Downgrade puts SABC bailout plans in the balance - economist

2017-04-07 13:50
Malusi Gigaba hosts a news conference in Pretoria. (AP)

Malusi Gigaba hosts a news conference in Pretoria. (AP)

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Cape Town - The cash-strapped SABC faces a tough task in securing a potential bailout from Treasury thanks to the economic implications of a ratings downgrade, a senior economist says.

The SABC is facing immense financial challenges this month, with acting CEO James Aguma admitting in March that the broadcaster is down to its last reserves.

A potential Treasury bailout has been made all the more difficult after Standard and Poor's decision to downgrade South Africa's economy to junk status this week, senior economist Dawie Roodt told News24.

"The state's finances are in real, deep trouble, if we look at the budget," Roodt said on Friday.

"Debt levels have been going up to record highs. Additionally what we've seen is the finances of state-owned enterprises [SOEs] have also deteriorated recently."

The state quite often guarantees their loans and in some cases provides actual money to the SOEs, he said.

"The reality is that state debt levels are unsustainable. It needs to borrow less, but now that some institutions have been rated on so-called junk level, it means the state has to pay more to borrow."

Gigaba's first test

Roodt said new Finance Minister Malusi Gigaba has a tough decision ahead of him if new Communications Minister Ayanda Dlodlo approaches Treasury for more money.

The SABC is likely too small an entity to be rated by an agency such as Standard & Poor's, but it is dependent on the state to secure loans.

"He [Gigaba] will be forced to show his hand now. So let's see what he is going to do. It's his first test.

"The reality is that they need to get money somewhere. That institution has been destroyed to such an extent that they need to get money urgently.

"The best case scenario would be to literally close it down and to sell off the assets just to stop the bleeding, but that's not going to happen because it's such a powerful and important tool."

The most likely scenario is that Treasury will provide the cash or guarantee somehow, but will need to ration resources and stop the bleeding.

"Bad times will therefore likely continue," he added.

Dlodlo meeting with Treasury

The communications ministry told News24 on Friday that Dlodlo met with Gigaba on Wednesday to "look at various options available" to address the SABC's financial problems.

They agreed to establish a cross-functional task team that will report to both ministers, and that will work with the SABC's new interim board and current executives.

"The minister has instructed the SABC to work closely with this team and for the broadcaster to be frank, honest and accessible in availing all the financial records that are requested from them by this Task Team," communications spokesperson Lebohang Mafokosi said.

Dlodlo also told SABC executives, including Aguma, to find new sources of revenue.

The new interim board will be inducted this coming week from Sunday to Tuesday. They have been told to use the induction to workshop a turnaround strategy.

"Only once the work of the task team is completed will both ministers be in a position to make a decision on the next steps," Mafokosi added.

Read more on:    sabc  |  malusi gigaba  |  economy  |  media

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.