ICASA Chairperson removal; SABC progress report; with the Minister

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Communications

12 March 2019
Chairperson: Prof H Mkhize (ANC)
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Meeting Summary

The Committee considered their report on the removal of Mr Manyaba Mohlaloga, Chairperson of the Council of the Independent Communications Authority of South Africa (ICASA). The background of what had given rise to the recommendation for his removal was read out to Members. He was found to have been convicted on charges of fraud and money laundering. He had been allowed to submit written representations as to why he should not be removed from office. Despite this, the Committee found that he could no longer occupy a position of trust and authority as a councillor and Council Chairperson. Members adopted the report as is, and announced his removal with immediate effect.

The Committee was briefed by the South African Broadcasting Corporation (SABC) on the progress made on their turnaround strategy, labour relations matters and the implementation of the recommendations of the ad hoc committee on the SABC Board Inquiry. Members were informed of the financial crisis in which the SABC finds itself, and the cost-saving initiatives which had been implemented to rescue the situation. The payroll was being prioritised over other expenses such as infrastructure, maintenance, payment to content suppliers and investment in marketing. Members were assured that employee salaries would be paid at the end of March 2019. The SABC was engaging and working with the Department of Communications and the National Treasury for an immediate intervention of funding and capital. A report of these engagements would be submitted to the Minister of Communications by September 2019. The biggest challenge was highlighted as financial sustainability.

Members raised concerns about employees receiving their salaries by the end of the month, but the Minister assured them this would happen. The Minister also assured them that a monitoring officer would be appointed by the Minister of Finance to ensure that finances were spent appropriately. Members also wanted reassurance regarding the implementation of a sexual harassment policy and the education of employees on these matters. Also raised was the issue of freelancers, adequate and equitable coverage of pre-election events for all political parties, the costs of ongoing litigation, how structural issues would be addressed, and the skills audit as it related to labour relations matters.
 

Meeting report

The Secretary was asked to read out the Committee report relating to the matter of the removal of the Chairperson of the Council of the Independent Communications Authority of South Africa (ICASA).

Mr Thembinkosi Ngoma, Secretary of the Committee, explained the Committee had received a letter from the Minister of Communications informing members that Mr Manyaba Mohlaloga, Chairperson of ICASA, had been convicted on charges of fraud and money laundering. The Minister had further requested Members to commence with the process of removing him from office. The Committee had resolved to commence with the removal process in terms of section 8 and section 6(1)(j) of the ICASA Act. The Committee had invited Mr Mohlaloga to make written submissions on why he should not be removed. Written representations had been submitted and considered, despite a conviction, by the Committee. It had considered the nature of the fraud, the amount of money involved, the loss suffered, and whether collectively these factors created a lack of trust in Mr Mohlaloga. The Committee was of the view that there was reasonable concern that he could not continue in a position of trust and authority. The Committee noted he had been granted leave to appeal his sentence, but not his conviction. Having considered the matter, the Committee had further resolved that he be removed as a councillor and Council Chairperson of ICASA in terms of section 6(1)(j) of the ICASA Act with immediate effect. 

The Chairperson asked Members if they approved the report.

Mr R Tseli (ANC) moved adoption of the report as is.

Mr B Bongo (ANC) seconded this.

Ms V van Dyk (DA) also agreed. Was there a time-frame within which the removal would take place?

The Chairperson replied that by the end the day it would be tabled in the National Assembly.

The Committee adopted the report.


SABC progress report

Mr Madoda Mxakwe, Group Chief Executive Officer: SABC, said the organisation had experienced many challenges over the last couple of months. The current situation had been focused on enhancing revenue generation from traditional and alternative revenue streams. Despite cost-cutting measures being implemented, the biggest challenge was financial sustainability. A culture of fiscal discipline throughout the organisation needed to be promoted. Some disciplinary hearings had been left incomplete or abandoned and there was a collapse of internal controls. Irregular appointment cases and sexual harassment cases were currently being worked on.

The SABC was working together with the Department of Communications (DOC) to develop a digital strategy and to ensure platforms were aligned to its audiences. They were also working together on the issues of capital and funding. The cash flow was currently depleted and the organisation could not adhere to its committed contracts or commission local content production. Several content providers had refused to engage with the organisation because of the inability to pay them over the last couple of months. A key issue was maintenance and infrastructure, and there had been increased public pressure in this regard. Owing to the challenges and liquidity crisis of the SABC, they had not been able to address this issue. There had been engagement with the National Treasury (NT) and the DOC, and these inputs would be submitted to the Minister by September 2019. The major issue which the SABC faced was the fiscal crisis.

Ms Yolande van Biljon, Chief Financial Officer, SABC, said the sports sales and liquidity issues contributed to the status of radio revenue. The main contributors to underperformance were the declining advertising revenue and the number of television licences. SABC 1 was over-performing and the organisation was too reliant on it. There was also underperformance in expenditure, as the payroll exceeded what had been budgeted for. There had been a delay in maintenance and infrastructure due to liquidity issues. The employee cost was also exceeding the budget. Where they were unable to settle issues, it got added to the existing backlog. The SABC was anticipating factual insolvency and their financial results would not be approved. They continued to work with the DOC and the NT to unpack these issues and find appropriate solutions.

Mr Chris Maroleng, Chief Operations Officer: SABC, said there was a significant commitment of employees to implement the turnaround strategy. The strategy looked at the key performance area, which was revenue enhancement. There had been a focus on exploiting existing content and generating partnership deals. More partnership deals were expected to come through. The strategy also looked at the key performance area, which was cost containment. Cost-saving had been effective through implementing initiatives within the organisation. One of the key ways in which it deriveds its revenue was by ensuring the audience saw compelling and exciting content and stayed within the platforms. There had been significant developments in this regard, as well as an increase in the radio audience. In television, there was a stabilisation of SABC 1, 2 and 3. There was also an increase in audiences who watched channel 404 on the DSTV platform.

Mr Maroleng said they anticipated the news channel as being the most viewed channel on the DSTV platform in South Africa. The digital strategy, such as running various channels on the YouTube platform, had seen an increase in viewers too. Broadcast platforms had been upgraded to ensure the best quality, despite the liquidity issue. A new operating system, DIRA, had been implemented for most of the radio platforms and this had resulted in improvements in the quality of broadcasts. The Printing Solution was implemented almost completely across SABC’s total enterprise.

Instituting quarterly performance reviews would bring in discipline and ensure key performance to achieve revenue increases. Cost-saving initiatives are also monitored on a regular basis. There had been an introduction of a career progression framework to ensure staff operate in an environment that allows them to engage in and enjoy their work. Mr Mxakwe was involved in engaging with staff on a one-on-one basis, and this engagement was done weekly. There were also weekly planned visit programmes to all of the regional offices to ensure alignment to the turnaround and cost-containment strategies. 

Mr Ntuthuzelo Vanara, Head of Legal Services, SABC, spoke on labour relations matters as they pertained to consequence management. The organisation had been busy looking at issues of discipline, where there had been a total of 38 cases in this financial year. Of the six cases which pertained to sexual harassment, one had already been concluded and the alleged perpetrator had been found not guilty. The other five were still proceeding. Of the 22 disciplinary cases, they had already been scheduled or were soon to be scheduled. The organisation was currently sitting with 15 suspensions. They were also currently consulting with organised labour. Career progression remained an important matter because it gave employees the opportunity to progress. The organisation was also currently busy with the skills audit which was a process under the authority of the Director-General.

Discussion

Mr N Xaba (ANC) asked if the SABC anticipated any challenges related to the upcoming elections. The presentation said the turnaround strategy would be submitted to the Minister by September 2019, but at the same time the SABC was working with the DOC and the NT on a weekly basis to deal with the issue of finances. Would the assistance and funding which would rescue the situation be based on the current plan or the submitted strategy in September? On the meetings conducted with the DOC and the NT, could the minutes and registers be provided to Members? How many freelancers did the SABC have? What was the actual problem around freelancers?

Ms Van Dyk asked if the SABC had been granted a bail-out for a guarantee. How much was it, and what was the list of conditions given to the SABC? Was there a panel or officer established to oversee the finances and, if so, on what legal basis would such an officer be appointed? Who was responsible for the appointment, what were the criteria and the responsibilities of the officer? The presentation said expenditure would increase to cover pre-election events -- would there be equitable coverage for all political parties?

Mr S Swart (ACDP) thanked the Chairperson for allowing him to attend, even though he was not a Member of the Committee. He commended the executive management of SABC for working under such difficult conditions. Would all political parties receive equitable coverage? The dire financial situation and the letter from the Companies and Intellectual Property Registration Office (CIPRO) was a great concern. It could result in personal liability in terms of the Companies Act. What was going to happen at the end of March? Given the fact that the SABC could not afford to have any form of blackout with the elections, would it be resolved by the end of March? The cost of ongoing litigation and forensic audit reports were a massive amount. Each external report was costing a lot of money. Were there ballooning legal costs? What impact did it have on the Corporation’s expenses? In terms of the ICASA requirements, the licence -which requires massive expenditure on certain items - needed to be re-looked at. 

Ms M Matshoba (ANC) congratulated Mr Mxakwe on conducting weekly meetings with staff. She commended the SABC on their hard work through the difficult period.

Mr Tseli asked if the SABC can guarantee that salaries would be paid at the end of March. There was concern about the 85% of the Auditor-General’s findings on structural issues. It was not clearly stated what these structural issues were. Could Members get feedback on the consultations and interactions with organised labour? He emphasised Mr Swart’s sentiments about the issue of giving employees their salaries at the end of the month. What was being done to address this particular issue?

Mr Bongo asked for a time-frame on the skills audit. Employees should not be retrenched before the skills audit was complete. On the turnaround strategy, it was being applied at the micro-level. What about the macro-level? Real turnaround was about the restructuring of the organisation itself at the executive level. This would deal with the issue relating to finances. It would also talk to the issue of freelancers. On the cost of litigation, could Members be provided with figures? Forensic reports should not be continued because a lot of money can be saved there. On sports rights, was the right approach being followed? On equity of coverage of political parties, the approach must be proportional. The political party which gets more votes must be shown more. On the content being shown, the SABC was showing exactly what was shown by the BBC and CNN, and this was not a true reflection of what was on the ground. How did they do checks and controls on what was being shown? There needed to be an exact story of what was actually happening on the ground and not the favouring of an imperialist agenda. On the consultations with the trade unions, how far was the SABC in terms of the retrenchments that had been discussed the last time the Committee met with the organisation? How were they applying section 189 of the Labour Relations Act (LRA)?

SABC’s response

Mr Mxakwe said they were ready for the upcoming elections and there was a comprehensive elections plan which would be presented to the Committee next week. In terms of the turnaround strategy, the inputs would be submitted to the Minister by September 2019.

On freelancers, there were about 1 893 in the organisation. They had a 12-month contract and when their contracts had to be renewed, management engaged with them based on their performance. There was certainly no purging of employees.

Whenever there was a transgression, due processes were followed.

On whether the SABC had been granted a bail out, he said they were still engaging with the DOC in terms of funding requirements. He was unaware of any financial monitoring officer being appointed as part of the SABC. The forensic audits and investigations were all done internally.

On a time-frame for the skills audit, this would be done until early next year. There had been engagements with organised labour in terms of section 189 of the LRA since the end of January. The turnaround strategy had been approved by the Board and now there would be engagement with the DOC to make sure inputs were received. The future structure of the SABC would be dealt with in that forum.

Ms van Biljon said the SABC had chosen not to spend on certain items such as maintenance, consultants and content, in order to ensure cash to cover the payroll. The end of March was the latest date and cash was managed on a day-to-day basis. Payroll was prioritised and protected above other expenses. The organisation was able to cover the payroll and critical service providers. Relationships had also been established with creditors, and their ability to support the organisation was critical. On the 85% target, there was an anticipation of achieving this amount. On legal costs, the first cost-saving initiative was to review legal expenditure, and external bills had been reduced.

Mr Maroleng said there were performance criteria which determined how the SABC engaged with independent contractors and freelancers. It was reviewed on a regular basis to ensure revenue and performance targets were closely monitored and challenges were highlighted. Where the organisation received proposals on potential plans and strategies, they were already looked at. The submitted turnaround strategy included these plans, and they arise from the operating model.

On the question of whether coverage of elections would be fair and equitable, the provisions of the SABC Charter explicitly stipulate that coverage must be fair and balanced. The Broadcasting Act also speaks to this. The SABC did not interfere in the editorial business of the newsroom, but rather provides an operational context so that those who cover the news could do so in a fair and balanced fashion. In the meeting next week, the executive team of news and current affairs could better inform the Committee of this.

On the issue of the BBC and CNN, the SABC respects the independence of the newsroom, but a national interest perspective was important. Public opinion and social justice must come to the forefront. If there was a challenge with the external coverage, the shortfall might be due to a lack of resources to go into those countries to obtain the coverage. Once the issue of resources was sorted out, the national interest approach would come out in a more amplified way.

On sports rights, it was important to find ways to work with the DOC to address the funding gap.

Mr Vanara said the consultations with organised labour were based on matters around performance management. Two unions, the Communications Workers Union (CWU) and the Broadcasting, Electronic, Media & Allied Workers Union (BEMAWU), had declared a dispute with the performance management process. There had been a number of meetings to try resolve this dispute and BEMAWU had taken the matter to the Commission for Conciliation, Mediation and Arbitration (CCMA). The dispute revolved around policies approved by the Board on matters which were either promised or not promised. The performance management was in line with the succession planning and career progression policies.

The skills audit was a process that the organisation was busy with under tight deadlines. Phase one pertained to the collection of data and the first report would be submitted at the end of this month. The skills audit process could take up to a couple of months.

Further discussion

Mr Xaba asked about the SABC’s engagements with the DOC and the NT, and whether they were keeping minutes and not just phoning each other. There had been a response to many policies, but what about the sexual harassment policy?

Mr Tseli said the savings question had not been addressed.

Mr M Kalako (ANC) asked if the issue of activities within the SABC had been resolved. What was the nature of the activities? How were they resolved? On the issue of the current tender that was in dispute, what had happened with that?

The Chairperson said it would be interesting to see how the organisation responded to the report on sexual harassment. In the one case where the alleged perpetrator had been found not guilty, it was alarming this was the outcome, given the systematic issues in the company. What was the SABC’s response to that?

In the last report of the CIPC, there had been an observation from the Commission that the SABC was trading recklessly under insolvent circumstances and contravening section 22 of the Companies Act. They had also requested the company to outline the measures taken to mitigate this and provide reasons why they had not engaged in business rescue proceedings. Once the Commission had put it directly out there to the public, it called for a deliberate response, more than a general turnaround strategy. On legal costs, could they provide more clarity on this? The question of the skills audit was a big issue -- how was the SABC responding to it?

SABC’s response

Mr Mxakwe said there had been a response to the CIPC, highlighting the steps taken to mitigate the risk of insolvency. This had been done and could be shared with the Committee.

The sexual harassment policy had been approved for implementation. The organisation was now in the process of making sure the current cases were in line with it.

Regarding the meetings with the DOC and the NT, there was indeed a register and they were not over-the-phone engagements. The reports of the meetings could also be shared with the Committee.

Mr Vanara said the nature of litigation was expensive. They had to go to court as they could not take the law into their own hands. Although some people lost their cases, successful litigants were going after the company to obtain costs. There was insurance cover for directors’ liability, but insurance companies had repudiated certain claims because of the reckless nature of those claims. All those costs were therefore borne by the company. There were a number of misconduct hearings and when people were unhappy about the outcome they went to court. The budget for litigation costs stood at R22 million. Costs were negotiated before the organisation engaged with external service providers and most of the work was done internally.

On the issue of activities, those officials who were allegedly placed under surveillance had already left the company.

On the procurement of security services, the awarding of the tender was a point of contention. A review application could be brought by the unsuccessful tenderer. What was holding that process back was that this was a tender which had been concluded by the interim Board. When the new Board came into being, they had to first establish the facts for themselves. Those legal proceedings could not be concluded because the investigation had not been finalised.

Ms Van Biljon said the organisation prioritised certain expenses to ensure there was enough cash. Savings were translated into cash and the organisation continued to manage this on a day-to-day basis. The payroll remained the priority and other things were merely delayed, postponed or service providers were engaged with.

Mr Vanara referred to the sexual harassment case which had been concluded. The alleged victim had appeared at the hearing and told the forum there was no reason to believe a sexual harassment matter existed. It was on this basis that the alleged perpetrator had been not found guilty. One of the other alleged victims had relocated to Kenya, the other to the United States of America. The other two cases were very difficult and painful matters, as families had been destroyed. The organisation was currently gathering information and remained busy with these cases. They were currently busy with a project to sensitise and educate employees on sexual harassment concerns. There was a policy which was continuously being looking at.

On the skills audit, they had started by engaging with organised labour, and there had been a misunderstanding as to why the skills audit should be proceeded with. The organisation was clear that they would not go back to section 189 of the LRA, and organised labour had to understand the skills the company had. The first phase was to make sure curricula vitae (CV’s) and qualifications were collated and job profiles reflected what people were doing. The second phase was the analysis of skills that they had and whether people were placed correctly. Finally, the report gave an indication of what they currently had and what was needed going forward.

Mr Swart commented that the payroll for March was managed on a day-to-day basis. Did this mean employee salaries would be paid by the end of March or not? On legal costs, could the Committee get a written report on the expenditure? He suggested the SABC use the Special Investigating Unit (SIU) to litigate in the Special Tribunal to recover funds and cancel contracts.

Ms Van Biljon replied that day-to-day referred to looking at what a critical priority on a specific day was. Items that arose in the course of a month were assessed to see when they could be paid. Forecasts were done on a weekly and monthly basis. At this time, the SABC was forecasting they would be able to pay employee salaries.

Ms Stella Ndabeni-Abrahams, Minister of Communications, said they had been guaranteed that by the end of the month, payment to employees would be made. A submission had been made through engagements with the NT, and there was a guarantee of an immediate intervention by the end of March. Money for salaries had not been asked for, but they would be able to use the money for this.

This was not the first time there would be funding for the SABC for their turnaround strategy. An intervention had had to happen again, and as a result the Minister of Finance would assign a person to monitor that the money was spent according to what had been submitted. This would ensure the SABC did not come back asking for assistance again.

On the turnaround strategy, it was important not to dwell on the past. The SABC must be able to respond to its challenges. The skills audit was important, to understand the capacity of the organisation. Where there were gaps, compulsory training would have to be implemented to bridge them. Certain skills would be rechanneled and remodeled to add value where they were required.

On ICASA and regulation matters, the new mandate was not only about facing the challenges, but also about focusing on the future. There was no reason why the SABC could not come up with its own innovation to compete with YouTube. Capacity within the SABC must be there and it must be built. 

Chairperson thanked the Minister for her input, and adjourned the meeting.

 

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