The SABC, which has shown signs of recovery in recent months, continued its loss-making streak, with the public broadcaster recording a net loss of R530m for the 2020/2021 financial year.
The broadcaster, which has previously been hampered by acute governance and financial crises, recorded a loss of R511m in the previous year. It has managed to narrow its losses over the past few years as the management battles to turn around the entity that at one point was on the brink of collapse.
Losses have decreased over the past number of years from a high of R1bn in 2016/2017 and R744m in 2017/2018. But indications are that it will continue to record losses for the foreseeable future amid a slump in advertising spend and reduced collections of TV licence fees, two key revenue streams.
Like many other state-owned entities, the national broadcaster has been in a financial mess for years, often relying on cash injections from the government to continue operating. But government funding has all but dried up as the state seeks to rein in the country’s debt load and avert a fiscal crisis.
The public broadcaster’s total revenue declined 12% year on year to nearly R5bn. It said the decline can be attributed largely to the effect of Covid-19 and the continuous displacement of scheduled programmes to accommodate communication and awareness campaigns related to the pandemic.
TV licence revenue dropped 0.4% year on year to R788m as household incomes remained stretched and unhappiness with the state of the SABC lingers after previous years of political interference.
As it explores ways to boost its finances, the public broadcaster, which remains the main source of news and commentary for many, especially in remote areas, recently proposed that a public broadcasting household levy be introduced, which will affect all homes whether or not they own a TV set. It has proposed that pay-TV giant MultiChoice and online players such as Netflix help it collect licence fees from the public.
Turnaround plan
Furthermore, the public broadcaster is pushing for new rules that will compel pay-TV operators to cough up for carrying its channels.
The SABC’s turnaround plan mainly focuses on cutting costs, diversifying revenue streams and investing in new content and distribution channels. It recently instituted retrenchments despite strong objections by unions and the then communications minister Stella Ndabeni-Abrahams.
In the annual report, SABC board chair Bongumusa Makhathini said that between 2017 and 2019 the board and management were faced with legacy governance failures that required urgent action. He suggested that most of these issues have been largely resolved and the SABC is completing the second phase of its long-term sustainability project.
“During this critical phase, from 2019 to date, the board approved a new target operating model and completed an arduous but necessary retrenchment process, which led to 621 employees leaving the organisation through either retrenchments or redundancies or voluntary retirements,” Makhathini said.
Before the retrenchments, the broadcaster had a staggering wage bill of close to R3bn a year for 3,000 permanent employees. The SABC board had set a target of slashing the wage bill by at least R700m to put the broadcaster on a sustainable path and wean it off government bailouts as part of conditions for the Treasury to advance a R3.2bn cash injection in 2019.
Qualified audit
The retrenchments at the public broadcaster were also seen as important in the broader context of the government’s fiscal consolidation efforts and setting the tone for how the cost-cutting drive proceeds at other struggling state-owned entities such as power utility Eskom and arms manufacturer Denel.
In the SABC’s annual report, auditor-general Tsakani Maluleke gave the broadcaster a qualified audit opinion, highlighting irregular expenditure incurred due to payments made in contravention of supply chain management legislation and regulations.
Maluleke also raised doubt about whether the SABC can continue operating as a going concern.
“I draw attention … to the consolidated and separate financial statements, which indicate that the public entity incurred a net loss of R530m (from R511m in 2020) and net cash outflows from operations of R690m (R1.2bn in 2020) for the financial reporting period to March 31, 2021. These events or conditions, along with other matters … indicate that a material uncertainty exists that may cast significant doubt on the [entity’s] ability to continue as a going concern,” Maluleke said.
In her report she could not determine whether any further adjustments were necessary to the irregular expenditure disclosure of just more than R2.8bn, suggesting that the figure could be higher. Irregular expenditure totalled R5.3bn in the prior year.
Maluleke said she was unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against some of the officials who had incurred or permitted irregular expenditure in prior years, as required by the Public Finance Management Act. The management did not prepare a regular, accurate and complete financial and performance report.
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