SABC 2019/20 Annual Report & outstanding issues; Status report on SABC; with Deputy Minister

Meeting report

The Deputy Minister’s overview of the progress of the SABC

Ms Pinky Kekana, Deputy Minister of Communications and Digital Technologies, stated that the Department had been invited to table the SABC’s annual report and take the Committee through their performance. They had managed to achieve 59 percent of the targets they set for themselves. The presentation would explain what the challenges had been and what led to the net loss of R511 million. They had been reporting from time to time on poor advertising revenue performance. The Committee was aware of the employee costs and the signal distribution costs which remained an issue. The presentation would address how the creditors were dealt with when the Minister of Finance and the Minister of Communications intervened by bailing out the SABC with R3, 2 billion.

Another challenge was the retrenchment process in terms of section 189 of the Labour Relations Act. The Minister of Communications and Digital Technologies, Ms Stella Ndabeni-Abrahams, had invited the Minister of Labour to engage not only the SABC Board and the Executive but also the trade unions. The SABC had wanted to retrench 600 employees. Through those engagements, the number was reduced to 303 by making trade-offs. There were four alternatives for bringing the number of retrenchments down. One that was shared with the unions was freezing salary increases for the next three years, which would allow the SABC to save R12 million.

Another solution was leave reduction. The leave entitlement at the SABC was 35 days. It had been proposed that this be reduced to 28 calendar days, which would  save the SABC R13.7 million. The board had proposed a review of the sick leave policy and that workers be entitled to 36 days of sick leave over three years with no accumulation. The SABC was still waiting on the trade unions to engage.

The Deputy Minister said the Department was looking for quick wins for the SABC. Some of these solutions had legal implications and were not within the purview of the Department. An example was a proposed household levy which was within the purview of the Minister of Finance. The current law, however, allowed third parties to collect licence fees on behalf of the SABC, so they were looking into whether companies like Multichoice could be contracted to collect licence fees. This possibility was among the “low hanging fruit” in dealing with the unfunded mandate of the SABC.

The Draft White Paper on Audio and Audiovisual Content Service Providers spoke to some areas that had to be addressed. The main goal was changing the role of the public broadcaster to that of a public media service provider. There had been engagement with the President on the challenges confronting the public broadcaster and he would look into putting together a team that would engage the public to determine the funding model for the SABC.

Presentation: Messages from the annual financial statements of 2019/2020

Mr Madoda Mxakwe, Group Chief Executive Officer, SABC, provided an overview of the presentation.

Ms Yolande van Biljon, Chief Financial Officer, SABC, took the Committee through the presentation which provided a summary of the SABC’s financial performance; their revenue performance; TV licence collections; expenditure performance; a summary of their financial position; an analysis of irregular, fruitless and wasteful expenditure; an audit opinion analysis; going concern assumptions; the status of internal controls over three years; planned interventions to improve audit outcomes and ongoing intervention towards an improved audit outcome. 

Presentation: the extended consultation - section 189 update

Dr Marcia Socikwa, Board Member, SABC, took the Committee through a presentation on the section 189 process which addressed the key steps and matters of consultation and transitioning to a new structure.

The Chairperson asked Members to engage on the presentations. 

Discussion

Ms P Faku (ANC) acknowledged that a lot of work had been done but said she had concerns with the report that had been presented. The 2019/2020 performance of the SABC was not a good reflection, with only 59 percent of the targets achieved, continuous decline in revenue, a net loss of R511 million and an audience decline. The SABC needed to look at how to improve its content to attract audiences beyond the SABC platform.

On the issue of the fees paid by the SABC to its signal distributor, Sentech, Ms Faku said Sentech already gave the SABC a discount on its signal distribution costs. There needed to be continuous discussions between the Deputy Minister, the SABC and Sentech on the matter. It must be understood that Sentech must not suffer. It must be a fair and realistic engagement.

Ms Faku said that she was completely against the section 189 process. However, it had happened, and she acknowledged the intervention made by the Ministry. Initially 604 staff members were affected but now only 303 were affected. She appreciated the improvement. She appreciated the fact that the SABC was now also negotiating with the trade unions, which was an improvement. These engagements must continue, especially as they had been negotiating in good faith.

She was not happy with the audit findings. The CEO and CFO mentioned implementing consequence management. When the SABC presented to the Committee again, irregular expenditure must be highlighted in the audit findings. Material findings had been reduced to 97 from 214 in the previous financial year, but she expected this to be reduced to none.

Ms Faku raised the issue of the SABC mandate in terms of content and desired revenue. The SABC should never deviate from the public service mandate although they had had to generate revenue. The Committee had been told that TV licence collection was done internally but they had not reached their targets. During the section 189 process, the Department had raised an issue of upskilling staff. Had the Department received that information? Perhaps some of those people could be redeployed to other agencies, especially within the Department.  

Ms P Van Damme (DA) suggested that when dealing with the SABC the Committee needed to be more future-focused. The previous year, the Committee had been bogged down with several meetings discussing the same issues. She requested that they focus on ensuring the SABC was self-sustaining and free from political interference. She expressed dissatisfaction that the Deputy Minister’s presentation had not been made available to them beforehand. They had repeatedly asked that those presentations be made available. The Deputy Minister had made bold suggestions in her presentation, but had she gone into more detail, the Members could have engaged with her on those points. 

The unfunded mandate issue needed to be resolved. The Deputy Minister had spoken about implementing an ANC solution, and she should be careful about talking in that language. The Deputy Minister was representing the Government, not the ANC. She requested that, as a Committee, they put their political differences aside and did what was best for the country. The unfunded mandate issue had been spoken about repeatedly, but nothing changed. She requested that they prioritise a meeting with the National Treasury, otherwise in the next year they would meet again with the SABC having made a loss. Part of self-sustainment was understanding the fundamentals which related to coverage of events of national importance and which should be properly funded by the government, because they did not relate to the SABC’s commercial side.

The Deputy Minister had suggested that the SABC funding model should be changed to the Namibian model because it was Apartheid-based. She did not understand what this meant because there had been significant reform of the SABC since 1994. The Broadcasting Act itself which governed the SABC was promulgated in 1999. The Electronic Communications Act was promulgated in 2000. If the Deputy Minister’s report was made available to the Members, they could understand what she meant. She agreed that the funding model must be changed, but it should be done on the basis of understanding that a self-sustaining broadcaster was wanted rather than speaking of Apartheid. There had been a significant overhaul and the laws had changed to reflect a constitutional democracy.

The SABC annual report showed a steady decline in losses. It was great that they have done so, but the Committee was going to keep pushing them to do their best so those losses continued to be reduced. They must break even. They did not have to make a profit, but they needed to break even at the very least. Making a profit was great, but they must be in a situation where they were self-sustaining and did not need additional funding from the Government outside of the funding mandates and the money that was already being provided.

An increase in irregular expenditure was simply not good enough. It was R202 million and it had increased to R254 million. That spoke to a severe weakness in internal controls in the procurement process. The CFO had said a new Head of Procurement would be appointed, but this was not good enough. It required investigation and the Committee needed a detailed report of the irregular expenditure and which contracts were involved.  There has been a great reduction in wasteful expenditure, but the Committee wanted there to be none.

Ms van Damme said the Committee had not met with the SABC since the tabling of the Draft White Paper.  She asked for the SABC’s stance on a number of matters regarding it. She commended the free-to-air dedicated parliamentary channel. Amendment of the Broadcasting Act to reflect the SABC’s independence from the Minister was an issue they had been talking about for the last four years. If it did not happen perhaps the Committee should exercise its power and draw up Committee amendments to the Broadcasting Act. It was quite clearly not forthcoming, and the Deputy Minister’s presentation did not provide sufficient detail about it either. She asked that the SABC update the Committee regarding discussions on the Must Carry regulations of the Independent Communications Authority of South Africa (ICASA) and its sports rights regulations. 

Ms van Damme raised the issue of an additional licence fee to cover streaming services. In the previous year, an official from the Department had said this was not the intention but there were now indications that it was. If that was incorrect, then it needed to be publicly communicated. What was the SABC’s official stance on that? There was a very concerning section of the Draft White Paper on a code of conduct for streaming services. This was all well and good, but they were dealing with companies that were based outside South Africa such as Netflix and Amazon Prime. What the Committee should be focusing on was beginning discussions with those big tech companies. They had agreed the previous week to meet with Facebook and extend those discussions to Netflix and Amazon on issues specifically related to broadcasting so they could satisfy themselves that they were acting in a competitive manner. She expressed concerns about what appeared to be the establishment of a censorship bureau. If the code of conduct was not met, the Government would have the ability to blacklist certain streaming services. That absolutely could not happen, because it would start with Netflix, then Facebook, then Gmail, which opened the door to the Government being able to block certain internet services. That must not, in no uncertain terms, make it into the White Paper.

Ms Z Majozi (IFP) first addressed the performance report. On their strategic turnaround strategy, they should zoom in to ensure that irregular expenditure was at zero and that they did not incur losses like the one of R511 million. The SABC always received a qualified audit because it seemed no one took accountability of what was happening. The CFO had said that they would be employing a senior manager in the supply chain. That was needed so people would take accountability. She was happy with the section 189 progress so far. There was now political will. If there was no political will, they would remain stuck with the problems of the SABC. Although matters had not been fully resolved, she appreciated that there had been improvements. The engagements should not stop with section 189 and a turnaround strategy but should continue into ensuring the government took them seriously. The SABC was a State Owned Enterprise (SOE), yet it received less than three percent of its funding from the Government. She requested a report on what needed to be done to ensure that the SABC received enough funding to make it functional and sustainable.

Ms Majozi said she was not happy about the SABC achieving only 59 percent of targets, the irregular expenditure and the loss they had incurred. She was pleased that now they were at least moving in the right direction. She hoped the engagements with the trade unions would result in positive outcomes. The trade unions must play their part as well, so that even if they were not engaging now, they would in future. She supported imposing TV license fees on streaming services such as Netflix. She believed it was a good strategy and it would generate more income for the public broadcaster. She recognised that a lot of work had been done. It was not only about section 189, but rather about improving the SABC as a whole.  She recognised that the Deputy Minister had put more effort into the Board to ensure that they got to where they were today. The Committee would be looking closely at the SABC. On the section 189 issue, if some people had to leave, then it would be unfortunate, but they would just have to bite the bullet and move on in order to see that the SABC became sustainable.

Mr Z Mbhele (DA) said this was his first engagement on SABC matters as a new Member of the Committee and asked that the Committee indulge him a bit. He said he had a bit of a family connection to the SABC because in the late 90s and early 2000s, his father served on the Board of the SABC and his mother worked there as a human resources manager. The link went back 20 years or so. In reflecting on what was presented, it was the first time he had seen all those indicators and matrices in black and white in that way. The SABC had suffered a calamitous decline in those years, and the performance matrices were quite staggering. There was quite a long way to go in the turnaround.

Often when the Committee received quite detailed comprehensive financial reports, they could lead to getting lost in the details. He found it useful to view all of this data and information through a lens of systemic and structural analysis. He used the metaphor of household finance. In a household, the income had to balance out certain operational costs and they would have some discretionary spending and so on. When a household entered into unsustainable debts, they had to cut costs. There was no other way out of it, otherwise matters just became worse. They had to look at ways of making debt sustainable.

When a household had to go into debt rescue, which was effectively the equivalent of a bailout for an organisation like the SABC, it came with certain conditions and restrictions so that they were enabled to start getting out of unsustainable debt. They would then structurally prevent themselves from getting back into that hole. When they realised that their expenditure on a chronic basis outstripped their income and therefore they faced an ongoing and growing loss, they had to cut unnecessary spending. Was this view shared and internalised by the leadership and management team at the SABC? If that was not the case, then they were not really dealing with the root cause of the issue. The term, root cause analysis, seemed to be bandied about in the public sector but it did not actually become internalised and the real driver of how things were analysed, and decisions were made. 

Was the SABC a household that was taking its situation seriously in order to reduce unnecessary spending, climb out of debt and fulfil core obligations or were they going to be a household where the children's school fees were not paid, there was not food on the table some evenings and were going into arrears with their rent and other payments? That was the question. That was the metaphor the SABC needed to be centred on.

On the section 189 presentation, it was very clear that the process had been undertaken in a manner that was optimally fair and compliant. It had been exhaustive and accommodating and it really seemed to aim for a win-win outcome for all stakeholders. As much as downsizing was generally undesirable, it must be kept in mind that the imperative in this environment was ultimately the rationalisation of the SABC so that it became value creating, self-sustaining and commercially successful as a going concern. Ultimately, it was really a matter of whether the SABC was going to take its medicine now to get better or whether it would have to take a much more bitter medicine that required more aggressive treatments or possibly resulted in organisational fatality in the future. The Committee should note this presentation and commend the process and work so far. The management should be given the space to continue driving the organisational turnaround in a rational and effective way that was about the overall health and interests of the SABC. It should not concern narrow ends that might serve them in the short term, but in the long term kill the goose that was laying the golden eggs.

Mr C Mackenzie (DA) said he was heartened to hear the presentation from the SABC because when he looked at entities, companies or share prices, he looked at trend lines. Without exception, all the trend lines in the presentation showed the SABC was heading in a favourable direction. They could discuss and debate whether enough was happening here or not enough there, but he was heartened by those trendlines. It said to him that there was a board, leadership and management that was moving the organisation in the direction it should go. He congratulated the SABC, because they had been through a very difficult time and their load had been added to with the section 189 process.

On the collection of TV licence fees, there had been a general public outcry about the Minister's ideas around collecting from Netflix, Showmax, DSTV and Multichoice. It had given rise to comments asking whether one would have to get a TV licence for one’s phone.  Reading the national mood, it would be very dangerous for any politician to go in that direction as it really was a road to hell. He thought they should stay well away from it.

He would rather address ways of maximising licence revenue. As a holder of a TV licence himself, every so often he received a notification to pay a licence fee and then he paid it. Sometimes there was a fine attached to it, but the notification for that renewal was absent. The SABC had had his email address for as long as he’d had a television set. He imagined they would use some sort of digital means to notify him that his TV licence was due, but he did not get that. He asked for details on the licence collection process.

Telkom had come under fire from a number of users for its use of debit orders. An amount was pulled out of their bank account automatically by debit order submitted by Telkom or any other agency for that matter. Why did the SABC not implement the same system considering that they had users' bank account details? This would absolve people from the responsibility of having to check whether they’d paid their licences or not and would make the SABC’s income stream a lot more reliable. 

Mr L Molala (ANC) addressed the annual report. If the SABC said they achieved 59 percent of their targets, this was not a good performance. It was not even average. If they claimed to be improving, the figure should be around 70 percent. They were to be commended for reducing the planned retrenchments from 600 to 303 but he believed they could do still more in terms of engagement. At least there was engagement compared to the arrogance shown previously. Some good concessions were made by the trade unions and perhaps the SABC could indicate how that would impact on the net losses? It was unacceptable to continuously have a net loss of R500 million. How would concessions on freezing salaries for three years ultimately affect their net loss for the next financial year?  

Mr Molala asked for details about irregular expenditure. On the overall audit report, the SABC said they had improved by obtaining a qualified report with findings, but they had also received a qualified audit the previous year. It might be that there were less findings, but the outcome was still the same in that they obtained a qualified audit.

He suggested that in another meeting, they return to the issue of the unfunded mandate which his colleagues were hammering on. The SABC spoke about injecting business fundamentals, which was an interesting discussion that the Committee needed to have, possibly not at this meeting but at some point. If they wanted the SABC to be fully funded by the state, they needed to analyse the implications. That was why the Apartheid context had been referred to, because at that stage the SABC was fully funded by the Apartheid government and the results were that it became a propaganda machine. This was amended to give the SABC a commercial arm so that they were able to sustain themselves. If the three percent funding needed to be increased, they needed to look at the implications of that. This was perhaps a discussion for another day, but he raised it because it had been hammered on consistently by the Members.

On the section 189 issue, he was surprised to hear Members agreeing that retrenchment was necessary. He did not personally agree with retrenchment. He said he had received complaints about people being evicted from houses that were being disposed of by the SABC in the North West province. There were people who had been living in those houses for more than 20 years and had not been given the option to buy them. If that was true, why were those people being punished? He asked for clarification so that he could report back. He had received many complaints from people who were not given letters or even engaged and were just pushed out. Some had passed on because of depression.

Mr W Madisha (COPE) said he agreed that there had been progress, but the challenges needed to be engaged with positively so that the progress could accumulate. He asked for the SABC’s proposals on what the Committee could do to assist in their progress. This had been done before, before when the Committee took proposals to Parliament on what the SABC required to survive, such as the R3.2 billion they received. South Africa faced a terrible economic trajectory at the moment. The report before them indicated losses and the credits which showed that there had been important improvements compared to previous financial years. He asked for specifics regarding the engagements the SABC had had with trade unions and their responses so that the Committee could know whether the resolutions had actually been implemented, whether there were any unsigned agreements and which trade unions had not engaged with the SABC. Unless they could pinpoint what needed to be addressed, this would remain a very serious problem. If the trade unions were the ones that had not acted properly, the Committee should be told so that they were able to hold the representatives accountable. However, if the SABC had not done the work that was agreed upon, then they would blame the SABC management.

Ms N Khubheka (ANC) said she recognised from the overview the Deputy Minister had given that they were trying to seek solutions for the SABC. On the issue of the audit report, she appreciated that although there were challenges, they had still managed to achieve a qualified report. The 59 percent of targets achieved was low, although there had been improvement. The Committee might need to raise its voice sharply on irregular expenditure. The 78 percent target achieved for content was an indicator of how the SABC could work harder to achieve better. There had been an improvement on internal controls, but it could not be said that they were happy with the performance. They would continue to support the SABC but expected more from them.

On the issue of the unfunded mandate, there had been no response from the SABC on the matter, but they claimed the Committee was quiet on the matter. It might be best for the Committee to communicate with National Treasury to determine how best to fund the SABC. She wanted public broadcasting services to be declared as a whole, including foreign services, in a way similar to the BBC which was funded from direct taxation. The SABC’s commercial broadcast services must be run as a profit-making entity contributing to its public service mandate.  

She proposed that the President lead the dialogue on how to see the SABC in the digital era, and particularly in terms of the separation between its public service mandate and its commercial service funding. She proposed that they recommend the governance model of the SABC as a public broadcast service advancing the vision of creating a united, non-racial, democratic, non-sexist and prosperous service for this society. On the issue of the section 189 process, the SABC said they had managed to reduce the retrenchments to 303 but was it enough or could the Department do more to reduce the number further? In their constituencies, they could not support retrenchment.

The Chairperson asked for clarity on the section 189 process on the 303 retrenched workers, because the presentation had also said that there were vacancies. On the annual report, he asked for clarity on whether the SABC had the capacity internally to deal with the challenges. The capacity issue related to variation orders as well. Another area that needed attention was where they were paying service providers without contracts. It had arisen again in 2020. What recurrence of such issues would there be in the current year?

Responses

Deputy Minister Kekana stated that now that the annual report had been tabled, they must come back to the Committee and table an action plan which responded to issues of recurrence, particularly on irregular expenditure. The Standing Committee on Public Accounts (SCOPA) had been dealing with expansions and variation orders. They should be able to report to the Committee that their action plan addressed things that created irregular expenditure and dealt with the material findings by the Auditor General as well as other issues the Members had cited.

She echoed Mr Madisha in his question on where the SABC stood in the section 189 process. The SABC, through the board, proposed that they reduce the 600 retrenched workers to 303 and for that to happen, alternative issues needed to be addressed. Towards the end of the previous year, the Minister headed discussions on this issue with the SABC and the Minister of Labour. There had also been communication between the Minister of Communications and the SABC board. They were at the stage where the Minister had written a letter to the board and a response had been received. They would have to determine what came next if the four alternatives were not accepted, because they would have to go back to square one with the 600 retrenchments.

The issue of the unfunded mandate was a reality. Among the quick wins proposed by the SABC in the presentation was the need to engage the Government Communication and Information System (GCIS) to coordinate and channel government advertising to the SABC. The current Broadcasting Act allowed a third party to collect TV licence fees. They could look at which third parties could assist including, but not limited to, Multichoice. This solution spoke to the clientele and capacity issues and this was why they wanted the law to make it obligatory if it was possible.

A new Broadcasting Act was in its final stages in the Department and would go to the Cabinet in the next month. It would be tabled through the Cabinet Committees and once that was done, they would begin engaging.

She explained why they spoke about doing away with the Apartheid legacy. The reality was that the broadcasting industry was moving online aggressively and the SABC was trailing behind. The current market on TV was 36 billion whereas on the internet it was 80 billion. On HBO, the market was at four billion and streaming and podcasts were at three billion and growing very fast. They needed to change the operating environment of the SABC.

The main goal was to declare the SABC as the Public Service Broadcaster and once that was done, it would be able to be competitive. The old TV service, which was predominantly English and Afrikaans, the old Springbok radio and SAFM were funded. The SABC currently had budgetary constraints which forced them to close or merge regional broadcasting services. Under normal circumstances, they would want to expand those. They ran the risk of regressing because of financial constraints, rationalising channels, and marginalising indigenous languages. That was why they proposed a public household levy to assist the SABC. Only the Minister of Finance would be able to approve that. This was the proposal that they were going to put out into the public arena. 

They needed to get information on how to enhance the SABC Africa Channel to ensure that the SABC grew on the continent and on how to use the SABC as an instrument to connect Africa while being mindful of the different languages spoken throughout Africa. The Department and the SABC board were working together closely to determine their options. These were not conclusive and the Members could engage with the amendments in the Draft White Paper.

Mr Madoda Mxakwe, Group Chief Executive Officer, SABC, stated that they were fully aware that from a performance point of view, they were not where they wanted to be. However, they were not where they were a couple of years ago. Their turnaround strategy was a 36-month journey. Turnaround activities were monitored every single month and every quarter.  On the revenue generation issue, they noted the concerns but in a very constrained economic environment, the team had performed quite well in the past couple of quarters and they would share this with the Members when they presented. They had seen a lot of positive green shoots when it came to revenue generation. The television and radio sports divisions had outperformed their budgets by about 128 percent. For the first time in five years, advertising during prime time had been sold out. By December 2020, their revenue was seven percent higher compared to prior years. In December 2020 they had achieved 92 percent of target. All of this was happening in a very difficult economic environment, but it did show that the revenue generation plans that had been put in place were beginning to bear fruit.

They had implemented robust measures to contain operational costs. The idea was not just reduction of expenses but to ensure that the organisation was sustainable enough to carry out its public mandate. He agreed with Mr Molala on his point about their net losses but the trend on net losses was quite positive. It showed that year-on-year they were reducing them. On the audit opinion, there needed to be an appreciation that they inherited an organisation that was literally and functionally collapsed. They had moved from a disclaimer and were now on a qualified audit opinion with few findings. Their goal is to ensure that in the next two fiscal years, they improved significantly. Linked to that was their plan is to break even by 2023. The idea was not to be profitable but to ensure that as an organisation they were on a sound footing to fulfil the unfunded mandate.

On the matter of the unfunded mandate, they had to generate revenue from the private sector in order to fulfil what they deemed a public good. Their annual budget was about R1 billion a year and then they had the exorbitant cost of acquiring sports rights for half a billion. These were things that they needed to do as the SABC and why they needed to generate sufficient funding from the private sector. He noted the concern that they must deal in business fundamentals, but that was key to running any organisation. They had to ensure that they generated revenue, they had to ensure that they dealt with the high cost base and instilled proper governance. They had to look at all their TV, radio and digital platforms to ensure they were run properly. When they talked about instilling sound business fundamentals, they were not talking about commercialising the SABC, but ensuring the model they had was sustainable enough to carry the unfunded mandate.

On Mr Madisha’s question about what proposals the SABC wanted the Committee to make on their behalf, he said they had already submitted the SABC’s contribution to the Draft White Paper. At the heart of it was dealing with the unfunded mandate. Government funding was only three percent of revenue and that went towards the educational programmes as well as Channel Africa. It was difficult to go into the market and the industry to generate revenue for news.

On the point that the SABC wanted to commercialise, they understood that the SABC was a public broadcaster and they had no intentions of changing this. What they wanted to do, and what was in line with their turnaround plan, was to ensure that they ran a financially sustainable business that was able to carry the organisation in fulfilling the unfunded mandate.

Ms Yolande van Biljon, Chief Financial Officer, SABC, responded to a comment by Ms Faku that revenue was not what was desired in terms of their investment in content. She reminded the Committee that the yearend they were reporting on was 11 months ago and much had happened since then. The 12 months that preceded that were quite a dark time in the SABC. They had received a bailout in the second half of the year, and had to cut things and as a result there were issues in the department that was responsible for revenue generation. The revenue was not where they wanted it to be as a result of internal and external factors.

On the TV license fee collection, ideally one would always want to do whatever was possible to increase it, but in the past three years their collection average had been more or less the same. There were 2.5 million households that religiously settled their accounts. On the other hand, there was a trend where people paid only when buying a new TV set and not in subsequent years. They had implemented innovative measures to make payment as easy as possible, from Paypal to online payments. The problem was a culture of non-compliance among the 74 percent of people who chose to not pay their licences. It was also a fact that the organisation’s reputation had been quite tainted, and its content was tired. All these things were in the process of changing over the past two years.

Accountability was critical in the year that they were discussing. Many people were in acting positions. That did not lead to stable leadership that had a shared vision. All of that had changed significantly in the past 12 months. They were making efforts to recruit the Head of Supply Chain.

Ms van Biljon said Mr Mbhele spoke her language. He had described the example she often used. In the course of the past two years a few things had happened.  They had consistently targeted reducing luxuries so that they had been cut out entirely. They had made headlines about two years ago because they stopped supplying biscuits in meetings. Now, they just provided water, it was to that level of detail. They had also reviewed the way they acquired content. They had dealt with a number of properties that had been making losses for many years. They had reviewed the way in which they acquired sports rights which had resulted in having to deal with difficult conversations and situations. All of these things had contributed towards a cost base that was much more efficient. What remained was to work more on what IT systems could yield in creating operational efficiencies. It was about gaining efficiency by working with technology, which was where they were now. This allowed them to spend hours doing value creating things as opposed to things that were repetitive.

Over and above doing all of that, they needed to start selling. They had fantastically valuable properties and the largest radio audiences in the country, if not in Africa. They had a wealth of treasures lying there. They must be able to monetise it. She had been in various meetings with a number of big clients and the common message was that the SABC had audiences that could not be found anywhere else. They must be able to present their clients with attractive deals that were financially beneficial to them and in everyone’s interest. They had to sell the value which was created by bringing fresh and compelling content to their audiences.

On the TV licence issue, they were doing their level best internally and with technology and working with partners to make the process of collection as simple as possible, but in some way they needed to address the non-compliant behaviour in the nine million households that had licences. That was why there were suggestions in the Draft White Paper to broaden the collection base on the back of an organisation which was reputable, had integrity and ethics and which brought value to their audiences.

Of the R3 billion bailout they received, R2 billion was used to settle trade and other payables, and there was still a little left there. An amount of R800 million was dedicated to content. The Committee might have seen the new properties that were being advertised in the past few months.

The revenue performance was now nearing where they needed it to be and what they knew they were capable of. The impact of the interventions around their payroll was quite tangible in their corporate plan. The payroll reduction, not only as a result of the current initiatives, but as a result of there being no salary increases, was upwards of R300 million per annum. They had not yet factored in the three additional alternatives, but this could possibly yield another R1 million or so per annum. It would be very visible in their payroll in future and therefore help them move towards that needed break-even position.

On the disposal of the houses in Northwest Province, Ms van Biljon said part of what the SABC had to do was to divest of all non-core properties. The organisation had an extensive property portfolio which included a number of residential houses as well as vacant land, and those were earmarked for disposal following board approval and an audit by an external company which said what the properties were worth. They then also sought approval from their shareholders and the National Treasury to proceed with the disposal of these properties. Their relationship with the individuals that resided in these properties was purely that of a landlord and a lessee in the context of a lease agreement that was renewable annually. They had operated strictly according to that agreement, which was a legally binding document. Their approach in disposing of these properties was strictly according to the Public Finance Management Act, which required transparency, cost effectiveness and equity in terms of how they proceeded with the process. The methodology was an auction that allowed all interested parties a fair chance to participate.  It was very important for the SABC to realise the value in these properties and they were not able to accept anything less than market value. These were state assets. They had a duty to secure the best possible value they could, hence the approach that they had followed. There had been constant engagement with the individuals in these properties, even beyond the lease agreement conversations that started in October and November.

Ms van Biljon thanked Ms Khubheka for the acknowledgement that there had been improvement. She agreed that their single focus in this financial year and going forward was to eradicate misconduct. 

She responded to the Chairperson’s questions. If audit action plans were successfully implemented and addressed the root cause of the problem, then they should not see repeat findings. Unfortunately, in the past 20 years they had had a number of repeat findings, which meant that their audit action plans were not as successful as had been expected. They had developed additional interventions and brought in extra oversight from suitable individuals in the organisation to help the teams responsible for the audit action plans.  It was not a capacity issue. It was merely the ability to identify whether they really had tackled the root cause and whether their action plan actually spoke to that root cause. 

Variation orders and deviations were a theme that SCOPA was also interested in.  Measures had been strengthened to reduce these or where they had to take place, as permitted by law, to ensure that it was in highly exceptional circumstances and subject to evidence that they had tested the market appropriately. Their industry was quite unique with a select few service providers in South Africa and worldwide who provided them with the kind of technology necessary for broadcasting. They would do their level best to ensure each time that they honoured all the requirements in section 217 of the Constitution in their procurement processes.

The mechanism called payment without contract had been discontinued 11 months ago. The ones seen in the report under irregular expenditure were approved before that deadline. That specific theme had reduced significantly and a number of other themes that drove irregular expenditure had reduced to nil. They were in the unfortunate position where they had needed to add a category or two in the financial year under discussion. Their extensive plans were shared with SCOPA and the National Treasury.

Mr Ian Plaatjies, Chief Operating Officer: SABC, responded to Ms van Damme’s question on the Draft White Paper. The SABC had made a detailed 40-page submission. They welcomed the core principles of technology, neutrality, regularity, parity, and fair competition. Comprehensive legislative and regulatory change was needed for free-to-air broadcasters to be able to fairly compete with other audio and audio-visual content service providers.

In their submission, they had primarily dealt with the elements of the policy framework that directly impacted the SABC, its funding model and future sustainability. In summary, the SABC supported the principle of a household levy, but was not in favour of licensing or changing any devices or technology or charging for those. They believed that the dominant subscription-based broadcaster should be required to collect the public broadcasting household levy from subscribers.

On the unfunded public mandate, he said that rather than requesting an annual sum from National Treasury for public mandate programming, the relevant government department should allocate and reference a line item in the budget for the relevant public service content. There should be specific focus on sports of national interest and on news. For example, they supported the scrapping of the must-carry law. This would give the SABC an opportunity to commercially exploit its content through carriage agreements while achieving universal service and access services at the same time.

The SABC opposed the proposal to create a protected monopoly for Sentech as it conflicted with the definition and role of a common carrier as set out in the Electronic Communications Act. The SABC had made submissions to this Committee on the prohibitive and unsustainable high cost of Sentech’s analogue and DTT networks.

Dr Marcia Socikwa, Board Member, SABC, addressed the issue of upskilling and re-skilling of staff. She split it into two categories. There were employees who would be placed in alternative positions. Some of those employees would have some development gaps which would be addressed though a budget of about R10 million.  On the question of whether it would be possible for employees to be absorbed in other Government departments, they would have to know what they required. They should avoid creating hopes among those who had not been placed in alternative positions. 

Among the employees who had not yet been placed were some without formal qualifications beyond matric. There was a mismatch between experience and qualification versus confirmed competencies. The SABC was among the top paying organisations in the country, as seen in their audited annual report. There were clips making the rounds regarding the millionaires that the SABC had made. Their average salary was R1 million per annum. For departments attempting to absorb these employees on current terms and conditions, that was the average budget they were talking about for an employee.

On the issue of what organised labour’s response had been to the four alternatives on the table, she said that, unfortunately, they had not returned with anything. They had opted for undesirable alternative relief to stop the section 189 process. That was how they ended up in court. It was always difficult for organised labour when, in principle, it was against the entire process of staff optimisation. It would be very difficult for any organisation that was constituency based, which initially took a posture that they were going to stop the process, communicated that to their members explicitly and went to court twice, to now accept the process and communicate that to their members. It was a very difficult position.

Dr Socikwa addressed the question of what the SABC could do with regard to the four alternatives in a case where labour did not provide a positive response. She said her response to the question, and not an official SABC stance, was threefold: The National Treasury and the Department had already issued a directive to all entities in that sector to factor in zero increases in their budget going forward. If the National Treasury and Department had already issued a directive to that effect, she could infer that the Board would not find it difficult to give a mandate of a zero increase when the cycle for annual salary negotiations started in March/April. She predicted that the outcome would be a zero increase as per the National treasury or Department directives as well as the imperative of reducing the SABC’s bloated salary bill.

On the reduction of leave days for management from 35 days to 28 days, she believed that SABC management must do the right thing.

On the issue of the 303 redundant employees, she said there were 170 vacancies to be filled. Subject to competency and willingness to accept alternatives, that number of 303 could be reduced.  When affected employees were not willing to make a sacrifice relative to available alternatives, they would exercise their rights and take a severance package. She said she had already spoken about the challenge of qualifications. Some would have to commit to transitional development. Not all alternatives that were available were at affected employees’ current salary levels. There was a commitment to engaging affected employees at a personal level. They had also left the voluntary severance package and early retirement option open until the end of the month.  

Follow-up Discussion

Ms Faku asked for clarity on a few issues that had been raised. When the Deputy Minister responded on the issue Mr Madisha raised, on whether the Department of Labour was currently engaging with the Board and management, the Deputy Minister referred the question to the Board and the Board responded to it. What they heard was that the Department of Labour was not fully participating in the process. They wanted a response from the Department and not for the Deputy Minister to just refer the question to the SABC. Although they wanted independence for the SABC, they wanted to hear the Deputy Minister's proper response on the Department of Labour’s engagements. She proposed that in the next meeting they receive a proper briefing on the negotiating the Department had done with the Department of Labour.

On the issue of the SABC and GCIS, when they received a report from them it showed they were using most of their budget through the SABC.

Ms Majozi said that on the issue of the SABC, members should not only be politicians but leaders as well, because as leaders they must sometimes take hard decisions. Being a politician was something else and it was important, but you were either born as a leader or not. She was happy with the responses but asked that the SABC keep the Committee abreast of the processes with the trade unions. The Committee must speak as one and have a unified understanding of what was happening and why the unions were not coming to the party in terms of section 189 discussions.

Mr Madisha said he understood the proposal made by the SABC. They had identified the problem of the unfunded mandate, that the Government provided only three percent of their funding, and that was directed at education only. They survived on what they got from advertising. His position was that the Committee should have discussions on this matter. They had discussed this in the past and had adopted particular resolutions, inter alia, persuading the Department of Finance to give the SABC that R3,2 billion. He proposed that they should see how they could put their shoulders to the wheel in dealing with the State.

He had a question for the trade unions, although they were not present at the meeting. Why were they not getting involved in the resolution of this matter? The audi alteram partem rule meant they could not actually proceed. The unions were not doing what they were supposed to do. He asked that the unions interact with the SABC management and if once again there were serious problems, the Committee would have to see what it could do. He proposed that the Committee should sit with the Minister to determine how to deal with the issue of the unfunded mandate.

Ms Khubheka said that Members could not run from the fact that they were politicians. She asked if there had been engagements between the Department and the Minister on the number of workers being retrenched. This issue did not just affect the workers but the government itself because those people would immediately go to the street.

In his summary, the Chairperson said it might be important to first deal with the matter raised by Ms Majozi so that it did not arise again. When the Committee started discussing this matter, there were a particular number of possible retrenchments, and the discussions they had with the unions and other stakeholders, including the board as a whole, were part of the consultation process so that they could fully understand what was happening. It was important that they did not forget why they had such engagements because in the future they would have such engagements where they would meet different stakeholders to assist the Committee to make informed decisions. There had been a meaningful engagement. All the Members had agreed that there had been an improvement in terms of where they had been versus where they were now. Their goal was to have a sustainable SABC that would not collapse, while saving the livelihoods of SABC workers. They would be guided by those engagements in terms of the alternatives presented. Retrenchments were the last option after all alternatives had been looked at. He was clarifying the matter to ensure they did not discuss it again in the next meeting.

The Committee noted that this report related to the previous financial year, but also noted the progress that had been made in a number of areas. The problems were also accumulative and were coming from previous years. The Committee should support them in solving those problems. Regarding their action plans, the Committee had been told that additional measures were put in place. He asked that they be presented with those measures so that they might monitor their implementation.

On the section 189 process, they had been briefed on the movement in numbers and there would be further movement depending on what happened with the engagements and absorbing people into the system, but without creating the expectation that everyone would be absorbed. It was appreciated that the process was not yet complete. At an operational level they were identifying exactly which people would be on the final list of redundancies and what needed to be done on that score.

It should be clear that the SABC would remain a public broadcaster. Their recommendation should be that the SABC be declared a public broadcaster.  It was recognised that the SABC needed to generate other revenue. In the White Paper process there must be a balance between broadcasters supporting one other and creating space to fulfil the roles they each played.

There was a need for experts appointed by the President to assist in positioning the SABC as the public broadcaster. This became even more important if, as a result of the finances, consideration was being given to rationalising some of the stations which broadcast in different languages. Given the history of the country, not being able to maintain the diversity that the Constitution recognised could be a recipe for disaster. The SABC wanted to manage their finances, yet the SABC was a public broadcaster that must create an opportunity for this diversity to find expression or it would defeat the whole nation building project the country was engaged in.

Funding the public mandate did not mean changing the SABC into a propaganda machine. There were already laws that protected its independence. When they debated about this the previous year, it was not just a public exercise but a serious commitment that the Committee made to look at the funding model of the SABC.  There had been an agreement in the debate that the SABC was too important to be left to collapse.

The meeting adjourned after adoption of the minutes of previous meetings and discussion of the committee’s programme.