The South African Broadcasting Corporation’s (SABC) year-end operating loss and liquidity constraints put its status as a going concern perilously at risk before the government came to its rescue, Irene Charnley, chairperson of the SABC’s exiting interim board, has revealed.
In the SABC’s 2008-09 SABC annual report, which the Mail & Guardian has seen, Charnley said the R200-million allocation from the treasury in October and the government’s 11th-hour granting of a guarantee of R1,473-billion in November had restored the SABC’s status as a going concern and allowed for the approval of its annual financial statement.
As of March 31 this year the SABC’s pre-tax losses were R913-million. Revenue rose by only 0,9% year on year, while expenditure rose by 19%. Charnley said the government guarantee will be used to secure medium-term funding from commercial banks at competitive rates.
”Like other media companies, the corporation’s commercial revenue was negatively affected by the economic downturn,” said Charnley. ”However, it would be disingenuous to blame this alone for the deficit, as the SABC’s failure to foresee this downturn and develop mitigating strategies was fundamentally limited because of management instability.”
The 2008-09 financial year was not an illustrious one, said Charnley, and was marred by leadership and governance crises.
This gave rise to sustained public battles between the board and the executive and the suspension of the group chief executive, Dali Mpofu.
These battles were played out in Parliament, the courts and the media, leading to the dissolution of the board and the appointment of an interim board in July. The crisis prompted Parliament to instruct the auditor general to investigate allegations of financial irregularities and other mismanagement at the SABC.
In a bid to contain the risk of prolonged litigation and further damage to the SABC’s reputation the interim board moved swiftly to stabilise the situation by settling with Mpofu, Charnley said. Steps were taken to begin curbing expenditure and restore the broadcaster’s integrity.Charnley emphasised that there were ”no quick fixes to a crisis of this magnitude”.
Robin Nicholson, the SABC’s chief financial officer, said in the annual report that a key challenge was ongoing organisational instability.
Nicholson said unbudgeted expenditure in the expansion of foreign bureaux and SABC News International had had a considerable negative impact on the SABC’s overall financial performance.
The SABC is not expected to pay income tax in the current year because of operational losses, he said, adding that declining revenues and increased expenditure had negatively affected the SABC’s liquidity, forcing it to use a substantial portion of its overdraft facilities.
”Creditors’ payments were not met as they fell due, which will impact negatively on the going concern status of the SABC in the 2009-10 financial year.”
The global financial crisis, reflected in declining advertising revenues, also affected debt collection and the SABC’s ability to pay its debts. But, Nicholson said, there were moves to secure funding from a combination of sources.