South Africans can be rightly underwhelmed when hearing about another turnaround plan for rescuing another state-owned entity (SOE).
For the past 10 years we’ve seen so many failed turnaround plans at SOEs that these expensively procured, colour-coded plans could be stacked as high as the SABC’s 29-floor Auckland Park headquarters.
So when the SABC board and management presented a 105-page turnaround plan to parliament in September, death by PowerPoint was not the only risk. We had to convince MPs that this plan was different and that a radical rethink was required for a sustainable public broadcaster.
The organisation had a fatal disjuncture between costs and revenue, had racked up debts of over R1.3 billion and had just reported a 2017/2018 loss of R622 million. The auditor-general had also just given the corporation an audit disclaimer – meaning you’ve hit rock bottom and are on the verge of last rites being issued before you are buried.
The situation is as serious as it has ever been. The fact that the SABC is struggling to pay independent television producers on time is the canary in the broadcasting coal mine. Together with our staff, these producers are the lifeblood of the SABC, which is after all a content business with an important and sizeable public mandate.
Following a comprehensive process, the SABC announced in September that it was contemplating section 189 of the Labour Relations Act as a core part of proposed cost-cutting measures, in order to make it financially sustainable. Some stakeholders reacted strongly, as if the board had not inherited the financial crisis but was somehow responsible for creating it.
Based on this false narrative, several myths started gaining traction in the media with misleading notions stated as fact. To get a proper debate back on track, lets unpack these one by one:
• The SABC’s section 189 process is a “knee-jerk reaction”. Steven Friedman normally takes a considered approach to his subject matter, but last week he showed a surprising disregard for the facts in his column when he referred to the SABC’s section 189 process as “fashionable”, “lazy” and a “knee-jerk reaction” as if the SABC board had not made a responsible analysis of the public broadcaster’s financial crisis; as if all options had not been considered; and as if there was an actual callousness about the lives of SABC employees. I hope Friedman takes a look again, as the publicly available evidence says otherwise.
Unlike other public-sector institutions, the SABC is a ‘for profit’ company, competing against powerful commercial media organisations for advertising and sponsorship.
The SABC’s biggest cost driver is the R3.1 billion salary bill, representing 42% of revenue. This is unsustainable and way above any local and international benchmarks.
Unlike other public-sector institutions, the SABC is a “for profit” company, competing against powerful commercial media organisations for advertising and sponsorship (77% of revenue) and having to fund a R2 billion public mandate with the government funding of only R185 million in 2017.
Furthermore, no attempt has ever been made to address an issue first flagged by the Treasury nearly 10 years ago. In 2009, one of the Treasury conditions of a government guarantee was that the SABC must reduce employee costs to be sustainable.
• A government guarantee would mean the section 189 process can be avoided. This myth creates the false hope that if the SABC is granted a government guarantee to be able to borrow funds, this can prevent the section 189 process. However, the primary reason the SABC needs an injection of funds is to pay down its debt of R1.3 billion and stabilise cash flows.
For the SABC to convince lenders it will be able to repay debt, it cannot be business as usual. A commercially sound turnaround plan has to be implemented in which cost cutting is but one important element. As presented to parliament, the SABC has thorough proposals for improving TV licence fee revenue and collection (currently 14% of total revenue).
Other commercial plans include a reduction in sports rights costs, a regeneration of television and radio advertising revenue and getting paid for SABC1, SABC2 and SABC3, currently carried by our competitors for free.
• Salary cuts for top management will solve the R3.1 billion staff cost problem. While the total executive director salaries are in fact a reduction on the total paid to the previous incumbents, this myth obscures the primary causes of the bloated salary cost.
Over the past decade there were irregular promotions and salary increases for hundreds of employees, as well as blatant disrespect for recruitment policies. In some instances there are now six layers below a manager.
A fair and proper analysis of the facts shows that the SABC has no choice but to take some tough decisions to ensure a financially sustainable future for the public broadcaster.
Michael Markovitz is an SABC board member.
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