In comparison to the SABCs bottom line in 2016 versus 2017, the broadcaster had been in the red by about R268 million in 2016, compared to only R4 million in 2017. By January 2017, the SABC was R863 million in the red, whereas the year-to-date figure in January 2018 showed the SABC with a net profit of R102.8 million positive as a result of income exceeding expenditure. However; as the financial year was at its tail-end, there were year-end adjustments that the SABC had to effect which would have a negative impact on its numbers, including such things as the post-retirement medical aid fund.

Ms Philiso said the ideal cash flow position for the SABC would be in the R550-600 million per month range, which was the target the SABC had set itself. Its debtors’ days were low because it had an early settlement discount for certain clients, as it was pressed to get cash early. Though the ideal creditor’s payment, as per the SABC’s APP, had been 60 days, it had been 128 days in reality because of the top six creditors which the SABC had not been able to pay.
  
Ms Thabile Dlamini, Acting Chief Financial Officer (ACFO), said the SABC planned to detail its cash flow projections for the next 18 months in attempting to convince AGSA about its going concern status, starting from 1 April 2018 until the end of September 2019.
Ms Philiso said the SABCs corporate plan, which also included the shareholder compact, had been submitted to the Minister and had been signed off.

The SABC had submitted a request for a government guarantee and were still awaiting a formal response as to where the process was, but that matter would be dealt with by Minister Nomvula Mokonyane.

It was in a difficult position regarding the sports budget, because though it had a mandate to deliver, affordability remained a challenge. The risks for SABC in the coming financial year would show that the broadcaster needed at least R1 billion just for sports, including production.

Regarding the filling of executive positions, the SABC had appointed Mr Thamsanqa Zikode, originally from AGSA, as chief audit executive in December 2017, and Ms Nada Wotshela as Group Executive (GE): SABC Radio. It had also appointed Ms Phathiswa Magopeni as GE: News and Current Affairs, and Mr Chris Maroleng as the new Chief Operations Officer (COO). The SABC was currently processing interviews for the CFO and CEO positions, and hoped to finalise the appointments in the next two months. The GE: Human Resources (HR) had been also appointed, and would be starting work on the 22 March 2017. There remained only three other vacancies, including the GE: technology, the head of the legal department, and the GE: Corporate Affairs. The positions would have been advertised by the last week of March, so the SABC hoped to have a full complement of executives and board members soon, although the board had recently had three vacancies, which had put quite some pressure on the remaining board members.
  
Ms Philiso said TV licence debt, like tax, never went away but simply accumulated over the years. From the presentation, the Committee could see that the licence fee was a grudge payment in that every time something negative was in the media, a direct correlation to the collection numbers could be drawn.

From time to time, the SABC did data cleansing to ensure that it followed the right persons, as it received many complaints about following up on persons who had defaulted in their TV licence fee payments.
 
During October 2017 a Culture and Climate survey had been conducted to assess the existing climate and to bring about renewal and achieve a corporate vision. There had been 667 responses received, which accounted for 18% of staff, which the researchers said was sufficient to use as a base, so that at the beginning of the new fiscal year, the SABC would start fixing the right things in terms of staff morale.

The SABC leadership had received a staff petition with allegations about what the news team were unhappy about, and management would be engaging with the staff about what the issues were. Management was concerned that some of the things seemed to be a repeat of what had happened previously.

Performance against Pre-Determined Objectives (PDOs)
 
Ms Philiso referred to the SABC’s content and platforms, and said there were challenges in meeting the target for hours of marginalised language content broadcast. One issue was funding that objective, and secondly there was not enough space currently to accommodate everyone -- and not everyone was happy with the equity principle. At present, the SABC was trying to process requests from the isiNdebele group via the Minister. It was important to recognise that it would take more than the SABC alone to address the provincial and language issues.

Regarding the number of SABC websites upgraded and launched, the board had managed to establish a digital technology sub-committee which, from a strategic level, would bring a focus to what the broadcaster’s role should and could be in the digital space.
 
In developing a career progression framework and policy, the SABC had initiated an operating model exercise to define what it had to look and operate like, which was unlike an operating structure exercise. That model sought to reposition the SABC, after which it would naturally look at the right skills fit and right sizing of the broadcaster. All the executives and the top three had signed performance contracts and with the corporate plan having already been tabled, the SABC would initiate contracting for the next financial year regarding performance agreements.

Matters of public interest

Ms Philiso referred to the vehicle purchased for the former board chairperson. The matter had already been raised at the ad hoc inquiry into the fitness of the former SABC board, where the previous board had decided to purchase the vehicle for Professor Mbulaheni Maguvhe, former board chairperson. That decision had been based on an identified need for him to have a dedicated driver, as he was blind, instead of having different service providers to drive for him. Indeed, the vehicle had had extra specifications and it was an Audi Q5. However, after the interim board had inquired about the vehicle, the SABC had approved the disposal of the it as an asset, and were in a process of selling it.

Mr Makhathini said there were issues that the executive management of SABC were dealing with regarding the staff petition, and there were issues that the board had to deal with. The SABC also wanted to return to a normal situation where, whenever there were challenges in the organisation, people could follow internal procedures and structures to have their issues resolved, as opposed to petitioning and using the media.

Regarding the staff petition:

As the board had been tasked to turnaround SABC, part of the turnaround would be uncomfortable, as things would be done differently, and possibly not everyone would be comfortable.
The board had decided to seek a legal opinion on the need to vet journalists in order to understand who needed to be vetted. Although it was a national key point, did vetting mean that everyone at the broadcaster had to be vetted?
SABC’s editorial policy touched on upward referral, which meant that the GCEO was the editor-in-chief for referral purposes. Daily operations of the broadcaster were, however, handled at the COO level.

Mr Michael Markovitz, board member, SABC said the R22 million legal fees for Mr Hlaudi Motsoeneng was a matter that predated the current board quite significantly. A lot of the decisions made regarding those legal fees had been made with the approval of that board, and related to the cover of certain legal fees through insurance or approval. To ensure that such things would never again occur, the current board had decided that any claim for legal insurance would have to be approved by the sitting board. Such approval could not be simply granted if the allegation was that the insurance claimant had committed an offence which was in non-compliance with the SABC Act.  

Mr Makhathini requested that the COO to be allowed to speak to the operational changes at the SABC which had been reported in the print media over the previous weekend.

Mr Chris Maroleng, COO, SABC, said it was important that the changes referred to would be understood in the broader context of changes that would be brought about at the SABC relating to the broadcaster’s mandate, which essentially was to ensure that the SABC increased its audience and met its commitment to maximize the quality of the content the SABC produced. In contextualizing the allegations against the broadcaster, it had to be understood that the changes were being made in an attempt to grow the audience share of the SABC and to return its status to being a going concern.

Regarding the repositioning happening in radio, it was important to understand that at the tail end of the financial year, the SABC’s various platforms engaged in a process of reviewing their schedules and the talent available. Therefore it was not unusual that the SABC had engaged in a process to re-orient some of the programming in its platforms. One of the platforms mentioned had been SAfm, and contextualising the matter in relation to SAfm’s historical performance, the platform had hit a particularly low point in approximately January 2017 in terms of the Radio Audience Measurement Survey (RAMS) measurement. The platform had 143 000 listeners, and for a national radio which had 127 transmitters, that measurement was particularly low, if the cost of the transmission was factored in, which had been calculated at just under R35 million. What was concerning was that certain of the talent pool which the SABC had been reviewing had also contributed to the decline in audience figures.
From that, the SABC had engaged in a strategic review of SAfm in the hope of turning around both its audience and talent pool in order to repurpose the station. It had been decided that its format would be changed from being only a news-driven radio platform, to becoming a talk radio platform with compelling news. That would be still in line with the SABC’s compliance requirements and its mandate with ICASA. The proposed offering would have two hours of current affairs during the week, where pockets of current affairs material would be delivered during the proposed talk format periods.

As the SABC looked around for a compelling audience, the operations component had then decided on Mr Steven Grootes, who was currently serving notice with Radio 702, to join SAfm in the new financial year. In radio, it was important in terms of audience attraction to have a compelling breakfast offering which would lead to heightened audience adoption throughout the day. Even though the SABC had not emphasised race in its recruitment processes, it was imperative to indicate that there had been only one white individual who had been recruited in the person of Mr Grootes. That negated the notion that there was somehow an influx of white talent into SAfm, as had been alleged in certain media. It was wrong to insinuate that the SABC was only for black people, when in fact it was a public broadcaster embracing the diverse South African society.

Executive management had also noted allegations that the SABC was creating something that had a likeness to some of its competitors. It was important to note that a lot of the talent that had gone to the SABC from various races had gone there of their own volition, given the perceived turnaround which was unfolding. The changes had not affected radio, but had affected TV. The evening schedule changes would have been visible in channel 404 -- the SABC news channel -- with Mr Bongani Bingwa having joined the news team, while Onkgopotse JJ Tabane had also been brought on board to host a current affairs programme. The Committee would realise that the changes were part of the process to turn the broadcaster around
 
Deputy Minister Kekana had proposed that as there was a digital migration process under way through the Digital Terrestrial Television (DTT) processes, the SABC had its own responsibility, especially for content digitisation. Possibly that had to be part of a continued engagement with the Committee to keep it abreast of developments on digital migration, as there were overlapping roles from ICASA as a regulator and the SABC in terms of content, as well as the Department Telecommunication and Postal Services (DTPS).

The DoC was proposing that an Inter-Ministerial Committee (IMC) prioritise overseeing that process, as there were overlapping areas between departments on digital migration. She was also proposing that the Committee meet with the DTPS Committee to check whether there was the required urgency in implementing the migration and the meeting of set targets and deadlines. However, the new target date for migration had been set for June 2019.

It would be important for the SABC always to share some matters with the DoC -- even internal operational issues -- so that the Department could offer any support necessary.

Discussion

Ms P van Damme (DA) said that she agreed with the SABC’s talent head hunting, and that its management could not be held to ransom by innuendo in the media.

What was new and innovative in the SABC funding model? Had its request for additional funding of R3 billion from National Treasury (NT) been processed? The Committee knew that the contract to collect TV licence fees had been given to Lorna Vision, which contract had been cancelled in July 2017 as that supplier had failed to deliver. How was the SABC collecting license fees to date? What was its proposed innovative funding model, aside from the licence fees, as quite clearly South Africans were not interested in paying them?

In the Broadcasting, Electronic Media and Allied Workers Union (BEMAWU) staff petition, there had been an allegation that Ms Sophie Mokoena (acting SABC political editor) had instructed journalists not to ask Mr Ace Magashule (ANC Secretary General) about the recall of former President Jacob Zuma? Had the SABC investigated whether indeed such an instruction had been given to journalists? There had also been allegations over political interference in the news room -- what had been done about those?

Was it true that Theresa Geldenhuys (SABC Company Secretary) had been promoted? She was glad that some action was being taken regarding staff that had been terrorised during the tenure of the previous board and former COO, Mr Motsoeneng, though it was not enough. One of the members of the SABC eight had been chased down the street by a supplier who had previously provided service to the SABC. What was the SABC doing to ensure staff safety? Why had there been a delay in the editorial policy?
 
Though the litigation funding for Mr Motsoeneng was under investigation by the Special Investigating Unit (SIU) in terms of the SABC’s Memorandum of Incorporation (MOI), the SABC was legally bound to recover those fees. The MOI provided that the SABC could cover legal fees of a director or staff matter when litigation related to a bona fide legal action, and it was known that all of Mr Motsoeneng’s legal actions were not bona fide.

The Chairperson recalled that Ms Geldenhuys had been about to retire at some stage, but had been retained for skills transfer. Could the board clarify that if something had indeed changed?

Was the amount reflected in the presentation what was owed in TV licence fees, after the service provider employed to assist the SABC in collection of said fees had been paid? Could the details be disaggregated?

Ms V van Dyk (DA) said consultation fees for the second quarter had been R31 million, which was R14 million over budget. What had been the nature of the consultation services, the duration of the contracts, and had they been extended or not? She also wanted to know how much money the SABC generated from its YouTube channel. Was the entity running that channel the same company that ran the SABC’s website which was not attracting any audience, as it was outdated?

How could a South African citizen who had emigrated still be litigated against for TV unpaid licence fees when they no longer lived in SA?

What did ICASA’s local content quota refer to? If contracting for new properties and content had been the reason for under-expenditure, how had that impacted on the local content quotas? How much had been saved by cancelling the New Age breakfast show?

What type of training had been considered or already been done in anticipation of the DTT migration by the SABC? The dates when spectrum was available kept being shifted.

Ms M Matshoba (ANC) asked whether it was the current leadership’s decision to agree to only a 4.8% salary increment instead of the 10% demanded by the staff who had been on strike in 2017.

Mr R Tseli (ANC) said it was commendable that the current SABC had managed to claw back some percentage of the outstanding TV licence fees. He was concerned though about the 5% under-expenditure for the second quarter, because entities came to Parliament lamenting the under-funding for their mandates, but managed to under-spend when budgets had been allocated.  

On the professional consulting fees of R31 million, he also wanted clarification on the nature of those services procured, as 79% of the SABC’s budget had been spent on them. It was concerning that so much had been spent on external skills instead of in-sourcing.

He wanted to know whether the shareholder compact between the DoC and the SABC had been signed.

Irregular expenditure of R4.4 billion was extremely concerning, especially when R18.5 million had being paid for services without there having been any contract in existence. What measures had been taken against those implicated in that wasteful expenditure?

He wanted the listenership targets per radio station for all SABC stations, apart from the top five radio stations. He also wanted to know how the SABC intended to pay Sentech what it owed in fees to the signal distributor.

Mr M Kalako (ANC) recalled that in a previous engagement with the current board, the Committee had been given a progress report on the contracts which were illegal and irregular, and wanted a new update on where the SABC was on the irregular contracts to date.

The issue of the progress and process with the government guarantee seemed to be more urgent after the second quarter performance report, and the Minister and Deputy Minister would have to engage the Committee on that matter sooner rather than later, as the elections were coming up.

The non-payment of Sentech for services rendered was a challenge not only for the SABC, but there were other entities that abused Sentech and it was concerning. He agreed that it would be important to interface with the Committee on Telecommunications and Postal Services at the Ministerial level.

Did SABC need legislation to deal with the collection of TV licences? If that was the case, the SABC had to communicate that clearly so that it could be prioritised.

He said the leadership had to use regulations, codes of conduct and policies to normalise the situation at the broadcaster and to ensure that staff complaints were resolved in-house, because it impacted negatively on the image of the broadcaster to always be in the news for the wrong reasons.
The Committee would not want to return to what BEMAWU had accused the broadcaster of doing, where allegations of political interference had been levelled against it because politicians had discovered that there were other elements that had friends in the news room, and had exercised influence on editorial matters. The Committee wanted an assurance that that would be investigated.

Mr Kalako said it was disappointing to read about the Mafoko and Mjayeli security companies allegedly having links to some board members in the SABC. He certainly did not believe that an individual would simply make up accusations of such a damning nature without any evidence, as that would be defamation. He asked the SABC and the DoC to get to the bottom of that matter, because it would be returning the SABC back to the quagmire of the previous year. He proposed that the Committee invite the authors of the letter to present on the allegations, because the situation could not return to having board members being involved in the awarding of contracts.  

The Chairperson concurred that the Committee had to invite the authors of that letter, and said if the leadership of the SABC wanted a smooth-running operation it had to ensure that it engaged with the unions, because they would raise anything related to workers’ grievances with management.

If there was any political interference taking place at the SABC -- and there was no mandate like that from any political organisation -- it was the responsibility of the board chairperson, together with the SABC executives, to raise that matter sharply with the said political organisation, because the SABC had gone into the doldrums exactly because of that. The Committee would not accept that any more, as it had come a long way with the SABC.

Ms Van Damme said she was entirely against the vetting of journalists, as that harkened back to the days of apartheid and Mr Motsoeneng, who routinely had the State Security Agency (SSA) coming into the SABC to bug offices and tap phones.

There had been news that there had been no revenue generated from the advertising of the ANC congress, but she recalled seeing advertisementsof various ANC candidates on TV -- had the advertising been given for free?

What was the duration of the contracts for the dramas and soap operas on SABC 1.

DoC’s response

Deputy Minister Kekana replied that as the Executive Authority (EA) at the DoC, they had committed to working on getting a discussion with the Minister of Finance on the situation of the SABC’s status.
The shareholders compact had been signed and agreed upon.

The DoC had also become aware about the security tender issue, and was expecting the SABC to act swiftly to demystify it.

Mr Makhathini said that the board was aware of the security tender allegations and had taken action to get them thoroughly investigated. The SIU was assisting.

The SABCs funding model had three pillars to it.

There was the commercial pillar, which included advertising, sponsorships and all commercial issues, which was the bulk contributor to the viability of the organisation. The board were not anticipating changing the model but rather prioritising focusing on that pillar and finding other commercial revenue streams like content licensing ,and many other things the SABC was exploring to strengthening that pillar.

The second pillar was TV licences, which generated about R1 billion for the SABC. This could not be simply done away with, as the organisation had improved on its collections, as had been presented.

Third was the government grant pillar. The SABC was still appealing to government to increase the funding for the SABC’s public mandate, because it cost the broadcaster approximately R4 billion to carry out, whereas the allocation from government currently sat at roughly R180 million.

Part of the work to turn around the SABC was getting it to be orderly internally before venturing to seek external funding. It had to be a fit for purpose organisation, which was why the presentation had spoken to an operational model to ensure there were the right skills doing the right work at the broadcaster. Now and again there would be a lot of noise as the SABC was changing and requesting more accountability, and internally there would be complaints. The board wanted to know what value people were adding to the SABC as they woke up every day to go to work at the broadcaster.  Moreover, once all the vacant positions had been filled, the confidence, accountability levels and efficiency of the organisation would improve. Although the SABC had approached a number of potential partners with interest to invest so as to leverage the SABC’s content in other platforms, it could not disclose the names of the individuals, as talks were still being held.

There were also matters from a structural perspective that needed to be attended to, because it cost the SABC R1.2 billion for its sports mandate to be covered, which was money it did not have.

The SABC was seeking a legal opinion on the matter of vetting journalists, to ensure it complied with the law and was also not infringing on journalists’ constitutional rights.

The board wanted to establish what was recoverable regarding the legal fees of Mr Motsoeneng, hence the investigation and analysis to find out what had been approved, and for what reasons, by the previous board.

Ms Philiso said that the SABC had not received a formal response regarding its two submissions for a government guarantee, and the SABC had acknowledged that it could not expect to hand held by government all the time. However, at the end of the financial year the SABC had creditors to deal with, and needed assistance with this.

The reason why the SABC management was treating the allegation against Ms Mokoena seriously was that it did not want to treat it as an old allegation. It had therefore asked the five individuals alleging political interference to have representation and to meet with management, and she hoped they would be open enough about the specific incidents they had alluded to, as there were incidents relating to the ANC’s January 8 statement and the ANC conference in December as well. On Thursday, the SABC would be meeting with the journalists, and the broadcaster would submit a written update on the matter to the Committee.

Ms Geldenhuys still remained in the position she had been in when she appeared before the ad hoc Committee on the fitness of the previous SABC board. As one of the appointments under investigation, what had happened at the time had been that though she was of retirement age, she had been made an offer to stay on at the SABC.

The SABC had gone quite a distance in the matter involving its journalist being chased down the street. The board had decided to have a separate investigation into the matter, which was being led by Ms Khanyisile Kweyama and Mr Mathata Tsedu, who were engaging with Thandeka Gqubule. There had also been correspondence with the accused company, as it had been established who the driver worked for. The SABC had also insisted on keeping its managers away from the matter to allow for independence to prevail, and had sourced in an external law firm to sit in on the commission to try and get the facts of the incident.

There was not a lot of money generated from the SABC’s YouTube account. The SABC could not use the same company for YouTube and its websites, as the company which was responsible for its websites had been irregularly contracted, and the SABC had stopped that contract. The digital sub-committee was looking at a new comprehensive approach on how to position SABC digitally including the website, application and all digital issues.

Regarding the ICASA local content quotas, the SABC worked according to what its licence percentages were. Therefore on a quarterly basis, the SABC calculated its hours and minutes to check whether it was compliant. However; the reason it had flagged repeat strategies not being ideal was that there were certain repeat slots that did well, but overall advertisers were attracted to new content. In the absence of one being able to commission new content quickly enough, one was forced to repeat content and viewership would still be there, but of course it would not probably reach the aspired targets.

For the past ten years, there had been attempts to intervene in terms of training, and the SABC’s involvement in DTT was in fact in terms of content offering. The training the SABC would need for DTT readiness was that it had to start operating as a non-linear organisation. It had to be producing content for different platforms instead of producing for TV only, and that was what the current management believed would be an impactful intervention in the DTT space. From a technology perspective, the training would be supplier-focused, because whatever infrastructure the broadcaster would acquire would be where the training would come in, but the Committee could be assured that the SABC was acquiring infrastructure with the digital landscape in mind. There were instances where it offered a hybrid model, where some of the SABC’s infrastructure was already High Definition (HD) ready, but could not be transmitted in HD -- even when a feed was HD, it had to be converted down to standard definition for purposes of transmission.   

Ms Philiso had been under the impression that the SIU had given a high-level summary on the irregular contracts. Unfortunately it did not report to the SABC, but to Parliament and the President. There had been progress made in terms of disciplinary cases internally, and the SABC would be issuing charges against those implicated in terms of those transgressions. 
 
Ideally the structures , including unions and the board, were and could be useful in hearing employees’ grievances, but even those were sometimes overtaken. For example, she had received the staff petition after it had been circulated on social media.

The Chairperson asked which union was recognised by the SABC.

Ms Philiso replied that there was BEMAWU, the Communication Workers Union (CWU) and MWASA (Media Workers’ Association of South Africa), which had limited recognition, meaning they could come into the SABC and meet with their members but could not engage the SABC, as they had not met its threshold in number of members.

The Chairperson said it had been reported that the SABC had been using suppliers that were not on the National Treasury central database (NTCD) of government. Was that not problematic in terms of the Public Finance management Act (PFMA)?

Ms Philiso said it was problematic, but the Acting CFO would elaborate.

Ms Dlamini replied that in terms of the professional consultation fees, there were three big payments made to consultants by the SABC. The first was the AGSA payments for external auditing; secondly there were payments related to legal fees; and thirdly, there were payments to the SIU for all the investigations conducted on behalf of the SABC.

On suppliers not on the NTCD, that issue had arisen as the SABC had some foreign suppliers because of the nature of its procurement. An example of foreign content suppliers included Disney or Fédération Internationale de Football Association (FIFA), and due to SABC’s mandate to broadcast soccer, it had to obtain rights from FIFA. However; there were minimum requirements that SABC set for foreign suppliers, such as being tax compliant to trade with the SABC. The broadcaster was working hard to ensure it was 100% compliant with the NTCD.

Ms Sylvia Tladi, Head: TV licenses, said that after the cancellation of the Lorna Vision contract, the interim board had agreed at the time that a lot of the internal collection mechanism within SABC had to be revived, but had to follow the necessary governance processes to ensure the compliance of the mechanism. Currently the focus was on the renewal of existing TV licence accounts on the SABC database, as well as debt collection, as those were the two main revenue streams within TV licences. Some of the procurement processes were under way and SABC hoped that in the new financial year all that work would be completed.

The Committee had to be cognisant of the fact that the revenue reflected and collected from TV licence fees was the overall cash injection that the SABC received from the public. However, she proposed that the Committee consider TV licence fees as self-funding, since the SABC did not charge additional for collecting successfully. At the end of a financial year, for accounting purposes, it took the cash injection reflected and also accounted for collection fees spent in bringing in that money, and the remainder was then considered the profit from TV licences. When targeting, the SABC moved from the profit made from the previous financial year to the following financial year.

The debt collection fees entailed short text messages (SMSs) and email notices sent on a weekly and monthly basis to TV licence holders. There were also pay points where TV licence payments could be made at all major retailers and banks, which also charged debt collection fees. Therefore apart from just collecting TV licence fees, there were the above listed service providers that the SABC utilized, as it needed a national footprint to collect TV licence fees, as it largely depended on the South African Post Office (SAPO) for collection in the rural areas.  

Regarding the process to follow when cancelling a TV licence, the SABC website had the necessary information, as the broadcaster had over time spent money on marketing how that could be done. The issue currently was for the SABC to regain customer confidence, as the previous era had lost the SABC its customer confidence. The most common and basic requirement was for the licence holder to produce an affidavit as proof they had emigrated, which would enable the SABC to cancel the licence, as the matter was a daily operational issue.

She concurred that the SABC was collecting licence fees with limited legislative provisions, as the rules applied were more than 20 years old, which meant they had not evolved with the changes in society and that made the successful collection of licence fees somewhat difficult. The SABC also had to increase its revenue annually, but it would be constantly chasing an amount which had stayed the same for at least six years, despite inflation and the interest rate changes that occurred in society. Currently the legislation did not provide for a fine or imprisonment as legal recourse for the non-successful collection of TV licence fees.

Deputy Minister Kekana requested that the SABC be allowed to submit written responses to outstanding questions.

The Chairperson acceded with the request, and said the Committee would submit in writing matters for the SABC to action from the discussions of the day.
 
ICASA Second Quarter report

Ms Palesa Kadi, Councillor, ICASA, said that as new councillors they would be presenting for the first time to the Committee. She would speak mainly to two issues, one of which was the lower financial performance trends with regard to the 30 day’s timeous payment of service providers, which had meant that ICASA could not continue paying providers if there were issues of quality and due diligence that had to be paid for. Additionally, the issue of licences and revenues which had not been forthcoming as targeted, had led to the under-performance.
Secondl,y ICASA was currently busy with the sports broadcasting review, working with the SABC to respond to some of the challenges the SABC had indicated regarding ICASA’s mandate. ICASA were also reviewing election broadcasting regulations in terms of the state of readiness.

Mr Willington Ngwepe, CEO, ICASA, took the Committee through ICASA’s performance report.

He said that in Programme 1 (Administration) ICASA had cumulatively achieved 67% on five sub-programmes.  In Programme 3 (Policy), even though the target on the number of reports on broadcasting of national sporting events had been met and were ready for submission, they had not been approved by Council as of the end of the second quarter due to delays with the tabling of the submission. They would be tabled for approval in the third quarter. Programme 5 (Regions), where the strategic objective was to protect the rights of consumers, was where the bulk of the enforcement took place in terms of compliance by licensed operators, as well as ensuring that no illegal operators could cause harmful interference to licensed operators.

He said though there had been a slight drop in ICASA’s second quarter performance, compared to the first, it was fairly insignificant and ICASA hoped to pick up the momentum in subsequent quarters.

Mr Tebogo Matabane, CFO, said that the revenue shortfall of 7% was because when ICASA requested its quarterly drawings, the first two quarters normally were drawn at 40% so that the last two quarters would be drawn at 60% of its annual allocation. The R 1 591 888 for deferred grants which had not been included in the disclosed amounts had been from three years ago, and when the need arose for additional funding, ICASA would draw from that allocation.

In Programme 1 (Finance), underspending of 8.1% had been due to ICASA being able to convince its insurance services service provider not to increase its insurance premiums. The under-spending of 12.2% in Programme 6 (Regions) had been vacancies for the Limpopo and North-West (NW) offices, but in the third quarter  the Limpopo office had been established and ICASA hoped to have a full staff complement by the end of the financial year. In NW, underspending would continue as ICASA would be able to start recruiting for its offices there only after securing office space, but the regulator hoped that by April of the calendar year it would have filled the vacancies for its offices in NW.

Discussion

Ms Kekana said there would probably be items that would remain on ICASA’s agenda, like spectrum and what progress and options ICASA would make available. The Committee would also probably want to know how far ICASA was and planned to go in terms of the penetration of Information Communication Technology (ICT) services in the rural areas.

The Chairperson said that when a target was unachieved, it had to be recorded as such instead of ‘partial achievement,’ as that misled the Committee.

Mr Tseli wanted a progress report on the moratorium on the licensing of community radio assets. He wanted a policy briefing on the auctioning of assets to staff of ICASA. He was concerned about internal audit non-achievement, especially the internal audit manager vacancy. It could not be right that entities complained about being under-funded but were under-spending funds when allocated adequately. Why had ICASA under-spent so much?

The Chairperson wanted clarity on how internal audit achievement had been 75%, when only one target had been unachieved. 

ICASA’s response

Mr Ngwepe replied that the Committee would recall that it was the first time that ‘partial achievement’ had been used as an indicator in its presentation, and that was mainly out of a need to communicate that even where things were not achieved, work had been undertaken and it was proceeding. Perhaps in future ICASA would provide a status update on the work in progress, instead of indicating partial achievement, in line with the Chairperson’s request.

In terms of the internal audit achievement, the percentage when having planned four targets and achieved three, the corresponding percentage equivalent was 75%.

Ms Van Damme said she wanted an update on the complaint submitted regarding MultiChoice, and where the investigation was. Who were the four applicants that had applied for free to air channels, and how was the public to comment on the applicants if they were not known? Could ICASA give brief overviews on who the applicants were, and the content of their applications?

Ms Van Dyk wanted clarity on how 96.35% of spectrum applications had been processed within 60 working days when there had been a moratorium on the licensing of community media -- or was that not related to that licensing? How many licences had actually been processed, as percentages tended to hide actual figures? Was the 30% target for the percentage of the predetermined list of broadcasting compliance inspections for the year, or just the second quarter? Could ICASA clarify the quarterly variance comparison for the percentage of individual licence amendments, transfers and change of control applications processed within 180 working days? Similarly, with number of province-specific quality of service reports, as it seemed that only 50% of the first quarter work had been done by the second quarter. Had the 90 unachieved investigations in the first quarter  been included in the second quarter performance of number of high-site investigations conducted? What had been the reasons behind that big variance? Had there been any fruitless and wasteful expenditure incurred for the period under review?

Ms Matshoba said she wanted to know what type of staff vacancies had affected the operating budget expenditure. Was there a new spectrum available for community radio applications, and how was ICASA assisting those who did not know the process to follow when applying for a community radio licence?

Councillor Kadi replied that the community broadcasting regulations were still under review, and that spoke to whether communities were ready to deal with the technical nature of the process of being a licensed entity. That was where good governance principles and directors’ boards were already embedded in the organisations proposing to establish a community radio station. ICASA was currently involved in consulting communities on those governance issues, and anecdotal and preliminary findings were that quite a few proposed community broadcasters had challenges of in-fighting amongst themselves. ICASA had therefore decided on a developmental view in the licensing of community broadcasters so that it could assist in the licensing process from start to license acquisition.

She asked that ICASA be allowed to submit the breakdown of the staff vacancies in writing. The level of detail in the MultiChoice complaint and investigation also compelled the regulator to submit that response in writing.

ICASA would review whether there had been any disparity in how it had published the details of the free to air applications currently being processed by the regulator.

Mr Ngwepe said the moratorium on the licensing of community broadcasters was still in effect, but the review of the regulatory framework for community broadcasters was at an advanced stage. ICASA was expecting to publish draft regulations at the end of the 2017/18 financial year so that it could undertake public consultations on the work, so that at the least the second quarter of the new financial year would end with regulations already having been published. Additionally, ICASA hoped to have the moratorium lifted during the course of the new financial year.

ICASA was just as concerned about the challenges it faced in recruiting for internal auditing, so that in the interim it had outsourced the work to ensure that no work lagged behind.

ICASA was challenged with under-spending. The Committee would recall that ICASA had moved from a period where its performance had been 25%-36% achieved, but expenditure had been high. To date, performance had been stabilised at 70% of targets met, but with little spending, so possibly there had been disconnect between how ICASA planned its targets and how it budgeted. In the new financial year, ICASA had tried to align its budget appropriately to the targets because there were instances, for example, the national radio frequency plan, which had to be developed. ICASA had planned and included the use of consultants and budgeted accordingly, having decided earlier in the process to develop the plan with its internal expertise and drawing on the DoC and DTPS expertise as well. As a result, the allocation set aside for consultants had not been used.

The spectrum mentioned in the presentation did not relate to community broadcasting services, but rather to the electronic communication services spectrum typically used for mobile communication and fixed mobile services.

Mr Matabane said that ICASA was in the process of reviewing its asset disposal policies, as it wanted to incorporate ICT equipment and to combine its two disposal policies into one policy.

Matters of emphasis raised by AGSA had been flagged at the end of quarter 1, negatively impacting that quarter. Improved controls had then been implementated from mid-July of the 2017/18 financial year, and the impact of that would probably be seen at in the first quarter of the new financial year. ICASA had investigated irregular expenditure in quarter 1 internally, and that report had been submitted to internal audit for review so that it could be tabled to the Council. ICASA was regularly consulting AGSA on some of the matters it had raised with regard to its quarter 1 performance. It had also managed to recover some fruitless and wasteful expenditure from quarter 1.

Regarding the first and second quarter comparison and variances, all the quarterly targets were determined a priori, followed by implementation. What that had been done was a variance to variance comparison.

The meeting was adjourned.