1. PROGRESS REPORT ON THE SABC
Presenter: Avril Halstead | Chief Director: Sectoral Oversight, Asset and Liability Management Division | AUGUST 2011

2. Contents
Reporting
Compliance with guarantee conditions and commitments
Projected cash flow position
MTEF application

3. This report is based on submissions received from the SABC
Dates for submission of the reports by the SABC to the Monitoring Task Team (MTT) and monthly meetings of the MTT have been agreed for the rest of 2011
SABC submitting on a monthly basis the following information:
CFO report
Divisional income statements
Turnaround strategy executive project update
Performance review report
MTT has also received:
Corporate plan (Missing 3y financial projections)
36 month cash flow projections (includes 3y financial projections)
Turnaround strategy executive project update (details turnaround initiatives)
SABC to consolidate these reports into a single “turnaround strategy”
An MTEF application has been submitted to DOC (and copied to NT)
Signed performance agreements for Executive Committee members submitted
There are still inconsistencies in the information that has been communicated to Government (e.g. News24)

4. SABC is still not meeting many of the guarantee conditions
Compliance
Develop a detailed turnaround plan outlining milestones, timelines and executives responsible for achieving the cost savings and revenue enhancement measures X
Implementation plan for addressing the issues raised in the Auditor General’s (AG) report
Cost cutting and revenue enhancement measures to be captured in the shareholder compact
Monitoring task team to be established to monitor progress on the turnaround plan √
Guarantee conditions met: √
Guarantee condition not met: X

5. SABC has failed to achieve the committed changes in its cost structure
Cost cutting or revenue enhancement initiative
Targeted saving
Achieved
Comments
Advertising revenue enhancements
R535m X
Increased sponsorship revenue
R128m
Enhanced content management
R336m √
Content savings achieved at the expense of long term performance
Decreased people costs
R287m
Reduction in professional fees
R136m
Increased expenditure on marketing
(R42m)
Marketing expenditure declined instead of increasing
Improved license fee collection
R46m
Mitigated by some savings on collection costs
Other costs
R72m
Net finance costs
No target
Commitment met: √
Commitment not met: X

6. Process for finalising the turnaround plan and shareholder compact
SABC is proposing amendments to the cost cutting and revenue enhancement initiatives that were committed to in applying for the guarantee and which were the basis for the guarantee being issued
SABC is also proposing that the guaranteed loan be restructured
Request to amend initiatives and restructure loan to be submitted by SABC with revised turnaround plan to MOC and MOF for approval
Turnaround plan needs to be in line with government guarantee requirements and address the issues raised in the Auditor General’s report
SABC Board drafting a proposed shareholder compact
If approved, shareholder compact, which is based on the turnaround plan, can be finalised

7. SABC’s capacity to meet its obligations is entirely dependent on MTEF funding
Source: SABC

8. SABC’s MTEF application

9. MTEF application
DOC needs to assess the SABC’s application and submit a request for funding for consideration in the Budget process
For the 2012 Budget, the focus is on finding savings and reprioritising spending as very little additional funding will be made available
SABC’s request for funding in 2011/12 cannot be considered as additional funding is only for unforeseen and unavoidable expenditure
Business case for News24, Sports channel and DTT is still outstanding
Funding requests are to cover operational expenditure (for DTT, SABC had committed that the company would cover all operating expenditure and would only require funding for capital expenditure)

10. Additional information required
To get a more complete understanding of the MTT has requested the following information from the SABC which is still outstanding:
Business plans for News24, DTT and Sports channel
Turnaround strategy for SABC 3 and link to content procurement
SABC’s proposal for restructuring the Nedbank Loan
Consolidated turnaround strategy
Project plan and progress report on initiatives to address the Auditor General’s recommendations
Separate reporting of public and commercial broadcasting businesses
Monthly reporting on risks and mitigating actions being taken by the SABC

11. Conclusion
There has been an improvement in the working relationship between the SABC and the MTT, with regular reporting being more forthcoming
The SABC is still not meeting most of the guarantee conditions
The SABC’s financial sustainability is entirely dependent on receiving additional funding from government
Additional information is required to get a more complete understanding of the SABC’s financial position

12. Annexure