SABC & MDDA on their 3rd Quarter Performance, with Minister

Meeting report

Opening Remarks by Minister & SABC Board Chairperson
Ms Faith Muthambi, Minister of Communications, commended the SABC on its work during the funeral of former the Head of State, Nelson Mandela. The SABC had completed repaying the state-guaranteed loan it had received in 2009. There were still some areas where the SABC was experiencing challenges. There was a need to prioritise the public broadcaster’s funding model.

Ms Ellen Tshabalala, SABC Board Chairperson, said the SABC had performed well under difficult conditions. The organisation was working tirelessly to deal with the actors’ strike. Vacant posts had been advertised and a recruitment agency had been selected. The report was outdated, as various developments had since taken place.

Briefing by SABC on its 3^rd Quarter Performance Rport
Mr Tian Olivier, Acting SABC Chief Executive Officer, presented the third quarterly performance report for the period ending 31 December 2013. During this quarter, the SABC had succeeded in achieving good results in some areas. Total revenue was R2.1 billion -- R143 million higher than the budget. Total expenditure was R1.69 billion -- R153 million higher than the budget. The surplus was R371 million, which was R26 million higher than the budget. Year on year revenue had increased by R494 million, which represented 10% growth compared to 4% of the previous year. The highest increase had been from television sales of R240 million, with radio advertising contributing R108million and R94 million coming from sponsorship trade exchanges. In the third quarter, television had delivered a target audience of 48% against a target of 53%, radio had reached 68.6% against a target of 67%, with a 53.4% share of the advertiser-attractive audience segment. With sound management and keeping within the predetermined financial parameters, the SABC was in a position to deliver on its public mandate.

The SABC had received accolades for the excellent content it had broadcast during the funeral of former President Nelson Mandela. It had performed two functions on that occasion -- being the host broadcaster as well as a public service -- with the former requiring the SABC to manage TV production for all the public events associated with the funeral for the benefit of international broadcasters, and Sentech handled distribution to the rest of the world. A public service agreement had been entered into by the Government Communication and Information system. The death of Nelson Mandela had resulted in overtime costs owing to the SABC’s lengthy coverage of his passing and the funeral. It had also made use of freelance journalists.
He said the SABC was ready for digital migration.

Risks to SABC cash flow sustainability were:

- Continued low levels of programme stock;
- A decline in TV audiences;
- Lower than required spending on capital expenditure (CAPEX);
- Sport mandates that could not be funded from revenue generated by the event, and therefore required funding from other sources; and
- Constant requests to increase head count.

Discussion
Mr G Davis (DA) asked about the growth in radio’s revenue from government advertising. He asked why there had been a decline in TV licences, the differential salary levels over four months, and what the SABC was doing to source interesting and informative information. When was the last editorial review done? He was concerned by objectives that were not measurable, and urged the SABC to quantify them in future. He asked the Minister if the appointment of a full CEO was on track. There had been an advertisement in the Sunday Times for a senior management position reporting to the chief operating officer, requiring tertiary qualifications. What was the importance of tertiary qualifications for the jobs advertised? He asked what the SABC was doing to address declining audiences, typified by the 500 000 news viewers compared to ETV’s three million. The decline in audiences was a result of people’s perceptions of a bias in SABC news, as evidenced by Project Kindle report.

Mr Davis commended SABC on the work it had done during the Mandela funeral. He asked on what grounds the SABC had not covered the booing of President Zuma during the funeral, which was covered on ETV and other international news channels.

Ms V van Dyk (DA) asked why sports like rugby and cricket were not included in sports programmes. She asked when programmes rescheduled on SABC 3 were to be restored, given that people in the Northern Cape and North West were Afrikaans-speaking, and relied heavily on SABC 3. She asked when new local content programs would be broadcast. What risk management procedures had been put in place to detect misrepresentation of qualifications?

Mr M Kalako (ANC) asked what mechanisms had been put in place to address declining TV revenues. It was important for the SABC to quantify its objectives so that they were measurable. He asked when vacant posts at the SABC would be filled. What was the current state of low-power transmitters, and in which provinces were they?

Mr R Tseli (ANC) asked when CAPEX projects were likely to be completed. What progress had been made on the Memorandum of Understanding (MOU) with people with special needs? He also asked about progress with regard to recommendations made by the previous parliament on proper financial controls.

Ms N Ndongeni (ANC) asked the SABC to explain its risk management strategy. What was the status of the technology to carry out digital transmission?

Mr Olivier replied that he was not sure about the MOU with people with special needs. Revenue from TV licences had been lower in the third quarter because new TV sales had been lower, owing to the economic outlook. As a result, only R7 million had been received, against a target of R10 million. Differential salaries were the result of annual bonuses being paid in December, and overtime during Mandela funeral. The last editorial review was five years ago. The current editorial review process gathered information from around the country, and most of the comments were in vernacular language. These were being translated into English. He was aware that some of the targets were not measurable. He had never seen the Project Kindle report. SABC had developed an app to pay TV licences through Android and Iphones. There were 100 low-power transmitters, but he was not sure of the distribution in the provinces. Sentech was ready for Digital Terrestrial Television (DTT) coverage. CAPEX projects usually run for three years, but some run into four years because of procurement challenges. The SABC had capacity ready for digital migration.

Mr Hlaudi Motsoeneng, Chief Operating Officer, SABC, said the SABC was doing well. The fact that SABC audiences were declining was debatable, because those who did research limited it to urban areas. The SABC was achieving a target of 26 million viewers during news hours. The SABC went around to all the provinces, getting views on local content, but unfortunately production houses were limited to KwaZulu Natal, Gauteng and the Western Cape. SABC wanted exciting radio “soaps” and dramas to be put on television. It wanted to increase local content, to get rid of international content. People should envisage a new SABC going forward. SABC would invite the Committee to its premises. It was not going to talk of its strategies in front of other competitors in Parliament. SABC had an agreement with the South African Football Association (SAFA) to make sure that it prioritised the SABC for broadcasting matches. SABC would like to broadcast all sports of national interest, but there was a challenge in getting the rights for cricket and rugby. The booing of the president was broadcast live, and there was no way the SABC could make a hullabaloo about it.

Ms Tshabalala said the SABC employed a corporate executive risk management policy. However, there had been serious leaks from the board. There had also been interference from Members of Parliamentary. The appointment of a full CEO was with the board. It was not wise to discuss its corporate plan in front of competitors, as this had impacted negatively on the work of SABC previously. She would submit the correct number of low-power transmitters.

She was not sure of the MOU with people with special needs. The Deputy Chairperson of the SABC was disabled and contributing effectively, to ensure that people with disabilities were well catered for. SABC also had disabled employees within the organisation. It was moving to employing disabled people in acting because it had been criticised heavily -- it had made people pretend that they were disabled, without employing disabled people themselves. The funding for SABC was not for a public broadcaster, and this needed to be debated vigorously. She would invite the Committee to the SABC’s premises to get first-hand experience of the good work it was doing.

The Minister said the SABC was full of Hollywood actors. The policy of SABC required that academic qualifications and experience were a prerequisite. She was “sitting on the neck” of the SABC, without necessarily interfering, to ensure that all vacancies were filled. The gaps on non-quantifiable objectives had been closed in the new strategic plan.

Mr W Madisha (COPE) said that as a person who came from the labour movement, he welcomed the SABC’s intervention on the problems faced by the cast of Generations.

Mr Davis said the last editorial review had been done ten years ago, not five years ago. He asked why there had been a delay in the editorial review of the policy of SABC, given that it must be done after every five years. He asked if SABC risk management strategies included detecting fraudulent qualifications. He asked if Ms Tshabalala if it was true that she was conducting an investigation into board members because of allegations in the media that she had misrepresented her qualifications when she had applied to be a member of the SABC board. A voice had been heard from the control room in Auckland Park, calling: “Cut away! Cut away! Cut away!” when Zuma was booed. This showed that it was censored. This booing was censored and not broadcast on prime time news.

Mr M Ndlozi (EFF) said the financial report had noted that SABC did not comply with International Financial Reporting Standards (IFRS). The remedy SABC proposed was strengthening internal controls. He asked why the intervention was not reconstituting the audit committee, rather than trying to strengthen internal controls, if the internal audit was ineffective. SABC audiences were declining, and it had to restore public credibility through its editorial policy. It was fair for SABC not to share its corporate plan in front of competitors. However, how was that to be balanced, as SABC was a public broadcaster that accounted to the public? If officials from SABC did not want to share its corporate plan, as was the practice in the private sector, it was free to go to the private sector. The best way to restore declining audiences was to broadcast of parliamentary proceedings without censoring them while Members were saying: ”Bring back the money!” He asked what SABC was proposing with its problematic funding model so that parliament could intervene. Was the SABC getting revenue from advertising on the 24-hour news channel? He said Ms Tshabalala was the anchor of moral legitimacy in the SABC, to ensure people in the SABC did not fraudulently enhance their qualifications. He asked if she held qualifications for being the chairperson of the SABC, and if she had, she should show them to the public to sweep away allegations in the media that she had misrepresented them.

Mr Kalako said the SABC must clarify if it did not hold rights for cricket and rugby. He had seen the booing of President Zuma on SABC. SABC was on the right track, as it was not censoring information. The Committee could organise closed sessions, as it was unjust to share one’s secrets with competitors.

Ms Van Dyk asked if the SABC’s internal processes were sufficient to detect misrepresentation of qualifications.

The Chairperson said the Committee would go to the SABC as part of an oversight visit. She asked if the SABC had ring-fenced budgets that could be used in times of emergency. The SABC should explain its procurement processes so that the Committee could help find the bottlenecks in the procurement process and speed up the supply management procedures.

Ms Tshabalala said the skills audit to assess the capacity of the SABC had produced questionable reports. The article in the Mail & Guardian -- that she was conducting an inquiry -- was untrue. The Mail and Guardian had a way of misconstruing facts, and she was not going to deliberate on that. Her ambition was ensure sound corporate governance at the SABC. The Mail and Guardian article was the work of detractors and her focus was to ensure that SABC members were legitimate, mature and authentic to the operation of the SABC.

The conference held by the ANC in Stellenbosch had agreed that the SABC was to be funded 60% from Treasury, but it continued to receive only 3% from Treasury. More than 60% of SABC funds came from advertisements. Other broadcasters internationally were funded 100% by the state, and the SABC found itself in the precarious position of trying to fund itself. The tarnishing of the image of the SABC by certain parliamentarians was scaring away potential customers. On qualifications, she said she was following the processes of parliament, and would honour any inquiry that parliament put in place.

Minister Muthambi said Section 33 (1) of the Constitution afforded every individual the right to fair administrative action. She was not denying Members the right to ask related questions, but the agenda of the day was the third quarter performance report of the SABC.

Mr James Aguma, Acting Chief Financial Officer, SABC, said the Auditor General had found the SABC short on TV revenues, and had noted that the SABC was accounting on a cash basis, without accounting for the debt that customers owed it on TV licences. There were two chartered accountants sitting on the audit committee. The need to strengthen internal control followed the Committee of Sponsoring Organizations (COSO) model as a means for companies to identify and mitigate risk that could lead to financial misstatements. It had five components -- control environment, risk assessment, control activities, information communication and monitoring.

Mr Motsoeneng said the SABC wanted to cover parliament. It had recruited the right people typified by Mr Aguma, who had been recruited from the Auditor General. He did not know what bias was, as people had different biases. The SABC had editorial independence and did not interfere with news because it wanted quality. Editors and journalists took their own decisions. The SABC reflected the truth and did not mislead people. The SABC had a very good strategy, but kept it behind closed doors.

Mr Olivier said that the audit committee consisted of people with qualifications such as B Com, M Com, Honours and chartered accountants. The SABC provided transport for its staff who worked after hours. It was true that the last audit review was from 2002-2004. R14 million had been realised from the 24-hour news channel. The SABC had refrained from committing itself to long-term agreements in sports because of the financial difficulties it had been going through. The supply management procedures depended on what needed to be done, in line with Treasury regulations.

Briefing by Media Development Diversity Agency (MDDA) on its third quarter performance report
Minister Muthambi said the MDDA was turning ten years old, having achieved a clean audit since its inception. The only vacant position was that of the CEO. The Minister said she would have to leave early to attend the proclamation of functions.

Mr Mshiyeni Gungqisa, Acting CEO, MDDA, presented the agency’s third quarter performance report. Achievements include:
- 11 years of unqualified audit reports since inception;
- a total of 570 media projects supported with MDDA grants worth R275 million;
- more than 2 021 individuals trained and skilled;
- more than 247 bursaries granted for media studies;
- community and small commercial newspapers and magazines produced in indigenous languages;
- research work produced and published on media topics; and
- signal distribution costs for community broadcasting discounted.

Challenges included demands for funding that outweighed available resources, and an increase in applications without additional funding.

Discussion
Mr Tseli was impressed by MDDA’s achievements against performance targets. He asked about the gender balance and people with disabilities at operational and executive levels in the agency. He asked if it was involved in the election of board members of community radio stations.

Mr Ndlozi asked how the MDDA budget of R4 000 for research was going to be enough, as it was too little even for a Master’s student.

Mr Madisha asked if the staff were well paid, satisfied and happy. He asked how parliament could help MDDA to unleash its full potential.

Mr Gungqisa said that there were two men and three women at the executive level. The total staff complement was 23 -- 10 male and 13 female. MDDA did not interfere with the work of community radio stations, but its programme manager attended board meetings of community radio stations. It gave the community stations a tool kit for corporate governance. It had difficulty visiting all the community radio stations, as their total staff operated from Gauteng.

The Chairperson said she was looking forward to the annual report of MDDA.

SABC board Chairperson Matter
The Chairperson said all members would constitute an inquiry into the allegations of misrepresentation of qualifications by the SABC board chairperson.

Mr Davis proposed that Ms Tshabalala be suspended, as there was sufficient prima facie evidence that she may interfere with the inquiry.

Mr Ntutuzelo Vanara, Senior Legal Officer, Parliament, said that for the suspension to be imposed, the Committee had to write to Parliament, recommending her suspension. Parliament would then write to the President, recommending suspension, as he was the appointing authority.

The Committee agreed that the inquiry would take place on 25 September and would be open to the public.

The meeting was adjourned