The Select Committee convened virtually for a briefing by the South African Broadcasting Commission (SABC) concerning stabilising and/or resolving its financial and operational challenges, to turn the broadcaster into a sustainable business entity. The Minister was in attendance.
The Minister indicated that the Department was determined to support the public broadcaster in addressing matters concerning its sustainability and profitability. The Minister, along with several Members of the Committee, commended the broadcaster’s progress in fulfilling their turnaround strategy, which had reached 93%. The main issues facing the SABC concerned its financial performance and regulatory and legislative hurdles.
The public broadcaster had received a qualified audit opinion for the 2020/21 financial period, which was said to have related to the completeness of their opening balance as of 31 March 2020. Notably, there was a 66% reduction in irregular expenditure, while fruitless and wasteful expenditure had dropped by almost R100 million. The entity assured that it took certain interventions concerning the supply chain management, including consequence management and strengthening their compliance department. They also developed guidelines and policies to deal with the prevention, detection and monitoring of irregular expenditure.
To reduce the total payroll bill, the SABC established three reduction strategies that included scrapping salary increases for the current financial year and discontinuing the practice of leave encashment for employees. To boost revenue and attract customers, the entity recognised the need to tailor pricing strategies to different customer segments. They also recognised the need to broaden payment points to allow address the issue of non-compliance of the payment of TV licences. This non-compliance had been noted as a big issue for the SABC’s revenue, further exasperated by the current TV licence fee system and Must Carry Regulations, which prevented the SABC from exploiting the economic benefits of its channels. The SABC also expressed concern that the current funding model did not sufficiently cover the SABC’s public service mandate.
Members expressed concern over the entity’s qualified audit opinion, and the SABC said that they needed to first ensure the completeness of the irregular expenditure register, which included testing the value payments of the 2019-20 financial years. The public broadcaster had a specific project put in place to address these audit concerns and were aiming for a clean audit in the 2023 financial year.
A Member expressed concern over the vacancy of critical posts, while another Member asked how the SABC would avoid making irregular appointments and recruit in line with policy and compliance procedures. The SABC said that vacancies arose from the retrenchment process of employees deemed to be occupying surplus or redundant positions, wherein many employees could not take up other positions due to factors such as lack of qualification or unwillingness to move to less junior positions. Many of the employees who opted for the voluntary severance package occupied critical positions that the SABC still needed but could only offer on new terms and at different levels. Therefore, when the SABC transitioned to a new employment structure, there was bulk recruitment and, in some cases, retention guided by mitigation plans that the SABC put in place.
Members asked for clarification regarding the SABC’s request for Public Finance Management Act exemption, considering that the Act is used by the Committee as a guiding tool for oversight. The SABC highlighted the impact on revenue that the some of the regulatory provisions were having. The entity was facing a backlog in acquiring content for its channels due to regulatory hurdles. They were also facing increased non-compliance in the payment of TV licence fees due to technological transitions that rendered the regulations restrictive to the entity’s revenue income. The SABC also emphasised the importance of being able to generate revenue from carriage fees, and stated that it had no intention of submitting a request to Treasury for recapitalisation. Therefore, their submissions for exemption from the Act were justified in the interests of keeping the entity financially viable.
The Chairperson opened the virtual meeting, welcoming the Members, the Minister and all the guest delegates. He then handed the meeting over to the Minister, for her introductory remarks before the presentations.
Minister of Communications and Digital Technologies, Ms Khumbudzo Ntshavheni, extended her appreciation for the Chairperson’s understanding of the Cabinet’s schedule in the Committee’s planning. She announced the presence of the South Africa African Broadcasting Commission (SABC) team, the Group CEO of the SABC and the Acting Director-General of the Department. She indicated that when they started, she took the opportunity to meet with all the boards of the entities that report under the Department of Communications and Digital Technologies (DCDT), so that the Committee could identify challenges and how they could be dealt with. Since it started from 05 August 2021, the Department had had a very good relationship with the board of the SABC, and it was trying to support the SABC on matters concerning its sustainability and profitability.
Of interest to the Committee was the stability of the SABC – for example, the matter of license fees that were owed by members of the public. The Department had supported the SABC on its request for amnesty on TV license issues. It was waiting on the concurrence of National Treasury so that it can take the matter to Cabinet, to make sure that there was such an amnesty. The Department believed that, if the SABC achieved the amnesty, they would be able to use the opportunity to improve their financial standing. The SABC was making very speedy progress in terms of their turnaround strategy, which both the Department and National Treasury had been pleased with. The SABC had so far met all the targets of the turnaround strategy, and was on its last lap. In addition, there were issues of local content that the SABC has not been fulfilling. However, the Department understood and appreciated that this would not be resolved overnight and was working with the SABC to make sure that they could get the local content right. It knew that it would be a gradual process, including the payment of the production houses as part of the work by the SABC to make sure that it pays all its creditors.
The Department would support the SABC with regards to their requests for exemption from certain Public Finance Management Act (PFMA) clauses because the exemption would allow the SABC to turnaround quicker in terms of their supply chain processes but also to turnaround quicker in terms of the positioning of the entity, thus ensuring that the SABC is sustainable. It was also working with the SABC to assess future trends in broadcasting and how it could support the SABC to get there.
Briefing by the South Africa African Broadcasting Commission
Opening Remarks by the Board Chairperson
Mr Bongumusa Makhathini, the SABC Board Chairperson, expressed gratitude for the support from the Minister. He said that the SABC was at 93% of the implementation of the turnaround of the SABC, which demonstrated the efforts and collaborative input received from the DCDT in getting the SABC where it needed to be. There were some areas that were still very critical to getting SABC to be financially viable, including the SABC’s regulatory framework and its unfunded mandate. There were a number of efforts that were being implemented to establish new revenue streams and to drive down costs such as signal distribution expenditure to Sentech, which had been a big cost line for the SABC. The audit opinion of the SABC had also improved as they were left with only one qualification. The Auditor-General (AG) commended that the SABC on the internal controls it puts in, and the improvement on the governance. He said that it was clear that a lot of work had been done to ensure that the entity got governance in place and dealt with whatever issues that may have resulted in the total collapse of governance that the SABC had suffered from. He was confident that from a leadership point of view, with the support from the Department and the commitment from the SABC leadership, the ABC was on track to a turnaround that would make all South African’s proud of what the SABC is able to deliver as a public broadcaster.
Mr Madoda Mxakwe, Group CEO of the SABC, said that the SABC’s turnaround plan is divided into three phases:
The stabilising phase:
- Development of a turnaround strategy
- Dealing with past failures
- Ensuring proper controls are put in place from a financial point of view
- Recruitment of a solid team
- Culture change
The enabling phase:
- Developing a relevant, vibrant target operating model in line with the 21st century
- Development of an organisational structure that can drive high performance
- Revision of business models particularly from a sales point of view
- Diversifying revenue streams
- Improving supply chain processes
The growth phase:
- Ensuring proper going concern
- Ensuring profitability of the organisation
- Acquiring compelling, relevant content
- Regulatory and legislative reform:
- Enhancing governance and risks frameworks
The SABC is now at 93% completion in the implementation of the turnaround plan. The key pillars that drive the SABC strategy:
- Financial sustainability and governance
- Content & platforms
- Human resources
- Transmission and digital migration
In the past three years, the SABC has ensured that there is a significant reduction in net losses year on year, despite the losses amounting to over a R1 billion. Although covid-19 accelerated the decline in revenue, there has been a decline since 2016.
Ms Yolande van Biljon, Chief Financial Officer, SABC, presented on the financial performance of the SABC.
- For expenditure performance, as reported over a three-year period ending 31 March 2021, the biggest cost drivers included:
- Employee costs - decreased in the three years under review due to moratoriums on recruitment, natural attrition and the section 189 process. In 2021 financial year, once-off cost of retrenchment amounted to R177 million.
- Content investment – decreased due to cashflow challenges and Covid-19 impact/lockdown.
- Signal and distribution – have mainly remained flat but remains a key cost driver.
- Operational expenditure – a host of initiatives over time have seen to a more optimised cost bucket, from more efficient processes to austerity measures and cost containment.
- On irregular expenditure, the SABC had seen a 66% reduction over the three-year period ending 31 March 2021. This shows how the SABC had engaged with this topic, how that their SCM processes have strengthened and how, with a combination of consequence management, they are changing the culture in the organisation. About 90% of the R111 million reflected for the 2021 financial year is multi-year contracts that are lawful.
- Fruitless and wasteful expenditure had dropped from R297 million in 2020 to R199 million in 2021. Contributors to the 2021 financial year expenditure include a lease in one of the SABC’s regions that was entered into in 2017, which is currently subject to an SIU investigation and interest that needs to be paid on repeat fees.
- Main interventions concerning supply chain:
- Implemented a number of checklists throughout the supply chain processes;
- Established a compliance department that performs compliance activities over a number of tenders;
- Involving audit team in ensuring the validity, accuracy and honouring of the supply chain constitutional principles;
- Permanently established leadership;
- Established a process where the organisation looks at lessons learned. For example, past audit findings;
- Established a frequent training and awareness process in supply chain and business at large;
- Engagement with Treasury on a number of issues including irregular expenditure;
- Developed guidelines and policies that deal with the prevention, detection and monitoring of irregular expenditure as well as consequence management of financial misconduct.
- Consequence management had taken place in respect of irregular expenditure identified in the course of the past three audits. The majority of that typically sits in supply chain.
- The SABC’s compliance department had been strengthened by the addition of two senior investigators.
- Almost all of the R2.8 billion reflected in the irregular expenditure opening balance pre-dates the 1 April 2018 period.
- The audit finding that resulted in the qualified audit relates to the completeness of the opening balance as of 31 March 2020. In that respect, the SABC has managed to confirm 60% of the completeness of the full population of payments for the period 2019-20. They have also managed to confirm the completeness of the current financial year for quarter one, and the team is currently dealing with quarter two and ensuring the completeness of the other 40% for the period 2019-20.
- Performance information reflected as red in slide 10 due to an error in one of the SABC’s systems, and that has since been corrected.
- Non-compliance, impacted by the harsh economic circumstances brought by Covid-19, has contributed to the decrease in revenue from TV licences.
Dr Mojaki Mosia, GE: Human Resources, presented on the SABC’s headcount and compensation costs.
- The SABC’s headcount, as at 31 March 2021, stood at 2 117 permanent staff, as opposed to the 3 465 pre-retrenchment.
- Positions in the SABC stand at 2 684, including vacancies.
- Most vacancies outside of section 189 were as a result of retirement.
- The recruitment process to fill all the 448 vacancies, as at 30 September 2021, through the restructuring process, is ongoing.
- The SABC is expecting the implementation of the three reduction strategies that were established to reduce the total payroll bill:
- No salary increases for the current financial cycle, which will save the SABC almost R100 million;
- Change in two elements of the conditions of services, including reduction of sick leave;
- Discontinued the practice of leave encashment;
- More than 60% of the current vacancies can be filled in the immediate period.
Mr Ian Plaatjes, Chief Operations Officer, presented on the SABC’s operational stability.
- SABC has been able to retain and attract new talent.
- Failure to implement DTH (Direct To Home) has been addressed by the ASO (Analog Switch-Off) project.
- Great progress in engagement regarding BDM (Broadcast Digital Migration) policy & ICASA (Independent Communications Authority of South Africa) regulatory reforms.
- Key risk in the SABC’s infrastructure, which is old and needs to be refreshed. There are aggressive technology renewal plans to address this.
Mr Reginald Nxumalo, GE: Sales, presented on sales and revenue generation.
- SABC has refined their strategic approach to be direct and intentional to specific customers and to simply their engagement. For example, SMME’s offering is low to cater for their limited budgets.
- Recognised the need to tailor pricing strategies and trading models to the different customer segments who all have different requirements.
- One key to the TV licence collection strategic approach is to broaden payment points such as online payments.
- Households make up 88% of the SABC’s targeted segment for TV licence collection.
Legislative and Regulatory
Mr Philly Moilwa, SABC Head of Policy and Regulatory Affairs, presented on the following legislative issues and changes required for the SABC to be self-sustaining:
- The Must Carry Regulations place a commercial burden on the SABC in requiring the entity to offer its channels to Pay TV licensees for free, while the SABC does not receive a benefit. Scrapping the regulation will allow the SABC to commercially exploit its content through carriage agreements and contribute significantly to the SABC’s revenues.
- The current ICASA licencing framework of SABC TV needs to be reviewed to account for a multi-channel digital environment and allow for flexibility in scheduling on radio and television.
- The ‘use it or lose it’ principle introduced by the DTT (digital terrestrial television) regulations sees the SABC at risk of losing its spectrum due to financial and other challenges. The regulations should allow the SABC to get channel authorisation from the Regulator like other broadcasters and not through a tedious public process that can result in delays.
- The current funding model does not sufficiently cover the public service mandate of the SABC, which is currently dependent on commercial revenue for its funding and therefore the SABC proposes the retention of a mixed funding model.
- Government funding should be ring-fenced to cover foreign services and for unfunded public mandates such as the opening of Parliament.
- The current TV licence fee system should be scrapped and replaced with a device-independent, tech-neutral public media levy for public broadcasting, which would levy all households, commercial enterprises, organisations and institutions excluding indigent households.
Ms W Ngwenya (ANC, Gauteng) asked about the progress to date regarding the SABC’s recommendation to government to consolidate and strengthen funding mechanisms for audio-visual content and to implement the development of content hoops in all provinces. She asked whether the SABC has managed to generate enough revenue from carriage fees. If yes, to what extent have they managed to do so? If no, why not? Has the SABC submitted a request for recapitalisation to National Treasury? If yes, could the Committee get an update on that request? How many households and businesses in the past financial year had paid their TV licenses, if TV licenses were still the SABC’s second source of revenue?
On the audit outcomes of the 2020/21 financial year, the SABC had received a qualified opinion with finding from the AG. This was not acceptable. When would the SABC receive a clean audit? Could the Committee get an undertaking that the audit opinion will improve at end of the current financial year? She thanked the Chairperson for allowing her to contribute to the meeting and for allowing her to ask questions that were in line with the Committee’s oversight functions.
Mr J Nyambi (ANC, Mpumalanga) said there is a serious improvement from what was happening in the SABC to what is happening currently. As advice to the SABC team, he said it would always assist the Committee for the SABC to come with something totally different in the way they present to the NCOP. He knew that the SABC has a footprint in all the provinces being represented. Therefore, it would be great if the Committee could get a sense of what the SABC is doing in all the individual provinces. This did not mean that the Committee should be deprived of information concerning the national level, but it would be good, for example, for a Member like himself, representing Mpumalanga, to see the status of the SABC in Mpumalanga.
On the issues of legislation changes required for the SABC to be self-sustainable: when was the SABC going to provide a timeframe for all these important issues? Because, to him, a timeframe is key to understanding what stage the SABC is in in their progress, what stumbling blocks they are facing and what interventions are expected from the Committee.
On the serious issues raised by Ms Ngwenya about the audit findings by the AG, what did the SABC mean when they said they ‘are working on them’? He wanted clarification on this statement to avoid making his own assumptions, to give credit where it is due, and be critical in a constructive manner.
On the issue of the moratorium, vis-à-vis the issue of posts that are being advertised, he said he was lost along the way because from the presentation there is the moratorium. But, on the other hand, there are people joining the Department. He wanted clarification regarding this moratorium.
On the issue of vacancies and the optimal performance of the SABC, he was of the view that there could be no vacancies for critical posts. There is a contradiction because it is said that critical posts have been filled, but as a representative of Mpumalanga, he knew that for almost a year, there had been no business manager, only one acting in that position. Several posts in that structure in Mpumalanga mirror this situation. He is not convinced that there can be a structure that can have people in acting positions and be performing at optimal level. He agreed with the presentation that once the SABC fills critical posts, they will be able to perform at a level that will be acceptable.
He said it would be good to attach numbers so that the Committee knows what the SABC is talking about, because once they use general numbers to refer to the issue of natural attrition and retirement, vis-à-vis the challenge of dealing with the structure as presented, it becomes difficult for the Committee. Members want to, at all times, without being apologetic, give credit where it is due but also be critical in a constructive manner where they see gaps. But in the absence of the correct information, the perception would become the order of the day. All in all, there was serious progress, but they had to tailor it in a way that would suit the NCOP. In future, the SABC needed to be allocated time in order to get justice from engagement.
Mr A Arnolds (EFF, Western Cape) thanked the SABC for the presentation. The Committee could see that the SABC is on track in terms of their turnaround strategy. It was commendable to see that they have met 93% of their targets. However, the Committee needed to get the SABC financially viable and in the right position in terms meeting their turnaround strategy. It was known that there was a decline in the advertising revenue, and it was well-known that the Covid-19 crisis had hit broadcasters around the world, who were largely dependent on advertising. When it came to the concern of jobs, he said that there must be a push for investment in content that will help the SABC to become viable. He believed that it was critical that content was prioritised to boost revue, audience and the SABC mandate. The Committee had always expressed concern, when the SABC came before it, over their supply chain management system. Now that they are hearing that there is a process of PFMA exemption, how was the SABC going to ensure that they do not find themselves on the wrong side again?
Regarding the SABC’s technology renewal plans, which remain a risk and concern when it comes to system failures, what progress had been made, if any? With reference to the policy and compliance, in line with the SABC on recruitment and selection process, how was the SABC going to ensure that they do not sit with irregular appointments again as was previously occurring? What progress had been made to recuperate money on irregularly awarded contracts? The Committee had also seen that there was a growth of 20% in the SABCs online payments in terms of their campaign of “paying less than 74 cents a day”. Could the SABC give an indication of how successful the launch and implementation of this campaign was?
Ms T Modise (ANC, North West) said that, when the Committee does oversight over the Department, they look to the PFMA as a guiding tool, especially in issues of finance; so, maybe the Department would provide a tool for oversight.
She noted that, on slide 31 of the presentation, the SABC proposed that Parliamentary event funding should be ring-fenced. Did the SABC have examples of other countries where this was being done? Looking at the SABC’s financial performance going forward, would there be a need in the near future for a capital injection from National Treasury or would they eventually be financially viable without the need for this capital injection?
Ms L Bebee (ANC, KZN) said, on slide 10 of the presentation, she noted that in 2020 there were 74 recorded immaterial findings by the AG and in 2021; this number increased to 79. She would like to know the reasons behind this increase. She asked whether there had been any money recovered as a result of the maladministration, following the investigation by the SIU. If yes, how much had been recovered or would be recovered?
Responses from the SABC
Mr Plaatjes responded to the Members’ questions regarding content. He said that the SABC had a backlog in terms of acquiring content, and were in the process of catching up. The SABC would be spending about R1.2 billion by the end of the current financial year to do this. The challenges around content acquisition and commissioning of content also speak to the exemption the SABC is requesting from PFMA. If the SABC wants to acquire new content, they had to do so as if it were a commodity. They were aware that, in the creative space, this was not possible. He said that the SABC comes up with strategies around the various channels that they have, and they want to acquire content that matches those strategies. But they cannot do that using the normal process in terms of advertising and taking the cheapest quote. This was the exemption that they were requesting and are hoping they would get to expedite ensuring that they acquired the rights content aligned to their strategies and all their other requirements such as local content, language and BEE. So, they were not deviating from their internal processes; they were just reverse engineering the process. Their current process started with their video entertainment seminal requirements followed by the SCM process that would do the assessment. What they wanted to do was to let the SCM process start off, do the evaluation and accreditation with the parties, followed by video entertainment, ensuring that the content they would be acquiring was in line with their strategy.
When it came to recommissioning, the contract is deemed to be an evergreen contract. What the SABC had to do if their content was successful is to apply to National Treasury to renew that contract and recommission it with the production houses that had produced that content. He said that that could take up to months before they got that approval. The SABC was not able to be nimble and sample, acquire and replace content if it did not work like their competitors. He said that they go through a process that is very tedious, and National Treasury often came back to them and asked additional questions; sometimes there was a delay. On other instances, they recommission the content in time so that there was not a break in transmission. Otherwise, what happens is that if they have a show like Uzalo, which has over 11 million viewers daily, and there was a break in transmission, they will lose that audience to somewhere else. By the time transmission came back, the audience numbers would have changed. That was the challenge they had, and that was what they would mitigate.
To stay compliant, they went out with an unsolicited offer and asked people to send in possible content for the SABC to consume. The last time they did this was three months ago, and they got over 500 responses. Because they have to be fair to everyone and stay within their compliance procedures, they had to work through every single one. This took the team two to three months just to work through and those were the disadvantages.
The issue of carriage fees is aligned with what Mr Moilwa presented around must-carry regulations. Up until now they were not able to generate any revenue from carriage agreements they have with other broadcasters. However, that has not precluded the SABC from concluding carriage agreements with companies outside of formal broadcasting. They had concluded their first agreement with Telkom with a carriage fee of R35 million a year over a period of five years.
Mr Nxumalo, in response to the questions on TV licenses, said that there are currently 1 696 210 households that are compliant. The total number of households in the SABC’s books is 10.2 million, which effectively means that 16% of households are compliant. He said that 88% of the SABC’s revenue from a collection perspective comes from households, so it is important to increase the compliance numbers.
In response to Mr Arnolds, he agreed that the markets were under pressure due to the pandemic as well as the social unrest in July, which had a domino effect. This is because, when real-estate has been impacted, advertisers withdraw their spent and campaigns, as they do not have stock and outlets. Markets came to an absolute standstill and that effectively impacted the SABC’s revenue significantly. There is an opportunity within the government segment for more spent in that currently, as a contributor of the budget, it was only carrying 10% of the budget, of the SABC’s R5 billion total revenue aspirations. Therefore, the government was lagging and was inconsistent in the manner in which it consumes products. Given the potential for partnerships and collaboration within the sector, it should have represented one of the lowest hanging fruits – be it the health department, transport, depending on the campaigns that were on board. In his opinion, had these numbers been met and exceeded significantly, this would have offset some of the calls to sponsor or subsidise certain things within the business. But it was important that the government look at the SABC favourably. He emphasised that the SABC had the reach in the country, with a 75% listenership from a radio perspective and up to 80% in some instances from a TV perspective, depending on the target market.
Mr Plaatjes, in response to Mr Arnolds’ question, said they had started with an aggressive programme with regards to their technology renewal plans, and the SABC had identified the top 20 projects. He said they have a fine balance between revenue generating projects as well as business continuity projects. He is responsible for regions. He noted the comment from Mr Nyambi, and assured the Committee that, for future presentations, they will have the regional components attached.
Ms van Biljon, in response to Ms Ngwenya’s question, said there has been no request submitted to National Treasury for recapitalisation. The SABC had no intention at that time to request for it in future. They are on their way to return to financial sustainability on their own steam. The critical factor to ensure that it is indeed on their own steam would be the alignment of the regulatory and legislative environment to their business environment. Therefore, they do not think that recapitalisation will be necessary in the near future.
On audit related matters, she explained that, before a clean audit is reached, an unqualified audit needs to be reached. There were three types of findings typically received from the AG. Annexure A results in a qualification. Annexure B was important but did not result in a qualification. Annexure C was effectively house-keeping matters. The SABC did not yet have Annexure C findings, which was required to get a clean audit. In the last three years, the audit team and business team had been able to shift their attention from annexure A’s critical, technical, and complex matters that see an adverse or qualified with findings or worse, disclaimer opinion. They had been getting to the next layer of information, financial controls and the internal environment in the organisation. The only findings that remained were the opening balances of the irregular expenditure register. For annexure B, on the slide entries, she said that it was typically expected and acceptable, as both the AG and the SABC started getting to the next layer of information and debt controls. Specifically, this year the SABC had a disruption because of the movement in personnel, as they were busy consulting in implementing the rolling out of the target operating model and everything that went with that. But those were the kinds of findings that are typically very easy to address. Now that they had settled down, those should not be the kinds of findings that expected to increase again.
In terms of how the SABC was going to the address the one remaining finding that resulted in the qualified opinion, she said that it was about how they ensured completeness of the irregular expenditure register. They had approximately R4 billion worth of payments in a year. They managed to test all R4 billion in 2021. They were currently at 60% in testing the value of payments in the 2019 and 2020 financial years. They had also already done quarter one of the current financial year. Once they were able to confirm that they had tested the full quantum of their payment universe in terms of a policy and procedure that they had developed in place, the AG would be happy to say that completeness was no longer the issue. That was where the SABC was moving towards. As they were cleaning up, they expected slight increase in the balance because they were not testing their whole universe of payments for what could have possibly been irregular. She said they were aiming for a clean audit in the 2023 financial year. The goal for the 2022 financial year was to get an unqualified opinion, subject to the SABC being able to confirm emphatically that they had addressed the completeness of the register opening balances. In that regard, they had a specific project with milestones that was running to achieve that. There were specific oversights in place, and they had support from their audit and risk committees as well as their board to help monitor the execution of that project.
On the PFMA exemption request, the SABC was not asking for total exemption from the Act. They were asking for exemption from a specific section of the Act for a specific part of their business, being content. Everything else would remain applicable. As they engaged with National Treasury to motivate for an exemption, they had to illustrate how they would honour the five SCM principles in the Constitution, and there was a lot of work and evidence being provided in that regard.
In response to Mr Arnold’s question on money spent on irregularly awarded contracts and recoupment thereof, she said that in probably more than 95% of the cases of irregular expenditure incurred, goods and services were received. Therefore, there was no recoupment necessary. The important step of the condonation process was to ensure that they got value. There was a team they had recently put in place, supplemented by investigators who are tasked with ensuring that they received value for what they paid for. Should they have not, then the next step would be a recovery process. They continued to work with the SIU on irregularly awarded contracts in the 2017 year in terms of their investigations, and those recoupment processes were unfolding. Should the court processes conclude, then recoupment would take place.
Mr Mosia said that the period of the recruitment moratorium was the period preceding section 189 of the Labour Relations Act, that is June 2020 until 31 March 2021. This was both morally correct and a legislative imperative, since there was contemplation of possible retrenchment of about 600 employees. These employees that were occupying positions that were either deemed surplus and/or redundant. There were many contributing factors to people not taking up positions and amongst those was lack of qualification. Some employees were not willing to move to less junior but available alternative positions. Others were concerned about the protection of retirement fund value, since the SABC was still on defined benefit instead of defined contribution. The unintended consequence, amongst other things, was an increase in the number of employees that opted for voluntary severance package (VSP) versus employees that were forcibly retrenched. Employees that faced forced retrenchment (75 employees) were significantly less than those that took VSP. Those who took VSP occupied positions that the business still needed, going forward, but these positions were on new terms and at different levels. The transition then took place, and they moved to the new structure, effective 01 April. When they transitioned, the total positions in the new structure were 2 684. Of those, they had 440 reported vacancies; to date, 290 appointments were concluded. Therefore, they had 150 vacancies, and this was typically what they referred to as healthy mobility of about 5% turnover. Under normal circumstances, the mobilisation happened over the period of a year. The unique thing circumstance in this case was that the 440 vacancies opened up at the same time they transitioned to the new structure. The consequence thereof was bulk recruitment, but they anticipated this. To avoid decline in performance and having the worst-case scenario, they had mitigation plans, including risk plans; these involved, amongst other things, securing the services of independent contractors and fixed-term contracts between one-twelve months, depending on operational needs, the complexity, and the shortage of skills. The cohort of people that were used as part of the mitigation plan consisted of highly experienced and competent individuals, some who used to work for the SABC for many years. Therefore, he assured Members that there was no need to be concerned about a possible decline of performance. For the sake of a conducive working environment and creating a high-performance culture, they wanted to fill all those positions. Lastly, acting positions were also an opportunity for those in junior positions to get the opportunity to grow. With regards to vacancies for business and regional managers, there were one or two vacancies in both and the SABC would close the year with almost all being filled.
Mr Moilwa emphasised that legislative and regulatory changes are a public process. Therefore, the SABC was dependent on the workings of the DCDT. For example, they had raised a number of challenges that relate to policy. They had made submissions, including one made on 09 June. They had had hearings with respect to a white paper with the Department, and they were waiting for them for direction on how they could take the process forward regarding the submissions made. There was also the Broadcasting Bill. They had made submissions on 31 August and October 2021 with the Department and made a proposal on how, as the SABC, they thought the provisions should change from the Broadcasting Act. So, the process was very dependent on the department. SABC would be engaging with the Department on their upcoming, joint strategy session.
He said that the Must Carry Regulations are run by ICASA. ICASA would issue, for example, a publication that said interested parties must make a submission. The SABC had made a submission in that respect and are awaiting a response from ICASA. In respect to Sports Rights Regulations, he reported that ICASA had finalised those regulations, but the SABC was not happy with those regulations and were weighing their options; action would be executed. In respect of Sentech, he indicated they had raised the matter with the Competition Commission, which would mediate between the two parties; the SABC was waiting to take the process forward with them. These processes were more externally dependent of the SABC, and they have done all they could on their end.
In response to Ms Modise’s question, Mr Moilwa said it was a common phenomenon for parliamentary channels to be publicly funded. He referenced the BBC Parliament and the CBC Parliamentary Television Network, which had influenced the legislation of South Africa’s broadcasting agent, as examples. These foreign parliamentary channels received grants as part of funding their public service mandate, because parliamentary channels are free-to-air channels and are meant to advance public service mandate objectives.
Adv. Ntuthuzelo Vanara, GE: Legal, Governance and Regulatory, SABC, responded to the question on the monies recovered subsequent to the SIU investigation. He said that, subsequent to these investigations, a number of actions or activities needed to unfold, as these irregularities would have had to speak to a number of consequence management for those involved. There were monies to be recovered, but the contracts that were irregularly awarded also had to be dealt with within the prescripts of the law. By way of feedback of the monies to be recovered, the SABC was standing at just over R20 million through a number of contributory instances. To name a few, there would have been monies misappropriated related to the bursary scheme in excess of R500 000. There was a success fee matter to the tune of just over R11 million. About R1.2 million of legal fees were paid by the SABC for personal legal challenges against one of the then officials of the SABC. He said that these processes involve the courts, and they assume a lifespan of their own. There were a number of matters; he assured that all the relevant cases were defended. This had had a direct impact on the turnaround time in terms of finalising these matters. All the matters were at a very advance stage, meaning that they were nearing the actual hearing of these matters in courts of law. The one matter concerning the legal fees paid for an individual’s legal battles had since been finalised. They were sitting with a court order by the SCA in favour of the SABC, which showed that they vehemently defended matters.
The SABC had entered into a repayment arrangement with the individual concerned who is currently repaying the R1.2 million in monthly instalment of R100 000, effective September 2021. The matters of the success fees and other matters were still outstanding. However, the SABC protected their interests so that when legal matters were finalised by courts of law, they did not sit with hollow judgments where people have used their monies, disposed of assets and yet they have nothing to show but a court order. To avoid this situation, they moved swiftly to first engage with the pension fund of SABC to have them exercise discretion in favour of them not paying the pension in interest of the affected individuals, pending the outcome of these recovery proceedings. Initially, the SABC did not get the consent and were forced to get a court order prohibiting the pension fund from paying out pension benefits of these individuals, of which they were successful. This had put the SABC in good stead to still recover the outstanding monies.
On the issue of contracts declared invalid, he said that the SABC had gone to court to have those contracts reviewed, set aside, and declared unlawful. The significance attached to this was that, once they succeeded in this regard, which they have succeeded in all but one of the cases, was the organisation was spared spending that was not subjected to the five elements of procurement, especially from a cost-benefit analysis perspective. When the courts set aside those contracts, the SABC is only liable for the operational expenses incurred by the service provider in delivering those services where they have been rendered. Thus firstly, they were guaranteed that the service had been rendered and they were not paying more than they were supposed to for that service, as the company concerned is not entitled to make a profit out of that transaction. That had saved the corporation a lot of money as a result of irregularly awarded contracts. Only two matters were outstanding. One related to the irregularly awarded Mbombela lease agreement in Mpumalanga,, where part of what the SABC was seeking to recover was the amount of money it paid for a floor that was rented but never used with no justification. There had been a great deal of success both from the monetary point of view but also from a re-invigorating the SABC’s governance processes.
Ms Ngwenya asked what the contribution of the government grant towards the SABC’s total revenue was. Were sports rights still a loss-making element of the SABC to achieve a public mandate? When was the term of the current board coming to an end?
Mr Nyambi commended the SABC team’s detailed response. He clarified that in his earlier question, saying that he was asking that the Committee be provided with a timeframe of when they can expect the legislation to be presented so that it can assist the SABC in becoming sustainable. He was not expecting to be told about completion; he just wanted to ensure that the Committee does not deal with the same issues repeatedly come year-end.
Mr Makhathini said the board took office in October 2017 and their term was coming to an end in October 2022.
Ms van Biljon said that the contribution of government grant to the SABC’s revenue was approximately 2%.
Mr Plaatjes said sports was not profitable at the moment due to agreements currently in place, which were signed many years ago at excessive prices, and due to the SABC’s inability to exploit them on just one channel. SABC had launched a new 24/7 sports channel with which they have the ability to exploit the current and new sports rights. All the new properties that they have acquired go through a very rigorous business case process, and the SABC does not proceed with them if they are not profitable. Thus far, all their new content has been profitable, and they were projecting that the business will become profitable. However, if they take into account the old contracts mentioned, the journey to profitability will take slightly longer.
The Chairperson said that any outstanding issues related to the Minister’s Department will be responded to in writing to the Committee. He thanked Mr Makhathini and his team for making a very comprehensive presentation. He commended the progress made by the SABC in terms of performance and issues around financial sustainability. He reiterated the Committee’s desire to possibly have another session concerning the SABC’s provincial footprint and the issue around vacancies. The last key issue concerned the legislative changes that will assist the SABC in becoming self-sustainable. The Chairperson said the Committee would engage with the Department and the Minister regarding these issues. The Committee would be ready to engage with these legislative issues in order to assist the SABC. The Committee wanted a continuation of the marked improvement in relation to audit so that all the issues that were raised by the AG were attended to.
The Committee adopted meeting minutes from 08 September 2021.
The Committee adopted meeting minutes from 10 November 2021.
There was an announcement by support staff that a decision has been taken by the Chairperson of the NCOP that the 16th International Internet Governance Forum meeting on 6-10 November will be virtual.
The meeting was adjourned.
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