SCREEN AFRICA EXCLUSIVE: South African public broadcaster SABC received a Disclaimer of Opinion from the Auditor General (AG) for its 2012/2013 Annual Report because of issues pertaining to conflicting reporting methodologies, as well as a lack of pre-requisite skills in the broadcaster’s financial department.
So said SABC GCEO Lulama Mokhobo at a press conference held at the SABC’s offices in Auckland Park, Johannesburg on 12 September.
“Due to a lack of training, our finance department experienced challenges in migrating from the GAAP (General Accepted Accounting Practice) reporting methodology to the standard utilised by the AG, the IFRS (International Financial Reporting Standards),’ explained Mokhobo.
Responding to reports in the media which stated that the SABC had spent an amount of R1.5bn without any supporting documentation and that this amount had been spent on consultants, Mokhobo stated that R408m of this amount was spent on broadcast costs; R514m on signal distribution; R123m on marketing; R63m on consultancy services; and R79m on personnel costs.
She continued: “The SABC was unable to provide some journals from a sample requested by the AG to substantiate adjustments to these categories of expenditure. However, it is incorrect to surmise that all the supporting documents such as invoices, tender documents and bank payments could not be provided. The issue was that the SABC, being a huge operation with provincial offices, did not have adequate time to collate the journals.’
Prior to Mokhobo’s presentation, chairperson of the SABC’s interim board, Zandile Tshabalala commented: “We are neither happy nor proud about the SABC’s results for the 2012 financial year.’
SABC spokesperson Kaizer Kganyago noted that in all the negative press generated by the release of the Annual Report a day earlier, no-one had mentioned that the SABC had, in fact, posted a profit after tax of R330m for the year.
Mokhobo presented a detailed account of the environment in which the SABC had operated in the last few years so as to provide a context for the 2012/2013 financials.
“The period under review (April 2012 to March 2013) was an extremely difficult one for the SABC. Many reports in the media referred to “ructions’ at executive and board level. Some board members resigned mid-way through the period and then in February this year the board was dissolved. This board came into office at a point when last year’s financial results were being audited and thus the board inherited massive challenges. Our skills audit revealed that the fact that we had so many executives in the “acting’ position was due to limited skills in many departments, including the financial department.
“However, we’re not going to excuse our bad results – acting chief financial officer Tian Olivier and his team did the best they could. Also, it’s important to remember that we were operating under very strict austerity measures.’
Mokhobo stressed that the government guarantee of just over R1.4bn, granted to the SABC in 2009, was not a bail out. “This loan was guaranteed by government so that should the SABC fail to repay the loan, the government would stand surety. The SABC in fact only took R1bn of this amount and by the end of this September, we will have repaid the loan. Requirements attached to this loan were very stringent.
“Part of our strategy at this time was not to replace people when they left the SABC. We decided not to retrench people and tried to find other ways of saving money. Those who left the SABC were on a fixed term contract. So through this natural attrition we had many competent people leaving the SABC. Consequently, we had to rely on staff members to fill these positions, without sufficient training. There were also lots of questions re how we are spending money on marketing and yes, investment in local content was reduced.
“All the above are reasons why we got the Annual Report results that we did – it was due to the stark conditions in which we were forced to operate.’
According to Mokhobo, in recognising these issues under the current interim board, SABC management instituted executives into the vacant posts and put them on training courses. The broadcaster has also instituted an Operation Clean Audit Process, headed by James Muguma who previously worked for the AG.
“Despite the challenges we face, the SABC is continuing to deliver its mandate in an increasingly competitive environment, both in the television and radio sectors. If we hadn’t had to repay our government guaranteed loan, we would have posted a profit much bigger than the R330m we did post. Admittedly the R330m was R14m less than the previous year,’ commented Mokhobo.
She noted that following the economic boom of the 2010 FIFA World Cup, the SABC experienced a severe dip in ad spend due to the worldwide recession. There was also a dramatic decline in audiences.
“A further setback was last year discovering that the audience measurement methodology employed by the South African Advertising Research Foundation (SAARF) was flawed, thus adversely weighting SABC ratings, which in turn affected our advertising revenue. Because of this reduction in ad spend we could not meet our government guarantee targets,’ stated Mokhobo.
Responding to reports in the media that an amount of R913m in licence fees had not been collected in the past financial year, Mokhobo said: “This is completely untrue – the licence fees have been delivered. The issue around this is due to the fact that the AG was of the opinion that licence fees should be reported on an accrual basis rather than a cash collection basis.
“There are 14 million TV licence households in South Africa. Historically the SABC has always used cash-collection reporting as you never know which of the licence holders will actually pay their fees each year. This method of reporting has been a point of debate and we are still discussing the matter with the AG and treasury.’
Mokhobo commented that the SABC had been lambasted in the past year for repeating content. “Repeats are international practice and a way for broadcasters to amortise the costs incurred in acquiring and producing content.’
She pointed out that sport impairment has been referred to as the SABC’s biggest problem.
“The SABC is mandated to cover sports of national interest so launching a dedicated sports channel is the next thing on our agenda, after having recently launched our 24-hour news channel.
“I would like to state that the SABC is completely ready to migrate to digital terrestrial television (DTT) and that it already broadcasts in high definition (HD). However, you need DTT and direct-to-home (DTH) receivers in order to receive our HD broadcasts,’ she said.
In conclusion Mokhobo commented that the SABC management was dealing with serious legacy issues, some that dated as far back as 2006. “We recognise the urgency of the situation and are geared up to deal with it.’
Acting COO Hlaudi Motsoeneng said that a special team had been put in place to deal with these historical issues. As to the current financial issues, he stated: “There are no financial issues.’
Olivier stressed that it was very important to look at the cash flow statement in the Annual Report. “The cash flow statement was reported to the AG by the bank and not by the SABC. It reveals that we paid off the government guaranteed loan and still have money in the bank.’
Report by Joanna Sterkowicz