SABC 2021/22 Annual Report and related matters hearing; with Minister
Meeting Summary
After two failed occasions to meet with the SABC, the Committee convened to receive briefings from the South African Broadcasting Corporation on its annual report and financial statements for the year 2021/22, which covered all investigations and irregular, fruitless and wasteful expenditures. The Committee welcomed the new SABC board, which was interacting with the Committee for the first time and stressed that it needed things to turn around at the SABC. Although progress was noted and acknowledged by Members, their satisfaction was still minimal.
Over a four-year period, the SABC moved from net losses that were over R1 billion to R201 million in 2022. The net loss improved by just over R329 million, representing 62% compared to the fiscal year 2021. Revenue grew by R90 million, with a marginal increase in sponsorship revenue. This R90 million increase was impacted by the need to acquire the Sports rights for the Olympics for R122 million. One of the issues always highlighted is the negative impact of the public mandate whilst pursuing the commercial part because the SABC spends R2 billion annually to fulfil this mandate. If the entity was not required to fulfil its public mandate, it would have reported a net loss of R78 million – an 85% improvement.
Irregular expenditure has also improved, as well as fruitless and wasteful expenditure. In 2017, the SABC moved from just close to R700 million and by the end of 2022; it was sitting at R91 million. The issue of going concern was being monitored and measures were being put in place to mitigate it.
Members probed the implementation of consequence management relating to employees or officials or even entities and the rate achieved; various contracts of the SABC; whether management had the capacity to turn things around; recoveries from previous employees such as the former Group CEO; the status of investigations; if the entity would still have the capacity to investigate the transactions between 2012 and 2018 as required or recommended by the Auditor-General of South Africa; status of investigations of transactions between 01 April 2018 and 31 March 2022; whether executive management and the board were confident that the entity had capacity to shift from the going concern status
Meeting report
The Chairperson welcomed everyone present and the new board chairperson of the South African Broadcasting Corporation (SABC). He provided a contextual background of the Committee’s interaction with the SABC; issues raised by the Auditor-General of South Africa (AGSA), and the investigations conducted thus far. He said that the SABC had been an onerous task. The Committee has been there and hopefully, before the term ends, the Committee can visit again to do a proper close-out report on relevant matters of the SABC. In the Fifth Parliament Legacy Report, the SABC was featured, and it remained a feature of the Committee.
Overall, the SABC maintained a qualified audit opinion for 2021/22, with a qualification on irregular expenditure. The 2021/22 Annual Report indicates that it suffered a loss of R201 million in the year under review, which is relative to the R530 million recorded in 2020/21. Amongst other factors, the AGSA raised issues around material uncertainty that may cast significant doubt on the entity’s ability to continue as a going concern.
It recorded a positive net asset position. However, the cash flow from the operating activities was negative and the cash reserves were low. Irregular, fruitless, and wasteful expenditure remained a challenge for the SABC, with an accumulated balance of R2.9 billion and R150 million incurred in the 2021/22 financial year. It is worth noting that, on two occasions, the Committee had to adjourn the meeting with the SABC, wherein the audit outcomes would have been discussed. Today, the focus is on irregular, fruitless and wasteful expenditures and investigations.
This speaks to the material challenges which have characterised governance at the SABC. On 23 November, the meeting was compelled to be adjourned due to the board following the end of the previous board on 15 October, and there was uncertainty about the delegated responsibilities. On the second occasion (01 March 2023), the Committee was also compelled to adjourn the meeting due to vagueness around the designation of the Group CEO as the Accounting Authority.
The irregular expenditure (IE) is R2.9 billion, compared to the R5.4 billion of the previous financial year. The IE awaiting condonation subject to further investigation increased marginally by 1.5% in the 2021 audit. There are several issues that the AGSA has raised, hence the SABC is a permanent feature of the Committee. The expectation is that these wrongs must be rectified. It is the Committee’s fundamental expectation that there is a renewed focus on an audit turnaround plan. These matters are long overdue, and it is becoming a revolving door and unacceptable. It was important to frame it early on the term of the board that the financial management issues continue to be of concern to the Committee.
Minister’s Remarks
Mr Mondli Gungubele, Minister of Communications and Digital Technologies, appreciated participating in the engagement. He said that the Department is aware of many issues that must be resolved to improve the SABC, whether it is legislation or policy, which currently appears to be the main contributor in the space the SBAC is operating. Last night, there was consensus that, out of 120 actions they were supposed to carry, they carried 105. The outstanding ones seem to be the major issues, but they are outside the SABC’s control. The substantive of this issue is policy and releasing the spectrum. If the SABC Amendment Bill is implemented, the Department hopes that it will deal with the remaining material issues or at least 50% of them.
This Report is for the 2021/22 financial year; the entity will begin with 2022/23 in October.
SABC Board Chairperson Remarks
Mr Khathutshelo Ramukumba, SABC Board Chairperson, said that the board accepted the challenges that it inherited. It appreciates the work that must be done ahead and notes the progress made so far. The focus is on concluding and closing investigations to free the entity from its financial woes.
SABC Group CEO Remarks
Mr Madoda Mxakwe, Group Chief Executive Officer at SABC, said this Report was tabled in Parliament on 03 October 2022. The premise of the strategy is to accelerate revenue generation. Over a four-year period, the SABC has moved from net losses that were over R1 billion, which have been reduced yearly with the aim of breaking even and achieving profitability. Hence, it moved from over a billion to hitting R201 million in 2022. The net loss improved by just over R329 million, representing 62% compared to the fiscal year 2021. Revenue grew by R90 million during that year and saw a marginal increase in sponsorship revenue. This R90 million increase was impacted by the need to acquire the Sports rights for the Olympics, which was R122 million. One of the issues always highlighted is the negative impact of the public mandate whilst pursuing the commercial because the SABC spends R2 billion annually to fulfil this mandate.
Essentially, if the public mandate obligation was not met to acquire the sports rights, the SABC would have an operating position of a loss of about R78 million, which would have been an improvement of 85%.
Irregular expenditure has also improved, as well as fruitless and wasteful expenditure. In 2017, the SABC moved from just close to R700 million. By the end of 2022, it was sitting at R91 million. The issue of going concern is being monitored and measures are being put in place to mitigate this.
Briefing by the South African Broadcasting Corporation
Ms Yolande Van Biljon, Group Chief Financial Officer, SABC, took Members through the presentation and outlined the high-level achievement of the strategic outcome-oriented goals, which were initiatives undertaken to respond to the findings by the AGSA. She said that some of the salient matters highlighted included, but not limited to, 52% achievement on predetermined objectives; implementation of the turnaround plan, which at the time was at about 97%; how the SABC was able to reduce its losses from 2018; payments of TV licenses, which were billed R4.4 billion and collections were roughly about R800/900 million; the decline of the audiences, which has been stabilised in the current financial year; payroll being the biggest expenditure item line, though it has since been reduced, but the SABC still struggled to get beyond 18% and it affects the internal control environment; the discontinued loss-making properties; R200 million left of the recapitalisation; reduced overall opening balance of irregular expenditure and the in-year IE that is incurred, and how the long-term contracts contributed significantly; R91 million was incurred as irregular expenditure in the current year; the opening balance was the reason for the qualifications but the AGSA was assured that it will be addressed; 100% review of about R17 billion of payments were investigated and the processes to resolve them were underway; SABC continued to implement initiatives on the supply chain activities; the reviewed supply chain policy; fully functional loss committee that reviews all condonation before they go to National Treasury; lastly, payments without contracts, which was a practice found in 2018 but has since been discontinued.
[See the presentation for further details]
Discussion
Mr A Lees (DA) welcomed the improving trend at the SABC. He also welcomed the board appointments by the President. He zoomed into consequence management at the SABC and asked about the Mafoko Security Services. He noted that a schedule with the names was produced and that Treasury condoned that those names and the case numbers would be reflected on the notes. Who are the names of the personnel implicated in the Mafoko matter? Is the Treasury condonation approved or awaiting the publication of the names?
Ms Biljon said that the report flagged board members of the interim board at that point in time. It was four of them and it also flagged two of the executive management at the time. The process was still underway and she was certain she could mention them. The names will be published when the Tribunal issues a judgment and whatever it says will be applied accordingly.
Mr Lees asked if Treasury condoned Alona Vision and who were the officials implicated in it.
Ms Biljon said that Treasury condoned but it did not have the same conditions and the matter did not go to the Tribunal. It was condoned because of the consequence management that was applied. It was the previous Supply Chain Head and group executive for sales. The names were provided previously in the SIU’s report.
Mr Lees asked for the consequences for Madoda Shushu regarding Quizzical Pictures and if there were any recoveries from him for the irregular expenditure.
Ms Biljon said that he got a verbal warning. No recoveries took place. This was assessed to see if there was fraud and corruption and, in this case, there was none. The SABC received the services for what it contracted.
Mr Lees asked if the R11.5 million was recovered from the former CEO.
Ms Biljon said that R6.9 million had been received in the SABC bank balance in the current year. There is an arrangement, and the balance will still be paid.
Adv. Ntuthuzelo Vanara, Group Legal at the SABC, concurred with the CFO that over R6.5 million was received. The SABC froze the pension benefits for the individual concerned and that was the amount that came from the pension fund. The total amount, inclusive of the interest, escalated from the date of payment of the amount involved to the date of judgment of the SCA to R18 million. The SABC was in the process of getting the person to pay the outstanding amount or decide when the SABC received an application for the consideration of the SCA (Supreme Court of Appeal) order, which put the process on hold. SABC is waiting to reconsider the matter at SCA before proceeding further.
This matter had gone to the High Court, where the judgment was in favour of the SABC with costs. There was immediate leave to appeal to the SCA. The SCA dismissed the application for leave to appeal and immediately, on receipt of the Order, the Pension Fund paid over the money, R6.5 million. Days later, the SABC was hit with a new application for reconsideration until it received an Order from the SCA saying that it would reconsider the matter, and this is what put the process on hold.
Mr Lees said that there was still a possibility that SABC might lose, even though it was unlikely. The Courts must do their job as quickly as possible. He asked if the Telkom R3 million dispute and disciplinary process were resolved, which was paid to Telkom without a contract.
Ms Biljon replied that the SABC received services for the money paid, but everyone resigned and could not proceed with consequence management. For Quizzical Pictures, the amount was R26 000 and the process is still ongoing. The individual resigned but the SABC might consider opening a case at SAPS to pursue the matter.
Mr Lees asked if anyone was held responsible for rentals paid for unoccupied offices.
Ms Biljon said that all the individuals involved were no longer with the entity. The best thing to do is to recover the money from the landlords. A civil case will be pursued once the final ruling is granted and how much can be recovered. An engagement with the landlord will determine if there is a further loss. If so, the matter will be pursued accordingly.
Ms Lees asked if the debt collection fee for the NCC Group was recovered.
Ms Biljon said this came from invoices raised in 2021/22. Unfortunately, the original business process owner is no longer here, and the story goes beyond 2020. The investigations were still ongoing to ascertain who else may be responsible.
Mr Lees acknowledged the progress and the improvement that SABC has achieved so far. He asked if recoveries had been made from the missed flights and if it was done.
Ms Biljon replied that it was recovered in the 2023 financial year.
Mr B Hadebe (ANC) said that what is concerning about the board and management is that, for five years now, the SABC has been failing to deal with the issue of IE, and the AGSA says that the SABC has not taken all steps to identify and address the IE. The recommendation by AGSA was that management should continue with the process to conclude the completeness of the IE. The SABC had committed to complete the process by November 2022. He wanted to know if the SABC managed to conclude this process. If it is satisfied that, in the next financial year, will it be able to disclose all instances of IE?
Ms Biljon said that the new Treasury Instruction Note, issued in January 2023, no longer requires that the opening balance of IE be disclosed in the AFS but report in-year instances only. However, additional information is included in the Annual Report, although that is not audited.
The SABC has completed 100% of the population review of all vendor payments from 01 April 2018. When the Treasury Instruction Note was issued, the SABC was starting to engage with the AGSA in the period from 2018 to 2012. SABC was looking at ways to deal with the old transactions. Working with the AG, the first round of SOP was developed to do the work, and the AG was satisfied. What stopped the SABC from concluding the old work was due to capacity internally. It did not make the November date for the full population from 2012. It would have been completed by now if it was not for the Instruction Note. Now, all the capacity will conclude the 2023 work rather.
Mr Hadebe asked if the SABC would no longer be qualified due to completeness.
Ms Biljon said this would be the second year the AG would test the processes to ensure completeness. If the 2023 financial year is crossed, she will be more confident. However, she could not confidently say that there would not be something that pops up.
The Chairperson highlighted that specifics would be important to provide clarity on this issue. If it is with the auditors, it will be noted when the Annual Report is submitted that it does not all through the cracks. The audit will confirm.
Mr Hadebe said that, between 01 April 2018 and 31 March 2022, there were 387 irregular transactions, totalling R867 million. However, the SABC only managed to deal with 10%, which was 34. Is there any progress in dealing with the transgressions?
Ms Biljon said the SABC was at 51% of investigations concluded, with 54% consequence management concluded. R445 million worth of investigations had been concluded, and R423 million was still outstanding from the R867 million. Consequence management has been performed on R474 million, and R395 million still needs to be dealt with.
Mr Hadebe said that, on the AFS (annual financial statement), the AGSA has indicated that the statements that were submitted were not done in accordance with the prescript of the financial reporting framework. The SABC relies on audit processes to correct financial misstatements. When is the SABC going to completely deal with this matter and stop relying on the audit process to correct the financial misstatements? The SABC has professionals that should take pride in their work. If the AG can pick up material misstatements in such a short space of time, yet there is an internal capacity that fails to pick these matters up and submit something that is a serious call for concern.
Ms Biljon said that the main reason for the statement was for the completeness of the IE Register from 2012 onwards, it is a material adjustment that could be possible, but the SABC did not know at the time how much that could be. SABC had some discrepancies in the numbers in the AFS and supporting schedules, but this year that will not be tolerated and it is unacceptable.
The other challenging process was the actuarial valuations for the Pension Fund and Medical Aid. There was a timing issue there and did not have the correct amounts when SABC handed over the AFS. This year, this process was managed better. A quality assurance service provider was brought in to assist in reviewing the AFS to ensure compliance.
Mr Hadebe asked for the reasons why the head of SCM only stayed in the post for four months.
Ms Biljon said that she had health issues and that her family had relocated. The post has been subsequently filled.
Mr Hadebe asked for the latest on the latest identified MI (material irregularities) and the reasons for the delays in the Tribunal.
Ms Biljon said that the SABC was still waiting for the Tribunal outcome. She was not aware of any causes of the delays other than the workload at the Tribunal. The Mafoko matter was also quite complex.
Mr Hadebe asked if the SABC terminated the contract with Mafoko.
Ms Biljon said that the contract expired. The Mafoko contract was not an unlawful contract, unlike the Mbombela contract, which was declared unlawful. There was no request to declare the Mafoko contract unlawful and set aside. The issue here was on the SABC’s side.
Ms Biljon said that, for the Mafoko contract, the SABC is waiting for the outcome of the judgement. Mafoko has since challenged the SIU report, and the matter is now before the Tribunal. No one that was involved back then still worked for the organisation.
Mr Hadebe encouraged management to continue the good work to improve the state of the SABC. He asked if the chairperson of the SABC board was confident that the issues raised by the AGSA would be addressed by management in the audit for the current financial year.
Mr Ramukumba said that the assessment of the board is that there is progress. The view is that the SABC should try and move ASAP to close these matters. Some of these matters date back to 2017 and 2018. The capacity internally should focus on the present and taking the entity forward. The ARC has met and engaged on some of the issues already.
The Minister stepped in and said it was his view that most of the time, the SCM capacity would not be an issue if the controls were in place. If controls are not in place, it is easy to run behind capacity.
Ms Palesa Kati, chairperson of the Audit and Risk Committee at SABC, said that, with management’s cooperation, the ARC had asked very difficult questions. A strategic plan was being devised, which will assist. The issue for the ARC is the revenue part of it. Secondly, the public mandate issue is also causing sleepless nights. Overall, the interest on recoveries is high, and ARC is asking that, whether people have resigned or not, they must be found and follow through. These are some of the measures being pursued. Though the new board inherited these issues, the board was working tirelessly to ensure the financial sustainability of the SABC.
Mr Hadebe sought clarity on whether the board was still in doubt about the issue of the going concern.
Mr Ramukumba replied that this had been an area that the AGSA has been concerned about for the past couple of years. The board does not expect things to be different for 2022/23, and there may be a sharp focus on it for 2022/23. However, the SABC will still be operating within the next 12 months, and the AFS are prepared on a ‘going concern’ basis. Discussions with management on this must be packaged, and a convincing case to the AGSA on this matter must be made.
Mr Mxakwe added that it is a huge concern from a commercial viability point of view. The audience ratings declined significantly by 40% due to the analogue switch-off, which affects the ability to package the audiences to sell to various clients. The Broadcast Research Council of South Africa identified this as a risk for the SABC. For example, about 14 months ago, Uzalo was sitting at just over 10 million viewers per night, and now it is half of that. Clients would not want to pay more for declining audience ratings, which affects revenue generation.
This was discussed with the Minister, and the regulations are not helping. SABC is obliged to advertise for 12 minutes of every hour and most competitors are not subjected to that. About 48% of the television programmes are geared towards the unfunded public mandate but this does not sell in the market. For radio, only 20% is dedicated to the unfunded public mandate. This affects the SABC, hence the finalisation of the SABC Bill needs to be done.
The Chairperson noted that the point on the issue of the public mandate versus revenue generation and what comes as a conclusion is that the SABC would need to be bailed out. This may be at the heart of the turnaround strategy, which the board needs to drive. The Department, with all the concerned parties and statutory bodies with a role in this, should be brought in. Even the National Elections will come with a burden of its own advertising requirements, which will be changed if the current Electoral Amendment Act stands as far as independent candidates are concerned. However, it has been taken to the Constitutional Court for issues around Constitutional muster. The competitors do not have the obligations that the SABC has ceased with. The issue is that the taxpayer carries this burden.
The Minister said that, although 105 is implemented, it does not do much to unlock bigger revenue. The bigger revenue lies in regulations in the law, which includes releasing the spectrum. The Department is deliberately ceased with this matter. Until these issues are resolved, the kind of demands expected from the SABC is against the Department doing these things timeously. A lot of money is locked in the policy and the release of the spectrum. The institutional competencies have been admitted to, and measures are being put in place to resolve them.
Ms V Mente (EFF) touched on the latest remarks pertaining to the legislative demands being embarked on to change the status quo. She said that the SABC has a ministry for a reason, because it is a public entity. Thus, a public mandate that it carries must be accomplished. The SABC’s business model cannot be compared to the private sector nor can it depict what the private sector is. It cannot be because it is a public entity. Its business model must be suitable to the needs of a public entity. Hence, it is important that people must appreciate that it is not a business company that is looking for profits but how it can deliver its public mandate. The policies and legislation drafted must speak to that public mandate, and the SABC is not like any other entity.
If the SABC must be bailed out, it will have to be bailed out but on the condition that the internal controls, capacity, and systems are resolved. Therefore, shifting the SABC to a private operating machine is not going to work because it is not.
The Mafoko issue was said to be on the side of the people who handled the bidding process at the SABC. The bidding process is not only done at one level and ends there. Could all those people that were involved in the bidding process get it wrong?
Ms Biljon said that the right bidder was recommended, and the decision-making bodies that came after the BAC made different reasons. The process up to the bid adjudication committee was regular. There are certain things that happen beyond that.
Ms Mente said there are now people challenging the reports of investigations, and the state had to waste money through the SIU and SABC wasted money through investigations. Now, the same matter must be litigated in court. Who overruled the outcomes of the bidding committee? If ever those people are challenging the outcomes of the SIU and the SABC, at what point are we going to stop using the state’s money over something that a person did for who we have no clear explanation as to what happened to them?
Ms Biljon said that the bidding process was overruled at the interim board level, and they believe they were justified in why they chose bidder number two instead of the recommended bidder number one. She confirmed that the State money is not being used for these challenges.
Ms Mente said that the IE has not been disclosed to its full extent.
Adv. Vanara clarified the SABC’s question regarding the Mafoko matter and said that after the SIU investigation was completed, the board conceded the report and agreed with the findings of the SIU. It was agreed that the agreement was to be set aside and that the monies due to the SABC must be recovered. This is the position of the SABC in the legal proceedings. Those opposing the SIU findings have lodged their own application to challenge the findings and are doing so from their own pockets and the SABC has been awaiting judgment on this since 11 May 2022.
The Chairperson said the courts must also wake up and move with agility on these matters because they hamstring the entities.
Ms Biljon said that the full disclosure of the IE by the AGSA meant testing every transaction dating back to 2012 to determine whether those payments were regular. The SABC is at 100% completion and nearly R18 billion worth of transactions have been tested, from 01 April 2018. The team was busy dealing with the period, before that period, up to November 2022, but was not able to do the 100% completeness check on the process. The Treasury Instruction Note came in January 2023.
Ms Mente asked if the same reflection would not appear in the upcoming annual report.
Ms Biljon said that the SABC is no longer required to report the opening balance in the AFSA but the activity of IE during the financial year. However, this will be dealt with in the Annual Report, which is not subject to audit. For the current year, the IE investigated was about R35 million.
Ms Mente said that, according to the Treasury instruction and its limitations, it is not going to provide the full reflection of the financial expenditure of the entity. An entity that is still sitting with previous balances must still be cleared. How is this going to be dealt with to its full extent to ensure everything is accounted for?
Ms Biljon said that now that the SABC has concluded the tests for the past five years, it needs to deal with the period from 2018 backwards. The AGSA and Treasury are engaged continuously on this matter until they are satisfied. The work continues for the period pre-2012.
Ms Mente said that, on two occasions, the meeting was postponed because there was no board. Some of these issues were under the current management’s tenure. SABC is at 54% in terms of consequence management. In the process, people resign and leave the entity while others are employed elsewhere. How is management dealing with instances of employees that were no longer with the SABC?
The CFO said the SABC has capacity issues that stopped the investigation team. If there is fraud or corruption and enough for civil litigation, the SABC will still pursue those matters. Unfortunately, if a person left and it was negligence and was dealt with through the DC process, then it can no longer proceed with that. It is a general concern in government that people resign and move to other departments.
Ms Mente said that there was room to apply what happens in India. In India, you cannot go anywhere if you are ever charged. Legislation must be changed, and people with cases against them should not be allowed to resign or move to another department. A private Members’ Bill will be introduced to this effect, and she asked that this be conveyed to the Cabinet. This becomes a hindrance in getting the state and entities correct.
The SABC did not disclose the state of deviations – about 51 contracts and R11 million was on deviations. What is being done about this now and the people responsible, even when the National Treasury did not approve the deviation?
Ms Biljon said there could be a good business reason, and planning has been improved around deviations. The largest one was purely due to bad planning and the investigation was fast-tracked and consequence management was applied. It was up to the Accounting Authority to approve deviations or not, subject to reporting as per the guidelines. The SABC has updated its policy on dealing with deviations and expansions. The discipline and the culture in the organisation are that this is not a norm. If it is extraordinary and due to bad planning, it is flagged, and steps are taken. Instances have been reduced but there are also instances where it may be justified within policy, legislation and guidelines.
Ms Mente said there was an instance of deviations where a COO over a virtual system justified a deviation that could not have been prevented over a matter of a system or software required for broadcasting and could not have been stopped. However, a person who was supposed to have overseen the process of procuring new software did not do so. What must happen in this case?
Ms Biljon said that, in one of the instances, the investigation was fast-tracked to indicate who was involved and followed up on consequence management swiftly, and this was reported.
Ms Mente said that if a service is being outsourced, officials have diaries and know at what point they need to start procurement processes and timeframes are known. Yet, at the time when the procurement process had to commence, someone’s alarm rings, yet that person is overseen by someone else. At the executive level, can Members be assured that the SABC will not be held at ransom by someone who fails to procure a system deliberately for whatever reason and at a price that is not even reasonable, compromising the laws guiding procurement?
Ms Biljon said there has been an automated contract management system for about three or four years and it has been functioning well. The contractor owner will get a notification before the contract expires and the team started adding officials to that list because of names that change. There is no excuse anymore. SCM also has service-level agreements with the main clients. Meetings occur once a meeting to review the status of contracts and tenders. A recent improvement was that a sourcing specialist presiding over a tender process would know if the process is going to take longer and should initiate deviation sooner to avoid unjustified deviations.
Ms Mente asked who the person that was responsible for the deviation to avoid blank screens was.
Ms Biljon said that she could not recall the specifics, but it came to the BAC and they had a dim view of the motivation given and the BAC was emphatic about it because it was going to amount to IE.
Ms Mente asked if that was enough punishment for a person who let the system slip and only be told consequences would follow.
Ms Biljon said that outcomes cannot be preempted because people have rights. The recommendation to the executive or line manager is to proceed with the consequence management, and they must consult with the SABC’s disciplinary policies on what needs to follow. The last Control Committee ensures that there is a level of consistency depending on the nature of the transgression.
Ms Mente said getting a list of the deviations would also be important. Treasury will also be requested for such. When SABC was in trouble and a turnaround strategy had to be implemented, it was mostly attributed to the wrong direction and bloated staffing that people must be retrenched. Yet, the systems are not closing in the resources of SABC to be effective. During Covid-19, people protested after being told they would be retrenched for things they were not responsible for. “We cannot attribute the failures of the system to the workers when they are not securing the purse of the SABC. To test that the purse of the SABC is secured, we need a list of the status of deviations of the SABC of live transactions that are happening. We need to test the effectiveness of the system now. The list should be accompanied by all the irregular expenditures and transactions flagged by the AGSA to test if the SABC works.”
Within the context of the disclosure of the financials, not being in full extent – two years ago, the explanation was that there was manual archiving. Some documents were being kept from the AGSA. Documents that could not be given to the AGSA, and Members saw this by themselves.
Ms Biljon said that the list of deviations is shared quarterly along with other relevant information required to be provided to Parliament regularly or quarterly. The information will be updated to include the requested list of information.
The recording-keeping has improved but there is a slight risk with the receipt of tenders both electronically and manually. The SABC is enhancing the process and systems was not yet at the point of effectiveness, though recording keeping has improved.
The Chairperson said that the AGSA had indicated that the SABC initiated a project to review procurement transactions from 01 April 2018 to 31 March 2022. However, no reports or registers were submitted for audit by the reporting date to validate the work conducted on procurement transactions prior to 01 April 2018. During this period, from 2018 to 2022, the vendor spending amounted to R14.8 billion, with R6.9 billion being subjected to investigations. These investigations led to discovery of an additional irregular expenditure amounting to R43 million from prior periods, which was appropriately disclosed. The project completion rate was at 96%; what is the status of the review of the procurement transactions of the cited period?
Ms Biljon said that it was 100% from 2018 to date. To go backwards, the SABC lacks the internal capacity to drive the investigations pre-2018. When the Treasury Instruction Note was issued, the SABC shifted its capacity to in-year irregular expenditure instances. The entity is concluding the work of completing the register and investigations and condonations. It was now at 100%. It will form part of the submissions for audit to the AGSA this year.
The Chairperson asked about the service provider or consultant to bring assurance associated with services for AFS, the costs to the SABC and the type of service it is providing to the SABC.
Ms Biljon said it was good business practice to at least, at regular intervals, have an independent third that reviews the way finances are disclosed, financial policies and IAS compliance requirements. The team thought it would be good practice to bring this service provider to assist with the financial practices of the entity.
The Chairperson asked if this was in response to the inconsistent financial reporting of the SABC.
Ms Biljon said it was an initiative that commenced last year but it was not in time for that audit. It is an additional enhancement that would add value.
The Chairperson asked if there were capacity challenges within the SABC concerning the preparation of the AFS.
Ms Biljon said that, in the group reporting division, which presides over the compilation of the AFS, the SABC has the capacity.
The Chairperson asked why the AGSA made the comment that the statements were not prepared consistent with the reporting standards.
Ms Biljon said this was because of the IE, which was incomplete, and the consequence management, which was also not completed. This also included the predetermined objectives that should have been reported against but were not achieved.
The Chairperson asked whether consequence management was always applied at the SABC.
Ms Biljon said that the finance division and the whole organisation were busy adapting to the new target operating model, and there were nearly 600 vacancies, back then. That could have contributed to that issue but this year, the SABC does not have that issue anymore.
The Chairperson sought more details regarding the assurance service provider and its associated costs as well as terms of reference or service level agreement in writing. When the AGSA releases the MFMA outcomes, surely there will be AFS issues. Last year, they cost about R1.3 billion combined throughout the country from all municipalities, yet the audit outcomes were in shambles. The primary focus should be building internal capacity.
Ms Mente wanted to understand if the board knew about this service provider and if its services were indeed required.
Ms Kati replied that the board and ARC are aware of this service provider. If this would assist management with an opportunity to do the work effectively, the board would support it. It is common practice to bring in additional capacity. There were also several previous instances of misstatements and numbers not correlating. When management sought this, it is a remedy they require, and ARC will test if this is working or not, during the audit.
Ms Mente said that this was a gargantuan problem because, if an entity was unable to ascertain financial statements at a level where the task must be done, it means there is no capacity. Thus, should SABC consider having competent staff that deal with this service instead of outsourcing? Clearly, this service will be required. Is it wise to tender for this service or capacitate the entity?
Mr Maxakwe said that the tender the entity was brought into the SABC stress tests the financial systems. It is a tender of less than R5 million, and the scope is clearly outlined. It is a specialised skill that the SABC does not have internally. All documents relating to this matter will be submitted.
Ms Biljon said the value was R100 000, but all documents will be submitted to the Committee.
The Chairperson commented on the SABC’s unfunded public mandate and said that due consideration needs to be given to what the SABC is expected to do. What are the costs associated with the business plan for elections? Is the budget available for it? What impact would this have on the daily operations of the SABC?
The Minister said that this matter had been dealt with. There is an amount of money that Treasury has allocated, whether it is enough or not. But the commitment that government will not waver on is a successful election.
The Chairperson said that it must not set the SABC on a collision course with its mandate and must come before Parliament for more money, and the default excuse must not be the Elections. The Committee acknowledged the board and hoped there was a commitment to turn things around, especially because the board applied for the positions. The expectation is that things need to turn around and the basis for such is prudent financial management consistent with the law. The SABC is too big a national asset to fail, given its reach and access, including but not limited to language. The SABC transcends language barriers. Ultimately, what must not happen is a SABC that bleeds out fiscus. Bailouts should not be normalised. They are an exception and must happen in exceptional scenarios. Any other bailout now would be an indication that the entity has collapsed.
The progress will be reflected in the audit outcome. The next discussion will not be pleasant if things do not change. Members are tired of underperformance and things are not changing. The Committee is not shying away from making recommendations to dissolve boards. Things must change for the better. This should frame future engagements, and Members expect things to improve.
There are improvements in certain areas at the SABC. But until things turn around, the level of satisfaction is minimal. The progress is noted, but Members want the good in total, not in parts. He concluded by saying that the chairperson of the board must crack the whip because SOEs have challenges with implementing consequence management. The message is clear: shape up or shape out.
The Minister said that public broadcasting is critical in ensuring the predictability of the environment, and it gives a level of clarity which is critical for the minimum national sanity. It is not a luxury job but one of national interest. Being summoned to the Committee is not a favour but it is done in the interest of the nation. Oversight by Parliament is not a tool of conflict but accountability.
The meeting was adjourned.
Documents
Present
-
Hlengwa, Mr M Chairperson
IFP -
Gungubele, Mr M
ANC -
Hadebe, Mr BM
ANC -
Lees, Mr RA
DA -
Mente-Nkuna, Ms NV
EFF -
Van Minnen, Ms BM
DA -
Zibula, Ms BT
ANC
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