Department of Communications, SABC, ICASA, FPB, MDDA, Brand SA 1st, 2nd, 3rd Quarter 2014/15 performance

Meeting report

Mr R Tseli was elected acting chairperson, in the absence of Ms J Moloi-Moropa, and he asked the Minister to lead the presentations.

Minister of Communications, Ms Faith Muthambi ,said the period under review experienced mixed results from their entities. SABC showed a healthy financial position and it was able to pay all its financial obligations including paying royalties. Its cash reserves were respectable at R1,011.3bn with R978m invested in the money markets. The funds are invested with the Big 5 banks. She was encouraged by this financial position. Expenditure was below target based on the cost containment measures the SABC implemented. In October 2014, it issued a Request For Proposals book to the total value of R600 million making it the largest proposal request for local content issued by the SABC to date. Its 24 hour news continued to improve as its audience grew day by day. On the MDDA, the department intervened by seconding a chief executive officer to the Media Development and Diversity Agency. Although the MDDA had been in operation for more than ten years, it seemed to be having no impact on the ground as the media remain untransformed. Interventions to be taken include balancing sustaining existing projects with new ones. ICASA could not achieve most of its targets that include licensing free to air television channels. ICASA was only able to spend money ear marked for normal operations of the authority on accommodation, stationary, travel, employee costs and audit fees among others. It was unable to spend money earmarked for ring-fenced projects during the three quarters of 2014/15. These projects include acquisition of broadcasting and postal monitoring equipment, head office improvement, replacement of spectrum software system among others. ICASA has applied to National Treasury for retention of unspent money and lack of skills for these projects still remain the main challenge. Brand SA was not able to achieve almost all key deliverables for the past three quarters. Key deliverables not achieved include branding and messaging, pride and patriotism, positioning South Africa as the business destination among domestic and international audiences. It was not able to spend funds due to non-delivery of projects earmarked for the three quarters. Brand SA seems to be concentrating on and spending excessive resources outside the country and not doing sufficient effort inside South Africa. The FPB was able to achieve the key deliverables that were planned.

SABC quarter 1, 2 and 3 report of 2014/15
Mr Frans Matlala, Group Chief Executive Officer, SABC, said owing to profound transformation that broadcasters were undergoing globally and taking into account the shifts in the world economy, new technologies, changes in audience behaviour and increasingly complex competitive environments, the SABC needed to reshape its future with a Corporate Plan that is guided by a very clear sense of direction and focus. The SABC’s FY2014/15 – 2016/17 Corporate Plan was developed to ensure that the Corporation operates within well-defined parameters. The plan focuses on a new value proposition and a new forward-looking funding model which is essential to the future success and sustainability of the SABC as South Africa’s only public broadcaster. In the context of lower than expected economic growth and increasing competitive activity in the broadcast environment, the SABC remains the dominant player in the broadcast environment, recording significant year-on-year improvements – particularly relating to aspects of over-all audience and revenue performance. The targets set in the Corporate Plan were ambitious and some of these were missed. Mitigating actions and interventions were identified during the period under review and their implementation aggressively managed in order to address these. The outlook for the Corporation remains positive, as the SABC continues to deliver value to South Africans in terms of public service content with the Corporation’s services providing an unmatched diversity through all its platforms.

The third quarter of the fiscal year was financially challenging, however, the Corporation also had the following highlights: Cash and cash reserves were respectable at R1,011.3bn with R978m invested in the money markets. The funds are invested with the Big 5 banks. The cash reserves could be under severe pressure due to the effects of salary increases, a potential tax liability of R330m arising from government grants received over the year that were not taxed, the cut backs in airtime purchases by advertisers and delays in contracting TV Licence debt collection agencies. The cash balance at year end is projected to amount to R1,449.3bn up 3% from the previous year. The balance sheet is relatively robust with the SABC showing a net asset position of R2,374.2bn (at 31 March 2014) and R2,362.5bn as at the end of Quarter 3. Movements in non-current assets are expected as the Capex plan is implemented and service providers continue with the asset verification exercise that is anticipated to be completed by 27 February 2015. Revenue targets were not met in all instances other than net financing income and income recognised from the utilisation of government grants. Total revenue and income earned in the quarter was R2,099.7bn which was lower than budget by 9% (R207.3m). There were unfavourable performances in revenue from advertising, sponsorship, trade exchanges, licence fees, content and commercial exploitation, other revenues and other income all which fell short of their quarterly targets. The effects of increased competition, client (advertising) budget cuts owing to contractions in the economy, effects of the sustained labour unrest, the post office strike that affected mailing of TV licence statements, disruptions to the schedules and delays in approving revised TV licence tariffs all or in part contributed to this decline. Revenue and income earned for the nine-month period ended 31 December 2014 also fell short of budget by 7% equating to a shortfall of R451.2m.

Expenditure in Quarter 3 amounted to R1,877bn which was 7% (R139.2m) lower than budget. Significant savings of R205.2m were realised collectively from the following cost categories: content amortisation on programmes and films, broadcast, freelancers, employee compensation, depreciation and amortisation, marketing, revenue cost collection and professional and consulting fees. These cost savings were, however, reversed by over expenditure of R62.9m from the amortisation of sports rights and the production thereof that were not budgeted for. Expenditure incurred in the first nine months of 2014/15 was 3% (R175.1m) below budget. Cost savings arose largely from under spending in broadcast costs, employee compensation, marketing, revenue collection and other operational expenses. The cost savings were reversed by overspending on amortisation of content which was caused by changes in the amortisation policy and expenditure on sports content that was not budgeted for. However, despite this, R2.05m of irregular expenditure and R0.82m of fruitless and wasteful expenditure were incurred in the quarter under review. During October 2014, the SABC issued its Television Request for Proposals (RFP) book with a total value of more than R600m making it the largest RFP book issued by the SABC for local content to date. Through this substantial investment, the SABC continues to be the leading consumer of local content in South Africa, and more importantly the foremost generator of employment and development of the independent production industry. A significant amount of the RFP book has been ring-fenced for new black, female, people with disabilities and youth owned companies. As a public service broadcaster, the focus will also be to ensure that there is equitable distribution amongst the provinces in terms of allocating work.

Department of Communications (DOC) Quarter 1, 2 and 3 report
Mr Donald Liphoko, DOC Acting Director General, said the new Ministry of Communications was established after May 2014 general election. The former GCIS structure became the new DOC start up structure from 1 October 2014 to 31 March 2015. GCIS was re-established in the 2015/16 financial year. R12 million was received from Treasury to fund the new Ministry. The National Communication strategy was approved by Cabinet in June 2014 which prioritised key campaigns on unemployment, service delivery, crime and corruption. The DOC had to find innovative and efficient ways to achieve the 2014/15 Annual Performance Plan implementation, taking into account the impact of the National Macro Organisation of State (NMOS) programme and budget cuts. The department achieved 93% of the planned targets during the 1st quarter of 2014/15 with 59 planned and 55 achieved. During the second quarter, 95% of the planned targets were achieved with 65 planned and 62 achieved. It maintained the achievement of 95% during the third quarter, with 57 planned targets and 54 achieved.

Some of communication products produced to grow the voice of government were:

• 45 000 copies of the 2013/14 SA Year Book and Pocket Guide
• 15.3 million copies of the government newspaper, Vuk’uzenzele, were produced in different official languages and Braille copies were distributed.
• 36 editions of the weekly electronic newsletter My District Today, which provides updates on government's delivery on the Programme of Action (PoA).
• Intensified Minister and Deputy Minister of Communications outreach programmes
• 2014 Media Landscape Book which monitors media transformation
• Outreach campaigns were implemented, reaching over 50 million people
• Media briefings and Post-Cabinet media briefings
• Engagements between Political Principals and domestic and international media

Independent Communication Authority of South Africa Quarter 1, 2, 3 2014/15 performance
Mr Pakamile Pongwana, CEO: ICASA, said the Independent Communication Authority of South Africa (ICASA) noted some of its achievements for this three quarter period. The Invitation To Apply (ITA) free-to-air television broadcasting service licences was published in the Government Gazette in August 2014. The closing date for applications was extended from 1 December 2014 to 31 March 2015. Prospective applicants requested an extension, which was granted. Five applications were received by 31 March 2015. A concept document on the viability of licensing further terrestrial broadcasting licences was developed. A draft questionnaire was compiled and released in January 2015. A draft research report was compiled covering factors that affect the cost of digital terrestrial television (DTT) in South Africa. ICASA in collaboration with the National Consumer Commission (NCC) embarked on a process of requesting information from the operators based on complaints and sector developments that impact on consumers. This information will inform the position paper on retail tariff transparency. The International Mobile Telecommunications (IMT) Roadmap 2014 and the IMT Radio Frequency Spectrum Assignment Plans (RFSAPs) as well as the rules for IMT 450, 700, 750, 800, 900, 2300, 2600 and 3500 bands were published. The IMT Roadmap and RFSAPs are part of the final process in the development of the Invitation to Apply (ITA) for assignment of the broadband spectrum. The tender for procurement of a spectrum management tool was put on hold pending the outcome of the legal challenge by one of the bidders.  

Brand SA quarter 1, 2 and 3 report of 2014/15
Ms Chichi Maponya, Chairperson: Brand SA, spoke about its achievement of targets. Ensuring message alignment by key stakeholders - all targets (100%) for this were met. On pride and patriotism and active citizenship amongst South Africans - five of the six targets (83%) were met. Positive positioning of SA as a business destination amongst domestic and international target audiences - eleven of the thirteen targets (85%) were met.
Film and Publication Board quarter 1, 2 and 3
Mr Themba Wakashe, FPB CEO, said notable achievements in Quarter 1, 2 and 3 were:

• FPB Online was fully implemented with Computer Games classified online and registrations processed on the system
• 100 % of all legible materials submitted were classified
• Revised Classification governance framework being implemented
• Convergence surveys report tabled before Council and noted
• Surveys of cinema goers to be rolled out as part of the UNISA partnership agreement
• Total of 446 new registrations were processed
• 669 unregistered distributors inspected
• Total of 13 raids were conducted across the three regions in partnership with law enforcement agencies and a total of 24 688 materials confiscated
• Construction was completed and move to the new premises concluded in July 2014. Furniture specifications developed and approved
• Finalised review of tariffs for physical distribution . Research on tariffs for online regulation not achieved
• Quarterly Trends analysis report moved to Operations Division. Research Plan being implemented through partnership with UNISA. Established Research Reference Group (terms of reference approved) - UNISA MoU implementation plan approved and implemented

Media Development Diversity Agency quarter 1, 2 and 3 report
Mr Thalifhani Khubana, CEO, MDDA, said the MDDA cumulative achievements since its establishment were as follows:

• Grants totalling R280 million have been awarded to over 570 projects.
• Projects supported by the MDDA are spread across a range of District Municipalities in all 9 provinces.
• There has been a significant escalation in the number of Community and Small Commercial Media newspapers and magazines published in indigenous languages, as well as increased diversity in the media owners and communities served.
• Community radio listenership has increased to 27% of the total radio listenership in South Africa.
• Some 2,937 people have been trained in key community media-related issues, such as governance, financial management and content generation.
• A total of 348 bursaries have been granted for further studies into radio and print media.
• The MDDA has received an unbroken record of 11 unqualified audits since its establishment.
• Eight research projects have been completed, aimed at providing insight into media in South Africa , for example “Trends in Ownership and Control of Media in South Africa”.
• Discounts from printers have been negotiated for Community and Small Commercial newspapers and magazines.

Challenges include limited integration of internal business processes; high staff turnover, limited capacity building and inadequate budget allocation

Discussion
SABC
The Chairperson said, SABC was a broadcaster at work as evidenced by the awards it received and the Request For Proposals book. He asked if SABC had any strategy for people with disabilities in the request for proposals and measures to avoid fronting. He asked the strategies that SABC will use to collect TV licences when DTT was rolled out.

Mr G Davis (DA) said SABC collected 9% below target revenue stating the reason was due to the contraction of the economy. He asked if SABC was now planning for the economy. Independent research has shown that reduction in audience share by the SABC was as a result of news bias and asked if SABC was in agreement with this. He asked if any progress was made on the editorial review. The last one was done in 2004 yet it must be done every five years. This happens at a time Hlaudi has his own editorial policy on licensing journalists and 70% happy news - this goes against freedom of expression. He congratulated the GCEO of SABC on his appointment, but Section 13 of the Broadcasting Act says there must be nine board members to make an appointment. When he was appointed there was no quorum as there were six board members and two executive making the total eight. However, the GCEO is well educated with vast experience in the private sector.

Ms F Nkadimeng (ANC) asked SABC what strategy it has in place to address capacity challenges. What measures was the SABC was taking to address the Auditor-General’s findings and when Alex TV be restored?

Mr M Kekana (ANC) congratulated the Minister for a good job well done as SABC was moving from somewhere and going somewhere. He said its picture quality must compete with Supersport and MultiChoice. He was surprised by the withdrawal of the Alex TV licence by ICASA as it serves communities in the townships of Soweto and Tshwane. The same happened with Tembisa Radio and when the people marched, it was reinstated. The Alex TV licence must be restored in two weeks. He asked if the MDDA had delivered on its mandate if there was no media diversity in South Africa and which factors inhibited this.

Ms D Tsotetsi (ANC) asked how the SABC was addressing revenue collection challenges from government officials.

Ms O Matshoba (ANC) asked for the amount spent on paying royalties to artists. ICASA must think twice in withdrawing licences. This must not be informed by personal interests.

Prof Obert Maguvhe, SABC Chairperson, replied that interviews for the GCEO position were conducted in September 2014. The four members who are not part of the board were members then. The three executives had voting rights as voting members and there was a quorate board to appoint him.

Mr Matlala replied that reasons were clear in the presentation that revenue collection decreased due to decrease in advertisement and sponsorship. Licence fees were also below budget as it was dependent on SAPO which had a major industrial action last year. The state of the economy drives the people’s ability to pay TV licences. After the 2014 World Cup, Generations was cancelled and programs were shifted between SABC 1 and 2. People were not happy with the shifting and it reverted back to the original schedules. He did not have the privilege to see the research and credibility of its findings. The last editorial review was done in 2013. The turnaround strategy focuses on financial health, compelling content, broadening the number of platforms, harnessing the energy of people working at SABC by giving them reasons to enjoy working for the SABC. There were upgrades in technology, governance process, risk and compliance to legislation and to SABC policies. It leverages partnerships with different partners, sometimes on technology and with different broadcasters around the world. It partnered with Mozambique in covering elections and it ensures that governance processes of the host country were observed.

Mr Hlaudi Motsoeneng, Chief Operating Officer, SABC, replied it was not blaming government for the challenges on the economy as it was a global matter in that even Greece has collapsed. If there were projects of national interest, SABC was going to lose revenue as programmes will be shifted. It has to pay back money if advertisements were not screened. It was not just after profit, but sustaining the public. SABC wants real people with disabilities and not fronting. It was not rushing for editorial review excluding digital migration. He was not afraid of regulating the media. “Even parliament is regulated. The judges are regulated. What is the sin if media is regulated? I even ask, are these angels people? Even your DA is regulated”. SABC was paying royalties to actors.

Ms Muthambi said it was known that SABC was a state owned entity under the leadership of the ANC government. There was no reason for SABC to point to economic growth conditions. Under the ANC, the SA economy has grown. There was an Asian crisis in 1997, the world economic crisis in 2008 and recently Greece. Mr Davis must visit the President’s Nine Point Plan on how the economy has grown under the ANC leadership.  

Ms Tsotetsi asked if politicians pay their TV licences.

Ms Muthambi replied SABC was going to name and shame public servants who do not pay TV licence fees.

ICASA
Ms R van Schalkwyk (ANC) asked if ICASA was thinking of laying off staff or retraining them.

Ms Tsotetsi asked the initial time frame of the research that took longer than expected to be completed. Why were entities in the same department doing uncoordinated research?

Mr Davis said the SABC GCEO appointment was done this year on 2 July 2015. He asked when the editorial review was done in 2013. The last editorial review should have been concluded in 2009. The Committee must not allow entities to mislead it. There were five ICASA councillor vacancies so how were these impacting on ICASA operations. He asked if the clear cost of DTT was not known.

Ms N Ndongeni (ANC) asked ICASA if the spectrum can be used illegally by players.

Ms Muthambi replied it was the old Department of Communication that did the research and instances of such nature will not recur. There was a designated programme called entity oversight. There was a CEO / DG Forum and Minister / Chairpersons Forum to enhance coordination. Interviews for SABC were done in September 2013, three candidate were forwarded to her in November and what was outstanding was the Minister's concurrence. The board was quorate when the appointment was done.

Ms Pongwana replied nobody has lost a job at ICASA because of realignment. There was a problem of people in positions not meeting minimum requirements and these will be dealt with through lifelong learning. The research that was done by ICASA was handed over to Department of Telecommunications and Postal Services (DTPS) and the research on the cost of digital transmission need more market review. When players use spectrum illegally, it was because they have equipment that receives spectrum or they continue to receive after their licence has expired. However, it will be picked up as it interferes with other spectrum users. Dynamic spectrum was something that came into operation the world over. The research was taking longer because it was a collaboration between ICASA, CSIR and universities. It was an issue of definition and redefinition. He will provide a comprehensive report on Alex TV. Alex TV was given a 12 month trial licence, but it was found that it was transmitting on DTT. Now it was asking for a community TV licence. ICASA has not experienced the effect of vacant councillors as its management was set up to support councillors no matter the number.

MDDA
The Chairperson asked MDDA to do an audit on how local district municipality were assisting community radio stations in advertising. He asked why MDDA will be funding new radio stations when the old ones have challenges. It must devise mechanisms to detect fronting in cooperatives that are to be funded.

Ms V van Dyk (DA) said MDDA must solve the problem of late payments to community radio stations. In April, MDDA was asked to submit a skills audit report and has not done so. She asked how many vacancies it had, and whether they were advertised. She asked if its employees had performance contracts. 14 people had resigned from MDDA citing a hostile environment and the broken relationship of the CEO and chairperson. She asked if MDDA had a policy on travel arrangements. It must submit a written report on the research it undertook. She wanted clarity on the 400 versus 219 people who were offered training.

Ms Tsotetsi asked how much MDDA pays for each project and where do those projects exist in the provinces. She asked for a race and gender breakdown of MDDA employees and whether it was in line with the transformation policy.

Ms van Schalkwyk asked if MDDA had initiatives to help community media in distress, whether it has any litigation on the go and plans to reskill its employees.

The Chairperson said the questions will have to be responded in writing.

Mr Davis strongly objected to this as it goes to the spirit of oversight. This was a problem to the Committee. The MDDA stated that there was no funding for print media because of withdrawal of funding from PDMSA. He asked for the strategy it has in place to receive the money again. He asked why there was no financial report on internet censorship. He was more interested about how the FPB will monitor the internet given that 320 hours of material was uploaded on YouTube every minute. The Brand SA budget was R170 million and he asked how it was going to fund the expansion of its offices in China, Washington and London plus building a residence in Brazil.

Ms van Dyk said the Committee must not consider receiving written replies.

Ms Muthambi said she would facilitate to ensure written responses are sent by Friday 21 August before the officials leave Cape Town. Time allocated for the Committee was insufficient. It was good for it to request the whole day if there was a sitting in the House. She has asked entities to align their strategy with that of the mandate of the department. She thanked the Committee for the robust arguments as they provide opportunities to improve.

The Chairperson said there was a challenge due to time constraints. He was impressed by the work the Ministry and the entities were doing.

Meeting adjourned.