SABC turnaround strategy: Broadcaster’s bailout hinges on sale of radio stations

On Tuesday, the Portfolio Committee on Communications received a detailed report from the SABC on its turnaround strategy and its status report on the implementation of recommendations emanating from:

• the Public Protector’s report;
• the Auditor-General’s report;
• SABC’s internal forensic report; and
• the Parliament ad-hoc Committee on SABC Board report.

SABC briefing: What conditions did the broadcaster have to meet?

According to Board Chairperson, Bongumusa Makhathini revealed that the public broadcaster has met 10 of the 11 preconditions that were set out by National Treasury in overseeing the R3.2-billion bailout that SABC applied for.

In order to access the capital injection that the public broadcaster so desperately needs, SABC had to:

• determine their immediate cash requirements, supported by detailed cash flow projections for the next 12 to 18 months;
• submit a list of identified initiatives for revenue enhancement and cost-cutting initiatives that the entity has been implementing in the interim;
• conduct a thorough investigation into what caused the financial collapse of the SABC and why previous turn-around plans have failed to be successfully implemented;
• provide an update on how the entity is dealing with the people implicated in reports;
• produce separate financial reporting for their public and commercial broadcasting services;
• identify non-core assets for sale to assist with reducing the recapitalization required by government. Submit a comprehensive property strategy and a list of non-core assets identified for disposal including the timelines for disposal and the estimated values.
• commit and start a full review of policies, legislation and regulations affecting the Broadcasting sector and the SABC within a digital environment;
• develop a comprehensive Private Sector Participation strategy highlighting initiatives to be implemented and the net values to be derived from these partnerships;
• develop a comprehensive capital and content investment plan which includes the forecast return on investment of all Capex and content spend, split between commercial and developmental activities;
• appoint a restructuring team headed by a restructuring officer and supported by Broadcasting industry experts to lead a restructuring and turnaround of the entity; and
• appoint a new Board.

Makhathini revealed that they were at the precipice of meeting all preconditions. However, identifying ” non-core assets for sale to assist with reducing the recapitalization required by government” was going to be a little tricky.

The Board Chair explained that the public broadcaster needs more time to evaluate its media assets. With 19 radio stations and a mandate to provide content in 14 different official languages, putting these assets up for sale would be “reckless and irresponsible.”

He indicated that part of the SABC’s turnaround strategy was to reinvigorate its assets and use them as a means to bolster revenue.

“Some channels are under-performing, but we have plans to turn them around. We have got to be given time to implement the [turnaround] strategy,” he said.

Public broadcaster explains why it can’t invest in sports broadcasting

The committee also heard submissions from Group CEO, Madoda Mxakwe, on why the SABC decided against pursuing the rights to broadcast the Rugby World Cup 2019.

According to Mxakwe, it did not make financial sense to inject millions into broadcasting the competition when their current yield on commercial sports was negative.

“About six years ago, there was a contract that was signed, in terms of acquiring sports rights for football. That contract was R280-million per year, over five years. The revenue generated by the SABC was less than R40-million.

“So, you can appreciate that, that is a commercially wrong deal and what we’ve been doing since — in fact, what the Board instructed us to say is — we will not sign any deal that is not commercially viable for the SABC,” Mxakwe explained.

He further revealed that it broadcasting the Rugby World Cup 2019 would have cost:

• $28-million for TV rights;
• $60 000 for radio; and
• $900 000 for production.

Will SABC receive the cash injection?

The committee, as well as Treasury, has yet to determine whether the SABC has successfully met all of the preconditions needed to access the bailout funds.

According to Makhathini, however, besides the fact that the public broadcaster has been able to save R1-billion and reduce its losses by 33%, it needs an urgent cash injection of R2-billion by the end of the month.

The ball rests in Treasury’s court who, together with the Ministry of Communications, will have to consider the public broadcaster’s request.