The SABC is in serious trouble

The Auditor General of South Africa says there are significant risks on the going concern for South African Broadcasting Corporation (SABC), with the group in desperate need of revenue sources.

The AGSA presented its audit outcomes for the SABC to the Standing Committee on Public Accounts (Scopa) on Tuesday, noting an improvement in the public broadcaster’s overall position.

Following a disclaimed outcome with findings in 2022/23, the group managed to get an unqualified audit with findings in 2023/24.

While this is a positive development and an improved audit, it does not mean all is well with the SABC.

The unqualified audit just means that management has provided sufficient audit evidence to substantiate its own assessments of the business.

The disclaimed outcome last year was based on the going concern assumption and the uncertainties disclosure not being supported by records.

For 2023/24, most of these deficiencies were addressed by the SABC’s management, but the AGSA flagged concerns around repeat compliance findings related to irregular, wasteful and fruitless expenditure.

In addition to this spending still being incurred, consequence management is still not being full implemented, the auditor said.

Notably, the AGSA identified and assessed the key adverse conditions in the year under review, which cast significant doubt on the corporation’s ability to continue as a going concern.

Like many other state-owned companies, the SABC is overwhelmed by debt accumulation, which it struggles to service. It also shows an inability to manage spending and generate revenue.

The Auditor General said this contributes to South Africa’s low growth and drains public funds, adding to the country’s deteriorating fiscal health.

The broadcaster has also become something of a black hole.

The AGSA noted that in 2019, the SABC received a R3.2 billion bailout by the government to fund a three-year turnaround strategy—which has since been completed.

“Despite the turnaround plan, the entity’s financial position has not improved significantly since its implementation in October 2019,” it said.

“A review of recent information shows a slight improvement in the entity’s financial outlook.”

Sinking ship

The AGSA said the SABC is heading down a difficult path without significant interventions.

“The cost of the public mandate keeps increasing—running news channels, escalated cost for sports rights, mandated programming in prime time,” the AGSA said.

Meanwhile, there is no government funding and the old ways of drawing revenue, such as paying TV licenses, are not keeping up with the competitive changes in the sector.

The AGSA noted that the broadcaster should be collecting over R4 billion in TV Licences, but this has not materialised due to extremely low levels of collections. It manages to collect only about R700 million.

“The SABC requires an effective way to finance its mandate,” it said.

It recommended that the broadcaster implement a new plan to increase revenue. This should be done by creating more compelling content, making sport content financially viable and increasing commercial revenue streams.

It should also diversify its market by going digital. “All of this will allow for more viewers in order to increase rates and revenue,” the AGSA said.

More positively, despite the significant risk on the going concern of the SABC, the Auditor General said there is enough going for the broadcaster to “reasonably and feasibly” conclude the going concern principle.

This includes newer developments where the SOE has signed new contracts and acquired new content, with other initiatives in advanced stages.

But this does not remove the major risks the SABC faces at the same time.

The SABC has R1.6 billion owed to creditors, which is far higher than its available cash of R400 million, and it ended the year in deficit.

Notably, the AGSA said the broadcaster’s plan to reduce its debt owed to Sentech has a low chance of success.

It also flagged R60.2 million of fruitless and wasteful expenditure tied to the interest levied on this debt.