ATC090626: Report Inquiry into the South African Broadcasting Corporation (SABC) Board

Communications and Digital Technologies

Report of the Portfolio Committee on Communications on the inquiry into the South African Broadcasting Corporation (SABC) Board, dated 26 June 2009:

1. Introduction

On 17 June 2009, the Portfolio Committee on Communications reported to the House that it intended to commence with an inquiry into the SABC Board in terms of section 15A(1)(b) of the Broadcasting Act (No 4 of 1999), as amended by the Broadcasting Amendment Act (No 4 of 2009) (hereinafter referred to as the “Act”), read with Assembly rule 201(1)(c).

The Committee hereby submits a report emanating from the deliberations on the inquiry into the SABC Board.

 

2. Background

 

At its special meeting on the 17 June 2009, the Committee noted recent media reports on the following:

• The resignations of the majority of members of the SABC Board, including the Chairperson and the Deputy Chairperson, rendering the Board dysfunctional;
• The cash-flow crisis of the SABC;
• The salary disputes between the SABC and the labour unions;
• The protests by independent producers relating to the non-payment of fees to them;
• The recent court ruling in respect of the suspension of the Group CEO; and
• The perceived breakdown in effective corporate governance at the SABC.

 

Mindful of the fact that there was a scheduled meeting with the SABC Board for the 18 June 2009, where the Board was to submit its strategic plans and budget for the 2009/10 financial year, the Committee therefore resolved to institute an urgent inquiry into the SABC Board in terms of section 15A(1)(b) of the Act.

 

3. Terms of reference

 

Pursuant to section 15A(1)(b) of the Act, the Committee invited members of the SABC Board to an inquiry scheduled for 18 June 2009. The inquiry was conducted in terms of the rules of the National Assembly, including rule 201(1)(c). The brief submitted to the Board was as follows:

 

“The Portfolio Committee on Communications, having noted that eight members have resigned from the SABC Board, and having noted specifically that the resignations include that of the Chairperson and Deputy Chairperson of the Board, in terms of section 15A(1) (b) of Act 4 of 1999, wishes to inquire into the legal status of the Board with its current membership.

 

Board members are requested to attend the meeting scheduled for tomorrow at 14.00 hours in Committee Room V454, 4TH Floor, Old Assembly Wing, Parliament, with a view to also address the Committee on the status of the Board and show whether in light of the resignations it can still fulfill its statutory fiduciary functions in terms of the Act.

 

The Committee will consider oral and written representations at this meeting in order to report to the National Assembly accordingly.”

 

The Committee noted that section 15A(1)(b) of the Act provides as follows:

“(b) The National Assembly may, after due inquiry and by the adoption of a resolution, recommend the dissolution of the Board if it fails in any or all of the following:

                   (i)     Discharging its fiduciary duties;

                   (ii)    adhering to the Charter; and

                   (iii)   carrying out its duties as contemplated in section 13 (11).”

 

The fiduciary duties of the Board as contemplated in the instruments mentioned below include the following:

 

 

 

Broadcasting Act (No 4 of 1999) as amended:

·         Section 6 (5)(a) provides that the Board must prepare and submit to the Authority not later than three months after the date of conversion, policies that will ensure compliance with the Authority's Code of Conduct as prescribed and with the Corporation's licence conditions and with the objectives contained in the Act;

·         Section 6(6) provides that the Board must ensure that there is public participation in the development of the policies referred to in subsection (5) by inviting and considering public comment on such draft policies and by other means;

·         Section 11( 3) provides that the Board must keep accurate books and records of the financial affairs of the commercial service division separately from those of the public service division; submit to the Minister within 4 months after the end of the financial year of the Corporation  an annual written report, financial statements, and report of the auditors on the activities of the commercial service division;

·         Section 13(13) provides that the Board is the accounting authority of the Corporation;

·         Section 24(4) provides that the Board must ensure that the Corporation complies with the Public Finance Management Act (No 1 of 1999) as amended in relation to accounting procedures by public entities;

·         Section 28(1) provides that the Board must furnish to the Minister, on or before 30 September in each year, a report of the work of the Corporation of the previous financial year.

 

Articles of Association:

·         Article 12.1 provides that the Board controls the affairs of the Corporation in accordance with provisions of the statutes;

·         Article 12.2 provides that every director individually and all Directors collectively must ensure:

§         that the Corporation has an affirmative action plan in place;

§         never permit a conflict of duties and interest in violation of law;

§         disclose potential conflicts of interest at earliest opportunity;

§          act independently;

§         ensure that the Member is fully informed of any material matter affecting the Corporation’s business, with openness and substance rather than form;

§         exercise the utmost good faith, honesty and integrity in all his/her dealings with or on behalf of the Corporation;

§         exercise the care and skill which can reasonably be expected of a person of their experience;

§         always act in the best interests of the Corporation and never for any improper interest;

§         ensure that confidential matters of the Corporation, learned in the capacity as a Director, should be treated as such and not divulge to anyone without the authority of the Corporation;

§         ensure that the Corporation prepares annual budgets against which the Corporation’s performance can be monitored;

§         be satisfied that they are in a position to make informed decisions; and

§         comply with Section 50,51,54 and 55 of the Public Finance Management Act.

 

·         Article 14.2 provides that the Board must keep proper and accurate records of the financial affairs of the Commercial Service Division and the Public Service Division; submit to the Minister within four (4) months after the end of the financial year of the Corporation  an annual written report, financial statements, and report of the auditors on the activities of the commercial service division;

·         Article 14.4 provides that the Board shall monitor the activities of the Corporation and direct the Corporation both as to strategy and structure;

·         Article 26.1 provides that the Board shall from time to time, in accordance with the Statutes, cause to be prepared and laid before the Corporation in General Meeting such annual financial statements, group annual financial statements and other documents required by the Statutes;

·         Article 26.2 provides that the Board shall in accordance with section 303 of the Companies Act, prepare interim reports; and

·         Article 26.4 provides that the Corporation shall prepare and produce to the Member monthly unaudited management accounts.

 

Companies Act (No 61 of 1973):

·         Section 223 provides that no right or option to shares or convertible debentures may be given to directors, except if authorised by special resolution;

·         Section 234 provides that a director of a company who is in any way, whether directly or indirectly, materially interested in a contract or proposed contract referred to in subsection 2, which has been or is to be entered into by the company or who so becomes interested in any such contract after it has been entered into, shall declare his interest and full particulars thereof as provided in this Act;

·         Section 251 provides that every director or officer of a company who makes, or circulates or publishes or concurs in making, circulating or publishing any certificate, written statement, report or financial statements in relation to any property or affairs of the company which is false in any material respect shall be guilty of an offence; and

·         Section 284 provides that every company shall keep in one of the official languages of the Republic such accounting records as are necessary fairly to present the state of affairs and business of the company and to explain the transactions and financial position of the trade or business of the company.

 

4. Proceedings of the inquiry

 

The inquiry commenced on 18 June 2009. Adv Z Adhikarie of Parliament’s Constitutional and Legal Section was available throughout the process of the inquiry. The proceedings of the inquiry were recorded for reference purposes.

 

On the first day of the inquiry, two of the eleven Board Members, namely Ms Nadia Bulbulia and Professor Allison Gilwald, availed themselves. Apologies were received from the remaining Members of the Board who could not attend due to prior commitments.

 

The following members of the Executive Management of the SABC also attended: Mr Gab Mampone (Acting Group CEO), Mr Robin Nicholson (Chief Financial Officer), Ms Charlotte Mampane  (Acting COO), Mr Sipho Sithole (Head: Strategy), Ms Phumelele Ntombela-Nzimande  (CPO) and Mr Kaizer Kganyago (Head: Group Communications). Ms Thelma Melk (Company Secretary)  and Mr Dali Mpofu (Former Group CEO) were also present.

 

The inquiry could not be concluded due to the non-availability of other Board Members and was therefore adjourned to 23 June 2009.

 

The following Board Members attended the inquiry on 23 June 2009:

 

1. Ms Kanyisiwe Mkhonza
2. Ms Gloria Serobe
3. Prof. Allison Gilwald
4. Adv Pansy Tlakula
5. Mr Desmond Golding
6. Mr Bheki Khumalo
7. Mr Andile Mbeki
8. Ms Fadila Lagadien
9. Ms Christine Qunta

 

Ms Nadia Bulbulia could not attend the meeting due to the delay in her flight. Mr Ashwin Trikamjee tendered his apology as he was in Dubai. The following members of the Executive Management of the SABC also attended: Mr Gab Mampone  (Acting Group CEO), Mr Robin Nicholson (Chief Financial Officer), Ms Charlotte Mampane  (Acting COO), Mr Sipho Sithole (Head: Strategy), Ms Phumelele Ntombela-Nzimande  (CPO) and Mr Kaizer Kganyago(Head: Group Communications).

Ms Thelma Melk (Company Secretary) and Mr Dali Mpofu (Former Group CEO) were also present.

 

A presentation was submitted to the Committee on behalf of the following Board Members: Ms Christine Qunta, Ms Nadia Bulbulia, Ms Gloria Serobe, Mr Andile Mbeki, Ms Fadiela Lagadien, Mr Desmond Golding, Professor AllisonGilwald and Ms Kanyisiwe Mkhonza, which is attached to this report as “Annexure A”.

 

The Committee clarified that the affairs of the Board as a collective entity were being inquired into in terms of section 15A(1)(b) of the Act.

 

The Committee also received written submissions from the Save our SABC Coalition, the Television Industry Emergency Coalition,  the Broadcasting , Electronic and Allied Workers’ Union, the Communication Workers’ Union and the Media Workers’ Association of South Africa. 

 

The Committee also received correspondence signed by Advocate Sibongile Sigodi - Head: Legal and Executive Services in The Presidency stating that “the President has received resignation letters from the following members of the SABC Board:

 

Mr A Trikamjee

Mr B Khumalo

Mr D Golding

Mr A Mbeki

Adv P Tlakula

Ms N Bulbulia.

 

In terms of section 15(2) of the Broadcasting Act 4 of 1999 a non-executive member  of the Board may resign by three months’ written notice addressed to the appointing body, provided that the appointing body may on good cause shown allow a shorter period.

 

The President has not yet made (sic) his mind whether to accept a shorter period for the resignation notice. As such the three months resignation notices still apply until the President has decided on the resignations.”

 

The following Board Members attended the inquiry on 24 June 2009:

 

1. Ms Kanyisiwe Mkhonza
2. Ms Gloria Serobe
3. Prof. Allison Gilwald
4. Adv Pansy Tlakula
5. Mr Bheki Khumalo
6. Mr Andile Mbeki
7. Ms Fadila Lagadien
8. Ms Christine Qunta
9. Ms Nadia Bulbulia

 

The following members of the Executive Management of the SABC also attended:

Mr Gab Mampone (Acting Group CEO), Mr Robin Nicholson (Chief Financial Officer), Ms Charlotte Mampane (Acting COO), Mr Sipho Sithole (Head: Strategy), Ms Phumelele Ntombela-Nzimande (CPO) and Mr Kaizer Kganyago(Head: Group Communications). Ms Thelma Melk (Company Secretary) and Mr Dali Mpofu (Former Group CEO) were also present.

 

Mr Harry Mathabathe (Deputy Director-General: Finance and ICT Enterprise Development - Department of Communications), made an oral presentation detailing the relationship and interactions between the Shareholder and the SABC Executive Management and Board, particularly in respect of the SABC’s budget planning process, the “shareholder compact” and the non-compliance by the SABC Board in respect of the Public Finance Management Act. The Committee and the Board Members then deliberated on the presentation.

 

At the invitation of the Committee to Board Members to submit any further written evidence by 25 June 2009, the Committee reports that it had received submissions from Ms Christine Qunta, Ms Gloria Serobe and Ms KanyisiweMkhonza.

 

The core issues inquired into included, inter alia, the following:

 

1. the status of membership of the Board;
2. the functionality of the Board;
3. the exercise of fiduciary responsibilities by the Board;
4. the financial and funding crisis of SABC;
5. the Deloitte report on the breakdown in corporate governance at the SABC; and
6. the failure on the part of the Executive Management to effectively manage the finances and the operations of the SABC.

 

The Committee expresses its sincere gratitude to Board members, the Executive Management of the SABC and the officials from the Department of Communications for their attendance at short notice and for their participation in the inquiry. It also wishes to thank other stakeholders for the written submissions forwarded to the Committee.

 

5. Findings

 

The Committee deliberations culminated in the following findings:

 

• The SABC is in a state of crisis, both financially and in terms of a breakdown in corporate governance.
• There is a lack of common purpose among members of the Board and the Executive Management impairing their ability to carry out their statutory fiduciary duties.
• The tensions between some members of the Executive Management and some Board members had contributed to a virtual breakdown in their relationships to the overall detriment of the SABC.
• The SABC reported a financial loss of R839 million for 2008/09 financial year as a result of declining revenue and unrestrained over expenditure, resulting in the current severe cash flow crisis.
• There is confusion about the actual status of Board membership due to the resignations not being properly addressed by Members to the appointing authority in terms of section 15(2) of the Act.
• While the Board might still technically be able to constitute a quorum, it was in effect dysfunctional.
• There is evidence of serious lapses in sound operational management of the SABC by the Executive Management that warrants further urgent attention by the Shareholder.
• The Board does not enjoy a sound relationship with the Shareholder that is necessary for timeous reporting and proper accountability.

 

The Committee notes that the Democratic Alliance and the Congress of the People expressed concern as to whether the inquiry complied with the requirements of due process and had initially expressed a preference for the filling of vacancies in the SABC Board.

 

The Committee, noting the unanimous appeal made by Board members at the end of the inquiry calling upon the Committee to recommend to the National Assembly the dissolution of the Board, therefore concludes unanimously that there is no possibility of the current Board being collectively able and legally competent to fulfil its statutory duties.

 

6. Recommendation

 

The Portfolio Committee, having considered the above findings, unanimously recommends that the National Assembly adopts a resolution recommending to the appointing authority the dissolution of the SABC Board as envisaged in section 15A(1)(b) of the Act.

 

Report to be considered.