SABC Budget and Strategic Plan 2006/07

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
15 March 2006
SABC BUDGET AND STRATEGIC PLAN 2006/07

Chairperson:

SABC presentation on 2005/6 operations review
SABC briefing on MTEF budget (documentation cannot be made public)

SUMMARY
The SA Broadcasting Corporation (SABC) briefed the Committee on its core corporate goals for 2005/06, its achievements over the last financial year, its role in providing information for democratisation and nation-building, plans for expanding the ‘African footprint’ beyond the satellite platform, progress in rolling out its regional television services, the major legislative and regulatory projects for the 2006, and its delivery on local content

The Committee was also briefed on the SABC’s Medium-term Expenditure Framework (MTEF) allocations and financial strategy, SABC revenue generated, its income statements, operating costs, expenditure and marketing costs, and its capital expenditure budget over the MTEF. The SABC’s performance over the MTEF was outlined, which included the projected impact on the income statement, cash flow statement and balance sheet from 2006-2010, with an assumed growth in SABC revenue of 10%.

During the discussion, Members raised questions regarding problems with rolling out the Channels 4 and 5 regional television services and the timeframes for implementation; whether its goal of developing a psychology of a winning nation was partisan to the ruling party; and whether it would be commissioning independent and up-and-coming producers and directors in its investment in local content programming. The SABC was asked to explain whether it anticipated problems with the coverage of the FIFA 2010 Soccer World Cup, as Sentech had sketched a pessimistic prognosis of its capacity to cover the event. The extent to which the SABC gave fair and equal coverage to all political parties during the local government elections was discussed. Members raised concerns about the times of the news bulletins, the extent to which they were broadcast in the official languages, and the inconsistent content from bulletin to bulletin.

The Committee questioned whether television licensing revenue was a sustainable funding mechanism in a market being overhauled by convergence. The establishment of a dedicated Parliamentary television channel was suggested. The SABC was asked to fully explain the recent resignations of an SABC Board member and senior management official, and the court case involving SABC employees’ pension benefits.

MINUTES
SA Broadcasting Corporation briefing
Mr Eddie Funde, SABC Chairperson, introduced the delegation: Advocate Dali Mpofu, the newly appointed Group Chief Executive Officer (GCEO); Mr Solly Mokoetle, Chief Operations Officer (COO), Mr Robin Nicholson, Chief Financial Officer (CFO); and Mr Snuki Zikelela, Managing Director for News.

Advocate Mpofu then outlined:
- some of the SABC’s achievements over the last financial year;
- its progress in increasing access to news and information to South Africans;
- its role in providing information for democratisation and nation-building;
- its coverage of the local government elections;
- its role in promoting social cohesion and nation-building;
- its focus on supporting the ‘African Renaissance’; and
- its plans for expanding the ‘African footprint’ beyond the satellite platform.

He stated that the SABC was committed to playing a leading role in ‘raising the bar’ of service delivery, and outlined the SABC’s major legislative and regulatory projects for the 2006. The SABC’s delivery on local content was outlined.

Mr Mokoetle then briefly outlined the progress made by the SABC in rolling out its regional television services (RTS), which was an important part of the SABC’s local content mandate.

Mr Nicholson, CFO, then outlined the SABC’s Medium Term Expenditure Framework (MTEF) allocations, which included the:
- SABC’s financial strategy over the MTEF period;
- context within which its 2006/07 budget should be viewed;
- extent to which households were accessing the SABC’s radio and television market over the 2004/05 financial year, and the key change projects supporting the SABC’s goals;
- SABC revenue generated by media type, which included per programme type;
- income statements including those for news and current affairs, public broadcasting service (PBS) and community broadcasting system (CBS);
- SABC’s operating costs;
- SABC’s expenditure over the discharging of its mandate;
- SABC marketing costs; and
- its plan for the acquisition of sports rights.

He also explained the background to the SABC’s capital expenditure budget over the MTEF and its capital expenditure plan. Mr Nicholson outlined the performance over the MTEF, including the projected impact on the income statement, cash flow statement and balance sheet from 2006-2010, with an assumed growth in revenue of 10%. He concluded that the budget would only be sustainable if it was combined with improved efficiency and sustained revenue growth.

Discussion
Ms M Smuts (DA) believed that the SABC should be allowed to rethink the RTS, because they were not ‘properly thought out" when they were legislated. The SABC had no choice at the time but to apply to the Independent Communications Authority of South Africa (ICASA) for those licences because it was required to do so by law. Practical problems were however being experienced with the implementation of RTS, such as with the frequency spectrum and the funding constraints.

Mr Funde responded that the approach of the SABC Board was that it should comply with the law and establish Channels 4 and 5. The SABC was aware of the various permutations and limitations involved in rolling out those channels, and it was addressing the matter. Digitisation was also being pursued because it carried many benefits that would definitely solve many of the problems. One of the benefits was that it would allow many more channels to be used on the spectrum. The SABC was required by law to use Sentech as its signal transmitter, and if assistance were to be granted to Sentech, then the SABC could expedite the roll-out. The SABC would support any efforts taken to assist Sentech.

Adv Mpofu agreed with Ms Smuts’ comments on the legislative process, but stated that it was important to have an open mind on the matter. Channels 4 and 5 would ensure language expansion in public broadcasting, which was a good thing. The crux of the matter however was the actual model that would be used to provide those channels. A commercial element might have to be brought in to fund Channels 4 and 5. Several larger players have expressed serious interest, but the views of ICASA on the matter were awaited. The commercial element would be beneficial because it would then alleviate the extent of the state’s funding of those channels.

Ms Smuts sought greater clarity on the SABC’s objective to drive the development of the "psychology of a winning nation", as she assumed that referred to the SABC playing a greater role in Africa to encourage the ‘African Renaissance’. She felt it was the job of the International Marketing Council (IMC) to project South Africa as a winning nation. It could not be the role of a public broadcaster to project the ruling political party as the leaders of a winning nation. A public broadcaster should instead project that image via local television and empowering domestic independent producers, etc.

Furthermore, Ms Smuts drew the SABC’s attention to a recent television advertisement in which President Mbeki and former State President Mandela were spoken of in the same breath. She felt that a public broadcasting should not be airing such advertisements.

Dr P Mulder (FFP) agreed. He was however satisfied as long as the SABC was sensitive to the fact that it could be used as a propaganda tool and took steps to avoid that.

Mr Funde replied that the SABC had decided in 1994 that it would play an active role in nation-building, even if it only succeeded in sparking a debate on the meaning of nation-building. The SABC had played a critical role in the democratisation process. A good example was its coverage of the recent local government elections, in which it gave coverage to all the political parties, even the smaller ones. By ‘winning nation’, the SABC really meant the building of hope within the South African community. The IMC was indeed playing its part in promoting that, especially outside the Republic, and the SABC worked very comfortably and successfully with the IMC to further that common objective. With regard to the ‘African Renaissance’, the SABC was seen as a major player in giving African perspectives.

Adv Mpofu added that the SABC enjoyed a close working relationship with the IMC in promoting South Africa as a winning nation. If the arts and sport were not used to promote that, then a very influential opportunity was being lost. With regard to the mentioned advertisement, it had been filmed after the President’s State of the Nation address. They had decided not to air that advertisement before the local government elections for the very reasons raised by Ms Smuts. The advertisement was not partisan, and the SABC had no qualms about using any figure or topic that would allow it to promote nationalism. The reference made to former President Mandela was because he was the author of the statement included in the advertisement.

In terms of the SABC’s role in the African Renaissance, each initiative needed to make commercial sense. The SABC was the only broadcaster that provided an African perspective, and no other broadcaster could compete with that offering.

Ms S Vos (IFP) noted that the CFO’s presentation indicated that approximately R600 million a year would be needed to run one RTS, and that overseas partnerships would probably be sought. She asked whether the SABC had already begun looking for such partnerships and, if so, whether there were any signs of interest. The presentation indicated that the SABC was investing heavily in local content, such as the commissioning of writers and directors etc. She asked whether the SABC would be improving their capacity so that they could be used in future, or whether it would simply be commissioning the large and well-established production houses.

Adv Mpofu replied that the SABC had released commissioning rules for capacity-building initiatives, and the large production houses were in fact complaining that they would be losing out. Analysis indicated that out of the ten new productions commissioned, only two were based in Gauteng and some were from the Limpopo province. It was thus clear that the initiative was focusing on empowerment.

Ms Vos stated that in its meeting with this Committee on 13 March 2006, Sentech had sketched a less than optimistic prognosis of the capacity it currently had to cover the FIFA 2010 World Cup. She asked the SABC to indicate its own anticipated problems with the coverage of the event.
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Mr G Oliphant (ANC) asked the SABC to indicate whether it agreed with Sentech that the current technology was problematic and, if so, what precisely the SABC envisaged to address the problem.

Adv Mpofu responded that it would not be fair to comment without studying the full text of Sentech’s input. He wished to confirm however that the SABC was using an ageing analogue infrastructure, which was now 25 years old. Secondly, the FIFA 2010 World Cup made the need to upgrade the infrastructure even more urgent. It was incumbent upon the SABC, the Committee, Sentech, and the Department of Communications to concentrate on this issue.

A symbiotic relationship existed, and if Sentech did not receive sufficient funds, then the SABC would definitely be negatively affected, as would E-TV. It was for that reason that the concerns were trying to be addressed via digitisation. It would definitely affect the SABC’s business plan. The SABC were in the process of concluding a Memorandum of Understanding (MOU) with Sentech on the matter, because both entities had acknowledged the importance of the issue.

Dr Mulder stated that one of the biggest problems for all public broadcasters was to strike the right balance between healthy communication with political parties on the one hand, and undue influence by government on the other. He complemented Adv Mpofu for getting the balance right, as evidenced by the meeting he convened before the local government elections with the heads of all the political parties to inform them of the SABC’s coverage strategy.

Adv Mpofu replied that the SABC was very aware to this ‘balancing act’. As the local government elections had fallen so close to the President’s State of the Nation address, he had been forced to take one of the most difficult decisions of his career. The 8 January ANC Manifesto statement was published each year by the SABC as a precursor to the State of the Nation address. The trouble this year was that on 6 or 7 January 2006, the date for the local government elections was announced, and the SABC had to work around the clock to devise an alternate strategy because the January 8 statement now fell within the defined election period. There was no way that the SABC would allow the ANC to put forward its election manifesto in that live statement, as the SABC did not had the capacity to do the same for the other political parties. He then made it clear to the ANC that the SABC would only do the statement if there was a separation in the programme of the manifesto and the statement, and the cameras would only broadcast the statement.

Mr Mulder stated that he had received several complaints from disgruntled individuals about the change in slots of the Saturday and Sunday new bulletins, because the sport programmes appeared to take precedence.

Adv Mpofu responded that he had raised the differentiation of newscasts on several occasions, and again it was a capacity issue. He failed to see why SABC 3, which was supposed to be a commercial channel, could differentiate its newscasts. The matter was still being debated within the SABC. He invited Dr Mulder to write to the SABC about this. A balance should however be struck because the SABC could not simply have newscasts that catered to a specific racial group.

Dr Mulder stated that the United States was using television to fight negative stereotypes, and it was proving very effective. Some of the SABC dramas on apartheid perpetuated negative stereotypes of, for example, the corrupt, overweight and imcompetent Afrikaner policeman. He acknowledged that it was a difficult issue, but believed the SABC had a role in addressing the matter.

Mr Funde agreed that it was a problematic area. The aim was to have a public broadcaster respected by all citizens, and thus they maintained open channels of communication with the public. Adv Mpofu added that he would take the matter into consideration.

Dr Mulder sought clarity on the court case involving SABC employees’ pension benefits. Mr Nicholson replied that the SABC had studied the judgment and the SABC had subsequently reinstated pension benefits and memberships. It was currently in the process of finalising those claims with their attorneys, whose payment would not have a financial impact on the SABC this year because the payments were provided for. A complicating factor was that the court merely ruled that SABC members were in fact pensioners, but it did not go on to explain what the rights of such pensioners were. The matter would thus be taken to the Board in June 2006 for further consideration, and the outcome would be provided to the Committee.

Mr M Mohlalonga (ANC) stated that, while the SABC was trying to balance the coverage given to the various political parties during the local government elections, there tended to be a gravitation towards giving opposition parties more coverage. Mr Funde replied that if there was a concern that the SABC was biased, it would definitely investigate its editorial policy. Adv Mpofu added that if a topic were newsworthy, the SABC would cover it. This was why the SABC had decided to cover the unrest in the Khutsong Municipality.

Mr Mohlalonga sought clarity on the SABC’s licensing revenue, especially the extent of the contribution of television licenses. He contended that the rapid convergence phenomenon in the communications marketplace could require that a strong case should be made for the continued payment of television licences. It might eventually result in the SABC having to think of an alternative funding mechanism. He asked whether the SABC had given any thought to this.

Adv Mpofu felt that a public broadcaster should use public money to a certain extent. Even the Canadian public broadcaster was able to generate only 40% of its revenue from television licences, and the SABC currently generated 15%. It was thus an issue at international level. He explained that it was precisely because the SABC only generated 15% from television licences that its advertising revenue was so high.

Mr Nicholson added that the SABC would generate about R136 million in potential revenue from 740 000 households nationwide, and there had been improved compliance with the paying of television licenses. The convergence issue and its effect on the payment of television licenses was a contested issue internationally. However the model for public service broadcaster funding should take cognisance that there were groups within society that simply not afford to pay the television license. The would include pensioners or those South Africans living with disabilities, and they would either be exempted from paying for a television license or would be charged a reduced fee. Furthermore, as subscription television for digital satellite broadcaster was considered, it should be recognised that households in the lower Living Standard Measures (LSM) would not be able to afford it, even though they were in fact receiving the signal. This should be discussed further. He firmly believed that a licensing funding model was integral to the sustainable revenue stream of a public broadcaster.

Mr Mohlalonga sought clarity on the resignations of an SABC Boardmember and senior management official, which was recently reported in the media. Mr Funde replied that the matter really revolved around the misrepresentation in the report that the Deputy President had been boo’d when delivering a speech in Utrecht, Netherlands. The SABC had conducted a proper investigation and Adv Mpofu had taken certain steps, which resulting in those officials deciding to resign from the SABC. An ancillary issue was that the Boardmember in question raised certain matters in public that were being discussed internally at the time, and they should had been raised with the SABC in private.

Adv Mpofu added that much had been reported in the media recently about the relationship between the Board and the SABC management. He assured the Committee that they had enjoyed a superb working relationship over the last seven to eight months. An internal enquiry had been instituted by external agents, and it appeared that one of the SABC representatives had acted against a direct instruction to not speak on a certain matter. Further indications were that the person in question might have received two different instructions from principals. He had handed the matter over to the SABC Chairperson because it involved a Boardmember.

Mr Funde explained the first allegation of bias levelled against the SABC for not broadcasting the heckling of the Deputy President. Adv Mpofu had established an investigation into the matter that found that there had been no deliberate editorial decision. The field reporter who filmed the event did not file the footage of that specific portion of the event, as he did not consider it newsworthy. The incident was then reported on radio by an SABC journalist who had considered it newsworthy.

In the second issue of the Boardmember’s conduct, the person was given a second instruction by a specific Boardmember not to abide by Adv Mpofu’s instruction. It necessitated Adv Mpofu’s intervention and investigation. In response, the Board had adopted a very clear resolution to entrench that principle of appropriate corporate governance. It was during the investigation that the Boardmember in question had decided to resign, and expressed in the public media several issues that the Board was currently discussing internally. The disclosure created the perception that the Board was not exercising its oversight function properly. A complicating factor was the fact that no minutes had been prepared of the Board meetings at which those matters were discussed. The matter had been handed over to the Minister for consideration.

Mr Mohlalonga stated that the coverage of the Parliamentary slot should be reconsidered, because it was not fair for it to be shortened. He asked whether a dedicated Parliamentary channel could be introduced. The Chairperson agreed and sought clarity on the rationale behind cutting down the time slot. He had been informed by the SABC Chairperson and GCEO that it was being moved to another channel because the SABC was losing revenue, and he had no problem with that. The reduction in the time slot was however unexpected and should be explained to the public. The DSTV Parliamentary channel was more effective.

Adv Mpofu responded that, year on year, the SABC received more local content obligations, and one of the consequences was that the Parliamentary slot had ‘lost out’. As soon as the satellite platform was introduced for the public broadcaster, it would negotiate the transfer of the Parliamentary channel on DSTV to the SABC, because it properly belonged to the public broadcaster. In the meantime the SABC would consider ways in which it could improve the quality of the current time slot.

Mr Mohlalonga stated that Parliament was constantly mandating the SABC to establish a youth radio, yet nothing had been done to date. He asked the SABC to indicate the progress it had made, as there did not appear to be any sense of urgency. Adv Mpofu assured the Committee that it was still part of its programme, but it had ‘fallen through the cracks’ because the staffmember spearheading it had resigned. It would however be pursued.

Dr Mulder sought clarity on the status of Radio Pulpit. Mr Mokoetle replied that the matter should have been discussed with the license holders and suppliers. The Independent Communications Authority of South Africa (ICASA) required the SABC to diversify its religious content on radio. A panel of religious experts had been consulted on this. The SABC had then informed Radio Pulpit that its term would have to be shortened because the SABC needed to effect ICASA’s requirement that more diverse religious programming be aired.

Mr K Khumalo (ANC) congratulated the SABC on the good soap operas being screened, but expressed his disapproval of the several repeats that were being screened. Mr Mokoetle responded that repeats were aired to recover costs because no programme recovered its full costs after the first broadcast. Sometimes the ratings for the show were even higher when it was rebroadcast.

Mr Khumalo then expressed his concern at the continual predomination of foreign programming over local and African content on the SABC. Mr Mokoetle replied that the Board had taken a decision to increase local content and its budget, including sourcing programming from other African countries. The challenge however was the quality of the programming. The SABC was addressing the matter.

Mr Khumalo referred to the SABC’s objective to inform, and expressed his concern at the staggered times of the news bulletins and the fact that not all the official languages were covered. He proposed the introduction of subtitles that would not only cover many more of the official languages, but would also accommodate people with hearing problems.

Mr Mokoetle responded that the Committee had requested the SABC on a previous occasion to consider the introduction of close capturing to cater adequately for viewers with disabilities, and it was being investigated. The introduction of digital terrestrial television (DTT) was supposed to provide relief, and it was a pity that ICASA had decided to put its roll-out ‘on the back burner’.

Mr Zikelela added that at a previous meeting with the Committee, Members had called for a reshuffling of the SABC news bulletins to make some of the African language bulletins more accessible, and that had been done. It was however a very delicate scheduling exercise.

Mr Khumalo noted that the news was reported differently on the different SABC news bulletins, and some headlines were not included at all. Mr Zikelela replied that the SABC currently employed eleven editors, one for each of the eleven official languages, and they each decided what would be relevant for their target audience.

Mr Khumalo referred to the SABC’s objective to educate and stated that there appeared to be an absence of higher education programming. Secondly, steps should be taken to help those who were not able to see the television or hear the radio. Perhaps improvements in technology over the next 20 years could address the problem and truly ensure universal access. Adv Mpofu stated that the SABC would take these statements on board.

Rev Khumalo sought clarity on the Siyanqoba campaign, its key deliverables and its challenges. Adv Mpofu replied that the poor performance of the Bafana Bafana team did not make the work any easier. The SABC was however taking a long-term view of the project, which extended to the FIFA 2010 Soccer World Cup. The SABC viewed it as a pilot, and was constantly improving on it.

Mr R Pieterse (ANC) stated that the problem was that if the SABC spoke the truth, it ran the risk of being labelled as biased. Secondly, he felt that the inclusion of Channels 4 and 5 would not increase the radio and television footprint, with the result that those South Africans who were currently outside the spectrum would remain there and would continue to view broadcasting in a language other than their choice. The presentation indicated the SABC’s plans to expand into the rest of Africa, yet it was not even able to adequately accommodate its own citizens.

Mr Mokoetle responded that for the past four to five years, the SABC had been working with Sentech and ICASA to improve its footprint. It was impossible for the SABC to achieve the maximum footprint with the current analogue system because it relied on line of sight. This meant that Sentech would either not be able to send the signal over a mountain, for example, or it would have to expend great costs to set up numerous receptors around the mountain that would bounce the signal to the next receptor. Satellite television was clearly more effective, less expensive and had many more benefits.

Mr Oliphant asked whether a timeframe for the roll-out of Channels 4 and 5 had been decided. Mr Mokoetle said the plan was for the channels to begin running for four hours a day, and programming would be primarily in African languages. ICASA then required the channels to broadcast in African languages alone, and to be increased to eight hours a day within the defined license period. ICASA had completed a frequency management process, and the frequency for the channels was currently available. The problem was that the technology needed to use it was not in existence. Channels 4 and 5 thus existed as licensed frequencies, but a business plan was still awaited. The only solution was the introduction of DTT but its initial cost was very expensive, and international partners were being sought to carry some of the start-up burden.

The roll-out of DTT was also important for the SABC’s coverage of the FIFA 2010 Soccer World Cup. If however DTT was not provided by that time, the SABC might have to request ICASA to allow it to use Channels 4 and 5 to broadcast matches.

Mr Oliphant congratulated the SABC on the sterling work it was doing in skills development, but asked whether it had a learnership programme. Secondly, he asked the SABC to explain what had happened to all those freelancers it used during the local government elections. Adv Mpofu explained that they were only used for the local government elections, because the SABC had not had sufficient core journalists to cover such a massive media project. Mr Zikelela agreed that their services were not retained, because they were freelancers.

Dr Mulder stated that he was usually very sceptical of government providing funding for a dedicated African channel, but in this case he supported it. Adv Mpofu reiterated that it was the SABC’s unique selling point that it broadcast from an African perspective about African issues. Counterparts in other African countries were fully in favour of a dedicated African channel.

The meeting was adjourned.