If SABC management and the board are encouraged to continue with the turnaround, the results of which can be demonstrated already, there is a likelihood that the public broadcaster could emerge from years of corporate malfeasance as the leading phoenix among SOEs.
Finance Minister Tito Mboweni once referred to the prospects of a phoenix emerging out of the governance wreckage that has become the defining feature of South African Airways (SAA). Citizens would be forgiven for being indifferent to the minister’s optimism.
There was a time when he was the most despondent person about the prospects of the airline. Besides, how many times have citizens been told of turnaround plans, all couched with different phrases to appear realistic? And look where we are now: we have a debt-addicted company.
The only value in it is the name of our beautiful republic emblazoned on the airline’s aircraft. It would appear the billions pumped into the airline, all in vain so far, were rental fees to advertise the republic’s name. The airline should be paying us instead.
But Mboweni now sounds a little optimistic. Hopefully, he has attached the right and tough conditions before he could go out to borrow money and on-lend it in support for the emergence of a phoenix. The public will believe only him and Public Enterprises Minister Pravin Gordhan the day Phoenix SAA is able to pay its bills and turns a profit.
It can only be possible if a majority stake in it is sold to a not-politically connected private sector partner who can take on the operational responsibility. At this stage, it seems state-owned enterprises (SOEs) operated by the state function on the basis that profit-making is a swear word. The cool word is bailout which translates to taxpayer rip-off.
It’s irrational and unfair to expect poor people to subsidise a big company like SAA. Even the Greek mythology of the beautiful bird named Phoenix, that lived for 500 years before it set itself alight and thereafter emerged anew from the ashes, is premised on self-resurrection. No outside assistance.
In his supplementary budget on 24 June, Mboweni decided not to deal with the question of SOEs. We know that he wants them to cease to be a financial burden that they are on the fiscus.
But this correct view is consistently being ridiculed by some of his colleagues in the government. A few hours after he tabled his supplementary budget, which shows the financial dire straits the country finds itself in, the SABC presented to Parliament’s Portfolio Committee on Communications an update on the implementation of its turnaround plans.
The broadcaster’s chairman, Bongumusa Makhathini, and its chief executive officer, Madoda Mxakwe, presented a compelling case. Their turnaround plan is focused on cutting costs and enhancing revenue generation.
Financial sustainability is at the heart of their plan which is supported by facts. The SABC is forecasting a loss of R1.5 billion by the end of the current financial year. It could be conservative estimates, depending on how deep the economic damage of Covid-19 goes.
There is no denying the pandemic could merely exacerbate the consequences of a badly structured cost base of the company. From 2003 to 2019/2020, paying permanent employees has tripled to R2.3 billion. As a percentage of total operational expenses, permanent employee costs rose from 25.8 to 37.1%.
You would have thought, logically, the skyrocketing costs of permanent employee would make it unnecessary to spend money on contractors. But no! Independent contractor costs rose from R3.1 million in 2003 to R432 million over the same period. As a percentage of the company’s total operational expenditure, independent contractor costs have doubled from 3.7 to 7%.
In total, permanent and contractor employees constitute 43% of the SABC’s operational expenditure.
At SABC offices across the country, more than 3 000 staff members were stunned last week when they received emails warning them of looming retrenchments, which will affect at least 600 employees. | @City_Press https://t.co/A9FFwhjlTy
— News24 (@News24) June 21, 2020
If the turnaround fails, it will effectively become an employment agency as staff expenses consume the bulk of operations at the expenses of investment in content generation. The public needs content and the SABC must provide if it wants to compete in the dynamic media environment. So, its management has correctly decided to cut the staff size by an estimated 600.
This is expected to shave off the company’s employee cost base by R700 billion per year which, under current circumstances, management estimates could bring the company to financial viability.
It has approached the CCMA to facilitate the retrenchment process which will include helping affected employees with testimonials for future employment prospects. In addition, and unlike at SAA and SAA Express, employees will receive retrenchment packages for their years of service.
The SABC management cannot be accused of targeting employees. It has also delved into sensitive contracts and slashed costs. (SAA and Eskom, did you hear?). One sports broadcast rights deal that would have cost the company R1.4 billion over five years will now cost R360 million. Another one that would have cost R550 million will now cost R110 million over five years.
Like commercially driven companies that lobby for regulatory environment to support their business rather than strangle it, the SABC is now lobbying ICASA and other stakeholders to amend the regulations regarding the digital migration programme to reduce costs.
It wants to be able to use new and affordable technologies at far less the cost and to do away with penalties for delayed compliance. It currently pays R387 million a year for digital terrestrial television signal distribution.
As part of cost reduction, it has canned costly programmes that did not generate revenue. With all these efforts, you would have expected an applause and encouragement from the government and Parliament for a public broadcaster that is making an effort to wean itself from fiscal bailouts. Instead there are some grumblings in some corridors.
However, if SABC management and the board are encouraged to continue with the turnaround, the results of which can be demonstrated already, there is a likelihood that the public broadcaster could emerge from years of corporate malfeasance as the leading phoenix among SOEs.
– Mpumelelo Mkhabela is a former parliamentary correspondent, editor of the Sowetan and political analyst.
