Broke SABC slammed for incurring R5.2bn in irregular expenditure

The auditor-general has blasted the SABC for not taking appropriate steps to prevent irregular expenditure and for failing to bring  those responsible for the financial mess to book, BusinessLIVE reported.

The broke public broadcaster was slapped with a qualified audit opinion for the 2018/2019 financial year. It received a disclaimer the previous financial year, which is the worst possible audit outcome.

The SABC’s annual report tabled in parliament on Monday shows that the broadcaster incurred irregular expenditure of R5.2bn, up from R4.9bn the previous year. This as it continues to face an uncertain future due to crippling financial challenges.

In the annual report, auditor-general Kimi Makwetu raised doubt about the broadcaster’s status as a going concern, noting that it is still not able to generate sufficient cash to meet all of its financial obligations. The entity’s current liabilities exceed its current assets by R875m, said Makwetu.

The SABC ended the 2018/2019 financial year with an audited loss of R482m. Losses have decreased over the past number of years - from R1bn in 2016/2017 to R744m in 2017/2018. But indications are that it will continue to record losses for the foreseeable future after posting a R192.3m loss in the first quarter of the 2019/2020 financial year.

The broadcaster ended the 2018/2019 financial year with a cash balance of R72m. Total revenue was R6.45bn, which was R1bn (14%) below the budget of R7.48bn.

As it stands, the SABC is technically insolvent. Its dwindling revenue means it is unable to service its debt of almost R2bn and it could be forced to switch off its cameras and microphones.

The dire financial position means that it is struggling to invest in content and to acquire crucial sports rights. It confirmed that it would not broadcast the Rugby World Cup on television, though it managed to strike a last-minute deal to broadcast four of the Springboks’ games on radio, as well as the two semifinals. ​

It has requested a R3.2bn government guarantee to stay afloat and pay off some of its debt, but its bid for funding has so far been unsuccessful - largely due to its failure to meet the Treasury’s conditions.

Makwetu said effective and appropriate steps were not taken to prevent irregular expenditure, as required by the Public Finance Management Act. He said the full extent of the irregular expenditure could not be quantified.

Most of the irregular expenditure disclosed in the financial statements was caused by competitive bidding process not having been followed. Disciplinary steps were not taken against the officials who had incurred and/or permitted irregular, fruitless and wasteful expenditure, as required by the act, said Makwetu.

Also, effective and appropriate steps were not taken to collect all TV licence revenue due, as required by the act.

Advertising revenue, the SABC's biggest revenue generator, decreased in the past year by R241m (5%), a key factor preventing the public entity’s profitability. This revenue, which amounted to R4.5bn, makes up 70% of total revenue.

TV licence fees reported for the year amounted to R968m. This represents a “fee evasion rate of 69% [compared to 72% in 2018] of the known TV licence holders not paying their licence fees”, the public broadcaster said in the report.

SABC board chair Bongumusa Makhathini said in the report that damaging governance, maladministration and funding challenges faced by the public broadcaster over decades have hollowed out the institution, “making it tougher and tougher to play to our strengths”.

“The SABC’s financial position has remained under severe pressure, with the corporation still paying the price for years of compromised leadership, failed governance and prejudicial decision-making,” said Makhathini.

He said the SABC is unable to “simply shake off the damage caused without financial assistance by the government”.