SABC & MDDA 2018/19 Annual Performance Plan; with Deputy Minister

Meeting report

The Chairperson said the South African Broadcasting Corporation (SABC) and the Media Development and Diversity Agency (MDDA) would be briefing the Committee on their annual performance plans (APPs), and would also respond to concerns raised in the previous meeting.

Ms V van Dyk (DA) asked why the Minister of Communications, Ms Nomvula Makonyane, was absent from the meeting.

Ms Pinky Kekana, Deputy Minister of Communications responded that the Minister was absent due to work-related matters.

Ms P van Damme (DA) remarked that attendance at the meeting was also work-related.

Ms Kekana said that the Minister was not attending because she was looking into the issues involving SENTEC, the MDDA and other stakeholders, as they would be having a meeting the following day.

South African Broadcasting Corporation: APP

The Deputy Minister reminded the Committee that the SABC had been facing budgetary constraints. The Minister of Communications was engaging with the Minister of Finance to see how these issues could be resolved. The presentation would also speak to the findings of the Auditor General of South Africa (AGSA) and to the filling of vacancies with a view of stabilising the Corporation.

Mr Bongumusa Makhathini, Chairperson of the Board, SABC, said that he would respond to matters arising from previous minutes, which included the mismanagement of security contracts; workers’ complaints; political party interference; the vetting process; coverage of certain politicians; and responding to previous non-answered questions.

He said that the Special Investigating Unit (SIU) had conducted investigations into the alleged mismanagement of security contracts by the Board, which he had reported on at the previous meeting. The SIU was investigating all allegations and was looking into what had happened before, during and after the institution of the interim board. Once investigation of all matters was finalised, the Board would approach the court. The court had advised the Board that it should not speak about these issues until they had all been judicially or legally finalised. Employees had been advised to direct their complaints to labour unions, because they could not have a situation where each and every employee could approach the Committee if and when he or she was not happy.

Ms Nomsa Philiso, Chief Executive Officer (CEO), SABC, said the Corporation was engaging workers to raise management issues with their respective unions. The SABC Board was meeting with all the political parties in the run up to the national elections. The SABC had provided a report on the legal opinion regarding the vetting process, and would provide an update on the issue of the alleged instruction to SABC journalists by new management regarding the coverage of certain politicians. It had submitted written responses to questions that could not be responded to at the meeting, including the contract duration of “soapies,” irregular expenditure, radio listenship numbers, readiness for wage negotiations and the national elections, and the delay in the finalisation of editorial policies.

She said that the SABC’s radio stations included Radio 2000, RSG, SAFM, Umhlobo Wenne, TruFM, XKFM. Ligwalagwala, Thobela, Munghana Lonene, Phalaphala FM, Motsweding, 5FM, Ukhozi, Lotus, Good Hope FM, Metro FM and Lesedi FM.

Ms Philiso provided the Committee with a progress report on matters raised by the AG.

She said the SABC was the only broadcaster whose radio and news services covered all nine provinces in their mother tongues. It had experienced severe governance and management challenges over a number of years, and this had undermined the integrity of the SABC and destabilised staff and operations. Through the intervention of the Public Protector in 2012/13 and Parliament in 2015/16, the institution had been taken from the brink and again set on a route towards recovery.

The SABC had four strategic pillars and goals. These were:

• To be a financially sustainable organisation;
• To acquire and schedule compelling and quality programming spanning a range of genres, in all official SA languages, and exceeding its mandate objectives across traditional and digital media platforms;
• To develop a dynamic and motivated fit-for-purpose work force that embraced learning and was sufficiently adaptable to migrate into the digital age;
• To ensure compliant governance practices, complemented by effective risk management and an internal control framework.

The SABC’s priority was to ensure it remained a financially sustainable organisation, by growing its revenue base through traditional and innovative new resources while prudently managing its costs. More emphasis would have to be placed on both revenue generation and cost containment strategies for long-term results. It had a three-tier revenue base -- commercial revenue (85%), television licence fees (12%) and government grants (3%).

As with markets across the world, South Africa needed to adapt to the new reality of TV as one of many screens that commanded attention in the modern home, by producing more on-demand content and user-led experiences that interactive TV could offer. While this new environment showed an expanded base of players, devices and a global menu of content, it did not suggest that traditional TV and radio would disappear. However, there would be continued pressure from new alternatives. While audiences would connect with and consume SABC content in increasingly different ways over the next couple of years, what would remain unchanged was the demand for high quality, diverse and distinctive South African local content. Whatever the trend, and whatever the means through which South Africans chose to be informed and entertained, the SABC’s role remained critical. The 2018/19 strategies in respect of content and platforms was based on distinctive and quality local content, accessible on multiple platforms, in order to attract and retain maximum audiences, and technology and infrastructure to support the changing broadcasting landscape.

To meet its human resources needs, the SABC aimed at attracting and retaining talent. The main focus was on critical skills, while ensuring entrepreneurship, youth and community development and promoting the development of local content producers.

The development of an integrated approach to governance -- risk, compliance, monitoring, evaluation and assurance provision -- was as a result of the current complexities and uncertainties in markets around the world. The focus would be on rationalising risk management, controls, assurance structures and processes.

To fund its programmes, the SABC had prepared a budget based on the inputs from all business units within the SABC in order to achieve its strategic objectives, after considering the National Treasury instruction note on cost containment measures. Its three-year budget was prepared in conservative manner in order to ensure that it was realistic and to show an improvement in the its financial position. It was committed to return to a path of profitability within the cycle of the SABC plan.

Ms Thabile Dlamini, Acting Chief Financial Officer: SABC, provided the income statement. The revenue and other income in 2017/18 had been R6.8 billion, and expenditure had amounted to R7.2 billion. In 2018/19, income had been R7.4 billion, and expenditure was expected to amount to R7.7 billion. The SABC operated at a loss before finance costs and tax.

She said that a ban on the advertising of alcohol, and the effect of the sugar levy, risked reducing the SABC’s profit. The losses, along with a R1.2 billion risk in contingent liabilities -- unforeseen future events -- were in addition to a fine from the Competition Commission Tribunal which the public broadcaster faces in 2018/19. The SABC had not factored in the impact of the ban on alcohol advertising and the sugar levy on the SABC’s budget. She was highlighting the fact that there was a looming ban on advertising alcohol on television, as well as the sugar beverage levy. Another risk was the fine to be imposed by the Tribunal for collusive advertising. In this context, what the SABC needed to highlight was that the impact of that fine was huge, and the Acting CFO had not factored it into the numbers. In the year 2018, the SABC anticipated that it might sit on about R1.2 billion, which was not reflected in the numbers either. Another risk was the issue of acquiring sports rights, and the SABC intended not entering into any new commitments with sports rights holders.

It wanted to generate at least R7 billion in revenue, with R5.2 billion raised from advertising, R1 billion from television licence fees, and R253m in government grants and other sources. It also wanted to cut its losses from R973 million recorded in 2016/17, to R287.6m the financial year. However, their projections showed cash flow challenges. The SABC cash flow forecast for next year still indicated that they needed to have an injection from the banks.

Ms Dlamini also reported on the approved projects in progress, including the SABC’s television outside broadcast (TVOB) facilities, its Henley facilities, radio broadcast facilities, information technology, logistical services, provinces, and engineering services.

Discussion

The Chairperson commented that he was happy that the Board chairperson had strengthened communication between employees and executive management, and it had not stopped him from organising their meeting with labour unions. The strengthening of communication was something that should be done to ensure a good relationship. At the end, the chairperson would come to report to the Committee what was happening. This also applied to the changes that had been made at the SABC. People were affected, especially the labour union and the Board. Consistent communication would stabilise the SABC and create a good working environment.

Ms Van Damme thanked the SABC for covering the DA congress. Prior to this coverage, the DA had had to go to court in order to get the SABC to cover the DA congress. She was happy that the employees would be subject to a vetting process, which she hoped would be the human resources (HR) vetting process. She said that at the last meeting, the SABC had been told to increase its audience numbers because the viewership and listenership were being badly managed. Employees were also complaining. There was no communication with the staff. The SABC did not take employees with it, and did not take audiences with it. The SAFM was losing money simply because there was no good communication. Something serious was happening there. She added that there were issues that were not included in the APP, especially the issue of sports right costs and audience figures, and what category of audience was targeted. Her understanding was that the SABC had to cover certain funerals of prominent people, and asked whether they had spoken to the National Treasury about funding these programmes. Rugby and football should be aired free. She finally asked the SABC to elaborate more on its engagement and discussions with the Independent Communications Authority of South Africa (ICASA).

Ms Van Dyk asked whether the SABC was able to pay its signal distributor, SENTEC, and if not, whether any arrangement had been made to pay.

Mr L Mbinda (PAC) said he understood that the Corporation was governed and regulated by the SABC Act and accounted to Parliament, and said the SABC should implement what it had promised to do. Referring to the mismanagement, he said the SABC had assured the Committee that it should not worry, as the situation was improving, but he remarked that mismanagement had been demoralising employees. The presentation had said nothing about those who were not able to perform. What action had been taken? There was training for developing employees’ skills, but not all employees could attend such training for the sake of developing their skills. There was a need to change the organisational structure. He applauded the fact that there had been improvement in respect of communication with staff and their unions. For the sustainability of communications, small meetings should be institutionalised and meetings should be given considerable attention.

Mr N Xaba (ANC) asked the SABC to elaborate on how they were engaging with political parties prior to the national elections. The chairperson of the Board had stated that funding of the public mandate through government grants had not increased in proportion to the additional requirements to produce and broadcast more events of national importance, and the lack of finance compromised the funding of the public mandate. Referring to attracting and retaining talent, he commented that he would like to know who the SABC was attracting and retaining. As the SABC was exposed to risks by the current complexities and uncertainties, he asked whether there was any plan for disaster recovery. The SABC could not cover all areas of South Africa -- there were still areas where inhabitants could not watch TV -- and the presentation had not touch on this aspect.

Ms M Matshoba (ANC) welcomed the responses provided by the SABC with regard to matters previously raised by the Committee, but she was still worried about structures. She raised concerns over the affordability, availability and supply of set-top boxes (STBs) into the market. There had been court rulings, and the implementation of those rulings should be interrogated.

Mr M Kalako (ANC) asked the chairperson of the Board whether she was aware of the article published on 17 April with regard to the qualification of one member of the SABC. He was raising the issue for the Board to deal with it. Clarity on the alleged problems in the publication was needed. Another problem was that there no timeframe for the investigations, and the investigations should not take forever. The timeframe for investigations was critical. When the Committee met with the SABC in their last emgagement, it had been agreed that the SABC had to meet with the labour unions. Had they met? He said the Committee should find ways to assist the SABC to broadcast the sports which South Africans liked to watch for free. The SABC should come with a concrete funding proposal on the increase needed so that the Committee could approve it. If it did not bring such proposal forward, they would be caught in this cycle every financial year. How far was the SABC with the cases of two former executives, Mr Hlaudi Motsoeneng and Mr James Guma? These issues seemed to have been buried without a conclusion. How could the Committee intervene and assist the SABC to restore its integrity? How far was the report on the validity of the alleged mismanaged security contracts?

The Chairperson said the SABC had mentioned that it had lost a lot of staff, but no reasons had been given as to why they had left. He asked the chairperson of the Board to elaborate on what reasons of decline listenership and viewership could be. There was a need to cover the funeral of an important person like Dr Skweyiya, but it had been indicated that the broadcasting of funerals was not funded, so how were the expenditures recovered? By the end of 2016, the Committee had had to overhaul the Board of the SABC because it had been led by gangsters, and the interim Board had restored the confidence of South Africans. The public had also applauded Parliament for doing a good job. He said the SABC should not lose that track of confidence. The track would not get lost if the SABC kept communicating. There should a good communication between the Board, executive management and staff, as well as the labour unions. The SABC should interact with Committee on any matter -- it was just one call away.

SABC’s response

Mr Makhathini said that he had approached the member referred to in the newspaper over his qualifications, and he had shared his story with him. However, the fact was that the university had instituted an investigation into his PhD degree, and nothing could be done while an investigation was still going on.

With regard to investigations, he said that during the time of the interim board, a number of investigations had been instituted, and those responsible had been taken to court. The pensions of Mr Motsoeneng and Mr Guma had been suspended. Subsequently, Mr Motsoeneng had gone to court. He had also approached the Commission for Conciliation, Mediation and Arbitration (CCMA), stating that his dismissal was unlawful.

He referred to the financial constraints, and remarked that gone were the days when things were done at the SABC, despite the lack of resources. The SABC wanted to return to normality, adding that when one could not afford it, one could not just do it.

Ms Philiso said there had been no response yet on the ICASA issue.

On the question of broadcasting the sports freely, she responded that the SABC would like to cover all sports of national interest. However, the support of the entire nation was needed, and the salient questions were: How could the nation intervene to ensure that this was a reality? How should everybody be called in to cover this? The intention was that the SABC should cover all sports, and the main question was how.

On paying suppliers, she said that the SABC usually paid its production upfront and that suppliers were paid within 30 days.

On the question of mismanagement and the issue of morale, she said that the capacity of the SABC could be achieved through empowering workers. Communication was key for the operating model, and they had met twice with the unions since the last meeting with the Committee. They had agreed that they would be meeting on monthly basis, and this would establish a sound relationship with them.

Regarding engagements with political parties prior to national elections, she said that there had been the SABC’s “National Elections Plan,” which was not something new. Rather, it had been reviewed with a view to making things better. The issue that always arose was how fair coverage of all political parties could be done.

The SABC had the ability to do many things, but they had no funds. Expenses for covering funeral services of prominent people were drawn from other funded activities.

The timeframe for the investigations was three months.

The reasons why employees were leaving were because of better prospects and because of the conflicting environment they worked in.

Mr Xaba said that the crisis in the SABC had been confirmed, and a disaster recovery plan should be in place.

Mr Mbinda said that issues raised by the CEO on performance illustrated that they knew about their actions and plans, but could not show their contingent liabilities.

Mr Makhathini thanked Members for their inputs and comments, and commented that there had been an improvement in financial performance. The disaster recovery plan had been outsourced.

The Chairperson asked whether research had been conducted in order to ensure that the SABC met international standards.

Ms Philiso responded that the SABC had not been at international platforms in order to benchmark its standards. The standard that the SABC was applying had been brought forward in 2006.

The Deputy Minister said that the SABC would be sharing its ideas with the Committee in their further interactions. They wanted the SABC to come up with a plan on how the elections would be covered. They could not afford not to cover the national elections, even if there were no funds.

She applauded the Chairperson’s comment on restoring people’s confidence in the SABC and its trust in them. She had noted the Committee’s comment that the SABC should focus on increasing its audiences, and in so doing, they should take their employees with them.

The SABC would come to brief the Committee on its readiness for digital migration. There was a need for a joint meeting with the two concerned committees so that the Department could brief them on the progress on the rollout of the set-off boxes.

The Chairperson commented that there was a need for the Committee to back the SABC’s call for an increased government grant.

Media Development and Diversity Agency (MDDA): APP

The Deputy Minister said that there had been a high number of resignations from the Agency. This concern had been communicated to the Minister through her office. Of main concern was that the Board could not sit because it lacked a quorum. The position of the Chief Financial Officer and other positions had been advertised. There would be interviews. She added that SENTEC had been threatening to shut down community radios. The Department had to intervene, and there would be a meeting on this issue. The audit outcome of the MDDA looked as though it had regressed compared to the previoous year. In its presentation, the MDDA would respond to concerns raised zt the previous meeting.

Mr Musa Sishange, Acting Chairperson: MDDA, said the presentation focused on the external issues raised by the Committee, which included the MDDA Act review, the lobby for media diversity and public engagement, a sustainability strategy, regulation and fair competition, content diversity strategy and an increase in the MDDA funding base.

At the meeting of the Committee with the MDDA staff, two main issues had been raised:

• staff morale and improved channels between the Board, executive management and staff; and
• vacancies, executive committee members in acting positions, and under-capacitated community media.

A number of actions had been taken to address these issues. With regard to AGSA findings, the MDDA was progressively addressing them, and within this context, the key performance indicators (KPIs) for the 2017/18 APP had been reviewed in terms of “SMART” principles and complied with the National Treasury guidelines.

The MDDA’s strategic five-year priorities were to reconfigure the MDDA Act, to review the current MDD organisational structure and capacity, to promote implementation of cutting edge research responsive to sectoral dynamics, to review its sustainability model to ensure media diversity and transformation, and to contribute to increased public and media sector awareness in order to influence national policy.

Reporting on its impact study findings, Mr Sishange said that the MDDA had made a significant impact on transforming the media landscape through a number of community and small commercial media projects funded. However, internal and external limitations hindered its ability to deliver on its mandate. The MDDA received an average of R31 million per year from the Department of Communication, and external fund-raising resulted in the media receiving an average of R32 million from broadcaster funders. Over the medium term, the MDDA was developing a business case to secure additional external funding from the private sector and other funders. The total external funding had been R62 million in 2017/18 and 2018/19. The total grant expenditure had been R32 million in both 2017/18 and 2018/19. Over the MTEF, the spending focus would be on promoting media development and diversity through financial and non-financial support to community broadcasting, and community and small commercial print projects.

Discussion

The Chairperson welcomed the presentation, as it had indicated both successes and failures.

Ms Van Wyk appreciated the manner in which the Committee’s previous concerns had been addressed. The commitment to fill vacancies was very clear. Vacancies had decreased. She asked for the expenditure analysis to be elaborated on further so that she could understand it clearly. 39% of the budget had been allocated to administration, but it was not clear from presentation what percentage had been allocated to other programmes. Was compensation of employees not under the administration programme? How much had been spent on operations? How much was allocated to vacant positions? What were the vacant positions? What was the impact of the vacancies on operational costs? It had been stated that there was no CFO -- what had happened to the CFO? Was there any employee monitoring and evaluation system? There was an absence of provincial offices, and ICASA had reported that there were no regional offices, and she asked how the MDDA was communicating with ICASA. How were they collaborating? Were internal auditors outsourced was consultancy relied on? She agreed with the Board that the funding model’s criteria were very vague and that created problems. Did media have to demonstrate if they could become self-sufficient? She also asked whether the projects were old or new ones.

Mr Xaba commented that there was no decision-making in the institution. The MDDA should change its operations. He asked whether a review of MDDA’s policy should be done soon. An aggressive proposal on funding should not be postponed. He added that when changes were seriously needed, the review of funding and policy should not be delayed.

Ms Mashoba referred to an MDDA programme that took place in Gugulethu, saying that she would like to explain further about it but did not want to extend the meeting. She asked whether vacant posts had been advertised. What was the number of community radio stations approved by the Board for funding? What community stations were they? She remarked that prior to 2017, the MDDA had been an entity which had been victimised by individuals who had stopped it from providing people with government services. She could provide more information on the victimisation, which had made her heart sore.

The Chairperson commented that when there was no good leadership in any organisation, there would be a crisis.

MDDA’s response

Mr Sishange said that members of the Board did not comprise a quorum. That was the main problem. Decisions could not be made. It was the Board that took the resolutions. The three members responsible for overseeing auditing were not there. They were in the process of filling the vacancies, and five candidates had been interviewed. The Board would be able to give direction to executives when it had a quorum. This was the reason for the impasse. He added that there had been irregular expenditure, but these issues had been addressed and there would be no irregular expenditure in future.

The Deputy Minister said that responsibility for the MDDA fell on her shoulders. She had supported the MDDA’s proposal, but the final say rested with the Minister. When they had come to present the second quarter report to the Committee, some members of the MDDA had resigned. There were some processes that had to be followed in order to fill the vacancies. She was aware that another term was about to end without a functional Board. The day after briefing the Committee on the APP, there would be a meeting to address the issues. The issues could have been resolved if the Minister had not been playing a major role in Winnie Mandela’s funeral service. She promised that the MDDA’s Board-related problems would be finalised soon.

The Chairperson said that he was happy to see that everything was in the pipeline, but added that the pipeline should not be too long, implying that addressing the issues should not be delayed. Community radio stations were very important, because they could reach remote areas which TV could not cover.

The meeting was adjourned.