Department of Communications and Digital Technologies & SABC 2020/21 Annual Performance Plans

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Communications

19 May 2020
Chairperson: Mr B Maneli (ANC)
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Meeting Summary

Video: Portfolio Committee on Communications,19 May 2020

Annual Performance Plan (APP) of Government Departments & Entities 20/2021

The Department of Communications and Digital Technologies and the South African Broadcasting Corporation briefed the Committee on their Annual Performance Plans and budgets for 2020/21 year, their five-year Strategic Plans (2020 to 2025) and aspects of how they were responding to the COVID-19 crisis.

In discussion of the presentation of the Department, Members’ concerns centred around the impact of the COVID-19 pandemic and the shortfall of funds that National Treasury will experience, which will inevitably result in budget cuts within departments. Members questioned the role of the Department in ensuring that government and Parliament had access to reliable and secure software for virtual meetings. Responding to Members’ comments, the Director-General said that the Department would engage with MultiChoice to obtain discounts in fees for consumers, following which he will provide feedback to the Committee. In addition, the Department will provide the Committee with a written response on secure online platforms, after consultation with the State Information Technology Agency and other stakeholders.

The Chairperson of the SABC Board said the Corporation had now filled all its critical vacancies and was focusing on embedding a culture of high performance and ensuring a drive for growth. The true impact of the COVID-19 pandemic on the plans put forward would only become evident in the upcoming months. Clients and regular advertisers had been withdrawing their ad spend and reducing sponsorships as they battled to trade during the national lockdown. The realisation of some of the intended targets was now in doubt. The Committee would be briefed on the likely impact when it was determined.

The SABC was conservatively projecting a deficit of R1.5bn in the current financial year as its advertising revenue would drop significantly due to the economic impact of COVID-19 pandemic.

Members’ commended the Corporation for the 51% representation of women in leadership positions at the institution and thanked the Board for the work it was doing to stabilise the public broadcaster which had long been in turmoil. Viewers were clearly returning to the SABC in which they had a degree of restored faith. Members expressed their gratitude to the reporters providing quality news during the COVID-19 pandemic.

The Chief Executive Officer said the Corporation will provide Members with the details of the expenses relating to litigation and the outcome of court cases. The amounts lost in legal fees were, however, significantly less than what the SABC lost due to its previous systematic collapse of its governance processes.

The Chairperson asked the presenters to send written responses to any issues raised by Members which they had not addressed during the meeting.

Meeting report

The Chairperson opened the virtual meeting and welcomed Members and the delegations from the Department of Communications and Digital Technologies (DCDT) and the South African Broadcasting Commission (SABC). He noted apologies from Mr Jackson Mthembu, the Acting Minister, and Ms Pinky Kekana, the Deputy Minister for being unable to attend the meeting.

The first purpose of the meeting was for the Committee to receive a briefing on the Department’s Annual Performance Plan (APP) and budget for 2020/2021 with an emphasis on areas of minor adjustments in response to earlier engagements with the Committee. The second item on the agenda was the presentation of the SABC’s Corporate Plan for 2020/21 to 2022/23 based on the strategic pillars and goals that are utilised to realise the aims and predetermined milestones of the SABC Strategic Roadmap.

The delegation from the DCDT consisted of Mr Robert Nkuna (Director-General: Telecommunication and Postal Services), Ms Joy Masemola (Chief Financial Officer), and Mr Farad Osman (Chief Director: Monitoring, Planning and Evaluation). The delegation from the SABC included Mr Bongumusa Makhathini (Chairperson of the Board), Mr Madoda Mxakwe (Chief Executive Officer), Ms Yolande van Biljon (Chief Financial Officer) and Mr Ian Plaatjies (Chief Operating Officer).

The Chairperson asked the delegations from the DCDT and the SABC to keep the presentations brief and to speak on the highlights, as Members had had the opportunity to familiarise themselves with the content.

Briefing on the DCDT’s Annual Performance Plan (2020/21)

Mr Robert Nkuna, the Director-General, DCDT, presented the DCDT’s APP for 2020/21 as well as a breakdown of the DCDT’s Strategic Plan (2020 to 2025), an outline of its 2020/21 priorities and financial information, and a summary of the structure and interdependencies for the proposed plan for the Broadcasting Digital Migration Programme. He reminded the Committee that parts of the APP had already been covered in earlier engagements, and the presentation would address the most salient issues for consideration by the Committee. In some areas, the Department was requesting minor adjustments at the indulgence of the Members. He said that there was a current ongoing process within the government relating to the revision of departmental budget allocations [because of the Covid-19 crisis]. Any changes will require a revision of the APP as presented to the Committee.

The impact statement in the Strategic Plan outlines the DCDT’s goal to ensure that citizens have access to secure, affordable, and universal forms of digital communications and technologies. The overall goal of the DCDT is broken down into four outcomes that must be achieved by 2025.

The first outcome focuses on enabling digital transformation policies and strategies. In the five-year plan to achieve this outcome, six key targets were identified. The implementation of the Digital Transformation Act and the Digital Economy Masterplan; the development of 12 South African positions that are focused on supporting the digital economy at relevant international forums; the implementation of the State Digital Infrastructure Company Act and the State Digital Services Company Act; and lastly, the implementation and monitoring of the Presidential Commission on the Fourth Industrial Revolution (PC4IR), [released in January 2020]. For the 2020/21 period, twelve key APP targets are named for the first outcome. This includes the development of three country Positions to support the digital economy focused on the BRICS association, the Universal Postal Union (UPU) and the World Telecommunication Standardisation Assembly (WTSA) that is held every four years. Furthermore, it includes the submission of the South African Post Office SOC Ltd Amendment Bill and the South African Broadcasting Corporation SOC Ltd Bill to Cabinet, as well as the implementation of the Data and Cloud Policy. In addition, it includes the development and implementation of the Digital Economy Masterplan and the implementation of the PC4IR Report and the information communication technology (ICT) Small, Medium and Micro-Enterprise (SMME) Strategy. The last key priorities include the implementation of the Postbank Bill, the submission of the State Digital Infrastructure Company Bill and the State Digital Services Company Bill to Parliament, the issuing of the final Policy Direction on the 5G Spectrum, and the development of the blueprints for the Digital Technology diffusion.

The second outcome focuses on increasing access to secure digital infrastructures. In the five-year plan to achieve this outcome, four key targets were identified—the implementation of phase two broadband connectivity; revising the Updated National Radio Frequency plan and facilitating its implementation; installing 4.1m household devices across South Africa; and to coordinate and monitor the operations of the BRICS Institute for Future Networks. For the period of 2020/21, seven key APP targets are named for the second outcome: establishment of the BRICS Institute for Future Networks; the revision of the National Radio Frequency Plan in line with World Radiocommunication Conference (WRC-19) outcomes; the sustainable provision of broadband services to 970 connected sites; conducting a feasibility study for phase two funding; the establishment and operationalising of the Digital Transformation Centre; and lastly, the coordination of 900 000 subsidised television installations in three provinces and the establishment of an added Computer Security Incident Response Team (CSIRTs).

The third outcome focuses on creating a transformed digital society. In the five-year plan to achieve this outcome, three key targets were identified—the implementation of the e-Government Strategy and Roadmap; the facilitation and monitoring of six partnership agreements focusing on the digital economy; and the implementation of the Digital and Future Skills Strategy. For the period of 2020/21, three key APP targets are named for the third outcome: the signing and monitoring of two partnership agreements; the implementation of the National e-Government Strategy and Roadmap towards the digitalisation and paper-less transition of government services; and the Digital and Future Skills Programme.

The fourth outcome focuses on ensuring a high performing portfolio that promotes the achievement of its respective mandates. In the five-year plan to achieve this outcome, the five key targets are—the alignment, resourcing, and implementation of the revised organisational structure; the implementation of an integrated Digitisation Strategy; the analysis of the DCDT’s strategic plans and APPs; and the implementation of the Performance Management System and the Integrated Digital Economy and Society Indicator Model and the monitoring thereof. For the period of 2020/21, seven key APP targets are set for the fourth outcome: the revision and aligning of the organisational structure to the mandate of the DCDT; the development of a Workplace Skills Plan and an integrated Digitisation Strategy; the monitoring of service delivery performance and compliance of state-owned entities (SOEs); the implementation of the Performance Management System for Independent Communications Authority of South Africa (ICASA) Councillors; the development of quarterly analysis reports on the SABC’s turnaround plan; and lastly the development of the Integrated Digital Economy and Society Indicator Model.

Budget and financial information:

Ms Joy Masemola, Chief Financial Officer, said the DCDT has expanded its programmes by separating ICT policy, research, and development from ICT information society and capacity development. Regarding the Audit Action Plan for the 2019/20 year, 76% of findings received have been resolved, and the remaining 24% are in progress as recorded on 31 March 2020.

During the 2020/21 financial year, the DCDT aims to spend R 3.39bn towards its departmental programmes as follows: administration (R 313m); international relations and affairs (R 60.8m); policy, research and development (R 69.7m); enterprise development and SOE oversight (R 1.75bn); infrastructure development and support (R 1.12bn); and information society and capacity development (R 72.5m). The following payments are scheduled for services or products: compensation of employees (R 348m); goods and services (R 431m); transfers and subsidies (R 2.5bn); and payments of capital assets (R 31.7m).

During the 2021/22 financial year, the DCDT aims to spend R 3.92bn towards its departmental programmes as follows: administration (R 267m); international relations and affairs (R 57.5m); policy, research and development (R 97m); enterprise development and SOE oversight (R 784m); infrastructure development and support (R 575m); and information society and capacity development (R 74m). The following payments are scheduled for services or products: compensation of employees (R 370m); goods and services (R 453m); transfers and subsidies (R 3.07bn); and payments of capital assets (R 15m).

During the 2022/23 financial year, the DCDT aims to spend R 2.64bn towards its departmental programmes as follows: administration (R 283m); international relations and affairs (R 59m); policy, research and development (R 103m); enterprise development and SOE oversight (R 829m); infrastructure development and support (R 396m); and information society and capacity development (R 75.6m). The following payments are scheduled for services or products: compensation of employees (R 386m); goods and services (R 465m); transfers and subsidies (R 1.77bn); and payments of capital assets (R 15m).

The slides distributed for the meeting detail the payment of the R7.44bn of transfers and subsidies over the three year period.

The Broadcasting Digital Migration programme:

Mr Nkuna outlined the initial plan for the Broadcasting Digital Migration Programme, spanning 13 months. The Digital Migration Advisory Committee will be advise the Minister and ensure coordination with the Directors-General. The interdependencies of the programme include the Universal Service and Access Agency of South Africa (USAASA), the South African Post Office (SAPO), SABC (for awareness campaigns), SENTECH, and ICASA. The Northern Cape, Free State, North West, and Mpumalanga are the priority provinces for the first phase, and 863 810 household installations are projected.

Discussion:

Ms Z Majozi (IFP) thanked the delegation. In terms of the Strategic Plan, there is no current performance management system for the ICASA councillors. How will it be evaluated whether the mandate of the DCDT is upheld and the achievements required are realised? Regarding the financial information provided for the 2022/23 year and the funds secured for the programme of ICT Information Society and Capacity Development [on slide 13], could the DCDT confirm whether the amount is R 75m or R 75 625 and whether it is designated for employees only? In the Audit Action Plan, there are two policies that are in the progress of being resolved under the programme of administration. When there are no intact policies in place, the Auditor-General of South Africa (AGSA) will focus on how the DCDT is spending its finances when there are no guiding principles. The Broad-based black economic empowerment (B-BBEE) Verification has not been resolved. Does this refer to a verification of the documents or to a tender that was contracted to someone without verification?

Mr C Mackenzie (DA) referred to the amalgamation of the two departments that was discussed in previous meetings. The DCDT reported that there were no retrenchments or losses in staff during this process. Is there only one Director-General? How many Deputy Directors-General are currently with the DCDT? It is noted that the previous Director-General of Communications is now stationed at the Project Management Office (PMO). How have the salary pay scales been adjusted, if at all, during this process? Is the Digital Transformation Act based on the Electronic Communications Amendment Act (ECAA) that the Committee engaged with in the fifth term of Parliament? If it is based on the ECAA, the DCDT is requested to provide clarity on which sections are included in the Digital Transformation Act. The COVID-19 pandemic is taking its toll on the funds available to National Treasury and [government] will be short of money coming in this year. Does the DCDT expect to lose any of the R 3.39bn budget it had been allocated before the start of the pandemic? Where will the budget cuts be made to make up for this shortfall within the DCDT?

Ms P van Damme (DA) noted that parliamentary questions had not been answered this term. The Committee was aware that the Minister of the DCDT was under suspension, but an Acting Minister was in place. She requested the DCDT to respond to the questions timeously. Has there been any loss of revenues to entities other than the SAPO during the period of lockdown? The Committee received a presentation by the State Information Technology Agency (SITA) in the previous week, and it was noted that there is a system that is freely available and secure for virtual meetings, but it has not been used. What are the reasons for not utilising this secure system presented by SITA? Have any funds been spent to acquire virtual meeting software for governments? This would seem to be wasteful expenditure given the availability of the system presented by SITA. There was a SABC Amendment Act submitted to the last Parliament and then withdrawn. Will the tabling of the new Bill include the same proposals made previously? The DCDT is requested to provide clarity on whether the proposals will include a decrease in the size of the board and if it will remove Parliament’s authority in appointing board members. The implementation of the Fourth Industrial Revolution Commission within the presidency will be an entity that the DCDT must oversee. Can the DCDT provide the Committee with an update on the progress made in that regard?

Mr L Molala (ANC) raised the concern relating to the presentation of the APP with the possibility of the budget being reviewed because of the COVID-19 pandemic. What is the value and logic for the Committee to adopt an APP that does not have a stable budget? There are five African countries questioning their neutrality on the 5G debate before the International Telecommunications Union (ITU). Questions regarding this will be addressed to the principals of the DCDT. The budget of R 3.39bn includes the funds from the amalgamated DCDT. Does it include the funds from the two previous departments? Out of the R 3.39bn presented, there is R 900m that constitutes half of the transfers that will be made to two entities. Can the DCDT provide clarity on the nature of these expenditures? The impact statement outlines the DCDT’s goal to ensure that citizens have access to secure, affordable, and universal forms of digital communications and technologies. What are the timelines for ensuring that Parliament has secure communication lines given the fact that the meetings of Parliament have already been exposed?

Ms P Faku (ANC) appreciated the presentation and the work done thus far by the DCDT. She requested that the DCDT engage with MultiChoice to address the high rates paid to this entity considering the subscriptions and reduction of fees.

Mr Nkuna responded to the MultiChoice request by stating that the process to obtain a reduction in fees starts with the actions of the Competition Commission and the obtaining of zero-rating of forms of telecommunications. The DCDT noted the need to start engaging with MultiChoice and will undertake this process upon consultation to obtain a reprieve for consumers and discounts, following which the DCDT will provide feedback to the Committee. He affirmed the statement made by Mr Mackenzie that no staff member had lost their job because of the amalgamation of the DCDT from the previous two departments. There had been savings in the sense of creating a PMO for the Fourth Industrial Revolution, which is assisting the DCDT as the savings would not have been possible if the two previous departments remained separate. There are six Deputy Directors-General within the DCDT, and one Director-General. The structure has been retained as one of the previous departments did not have any Deputy Directors-General. The Minister of Public Services and Administration approved the creation of a position of Deputy Director-General at the PMO, which is where the previous Director-General of Communications is now appointed for a three-month contract on a salary scale at Deputy Director-General level.

Regarding the Digital Transformation Act, it is different from the ECAA as it deals with issues of infrastructure as well. When the ECAA was withdrawn, the Minister indicated that the Department needs to take a holistic view of the ICT and the digital infrastructure sector. So some of the provisions of the ECAA will be incorporated into the Digital Transformation Act, while others will either be reworked or taken out of the new Bill. Two separate Bills will be presented, the first dealing with digital infrastructure and the second with digital transfers. It is exceedingly difficult to say which aspects of the ECAA will be included as consultation with the relevant stakeholders is still underway.

Regarding the potential budget cuts, it is a difficult aspect to predict. But if the Committee looks at what the DCDT’s funding is spent on, except for international travel, it is spent on SA Connect and the Digital Terrestrial Television (DTT) programme. The Department does not currently have the money for SA Connect, except for maintaining the 1 000 sites already installed. The DTT programme is also linked to the licensing of the radio frequency spectrum, and a budget cut would have a knock-on effect on its licensing. The parliamentary questions will be responded to at the proper time as answering was delayed by the disturbance of adjusting to the nation-wide lockdown. The entities affected by the lockdown period will be outlined in a follow-up presentation to the Committee with a differentiation between entities receiving direct appropriations and those that do not. There is an offer that government has received regarding a system for secure online virtual meetings, but departments are exploring other solutions as well. There is a need for services that can be offered free of charge due to high data costs, and the DCDT is engaging with SITA to achieve a long-term solution with a comprehensive plan. There has been no expenditure for online virtual meetings so far, except for payments to procure Microsoft Office packages to be able to access Microsoft Teams.

The SABC Amendment Act has the purpose of ensuring that the SABC has its own founding legislation. Questions will be answered when the Bill has been drafted. There is a lot of work being done internally within the DCDT with the SABC Amendment Act and the other proposed Bills. The essence of the State Digital Infrastructure Company Bill is to ensure that the state’s investments in the ICT sector are coordinated within and between each entity. Many investments within the industry have had the effect of distorting the market. Previously, the DCDT indicated that the Passenger Rail Agency of SA (PRASA), the South African Social Security Agency (SASSA), and Eskom should each have their own broadband capabilities operating independently. These are the matters that the DCDT are dealing with in response to the Fourth Industrial Revolution Commission. An interim report was released by the Competition Commission for internal discussion within government to do further work and tighten the aspects of these issues that are deemed as priorities.

There is value in presenting and adopting the APP at this stage as some of the measures are being implemented at the moment and there is the need to spend money on the ongoing projects while the DCDT waits for the response from National Treasury regarding a change in budget allocations.

Ms Joy Masemola (Chief Financial Officer) said that in the presentation the DCDT neglected to include the ‘000’ on the top of the tables outlining the budget and expenditure to indicate that the amounts were in millions. On the issue of the Audit Action Plan, the two policies referred to under administration are the funeral and bereavement policy and the sports and recreation policy. These had not been reviewed by the time the preliminary audits started. These policies were concluded by the time the audit was done, but not before the findings were given. On the question of the B-BBEE verification, the DCDT failed to submit the relevant forms within 30 days after submission of its financial statements and the annual report to the Auditor General South Africa (AGSA). Since this was the first time this change in procedure occurred, the AGSA noted that it would not be included in the annual audit report but was placed in a management letter for attention by the DCDT.

Mr Nkuna addressed the questions on the performance management systems. The DCDT were engaging with the Minister to procure the final product on the framework and methodology that will be used for the appraisal of performance.

The Chairperson noted that SITA had raised issues about secured platforms or software for the meetings during their engagements with the Committee.

Ms N Kubheka (ANC) requested an indication of how long the revision of the Digital Transformation Act and the State Digital Infrastructure Company Bill will take before the Committee can get an indication of its progress in this regard.

Ms van Damme stated that it is concerning that one of the DCDT’s entities has spent money to design a system for the government to communicate and that it is not being used. This must be regarded as a major issue. The DCDT had informed the Committee that the system had been in place for an exceptionally long time. It is crucial that available systems are used to avoid wasteful expenditure. Regarding the Bills outlined in the APP, the Department said that the SABC Amendment Bill, the State Digital Infrastructure Company Bill, and the Digital Transformation Bill has been submitted to Cabinet. What does the DCDT mean when saying there is nothing on paper yet? She asked for the DCDT to provide the Committee with a high-level overview of what these Bills entailed as this was submitted to Cabinet for consideration.

Ms Faku raised the issue with the ICASA councillors in terms of their performance. At what stage is the process to develop a concept plan for the measures it will implement to evaluate performance?

Ms Majozi noted the problem of non-compliance regarding the B-BBEE verification and expressed the need to ensure that it does not happen again and ensure accountability for such non-compliance. She requested the DCDT give the Committee an update and specify the timeline for finalising the implementation of the data and cloud policy.

Ms A Mthembu (ANC) welcomed the presentation from the DCDT. She asked whether the Digital Economic Masterplan caters for the current situation of the COVID-19 pandemic. Does it plan for the election period next year? A clear plan for next-year’s elections is paramount.

Mr Nkuna apologised for misunderstanding the question regarding secure online platforms and for referring to the current tools and solutions used by governments. With the leave of the Chairperson, he noted that the Department will respond to the issue in writing after consultation with SITA and other stakeholders, and the response will include the matters of Human Resources as well. He stated that the Bills will take a year to be finalised for submission to Parliament. During the first quarter now, the DCDT will prepare the Bills to be submitted to Cabinet. The purpose of the SABC Amendment Bill is to create a single statute that deals with all matters related to the SABC, instead of having it spread over various pieces of legislation. It is simply an amalgamation of the existing laws governing the SABC. Once the Bills have been submitted to Cabinet, the DCDT will reach out to ensure engagements with the Committee. Regarding the question on the measures for the ICASA councillors in terms of their performance and the question of the implementation of the data and cloud policy, these matters are still being finalised with the various entities. The relevant Bills have been developed internally with the assistance from National Treasury. All governmental departments are required to develop their Digital Economic Masterplans by June 2020 and the DCDT is engaging with different industry players to meet this deadline. This plan must be catalytic and cater for the aftermath of the COVID-19 pandemic. Regarding the elections, the DCDT has two roles. Firstly, is the role of the SAPO to ensure that every South African has access to addresses and resources to be able to vote? Second, it is the role of the DCDT to ensure cybersecurity during the elections.

Mr Farad Osman, Chief Director of Monitoring, Planning and Evaluation, DCDT, stated that the timeframes of the mentioned Bills are specified in the quarterly targets of the APP.

The Chairperson stated that he had informed Mr W Madisha (COPE), who had trouble connecting, that he could ask his questions in writing. DCDT responses will be included in the Committee’s record of the meeting. He asked the Department to respond in writing to the issues that they have not managed to orally answer during this meeting.

Briefing on the SABC’s Corporate Plan (2020/21 to 2022/23):

Mr Bongumusa Makhathini, Chairperson of the Board, said the SABC’s presentation on its Corporate Plan for the 2020/21 to 2022/23 years included a strategic overview of the economic, competition, and regulatory context in which the SABC operates, an outline of the SABC services and platforms, a summary of the budget planned, and a summary of the strategic pillars and goals utilised to realise the aims of the SABC Strategic Roadmap.

He noted that the SABC has now been able to fill all its critical vacancies and the Corporation is focusing on embedding a culture of high performance and ensuring a drive for growth. There is a 51% representation of women in leadership positions at the SABC. Women are represented at all critical levels and this area of transformation is continuously worked on. He referred to the R 3.2bn bailout money. This was requested to assist with three main priorities: the procurement of compelling content, which is critical for attracting revenue; the settling of existing financial obligations; and for the maintenance of the main infrastructure and buildings of the SABC. Lastly, he said that the true impact of the COVID-19 pandemic on the plans put forward will only become evident in the upcoming months, but that the Committee will be kept appraised of the likely impact when it is determined.

The impact of the COVID-19 pandemic:

Mr Madoda Mxakwe, Chief Executive Officer, SABC, said the SABC’s Corporate Plan (with its predetermined objectives and targets) had been drawn up before the start of the pandemic. The plans represented what SABC needed to do to improve its sustainability prospects. Since the COVID 19 pandemic, and the national response to it (referring to the lockdown and continued restrictions), the realisation of some of the intended targets was now in doubt. There had been significant impact in terms of the SABC’s revenue generation efforts (halting of productions, no public events, no sporting events, and limited trading) The SABC would endeavour to achieve the performance targets outlined to the best of its collective ability.

The SABC is expected to fulfil its mandate within an incredibly challenging context. In terms of the economic context, the initially anticipated ‘sluggish’ GDP growth will now be negative due to the impact of the COVID-19 pandemic. The debate now is no longer whether the economy will grow or not, but by how much it will contract. The downgrading of South Africa’s credit rating to sub-investment grade by the only remaining ratings agency that had it at investment grade makes for a more challenging time ahead for the private and public sector alike. Tax revenues can be expected to again fall below required target levels. Debt levels (national, corporate and consumer) will continue to rise. Global slowdown in economic growth and related foreign exchange fluctuations will significantly affect the core business of the SABC, as it needs to acquire content, sports rights, and technology. The reduction in industry-wide spend by multinational and local advertisers experienced over the last 36 months will continue. The country’s overall perilous state of finances will have a negative effect on the SABC’s revenue generation efforts, both in terms of advertising revenue and TV licence revenue.

In terms of competitive landscape, new entrants to the media sector and strategic partnerships will continue to compete for audiences and advertising revenue. Video and audio streaming and podcast technology make it easier for content providers to reach audiences directly in a cost-effective manner. Entry barriers are high for new broadcasters but low for additional stations. As a result, new licensees focus on the most commercially valuable audiences, thereby impacting the SABC's margins. Non-linear and over-the-top (OTT) broadcast technology make it easier for content providers to reach audiences in a cost-effective manner in a unregulated environment while generating revenue in the process. South Africa’s pay TV broadcasters enjoy limited regulation which creates monopolies in the marketplace particularly around sporting events, local content offerings without mandate, pricing of bouquets and control of revenue through the fragmentation of advertising revenue. The SABC also faces competition for the best content and talent. The increasing number of licensed radio and television channels has increased the cost of keeping talent, driven up the cost of local production and the acquisition of content rights, particularly sports rights.

In terms of the regulatory landscape, the SABC must contend with a regulatory and legislative framework that has not kept pace with the growth of digital technology, the convergence of media, technology, and telecommunications. The SABC will continue to be involved in various policy and regulatory processes that are intended to culminate in new legislation that will have implications on the Corporation’s revenue generation capabilities and business operations in 2020 and future years.

The strategies planned by the SABC, painted in broad strokes in the Corporate Plan, represent the SABC’s efforts to remain relevant, fulfil its public broadcasting mandate, and be able to it in a self-sustaining way.

The SABC’s services includes 18 radio stations, five television channels as well as a digital media offering. A 19th Radio Station, Channel Africa, is managed by the SABC on behalf of the Department of International Relations and Cooperation. To many who have limited access to information technology and other more advanced media platforms, radio remains a critical source of information, current affairs, and entertainment. SABC Radio commands a 73% share of all adult radio listening in South Africa. This translates to 29m adults who choose SABC radio stations as their source of news every week.

Television remains the medium of choice for most South Africans. The public broadcaster’s five television channels attract, on average, 29m South African adults (15 years or older) in a typical month. The SABC News and Encore channels are delivered through the satellite platform and reach 5m viewers and 6.1m viewers respectively in a typical month. The SABC has a digital media presence across the internet including social media, online video, podcasts, and streaming media. SABC television channels and shows, radio stations, news, education, and other brands have some of the most popular and engaged audiences in the South African social media landscape.

Mr Ian Plaatjies, Chief Operating Officer, SABC, stated that the SABC will continue to work to realise the aims of the SABC Strategic Roadmap. This will be done by focusing on implementing the SABC Turnaround Plan and delivering in terms of the six strategic pillars outlined.

Firstly, to ensure financial sustainability, the SABC aims to increase its commercial revenue, enhance the collection of television licence fees, control cash management, leverage its asset portfolio, and to pursue policy and regulatory changes to ensure its sustainability.

Secondly, to achieve a competitive and innovative multichannel portfolio, the SABC aims to know the audience, obtain compelling contents, and to monetise local content.

Thirdly, to improve its digital assets and availability, the SABC will improve its broadcast and transmission initiatives, implement digital migration, and enable an OTT and multi-channel environment.

Fourthly, to achieve a competent, dynamic workforce fit for its purpose, the SABC will adopt a fit-for-purpose structure which incorporates performance excellence and skilled talent.

Fifthly, to promote compliant governance practices, risk management and sound internal controls, the SABC will expands its business continuity capacity, enterprise-wide risk management, compliance, and evaluation standards, and improve its internal control environment.

Lastly, to promote strategic and sustainable partnerships, practices will be aligned with the SABC’s strategic goals in terms of revenue generation and the reduction of unnecessary or wasteful costs.

Ms Yolande van Biljon, Chief Financial Officer, SABC, briefly outlined the budget of the SABC for 2021. The following increases were expected: revenue (17%); advertising revenue (14%), content exploitation (30%); licence fees (25%); channel carriage (23%); and sponsorship (1%). The financial implications of the implementation of the Broll Property Audit recommendations have not be factored in yet as Ministerial approval is still awaited. No assumptions around the disposal of other non-core properties have been incorporated into the budget. No assumptions related to the migration to Direct-to-Home (DTH) platforms and the possibilities that presents has been factored in. Signal distribution cost and the payroll remains the major expenditure drivers that require optimisation. Expenditure is expected to have declined by 5% (R 311m) during 2019/20. The expenditure for 2020/21 is budgeted to be grow by 14% (R 906m). The growth is to fund revenue generating activities and relates to content amortisation, increase in commercial revenue (related royalties), restoration of licence fees collection costs, marketing costs and staff training. Lastly, budget risks were identified. These included non-adherence to the government assistance conditions, the exclusion of certain sport rights, an inability to execute the Turnaround Strategy successfully, operational cashflow constraints, lack of capacity to execute the Long Term Capital Plan, leadership instability, and vacancies in critical positions.

The SABC was conservatively projecting a budget shortfall of R1.5bn in the current financial year as its advertising revenue would drop significantly due to the economic impact of COVID-19 pandemic.

Discussion:

Ms Mthembu thanked the delegation from the SABC for the presentation. She commended the SABC for the 51% representation of women in leadership positions at the institution.

Ms van Damme thanked the Board of the SABC for the work they are doing to stabilise the public broadcaster which had long been in turmoil. Viewers were clearly returning to the SABC and had a degree of restored faith. She thanked the SABC for bringing their projected budget shortfall of R 1.5bn to the attention of the Committee. She believed this shortfall could not be avoided. She also thanked the SABC for its regular public service announcements relating to the COVID-19 pandemic. Do the reporters and journalists who work in the field have the information they needed and proper protective gear? Are there regular testing measures in place for the SABC staff? Regarding the closure of the SABC Encore channel, she noted the media reports outlining that it will no longer be available on DSTV after the end of May because of royalties often owed to actors. She enquired whether the SABC was making a loss through the operation of the channel. Have the royalties of the actors been paid and if not, can the SABC provide reasons for the lack of payment? She also asked for an estimate on how much is owed to the actors. The Committee discussed the situation with the channel and considering the discussions with ICASA on the potential exemption on royalties from local content, it is especially important that local productions are given the support because of the need for diverse entertainment. ICASA has addressed the Committee on the Regulations on sports broadcasting, which would be quite unfair to the SABC as the institution simply does not have the funds to buy broadcasting rights. Has the SABC given thought to this?

Ms Faku applauded the launch of SABC Education and the role the institution is playing in improving public service content during the COVID-19 pandemic. She requested the SABC to provide the Committee with a concrete content development strategy and plan to prepare for the increased rollout of the DTT programme even if it is tabled on confidential grounds. She commended the SABC for the 51% representation of women in leadership positions at the institution but noted that the requirement is 50% across all levels of leadership and not simply as an aggregate of the institution, overall.

Mr Mackenzie requested an indication of the Board of the SABC’s view of the 6% increase in salary asked by junior members of staff and the 5% asked for by the management staff. Prices are not going to rise to the extent that salary increases that were negotiated two years ago can still be implemented. How will the SABC adhere to the salary increases, if at all? Regarding the public service mandate of the SABC, he echoed the other Members by thanking the SABC for their remarkable job in reporting on the vital information of the COVID-19 pandemic. Coverage on the President’s speeches attracts millions of viewers. Why has the SABC not leveraged the time preceding the President’s speeches on the pandemic to generate revenue by showing advertisements or other materials? Coverage on the President’s speeches attracts millions of viewers. Does the SABC still have access to the archives it sold to MultiChoice and can it be used and broadcasted for the purposes of generating revenue? He applauded the resilience and continuity of the current SABC Board. Are there any pending investigations of any of the members of the Board? Regarding the bailout funds received from government, there are requirements attached thereto, including revenue enhancement and the request for separate financial reporting. The SABC had started to apply these requirements and he requested an update on its benefits for the Committee. The SABC was also required to identify core properties or sites and dispose of them, and he requested an indication of the progress.

Mr Molala requested a detailed report regarding the clean-up of the finances as outlined by the Chairperson of the Board of the SABC. This report should include the amounts of money spent on litigation and the outcomes of the cases in the Labour Court. He emphasised the point raised by Mr Mackenzie relating to the use of the COVID-19 pandemic and broadcasting opportunities to boost revenue. How will the SABC use the funds it raised in support of the COVID-19 pandemic and what amount did it raise?

Ms Majozi requested clarity on how the SABC will mitigate the projected losses because of the COVID-19 pandemic specifically? The length and severity of the pandemic and the nation-wide lockdown was unknown and the SABC was already losing income during this period. Regarding the television licences, the SABC was requested to give an indication of how the monthly payments are mitigated to lessen the impact of this expense on the consumers during these troubling times? She sought clarity and confirmation regarding the termination of employment contracts of sports presenters at the radio stations. Could the Committee be provided with full information regarding this situation and the reasons for the terminations?

Ms Kubheka requested clarity on the use of the bailout money of R 3.2bn. Was the whole amount exhausted or were there amounts left behind? She emphasised Ms Majozi’s request for requested clarity on how the SABC will mitigate the projected losses because of the COVID-19 pandemic.

Ms Faku requested clarity on why the 26% was outstanding in the audit of the SABC. There had been allegations of staff members being ill-treated in stations and the CEO spoke on the news regarding this matter. Could the SABC give the Committee a response on the impact in this regard?

Mr Makhathini responded to the question surrounding salary increases agreed to in the agreement signed in April 2018. The SABC was now debt-free, and none of the bailout money had been used to finance salary increases that had been granted to staff (6%) and management (5%) the previous month. Being confronted with the COVID-19 pandemic, the SABC must finalise its operational plan and the skills audit to engage with leaders of trade unions to find a way to ensure that it can be sustained from a financial perspective.

Mr Mxakwe noted that the projected budget shortfall of R1.5bn was for the full fiscal period and not only for the two months of the nation-wide lockdown. He responded to the request by Mr Molala for a detailed report regarding the clean-up by stating that the SABC will provide the Members with the details of the expenses relating to litigation and the outcome of court cases. The amounts lost in legal fees were significantly less than what the SABC lost due to its previous systematic collapse of its governance processes. Regarding the use of the time before the broadcasting of an important speech, it is important to keep in mind the technicalities surrounding the connectivity of live broadcasts and the regulatory aspect involved. Clients and regular advertisers had been withdrawing their ad spend and other income streams such as sponsorships as they battled to trade during the national lockdown. MultiChoice bought a licence to access the SABC archives, but these archives were not sold to MultiChoice. Thus, the SABC have total control and access to the content in its archives. Regarding the rights to sports broadcasting, the SABC made detailed submissions to ICASA and proposed an unbundling of rights and proper regulation of sub-licensing criteria. The SABC Encore channel was terminated not because of outstanding royalties, but because of DSTV indicating that they would not be extending their contract regarding this channel. The SABC was exploring other avenues of continuing the channel. Regarding the termination of the contracts of sports presenters, when these annual contracts end, the SABC had to consider the strategic direction and performance of each radio station to determine whether it was financially profitable to extend or renew the relevant contracts. There were only five outstanding investigations related to the Public Protector’s findings.

Mr Plaatjies noted that the reporters and frontline staff have been equipped with personal protective gear, they are regularly screened, and if there are reasons to suspect they have been exposed to the COVID-19 virus, they are quarantined and tested. The content development and strategy plan was currently under revision and would be finalised soon. He noted that advertising around the speeches of the President was highly problematic as guaranteed slots that cannot be capitalised, and that advertisers were very hesitant to promote their products and services at that time due to the inability to predict what the news of the President would be. The termination of employment contracts of sports presenters at the radio stations formed part of the SABC’s cost reduction, and was applied across all radio stations.

Ms van Biljon stated that the SABC had not yet dealt with the balance of their financial statement presentations. The performance management systems and policies would be attended to during the year. Management reporting was done monthly but was not visible yet in the Corporate Plan or in the SABC’s audited financial statements for the past year. The disposal of residential properties was awaiting approval from the Board and confirmation from shareholders.

The Chairperson requested the delegations from the DCDT and the SABC to respond to in writing to the questions of the Members they had not had time to answer.

The meeting was adjourned 

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