ATC201126: Report of the Committee on Public Accounts on the 2018/19 Annual Report, Annual Financial Statements, and oversight of the South African Broadcasting Corporation (SABC) dated 11 November 2020

Public Accounts (SCOPA)

Report of the Committee on Public Accounts on the 2018/19 Annual Report, Annual Financial Statements, and oversight of the South African Broadcasting Corporation (SABC) dated 11 November 2020


  1. Introduction


The Standing Committee on Public Accounts (the Committee), heard evidence and considered the Report of the Auditor-General on the 2018/2019 financial statements, as well as report from the National Treasury on deviations and expansions, of the SABC.


The South African Broadcasting Corporation appeared before the Standing Committee on Public Accounts (SCOPA) to account for its 2018/19 annual financial statements as well as on its deviations and expansions. The meeting was held on 28 July 2020, and a follow-up meeting was held on 01 September 2020.


Subsequent to the hearings, the Committee undertook an oversight visit to SABC on 23 October 2020, in terms of Section 245 (1) (d) of the Rules of the National Assembly (2016), and reports its findings from the hearings as well as the oversight visit.




Mr. M Hlengwa         (IFP), Chairperson, leader of the delegation

Mr. S Somyo           (ANC)

Mr. B Hadebe          (ANC)

Ms. T Zibula            (ANC)

Ms. N Tolashe         (ANC)

Ms. B Swarts           (ANC)

Mr. A Lees               (DA)




Mr. M Dirks             (ANC)

Ms V Mente             (EFF)

M B van Minnen       (DA)

Ms. T Marawu          (ATM)



Support staff:


Ms. N Nkabinde            (Committee Secretary)

Ms. N Cenge                 (Content Advisor)

Mr. L Balfour                 (Committee Assistant)

Ms. F Ndenze    (Communications Officer)


The main objectives of the oversight visit to the SABC were to:


  1. Meet with the Technical Team department;
  2. Meet with Human Resources department;
  3. Meet with the Supply Chain Management department;
  4. Assess the extent of weaknesses of internal controls;
  5. Determine the cause of the lack of compliance in contract management;
  6. Determine the degree to which supply chain issues were adhered or not adhered to; and
  7. Meet with the Board and Executive.



  1. Findings


The followings findings were made:


2.1 Audit Findings


The SABC received an adverse opinion in 2016/17, a disclaimer in 2017/18, and a qualified opinion in 2018/19. The entity suffered losses in previous years, resulting in material uncertainty to going concern as current assets exceeded current liabilities. The SABC received R2.1bn of the R3.2bn bailout it requested from the Government.


Irregular expenditure, as well as fruitless expenditure, always remained an issue for the SABC over the years with an accumulated balance of R5,2 billion as stated in the Annual Report 2018/19.


A) Irregular expenditure


The Auditor-General identified that:


  1. The SABC did not include particulars of all irregular expenditure in the notes to the consolidated and separate financial statements, as required by section 55(2) (b)(i) of the Public Financial Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA);
  2. The SABC did not implement adequate internal control systems to          identify and record all instances of irregular expenditure in both the  current and prior years. This resulted in the irregular expenditure disclosure being understated; and
  3. The full extent of the misstatement identified could not be quantified and the amount of irregular expenditure to be disclosed by alternative means could not be confirmed. It was therefore not possible to determine whether any further adjustments were necessary to the irregular expenditure disclosure stated at R5 220 726 000 (2018: R4 977 300 000) in note 42 to the consolidated and separate financial          statements.


B) Management and leadership challenges


SABC Management did not exercise oversight responsibility regarding financial reporting and compliance related to internal controls. During interaction with the Committee, there were inconsistencies between the responses provided by the delegation from the SABC.



2.2 Hearings


The following findings were made during the hearing on deviations and expansions:


  1. There are several deviations and expansions involving Inala Broadcast dating back to 2010, and the Inala Broadcast was appointed by the SABC neither through testing the market nor though competitive bidding;
  2. Applications for deviations are submitted late to NT (see JASCO (Pty Ltd);
  3. Most deviations date back to 2010 (see Inala Broadcast and JASCO (Pty)(Ltd);
  4. In cases where the SABC apply on basis of sole supplier, there is no proof that the market was tested (see Inala, JASCO);
  5. The SABC might have continued with contracts prior to approval from NT (see JASCO), so payments might have been made without valid contracts in place;
  6. There are instances where NT rejects an application and the SABC appeals the decision;
  7. Companies were awarded tenders but rejected by the management of the SABC and sought to appoint certain suppliers through deviations (the NT regulations do not support these) (see Van de Venter, Mojapelo and Nu Debt);
  8. The AG declared the extension irregular (Inala ENPS newsroom contract) but the SABC applied for a deviation after the extension was rejected by NT;
  9. The SABC applies for expansions after contracts have expired.



2.3 Oversight Visit


The following were the findings and observations from the oversight visit:



2.3.23 Applications for deviations were submitted late to National Treasury;

  3. They cited a case of Inala being the only supplier for the entire African continent, which is the arrangement that the Original Equipment Manufacturer (OEM) prefers;
  4. his was   mainly due to poor planning and poor contract management;

2.3.29        The Supply Chain Management officials indicated that a lot of requirements would be brought in at the last minute, which meant short-circuiting the course of proper procedures. In some cases, instructions would be communicated verbally, leaving officials with a mere e-mail message to use as a basis for carrying out irregular instructions; and



  1. Recommendations


The Committee recommends that the Accounting Authority ensures that:


  1. The vacancy rate is reduced by appointing permanent senior management;
  2. Ther communication channels between the SCM and Business Units are improved so that exipiring contracts are identified early where normal supply chain processes are used, rather than deviations and expansions;
  3. Expansions and deviations are only used in exceptional cases where sole supplier and emergencies apply, as stipulated in National Treasury Regulations;
  4. In instances where deviations and expansions are applicable, there is evidence that the market has been tested and relevant documentation is available to support this and supplied to the NT upon request;
  5. The SABC  only makes any payments where a valid contract is in place;
  6. The SABC applies for deviations and expansions to the NT timeously and consensus is reached on supported and unsupported contracts;
  7. The Corporation improves its internal control environment to avoid misuse of financial and other resources;
  8. Disciplinary action is taken against employees who are responsible for incurring irregular, fruitless, and wasteful expenditure, as required by section 51 (1) (e) (iii) of the PFMA. In cases where criminality has been found, those cases must be referred to law enforcement agencies;
  9. Reasonable care is exercised to detect and prevent irregular, fruitless and wasteful expenditure, and that effective, efficient and transparent processes of financial and risk management, as provided for in Treasury Regulations 9.1.1, are implemented;
  10. The contract management unit is capacitated immediately to guarantee compliance with SCM requirements;
  11. All critical vacancies are filled;
  12. There is a continually updated list of contracts showing their expiry dates so that a new tender process is initiated on time;
  13. Deviations from competitive bidding processes should not be a norm but should only be resorted to in cases of emergency, or where the goods and services are available from the sole service provider, as required by National Treasury Regulation 16A6.4 and Practice Note 6 of 2007/2008;
  14. Contracts are not expanded or varied by more than 20 percent or R20 million for construction-related goods, and 15 percent or R15 million for all other goods and services, as required by National Treasury’s Instruction Note 32 of 2011; and
  15. The SABC Board ensures that committee members of the various procurement committees are appointed in writing, vetted and that their roles and responsibilities are clearly stated in appointment letters.


4.         Conclusion


The Committee has serious concerns regarding the high level of irregular; fruitless and wasteful expenditure as well as deviations and expansions, and about the gross disregard for procedures, rules and regulations such as the PFMA, Treasury Regulations, and other relevant legislation.


The Committee recommends that the Executive Authority submits a quarterly progress report on the implementation of the above recommendations to the National Assembly within 30 days after the adoption of this report by the House.



Report to be considered.



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