Progress report by the South African Broadcasting Corporation on the report of the Auditor-General and the investigations by the Special Investigations Unit

Meeting report

Dr Ben Ngubane, Chairperson of the SABC Board referred to the report of the Parliamentary Monitoring Group (PMG) on 22 November 2011, which incorrectly implicated the SABC’s Chief Technical Officer in the matter involving Mr Justice Ndaba in London.

The Chairperson advised that the minutes of the Committee were correct.  The matter was taken up with PMG.  The report was withdrawn and corrected and apologies were issued to the affected parties.  He had confirmed with the complainant, Prof Pippa Green, that the matter had been resolved.

Briefing by the South African Broadcasting Corporation (SABC)
Dr Ngubane asked Ms Suzanne Vos, Member of the SABC Board to brief the Committee on the background and context of the investigation by the Auditor-General during 2009.  She was a member of the Interim Board at the time the investigation took place.  Ms Vos read the written submission that had been prepared verbatim (see attached document).

Mr B Steyn (DA) requested a copy of the prepared statement.  He asked that the delegates from the SABC introduced themselves and stated what position was held.

Report by the SABC Task Team on the findings of the Auditor-General
Ms Sully Motsweni, Head of the SABC Task Team presented the briefing to the Committee (see attached document).

The briefing included the background to the report of the Auditor-General of South Africa (AGSA) that was submitted to the Board in September 2009.  A Task Team comprising members of the SABC staff was appointed on 24 November 2011 to review the report.  The key findings and observations of the Task Team were summarised.

The SABC Board had signed service level agreements with the Special Investigation Unit (SIU) to undertake investigations into the irregularities identified in the AGSA report.  The Presidential Proclamation was granted on 29 October 2010 and the mandate of the SIU was extended to cover the period January 2005 to October 2010.  The SABC made upfront payments to the SIU of R8.6 million for phase one (1 April 2010 to 31 March 2011) and R10.9 million for phase 2 (1 April 2011 to 31 March 2012) of the investigation.  An overview of the involvement of the SIU was provided.

The briefing document included a list of criminal cases that were opened as a result of the investigations undertaken by the SABC Group Internal Audit function and by the SIU.  A ‘dashboard’ indicating the status of current cases was provided.

The progress that had been made in implementing the findings of the Auditor-General was summarised.  To date, 7 findings had been fully completed, the implementation of four findings was on track and the implementation of the remaining 3 findings had been delayed.  The Task Team had developed an implementation plan to address all outstanding issues.  A copy of the project plan was provided.

Mr Hlaudi Motsoeneng, Acting Chief Operations Officer, SABC advised that the Auditor-General, Department of Communications (DOC) and the SIU had been briefed on the establishment of the Task Team.  He applauded the achievements of the Task Team after only two months of operations.

Discussion
The Chairperson requested that a copy of the prepared statement read by Ms Vos was made available to the Committee.  Members of the Committee asked for clarity on which document was under discussion.  Members had received three briefing documents.

Ms Motsweni explained that the briefing document with the logo of the DOC was replaced by the document with the logo of the SABC.

Mr Steyn pointed out that there were discrepancies between two briefing documents on the progress that had been made in implementing the findings of the Auditor-General.  He observed that little progress was made between November 2009 and the end of 2011.  He asked for a copy of the response of the SABC Board to the initial report of the Auditor-General in 2009.  He acknowledged that it was a mammoth task to turn around an organisation such as the SABC but someone had to take responsibility and be held accountable for the lack of progress made for two-and-a-half years.  He acknowledged the progress that had been made by the present Board.

Mr Steyn noted that the SABC Task Team comprised members of staff and differed from the Monitoring Task Team that briefed the Committee on 28 February 2012.  The report of the Auditor-General indicated that there had been widespread abuse and corruption in the SABC.  He asked for the assurance that members of the Task Team were not implicated in the allegations.  He asked for a copy of the terms of reference of the Task Team.  He asked if the terms of reference included questioning the findings of the Auditor-General.  He understood that the Task Team was concerned with the implementation of corrective action rather than conducting investigations.  The implementation of the Auditor-General’s recommendations had been a standing item on the Committee’s agenda for longer than two years and he wanted to know why nothing had been resolved during this period.

Mr Steyn noted that the matter concerning the abuse of petrol cards had been addressed by withdrawing the cards and paying a fuel allowance to staff instead.  However, the new system was 170% more expensive and needed to be reviewed.  There appeared to be no policy on the payment of bonuses. He wanted to know what bonuses were paid to employees and Board members and if a policy had been developed to curtail excessive benefits. 

The Chairperson explained that the Committee had long been concerned over the allegations made against the SABC.  The Committee had received a written complaint from organised labour during 2009.  The complaint from the unions included a number of allegations concerning the SABC.  The Committee had requested the Auditor-General to investigate the allegations.  The investigation was undertaken and a report was submitted to the SABC Board.  The Board was responsible for ensuring that the executive management of the Corporation implemented the recommendations of the Auditor-General.  The Committee continually insisted on progress reports but no action was taken by the SABC until the Task Team was appointed in November 2011.

Ms M Shinn (DA) queried the substantial ‘golden handshakes’ paid to former SABC executives.  She understood that a large proportion of the severance payments made were because of restraint of trade clauses in the employment contracts of executives.  She asked for an explanation for awarding contracts to businesses owned by SABC employees.  The report of the Monitoring Task Team presented to the Committee on 28 February 2012 had stated that little progress had been made.  She acknowledged that progress was being made but wondered if the effort necessary to turn around the corporation was justified and whether consideration should be given to privatising the SABC.

Ms J Killian (COPE) was disappointed that it had taken so long before progress was being made.  The lack of action had resulted in suspicions that there had been attempts at senior level to avert investigations by the SIU.  She wanted to see that firm action was taken against anyone implicated in the irregularities and that all employees understood that there were consequences for persons found to be unlawfully enriching themselves.  It would appear that the findings of the Auditor-General were being questioned by the Task Team instead of focusing on the assessment of the progress that had been made in implementing the recommendations.  The status report indicated that some progress was being made but the appointment of two executives did not solve the finding of the Auditor-General concerning the lack of leadership at the SABC.  The SABC had a number of highly-paid executive managers in place at the time of the investigation yet little action was taken.  In her opinion, the SABC was only at the beginning of the turnaround process.  She queried the discrepancies between the two briefing documents.

Ms Killian noted that the report of the Auditor-General included a list of allegations that were not investigated due to time constraints.  The investigation was limited to those matters where source documents and concrete evidence was provided.  Twenty members of staff were found to be involved in external businesses but only one had the approval of his/her manager.  She asked if the SABC had a database of approved suppliers and if all employees had been informed that action would be taken against anyone found to be transgressing the rules.  Eight employees were found to have been involved in dishonest transactions and three had contravened the Public Finance Management Act (PFMA).  She asked for a list of all persons that had received irregular payments from the SABC.  She did not observe that adequate measures were in place to ensure that the PFMA was adhered to.  She understood that it was a mammoth task to restore a culture of honesty and adherence to legislation and procedures and would like to see that progress was being made in this regard.  It was necessary that there was consistency and continuity and that all employees, senior executives and Board members were aware that transgressions would not be tolerated.

Ms Killian acknowledged that progress had been made but felt that more needed to be done to turn the Corporation around.  She asked for the assurance that the action plan developed by the Task team would be implemented.  She noted that a number of executives had subsequently left the SABC.  She asked if the persons concerned were implicated in the allegations of irregularities, were being investigated and were responsible for the failure to implement the recommendations of the Auditor-General.  She asked for more information on the findings concerning the acquisition of foreign content.

Ms W Newhoudt-Druchen (ANC) asked if the SABC had an implementation plan in place and if the plan was being adhered to.  She noted that the investigations by the SIU would only be completed in March 2012 and queried the upfront payments that had been made by the SABC.  She asked for more details of the findings of the Auditor-General concerning the payments made to employees doing business with the SABC, what action had been taken to address the issue and if this practice had contributed to the deficit declared by the Corporation.  She asked what action had been taken to ensure that procedures were in place for declarations of interest by all employees.  She noted that the abuse of the petrol card system had amounted to R4 million but that the introduction of the fuel allowance system was costing R7 million.  She queried the calculations that had been made and asked why the new system was costing so much more.  She noted that the SIU had recovered amounts of R23,000 for misuse of petrol cards and R180,000 for the Beijing Olympics.  She asked what the total value was of the irregular expenditure cases being investigated by the SIU.

Ms S Tsebe (ANC) said that there were other forums for a discussion on whether or not the SABC should be privatised.  The briefing had included much more information than previous briefings by the SABC on the progress that had been made in implementing the recommendations of the Auditor-General.  The Committee had recommended the appointment of the current members of the Board and was now in a position to focus on the implementation of actual action plans.  She queried the higher cost of the allowance system that replaced the petrol card system.  The National Treasury had urged all government entities to reduce expenditure.  She asked when the new system was introduced, what action had been taken to address the challenges and what was meant by the statement in the briefing that certain persons had been adversely affected by the fuel allowance system.

Ms R Morutoa (ANC) noted that a number of cases were pending, awaiting decisions by the National Prosecuting Authority (NPA) and the SIU.  The Task Team had raised concerns over the length of time taken to finalise certain cases.  She asked how the Committee could assist the SABC with the SIU investigations.  The SIU had been paid a substantial amount in advance but little had been delivered to date.  She agreed with other Members that progress had been made, despite that acknowledgement by the Board that the process had not been easy.

The Chairperson suggested that the response of the SABC to Members’ questions were categorised into issues related to its own processes and issues beyond its control.  The SABC could not be blamed for the failure to finalise the cases investigated by the SIU.  The briefing document did not include sufficient detail as much of the information provided was summarised.  The information provided during the briefing indicated that much work had been done and that progress was being made.  He asked the DOC to provide further clarity on the briefing document with the DOC logo.  He invited the representatives from the Office of the Auditor-General to comment on the briefing.

Mr Sam Vilakazi, Acting Deputy Director-General: Finance, DOC explained that the briefing document with the DOC logo pre-dated the briefing document with the SABC logo.  The latter document included up-to-date information.

Mr Mike Oberholzer, Senior Manager, AGSA advised that a meeting was held with the Task Team in February 2012.  The discussion involved making certain documents available to the Task Team.  There was no question that the SABC was querying the findings of the Auditor-General.

Dr Ngubane referred Members to the project plan developed by the Task Team included in the briefing document.  The project plan included the name of the person responsible for each task and the target dates for the completion of each task.  The Acting COO had overall responsibility for the Task Team and had informed the Board of the process that would be followed.  Other internal structures were involved in dealing with critical issues.  The SABC was unable to provide accurate and up-to-date information on content acquisitions to the auditors as a computerised system was not in place.

Mr Motsoeneng expressed confidence in the Task Team, which enjoyed the support of the management of the SABC.  The Committee had been critical of the use of external consulting services and it was decided to second internal resources to the team.  One member of the team was implicated in the matters under investigation but was removed from the team before work had commenced.  Two of the three vacant executive positions were filled, which equated to a 66% success rate.

Mr Desmond Golding, Member of the SABC Board recalled that the SABC had previously provided detailed briefings to the Committee on the action that had been taken in implementing the recommendations of the Auditor-General.  This briefing followed up on previous briefings and provided more information on what action had been taken by the executive management of the SABC and on the investigations undertaken by the SIU.  The Board accepted the findings of the Auditor-General and was committed to implementing the recommendations.  The SABC worked closely with the Office of the Auditor-General and the SIU.  The Audit Committee of the Board was responsible for oversight and had considered the internal systems and all the issues raised by the Auditor-General.  The task had been difficult but much work had been done and progress was being made.  The recently appointed executive management and the Task Team faced many challenges and deserved encouragement.

Ms Motsweni explained that the ‘dashboard’ included in the briefing document reflected the current status of the various recommendations.  As progress was continuous, the actual figures could be expected to change.  The provincial general managers were required to travel vast distances and had been adversely impacted by the withdrawal of the petrol cards and the introduction of a fuel allowance system.  The SABC was investigating alternative systems (for example imposing limits on petrol cards) and considering the experience of other organisations.  The Auditor-General had not recommended that the cards were withdrawn.  The former CEO had resigned in 2008 and was offered a contract for one month to complete her work.  It was found that she continued to work for 18 months and was contracted by an external service provider to provide legal opinion on foreign content acquisitions.  Businesses owned by SABC employees were removed from the list of approved suppliers (‘blacklisted’).  Previously, the department responsible for international content acquisition was allowed carte blanche.  Currently, the different channels each provided a list of the required content and content acquisitions were limited to the programmes on the lists.

Ms Motsweni was not able to advise the total amount involved in the SIU investigations.  Employees found guilty of abusing the petrol card system had signed an acknowledgement of debt.  One person had left the employ of the SABC and was being prosecuted for the outstanding amount.  The Head of the Legal Division was monitoring the outstanding cases.  In terms of the PFMA, a State-owned entity should not be making up-front payments for services.  The SABC had only 11 forensic investigators in its Group Internal Audit Unit.  The SIU was under pressure from other government entities to conduct investigations and had requested advance payment to allow for additional resources to be contracted.  However, the Task Team had found that most of the 11 forensic investigators in the Group Internal Audit Unit had been contracted by the SIU.  The Task Team had raised the matter with the Committee responsible for the implementation of the recommendations and was closely monitoring the progress that was being made by the SIU.

Mr Cedric Gina, Member of the SABC Board assured the Committee that the delay in implementing the recommendations had not been intentional.  The Board had removed the former Acting COO from the position when it found that progress was not satisfactory.  Much progress had been made since Mr Motsoeneng was appointed as Acting COO.  He pointed out that the President had signed many proclamations requiring SIU investigations.  The Board was concerned over the lack of capacity of the SIU and had reservations about the up-front payments that had been made.  The Board did not agree with the priority rating assigned by the SIU to the SABC investigations.

Ms Motsweni advised that a policy for the awarding of performance bonuses were in place and was currently under review.  Performance bonuses had not been paid because of financial constraints.  The Auditor-General had made findings on employees not declaring their interests and on employees owning businesses that provided contracting services to the SABC.  Of the 20 employees concerned, only one had the necessary management permission.  The person concerned offered voice-over services, which the SABC did not wish to curtail.  Of the remaining 19 employees, one operated a bed-and-breakfast establishment that was used by SABC staff on one occasion.  The establishment had subsequently been blocked.  Disciplinary action was being taken against the other 18 employees.

Mr Motsoeneng added that the employment contracts of senior executives now required the incumbent to appoint a delegate who could take over if necessary.  The SABC had experienced difficulties because succession plans were not in place and executives were not transferring skills to subordinates.

Ms Shinn asked for a list of all the task teams and committees involved in implementing the recommendations of the Auditor-General.  She asked for details of when the entities were appointed and what the respective mandates were.  She understood that the ‘dashboard’ was a dynamic instrument but this did not adequately explain the discrepancies between the DOC and SABC versions of the briefing document.

Ms Killian said that the matter of contract management appeared to require further intervention.  The asked that the target date was for the implementation of a contract management system.  She asked how many petrol cards had not been withdrawn.  She asked how many employees were linked to businesses that had contracts with the SABC.

Mr Steyn asked for further clarity on the meeting the Task team had held with the Auditor-General.  He asked what the position was concerning the submission of reports by the SIU to the SABC Board.  The fuel allowance system was costing significantly more than the amount lost through the abuse of the petrol card system.  He suggested that the imposition of limits on the petrol cards was considered.  The report of the Auditor-General referred to instances where invoices were paid without a contract being in place.  This issue appeared to have been omitted from the action plan.  There was no evidence that corrective action had been taken to prevent overpayments, which was a basic financial management process.  Action should be taken against employees responsible for the wasteful expenditure involving the private travel company.

Ms Tsebe did not understand why the SABC had to pay for the services provided by the SIU.  She was extremely concerned over the apparent lack of capacity of the SIU and the appointment of contractors to perform investigations.  She asked for further clarity on the inability of the SABC to respond to queries from the auditors.  She asked if the money paid to the owner of the bed-and-breakfast establishment had been recovered.

Dr Ngubane replied that the systems of the SABC were inadequate and sufficient data on content could not be provided to the auditor.  As a result, the SABC had received a qualified audit opinion for the previous year.

Mr Gina advised that the relationship between the SABC Board and the SIU was good.  The Board received interim reports from the SIU and had no reason to doubt that it would not receive the final report when the investigations were completed.

Ms Lulama Mokhobo, Group CEO, SABC advised that the employment contracts of executive personnel were currently under review.  The employment contracts of previous CEO’s included a restraint of trade clause that prevented the employee from moving to other media houses and using the knowledge gained during his/her tenure at the SABC.  The operations of the procurement division had been reviewed and the contract management procedures were amended.  All purchases had to be assessed against the specified criteria before being signed off.  The Auditor-General had recommended that contracts that were not properly authorised were declared null and void.  The Task Team had met with AGSA to clarify the recommendation and to discuss any suggestions.  Companies owned by SABC employees were black-listed and removed from the list of approved companies.  Disciplinary action was taken against the employees concerned.  The SABC acknowledged that services had been rendered prior to informing employees that the practice would no longer be allowed.  The procurement division checked employee data against the CIPRO data and was required to submit a quarterly report to the Board.  100 petrol cards issued to executive management personnel were withdrawn.  The card system was still applicable for fleet and operations vehicles and for the sales force.  Stringent limits were imposed and purchases were limited to fuel and toll fees.  Employees had to provide receipts for toll fees and fuel purchases, which were reconciled to the monthly card statements.  Overspent amounts were recovered from the responsible employee.

Ms Newhoudt-Druchen asked for clarity on the number of vehicles and the amount spent on traveling.

Ms Mokhobo replied that the average monthly expenditure on fuel was R5,000 per fleet vehicle.

Mr Thami Ka Plaatjies, Deputy Chairperson of the SABC Board conceded that there had been instances of wrongdoing at the SABC in the past.  He assured the Committee that the SABC Board was committed to addressing all the issues that had been raised.

The Chairperson thanked the participants for their input to the briefing.  The challenges faced by the public broadcaster were complex and required much effort.  The Committee recognised that the process of turning around the SABC was on-going and Members had acknowledged that progress was being made.  The following progress report to the Committee was due after the end of June 2012.  The Committee required the Board to be removed from the day-to-day management of the SABC and to ensure that proper governance procedures were in place.  It was understood that the Group CEO and the Chief Financial Officer were recently appointed and that the new incumbents were accountable to the Board.  He observed that significant progress had been made since the Task Team was appointed.  The commitment of the team members was evident and the effort being made was acknowledged.  The Committee applauded the utilisation of internal resources, rather than the appointment of an external service provider at vast expense.

The Committee suggested that the plan for implementing the recommendations of the Auditor-General, the turnaround strategy and the strategic plans of the SABC were integrated into a single plan.  Privatisation was a policy matter and privatised public broadcasting entities were uncommon.

Other Committee business
The adoption of the minutes of the Committee meetings on 21 February 2012 and on 28 February 2012 was postponed to 9 March 2012.  The accuracy of the minutes of the meeting on 21 February required verification and Members had insufficient time to consider the minutes of the meeting held on 28 February.

The Chairperson advised that the due date for the Committee report on State-owned Entities (SOE’s) was 5 March 2012.  The Committee had not had the opportunity to discuss the report and to obtain input from all the Members.  The adoption of the report was postponed to 9 March 2012.  The Chairperson undertook to apply for an extension of the deadline.

The Chairperson advised that the week commencing 19 March 2012 had been declared a Committee week.  The Committee’s application for an oversight visit to Mpumalanga province was originally declined but the application had subsequently been re-submitted.  Certain Members were unable to go on the oversight visit due to other commitments.  Members would be informed of the final decision and arrangements if the visit was to be proceeded with.

The meeting was adjourned