Bold new plans but same old problems for SABC as report shows how far it has to go

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The SABC describes the current financial crisis as 'the most critical for the future and sustainability of this 84-year-old institution'.
The SABC describes the current financial crisis as 'the most critical for the future and sustainability of this 84-year-old institution'.
  • SABC leaders have given a frank but optimistic account of the broadcaster's financial health.
  • The office of the Auditor General, meanwhile, told Parliament that the SABC needs to get its house in order financially.
  • SABC group CEO Madoda Mxakwe said the group would be placing the creation of compelling content at the centre of its approach to improve audience ratings.

While leadership at the South African Broadcasting Corporation gave a frank but optimistic account of the public service broadcaster's financial health in Auckland Park, Johannesburg on Tuesday, the office of the Auditor General told Members of Parliament in Cape Town that the SABC needed to get its house in order as saving or cutting its way to financial stability was not tenable.

Upon the release of the SABC's 2019-20 annual report on Tuesday, leadership at the public service broadcaster made no bones about the fact that the entity had a long way to go towards being financially sound, as it still spent R78 million on consulting and R27 million of that on legal fees.

Along with being outflanked by digital streaming platforms, struggles with getting to grips with its wage bill and a low compliance rate of TV license payments, the SABC struggled to invest effectively in compelling content this year, in part because of the Covid-19 pandemic.

At the release of the annual report, SABC Group Chief Executive Officer Madoda Mxakwe said the broadcaster would be focussing on increased investment in content, digitalisation and responding to the impact of the shift towards digital streaming platforms such as Netflix and Showmax on the consumer market.

Mxakwe said the SABC had cash reserves of R2.1 billion, an improvement from R73 million at the end of March in 2019. 

"The corporation was once again encouraged by the decline in year to year irregular expenditure by about 40% amounting to R202 million compared to the R336 million for the year that ended in March 2019. Year on year, fruitless expenditure declined 87% and that equates to R27 million," said Mxakwe.

Mxakwe said the public service broadcaster would place compelling content at the centre of its approach to improve audience ratings and ensure that marketing initiatives are aimed at drawing on new audiences and expanding existing audiences.

"There is huge focus on emerging revenue generation opportunities. We note that dependence on classic sources of revenue is not working. We are now transitioning to ensure that we can get more ad spend on digital platforms," Mxakwe said.

The CEO acknowledged the financial difficulties that the SABC has had and continues to confront but said the public service broadcaster was working to become more financially sustainable and more competitive.

"The SABC has taken bold and decisive steps to implementing our turnaround plans. Notwithstanding difficult economic conditions, the SABC remains on track to achieve financial sustainability," he said.

SABC chief financial officer Yolande van Biljon said Covid-19 and the related implications wreaked havoc on the broadcaster’s plans for the year. 

"Our main cost drivers continue to be the payroll, our content investment and our signal and distribution costs. Operational costs are made of hundreds of little items and that is where we have made inroads in the way that the organisation engages with its cost base," said Van Biljon.

Van Biljon said the SABC’s true operational performance improved by R110 million in a year to R585 million. She said the broadcaster was impacted by its inability to invest in compelling content in recent years, severely hampering the proposition to advertisers.

She also said the SABC was encouraged by the decrease in audit report findings by the Auditor General from 28 findings in 2019 to 23 findings in 2020.

"There is a balance at the end of this financial year that amounts to R5.4bn. This balance has been accruing over a period of nearly nine to ten years. The majority of it was identified in an activity in the 2016 year and it, therefore, predates that era," Van Biljon said.

SABC COO Ian Plaatjies said the broadcaster had some "transformative" initiative in the works, including a partnership with Telkom to introduce streaming services for SABC television.

"One revenue driver is in the form of a carrying license and the other is the ability to play in the advertising space in streaming services. In the new year you will see many more of these partnerships and collaborations as we transform the organisation," said Plaatjies.

Meanwhile, over at Parliament in Cape Town, MPs received an update from the Auditor General on the grim financial realities the SABC finds itself in.

Auditor General senior manager Jolene Pillay said out of all fruitless and wasteful expenditure at the Department of Communications and its entities, 99% relates to fruitless expenditure incurred by the SABC, mainly as a result of late payments to suppliers.

Pillay reminded MPs that the SABC received a financial bailout of R3.2 billion during the last financial year.

"The public entity incurred a net loss of R511 million and net cash outflows from operations of R1.2 billion for the financial reporting period to 31 March. These conditions, along with other matters indicate that a material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern," Pillay said.

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