R3.2 billion gone with nothing to show for it
A turnaround plan and R3.2 billion from the government have not been enough to rescue the South African Broadcasting Corporation (SABC), which has become technically insolvent with no clear plan to profitability.
The SABC has been in decline for years, characterised by financial instability, allegations of corruption, and its inability to keep up with new technology.
Its financial challenges have stemmed from various factors, including unpaid TV licences, inefficient management, corruption, and declining advertising revenue.
The SABC recently tabled its 2023/24 annual report in Parliament, which showed that the state-owned enterprise (SOE) is in financial trouble.
It explained that part of the reason for this trouble is the mass migration of audiences to global streaming platforms.
This has not only shrunk the broadcaster’s market share but also impacted its revenue from TV licence fees, as audiences either stream on screens other than TVs or simply do not pay their licence fees.
This caused license fee compliance to decline to all-time lows. “Compliance cannot be enforced, causing the non-compliance rate to increase to 85.60%,” the SABC said.
These problems can clearly be seen in the SABC’s finances, with the SOE’s annual report revealing a loss before interest and tax of R192 million.
Even more concerning is its balance sheet, which revealed that the state broadcaster is technically insolvent.
The broadcaster told parliament its balance sheet for 31 March 2024 shows a negative balance, primarily due to the cost of employee retirement benefits. These costs have become increasingly significant since 2020.
A negative equity balance means that the company’s liabilities exceed its assets, rendering it technically insolvent.
This follows numerous warnings from the company’s management and industry roleplayers that the SABC is on the brink of bankruptcy.
In July last year, William Bird of Media Monitoring told Newzroom Afrika that the state-owned broadcaster needs additional government funding to avoid entering into business rescues.
Bird said business rescue proceedings would not be a good idea for the SABC as they would create further challenges for the company without solving its underlying issue of being uncompetitive in the digital environment.
Group CFO Yolande van Biljon has made similar statements, saying the broadcaster could be liquidated if the group cannot sort out its financial situation.
To give the struggling broadcaster a lifeline, the SABC received a significant bailout in 2020.
The government allocated R3.2 billion to the broadcaster to help it address its financial woes and implement a turnaround strategy.
This funding was intended to cover the SABC’s outstanding debts and to support its efforts to improve its operations and financial sustainability.
However, in November last year, former Deputy Minister of Communications Philly Mapulane told Parliament’s Portfolio Committee on Communications that the SABC is worse off now than before it received the bailout.
“You will recall we supported the turnaround plan. It was implemented with the hope it would turn around the fortunes of the SABC, but the turnaround plan never turned the finances of the SABC,” he said.
“We are back to where we were, if not in a worse position than when we started with a bailout.”
While there are some small signs of recovery at the broadcaster, like increased advertising revenue and cost-cutting measures, the SABC still finds itself in a very difficult position to get out of.
At its most recent presentation to Parliament, the SABC said it ‘remains materially uncertain’ whether it will be able to meet its obligations in the next twelve months.
It will require implementing severe austerity measures, including suspending more than 80% of the long-term capital plan and limiting content investment.
“It must be noted that virtually no funding is currently available for any capital investment in innovation, infrastructure and technology,” the SABC said.
This means the broadcaster will likely fall even further behind new technology and innovations that are being developed, placing it on the back foot for years to come.
Corruption allegations
Aside from financial difficulties, the state broadcaster is also plagued by allegations of corruption and inefficient management.
In October last year, former SABC board member Mathatha Tsedu revealed widespread corruption and fraud within the state broadcaster.
According to Tsedu, SABC’s board was compelled to take an active role in the company’s management to halt these illicit activities, which were threatening the broadcaster’s financial stability and its ability to fulfil its public service mandate.
Despite a High Court ruling that criticised the board’s interference in procurement processes, Tsedu remained steadfast in his belief that his actions were justified.
In normal circumstances, Tsedu admitted that much of what the board did would be seen as undue interference.
However, the board felt obliged to interfere in the SABC management due to the broadcaster’s extreme circumstances.
The board cancelled numerous contracts, including some that involved the Gupta family, despite it not being the duty of the board to do so.
The SABC has also been plagued by unstable and ineffective management. The broadcaster operated without a board for six months of the last financial year due to the government lacking any urgency in appointing a board.
The government also botched the turn-off of analogue TV sets in South Africa, which caused the SABC to lose 40% of its audience.
“This is a perfect recipe for disaster,” said Bird. “Most of the blame, almost exclusively, should be laid at the government’s door.”
This article was first published by Daily Investor and is reproduced with permission.