The auditor-general has raised doubts about the SABC’s ability to remain in business despite the public broadcaster more than halving its losses in the most recent financial year as management continues its battle to put the state-owned entity on a sustainable path.
The company, which has previously been beset by governance and financial crises that took it to the brink of collapse, reported a net loss of R201m for the 2021/2022 financial year ended March 31, down from R530m the previous year. It expects to break even in 2022/2023 financial year, but auditor-general Tsakani Maluleke is uncertain it can continue as a going concern.
The losses have narrowed from a high of R1bn in 2016/2017 and R744m in 2017/2018, but indications are that it will continue to struggle amid a slump in advertising spend and reduced collections of TV licence fees — two key revenue streams.
“[T]hese events or conditions, along with other matters as set forth ... indicate that a material uncertainty exists that may cast significant doubt on the public’s ability to continue as a going concern,” Maluleke said in the SABC’s annual report for the year ending March 2022, which was tabled in parliament this week.
Maluleke also pointed out that irregular expenditure continues to hamper the public broadcaster, which remains the main source of news and commentary for many viewers, especially in remote areas.
“I was unable to obtain sufficient appropriate audit evidence that the irregular expenditure for the previous years had been completely accounted for, due to the public entity not implementing adequate procedures in the past to identify and record all instances of irregular expenditure,” she said.
Maluleke said she was therefore unable to determine whether any adjustments were necessary to the irregular expenditure disclosure, stated at R2.8m.
Irregular expenditure
Further, effective and appropriate steps were not taken to prevent irregular expenditure, as required by the Public Finance Management Act (PFMA), nor were measure implemented to prevent fruitless and wasteful expenditure amounting to R10m.
Maluleke pointed out that management did not prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information. Non-compliance with legislation could have been prevented if management had properly reviewed and monitored compliance, she said.
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. While government funding has all but dried up as the state seeks to rein in debt and avert a fiscal crisis, the outgoing board has been pushing hard to stabilise the entity and has recorded some successes. These include convincing the communications regulator to allow it to start negotiating carriage fees with pay-TV operators, which have since 2008 been permitted to carry the public broadcaster’s free-to-air channels without cost.
In an unpopular move, it also recently proposed that a public broadcasting household levy be introduced, which will affect all homes regardless whether they own a TV set. It has also proposed that pay-TV giant MultiChoice and online companies such as Netflix help it collect licence fees from the public.
Anti-competitive action
In the annual report, outgoing SABC board chair Bongumusa Makhathini said the SABC board and management is also challenging what it believes are anticompetitive actions by SuperSport and sports bodies, with regard to the acquisition and licensing of sports rights. MultiChoice, which owns DStv, dominates the market in part because it has exclusive contracts for premium and international content, including high-profile rugby matches, local Premier Soccer League (PSL), the English Premier League, the Spanish La Liga and the Uefa Champions League.
While Icasa has in recent years looked into opening up the market, updated regulations mostly maintain the status quo — meaning that sought-after rights for all platforms are sold to the highest bidder with no unbundling of rights or sub-licensing criteria required.
“The SABC believes that this anticompetitive conduct unlawfully impacts both the cost of sports rights and the ability of the SABC to monetise these rights via its sports channel on other platforms, like satellite and streaming,” Makhathini said.
The five-year term of the current board expires on October 15 and Makhathini chose not to make himself available to serve on the new board.
Makhathini told Business Day on Tuesday that it’s time to hand over the baton to new leadership and a new board.
“I hope I have played a role — together with my board colleagues — in stabilising the organisation after it went through years of maladministration and governance failures. I now plan to focus on contributing my skills and expertise elsewhere.”
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