The SABC’s unpaid bills at the end of July are believed to exceed R100m owed to 64 companies, with independent TV producers owed about R90m of that.
Well-placed sources told City Press that although the unpaid bill is lower than the estimated R120m owed in April last year, when producers were last not paid, the situation is the worst it has ever been because of a steady drop in audiences and a “very dire” decline in advertising revenue.
“There are no reserves left; there’s no buffer. The broadcaster is living week to week, hand to mouth,” said a source.
This latest crisis to hit the SABC has been a baptism of fire for newly appointed chief executive officer (CEO) Madoda Mxakwe and chief financial officer Yolande van Biljon.
On Wednesday, they met with representatives from the TV production sectors umbrella body, the Independent Producers Organisation (IPO), who were told that payments would be made by mid-August.
“But where does that leave the end of August? Treasury is not willing to guarantee a loan. Honestly, I can’t see how this entity will survive unless something drastic happens,” said another insider.
“We are seeing [former chief operating officer] Hlaudi Motsoeneng’s chickens come home to roost,” said another.
Data studied by City Press appear to confirm that a series of poor decisions during the Motsoeneng era have turned off the flow of advertising revenue into the broadcaster.
What the numbers say
Respected independent media consultant Britta Reid agrees that much of the SABC’s current crisis can be laid at Motsoeneng’s door, a claim Motsoeneng emphatically denies.
Drawing from data from Nielsen’s Ad Dynamix, which records expenditure at rate card level, and does not reflect any discounts, Reid compared the latest 12 months’ data, ending in May, with the previous year’s.
While the overall market growth in advertising spend stands at 5.6%, radio performed strongest, growing at 9.4%.
But not at the SABC.
We are seeing Hlaudi Motsoeneng’s chickens come home to roost.
“Although radio only contributes about a fifth of the SABC’s advertising revenue, its performance was particularly lacklustre, with a mere 1.9% growth,” Reid says.
“A closer look at individual station performance immediately shows plummeting revenues from 5FM (down 11.7%), RSG (down 11.2%) and Lotus FM (down 10.9%), and a muted performance from the usually reliable cash cow, Metro FM (up only 2.3%).”
These stations were particularly affected by political and line-up interference from management, and by Motsoeneng’s decision to implement a 90% local music quota on all SABC radio stations and 80% local content quota on channel SABC3.
Advertisers reportedly began to abandon some of the stations, a situation exacerbated by the hurried implementation of a new advertising management system called Landmark that, City Press reported at the time, is believed to have bled the broadcaster of about R300 million and caused long-term conflict with advertisers.
The 90% rule “certainly left its mark on these stations’ ad revenue”, says Reid, adding: “Given the size of the audiences of stations such as Ukhozi FM and Umhlobo Wenene FM, revenue growth of 7.7% and 7.3% is disappointing in a buoyant radio environment.”
The same forces played out on TV, the SABC’s biggest revenue generator. On the surface, the SABC’s 10.3% growth is ahead of the industry average of 5.9%.
“Closer inspection, however, reveals some alarm bells,” says Reid. “The unsettling effect of the local content directives on schedules, audiences and advertisers is particularly seen in SABC3’s evaporating revenues, and the declining fortunes of SABC News and SABC Encore on DStv. The last two were yet another of Motsoeneng’s follies.”
No bailout in sight
All sources City Press spoke with this week stressed the need for government to give the SABC a guarantee in order for it to secure a bank loan.
“The whole industry is feeling the crunch,” said an insider. “But DStv has got subscriptions to fall back on and e.tv can cut spend on local productions. The SABC can’t. It has a huge mandate from the regulator, the Independent Communications Authority of SA, to produce local content.”
Even though Communications Minister Nomvula Mokonyane is believed to support a loan guarantee, Treasury is said to be insisting on first seeing stability at the SABC so that it doesn’t “pour money into a black hole”.
The sources say Treasury has advised the broadcaster to seek alternative revenue streams.
At Wednesday’s meeting, new CEO Mxakwe apparently said he had drawn up a bold turnaround strategy which would be presented to the SABC board soon. It would then be used to lobby Treasury for help.
Several sources speculate that the broadcaster has no option but to downsize staff, a condition Treasury has previously placed on a loan guarantee.
Exacerbating the problem is billions in unpaid TV licences. In Parliament, the broadcaster admitted it had to write off more than R4.5bn of unpaid TV licence debt in the 2016/17 financial year.
SABC spokesperson Kaizer Kganyago told City Press that the broadcaster was engaging with the unpaid producers, but added: “We cannot comment on this matter in the public space.
“With regard to the impact of the non-payment of TV licences, please note that there is an impact of about 10% of our overall revenue, but there is an upturn,” he said.
“Lastly, the discussions between the SABC and Treasury are ongoing.”
The IPO’s Rehad Desai said: “We will be calling a special general meeting at the end of August to assess how the payments are going. If they are not going well, we will, unfortunately, have to call for drastic measures like refusing to deliver content.
“For now, campaigning for a bailout will be our focus.”
Asked what kind of future the revenue figures project, Reid said: “It is a disturbing picture, and one which will take time to rectify. Eroded trust and confidence is always hard to rebuild, and advertisers are always rightfully wary of how they invest their rands.”
Motsoeneng, whose legal fees ran to R22m during his tenure at the SABC and who is fighting an unfair dismissal case against it at the Commission for Conciliation, Mediation and Arbitration (CCMA), again denied that he tipped the public broadcaster into crisis.
“In fact, they need me to come and fix their problems so that they can be sustainable again. This happened under their watch, not mine.”
He defended his local content policy, saying local content ultimately generates more income, and he blamed the Landmark advertising system on management – who, he said, did not train staff properly. The MultiChoice deal, he said, brought much-needed revenue to the SABC and the channels were performing well when he was dismissed.
“I found the SABC in financial crisis and I fixed it. There were no production houses who were not paid when I was there. The problems started when the DA took me to court and I couldn’t be at work all the time, but blaming me for their problems today is misleading.”
Asked about his plans for the future, Motsoeneng said that his focus was currently on the CCMA, but “after everything I will reveal my plans. I have huge plans for leading South Africa.”