We've got news for you.

Register on TimesLIVE at no cost to receive newsletters, read exclusive articles & more.
Register now

Cash-starved SABC wants bank loan of R1.5bn

10 July 2016 - 02:02 By STEPHAN HOFSTATTER

The SABC plans to ask the banks for a R1.5-billion bail-out. This would force the Communications Department to approach the National Treasury to guarantee the loan, which economists say could trigger a ratings agency downgrade for South Africa.Internal documents obtained by the Sunday Times reveal that more than R500-million has been wiped off the SABC's bank balance in the past three months.The documents - including an e-mail from SABC treasurer Arrie Thomas to the financial directors of various SABC divisions last week, and excerpts of an SABC treasury report for the end of May - paint a dismal picture.story_article_left1In the e-mail Thomas says the SABC plans to ask Nedbank, FNB, RMB and Absa for cash, an overdraft, letters of credit and increased finance facilities totalling R1.5-billion.Thomas says Nedbank has expressed a "non-binding interest" in chipping in R500-million, but will first have to assess the SABC's draft financial statements for 2015-16. He proposes "meeting the banks in the next two weeks".The SABC's finances have deteriorated during the tenure of chief operating officer Hlaudi Motsoeneng and chief financial officer James Aguma, who is now acting CEO in the place of Jimi Matthews.From a profit of R358-million in 2014 it is expected to post a loss of R500-million this year.Despite this, Motsoeneng, Aguma and chairman Mbulaheni Maguvhe claim the broadcaster is financially sustainable because of its cash reserves in the bank.Two years ago the SABC had R1.2-billion in the bank. By March this year there was only R874.6-million left. In the past three months the balance has plummeted to R537-million.A memo discussed at an SABC treasury risk committee meeting on June 21 warns that it "must have a cash balance of +/- R650-million at all times to continue its operations".Thomas says in his e-mail that the balance is heading below R300-million.This is less than half it needs to keep afloat, which means the SABC will soon struggle to pay suppliers and salaries if the bank loans are not forthcoming."If one or two accounts fail to perform they are finished," said a former executive. "They will have to start paying suppliers late. About two to three months from now you'll struggle to pay your staff."block_quotes_start The cash cows are MetroFM and 5FM and they largely play American music block_quotes_endA senior SABC source with direct knowledge of its finances said: "The SABC will need to guarantee this debt from the National Treasury."If the SABC fails to pay and the banks call on the guarantee, the ratings agency will downgrade us. It's untenable."Azar Jammine, chief economist at Econometrix, said a government guarantee itself "would be very unpopular with the ratings agencies" and send the wrong signal. "They would see it as a precedent. It speaks to the whole issue of state capture. It's precisely the ilk of Hlaudi Motsoeneng who are supporters of Zuma who are trying to push for the capture of the Treasury."Treasury spokeswoman Phumza Macanda said the Communications Department had not asked it for a guarantee. "If we receive one, we will consider it before reaching any decision."story_article_right2Insiders said the SABC's cash crunch had been caused by bloated fixed employment costs of almost R3-billion a year, tens of millions spent on consultants doing work staff are paid for, and millions blown on legal fees and settlements for employees and suppliers who have taken the SABC to court.TV licence fee collection was R100-million in arrears for this financial year, said one source.Declining advertising revenues due to Motsoeneng's recent 90% local content quota would increasing play a role too."The cash cows are MetroFM and 5FM and they largely play American music," said the source. "It will have a major impact."SABC spokesman Kaizer Kganyago said the broadcaster "denies that the information you claim to have belongs to the organisation".He said the SABC was being audited and would table its annual results by September 30.Thomas declined to comment...

This article is reserved for Sunday Times subscribers.

A subscription gives you full digital access to all Sunday Times content.

Already subscribed? Simply sign in below.

Registered on the BusinessLIVE, Business Day or Financial Mail websites? Sign in with the same details.

Questions or problems? Email helpdesk@timeslive.co.za or call 0860 52 52 00.