SABC cash crunch deepens - but state wants strict conditions to be met before bailout

The SABC will not receive a government bailout until strict preconditions have been met.
The SABC will not receive a government bailout until strict preconditions have been met.
Image: Robbie Tshabalala

The government is demanding a stringent set of conditions be met before it will release money to the financially struggling SABC - even as the broadcaster's dire financial situation worsens.

SowetanLIVE's sister publication TimesLIVE can reveal that on the eve of the SABC bosses' appearance before parliament on Wednesday, the state reiterated on Tuesday night some of its strict preconditions before it will accede to the SABC's funding request.

These conditions include that the broadcaster should determine its immediate cash requirements, submit a list of identified initiatives for revenue enhancement and cost-cutting initiatives, conduct a thorough investigation into the cause of its financial collapse, produce separate financial reporting for its public and commercial broadcasting services, and identify non-core assets for sale.

“At this juncture, national Treasury will not release any part of the R3.2bn earmarked funding allocation for SABC until the two departments are satisfied that the public broadcaster has fully complied or demonstrated commitment to comply with the set preconditions,” said communications ministry spokesperson, Nthabeleng Mokitimi-Dlamini.

Mokitimi-Dlamini shared the information after a three-hour meeting of the National Council of Provinces' select committee on public enterprises and communications, where the SABC board and executives briefed MPs about the financial viability of the public broadcaster and several human resource-related matters.

Mokitimi-Dlamini added that the funding would be released in tranches, as and when the SABC produced satisfactory evidence in response to the preconditions.

SABC bosses had earlier told the select committee the broadcaster was not able to fully implement its turnaround strategy because it still had not received the financial injection it required from the government.

MPs also heard on Wednesday that the corporation's financial standing had worsened further during the 2018/19 financial year, and that it ended the financial year at the end of March 2019 with a cash balance of only R72m.

Its cash flow is depleted and it cannot honour payments to service providers, adhere to committed contracts and commission local content productions.

The SABC's unaudited loss for the 2018/19 financial year is R483m, but executives were quick to indicate that the losses have decreased over the past number of years — from R1bn in 2016/17, to R622m in 2017/18, to this year's unaudited loss, which is a 33% improvement on the year before.

They blamed the loss on a combination of cost saving or cost preservation by reducing investment in content and not investing in marketing as it should, cash conservation and on sports rights.

SABC bosses kept reiterating the urgent need for “capital injection”, saying the corporation's severe liquidity crisis threatened its status as a going concern.

The SABC applied for government funding in 2017 based on the dire financial situation, along with its board-approved strategic roadmap and turnaround plans designed to stabilise the broadcaster and return it to profitability while fulfilling its public mandate. The broadcaster generally gets a government grant of R280m a year.

About the response from Treasury, deputy minister of communications Pinky Kekana told the MPs that the feedback was preliminary and that “the SABC knows what to do”.

She said there was an expectation around the issue of financial sustainability but that there were conditions the finance minister had put in place.

Meanwhile, the SABC revealed that it was wallowing in debt, as it owed its creditors R1.8bn.

Board chairperson Bongumusa Makhathini said a big chunk of the R3.2bn funding would go towards settling debt.

“We also need to invest quite a bit in content that is compelling, quality content that can get us out of the situation we find ourselves in,” he said.

The other priority talks were around capital expenditure, as the corporation hasn't been able to maintain its infrastructure. It is facing issues around compliance with occupational health and safety standards, revealed Makhathini.

MPs appeared shocked when they heard that only three of 39 lifts at the Joburg headquarters worked on an average day. The corporation needs R160m to upgrade the lifts which are 15 years past their lifespan.

SABC group CEO Madoda Mxakwe reiterated that a financially viable and sustainable SABC was needed for the broadcaster to fulfil its public mandate.

He said they had developed a strategy premised on a few key pillars, the first being to ensure that the SABC drives revenue growth. The second pillar is to deal with its high cost base by focusing on robust cost-cutting and to also deal with the governance issues the broadcaster has encountered over the years.

The SABC generates 84% of its revenue from advertising, 15% comes from TV licence collection and only 3% is from the government. Mxakwe said this meant there was an over-reliance on the commercial aspect to subsidise the public mandate.

He said in the past three years, the SABC's mandate had cost R3.8bn and their projections showed that in the next three years it will cost R6.8bn, hence the work to get a model that will help with the financial viability of the organisation.

Due to the global slowdown in economic growth, a number of the SABC's advertisers had significantly reduced their spending on advertising.

Revenue is not the only area where the SABC is seeing a decline, audiences are also declining. This is largely due to the lack of investment in local content, explained Mxakwe.

“Audience drives revenue and if the audience numbers are low, inevitably it's going to affect the revenue of an organisation.”

CFO Yolande van Biljon added that cash management was a day-to-day activity but that they tried to be as prudent as possible to stretch the cents.

“There are occasions where we aren't able to honour payments, which means we often need to renegotiate and renegotiate again. Naturally it has a significant effect on our local content productions and the creative industry, an environment in which the SABC has 'solid relationships and tremendous support'.”

But the organisation is technically insolvent and is under tremendous strain as a result of liquidity issues.