'No government guarantee to bail out cash-strapped SABC': Mboweni

07 July 2019 - 15:59 By Mpumzi Zuzile
SABC in Auckland Park, Johannesburg.
SABC in Auckland Park, Johannesburg.
Image: Waldo Swiegers. (C) Sunday Times.

Finance minister Tito Mboweni declined to give the cash-strapped SABC a much-needed government guarantee in order for the public broadcaster to stay on air.

This was relayed to communications minister Stella Ndabeni-Abrahams in a two-page letter dated June 25 2019, seen by TimesLIVE.

This comes hardly a week after Ndabeni-Abrahams told parliament she was prepared to quit her job rather than give the SABC a loan guarantee while it did not have a solid turnaround strategy.

It has taken Mboweni and Ndabeni-Abrahams four months to reject the public broadcaster's loan guarantee application.

The SABC owes suppliers about R1.9bn while it struggles to continue paying salaries. Its buildings now pose an occupational health and safety risk to employees after years of no maintenance due to a lack of money.

“I therefore do not concur to the issuance of the R3.2bn guarantee. I draw your attention to the fiscal constraints which does not allow for the ongoing bailout of entities that should in effect be commercially sustainable if operated in an effective manner,” Mboweni said in his letter.

Communications department spokesperson Nthabeleng Mokitimi-Dlamini confirmed that the National Treasury had responded to Ndabeni-Abrahams with regards to the SABC  application for a government guarantee.

“The ministry confirms that a response to the SABC government guarantee application has been received from National Treasury. The minister is still engaging with National Treasury and further communication in this regard will be made upon engagement with all relevant stakeholders,” Mokitimi-Dlamini said.

SABC spokesperson Vuyo Mthembu could not confirm or deny that the broadcaster's application had been declined.

“The SABC, in line with protocol requirements, has submitted responses to Treasury on the pre-conditions for the government guarantee. The responses to the 11 preconditions from Treasury, was duly done by the organisation in writing through the department of communications on May 2 2019. The [department] would then send these inputs to Treasury on our behalf,” Mthembu said.

Mboweni, however, did tell Ndabeni-Abrahams that he recognised the immediate need for the SABC to be assisted with some form of assistance, and has asked the director-general at the National Treasury to determine how the SABC could be assisted through the funds provided within the contingency reserve. 

“The possible allocation of this funding will however be subject to budgetary processes. My officials will be in contact with the officials from the department of communications in order to facilitate this process,” he said.

Mboweni also told Ndabeni-Abrahams that the crisis facing the SABC did not derive from a lack of funding, but was the result of years of neglect in ensuring that the entity, its business model, operations and the policy and regulatory environment were repositioned to withstand and take advantage of changes within the industry. “There have also been numerous corporate governance failures within the SABC which have certainly contributed to its deterioration,” Mboweni said.

In his letter, Mboweni also gave Ndabeni-Abrahams' department a tongue-lashing, saying her department had a very important role and responsibility to play in the turnaround of the SABC. 

“The SABC is ultimately only an implementing agent for the department of communications, furthermore, difficult decisions will have to me made in ensuring the sustainability of the SABC,” he added.

Mboweni, in his letter, told Ndabeni-Abrahams that the guarantee would have been used to mainly fund the short-term, operational requirements of the SABC.

“The SABC has been struggling with declining profits as a result of underperforming revenues and a very high cost structure. The SABC’s cost structure is mainly driven by staff costs which constitute on average 40% of total expenditure,” Mboweni said.

Mboweni said a financial analysis conducted indicates that the SABC would invariably find itself in the exact same financial position within the forecast period of the financial model. 

“This to me indicates that there are fundamental problems with the business model of the entity which, if left unattended, will result in repeated bailouts,” he said.

Mboweni concluded that the SABC’s business model had remained largely unresponsive to a host of changes within the ICT sector, thus essentially undermining the sustainability and relevance of the entity. 

Last week, the department of communications (DOC) confirmed it had placed a moratorium on new appointments at the SABC, as the state broadcaster struggles to pay its debtors.

Three weeks ago, SABC board chairman Bongumusa Makhathini revealed that the broadcaster had to stop paying its rates and services in order to pay salaries and stay on air.

“We have also not maintained any of our infrastructure and a communication blackout is imminent. We anticipated Day Zero in March, but we have managed to stay on air until now.”

The broadcaster also owes Sentech - a state-owned business that provides broadcasting signal distribution - about R317m, and the MultiChoice division SuperSport R208m.

Mboweni’s spokesperson, Ntsakisi Ramunasi, couldn’t be reached for comment.


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