SABC is ‘technically insolvent’, must retrench staff

The SABC on Wednesday set out in detail why it needs to retrench staff, with group CEO Madoda Mxakwe saying the public broadcaster is “technically insolvent”.

TechCentral reported on Monday that the SABC could retrench a third of its permanent workforce, with up to 981 of its approximately 3 400 employees to be axed as part of a broader effort to cut costs drastically. It also plans to terminate the services of half of its 2 400 freelancers, with its freelance bill running at about R500-million/year.

“We are technically insolvent. We are not able to fulfil our monthly obligations,” Mxakwe said on Wednesday. “The threat of commercial insolvency is increasing significantly.”

He said the SABC wage bill is R3.1-billion/year, with total annual expenditure of R7.2-billion — far ahead of revenue. “It is not sustainable.”

Mxakwe and the new SABC board have the unenviable task of cleaning up the mess left at the public broadcaster because of previous mismanagement, including the disastrous reign of former chief operating officer Hlaudi Motsoeneng. Though it has cut costs significantly in 2018, this hasn’t been nearly enough, and the organisation must now move urgently to prune its wage bill, Mxakwe said.

Year to date, the SABC has generated revenue of R3.2bn “despite all of the challenges and market conditions we are experiencing”, he said. “Owing to aggressive cost-cutting measures we have put in place across the organisation … we see that the total expenditure year to date is at R3.5-billion.”

In the past two quarters, the SABC has cut costs by R463-million, he added. “It shows we are ensuring what needs to be done. However, this is not enough. The net loss, year to date, is R323-million.”

Sports rights

Cost-cutting measures have included reviewing sports rights acquisitions. “This is why in the past couple of months there have been very concerted efforts to look at all of the deals in as far as sports rights are concerned and whether they are commercially viable and make sense for the SABC.”

The SABC has a bloated middle management that is not sustainable, he said. The total cost to company of the broadcaster’s three executive directors is R12.5-million, while the figure for the group executive committee is R25-million. However, the organisation has five layers of management, with 495 managers in total, with a cost to company bill of R630-million. “If you include junior managers, that number balloons to R1-billion/year.”

He said the SABC continues to engage with government about guarantees to see it through its precarious financial situation, and is also talking to financial institutions about extending its borrowing limit.

One of the biggest problems facing the broadcaster is the fact that few South Africans pay television licence fees. Only 14% of the corporation’s revenue is from licence fees, with most of the rest — some 85% — coming from advertising. There has, however, been an improvement is licence fee collections in the recent past, Mxakwe said.

The SABC is also working hard to lure back advertisers who have abandoned the platform. “We are working on lapsed contracts (and there is) a strong drive on getting new business,” he said.

Speaking at the same press conference on Wednesday, chief operating officer Chris Maroleng said the SABC’s poor financial position has meant it hasn’t been able to innovate for the future. The broadcaster, he said, wants to develop streaming applications and related digital platforms to ensure it is “ready to benefit from the multi-channel future we will see in the digital terrestrial television environment”.

“We have seen a lot of innovation in this space, but we don’t have the finances to invest the crucial capex for new content innovations that will help us turn the corner,” Maroleng said.

The SABC said it Monday that it wants a consultation process with staff and labour unions to be concluded by no later than 31 January 2019, with retrenchments to take effect on 1 February. It has proposed paying severance packages of one week’s salary per completed year of service.

In a letter to staff seen by TechCentral, Mxakwe said all employees at all levels in the SABC will likely be affected by the retrenchments. These include group services, provincial operations, commercial enterprises, media technology and infrastructure, news, radio, sport, and television.

“At this stage, and should retrenchments be necessary, it is envisaged that 981 employees may possibly be retrenched as a result of the restructuring, across all the aforesaid business units and operations of the SABC,” Mxakwe said.

‘Drastic measures’

He said the SABC’s “dire” financial situation means the broadcaster is not sustainable without “drastic measures” being taken. He added that “irregular and unlawful” operational decisions made by former senior executives have compounded the situation and “need to be remedied”.

“…Under the auspices of the erstwhile management of the SABC, there have been many instances of unlawful and irregular promotions and increases afforded to employees, resulting in an inflated remuneration cost and the payment of salaries to employees that are not commensurate to the actual positions occupied by employees. The SABC is also overstaffed, considering its actual operational needs,” he said.  — © 2018 NewsCentral Media