SABC/Independent Producers’ Organisation briefing; SABC on Premier Soccer League Deal & Fraud Whistleblowing

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
15 August 2007
SABC / INDEPENDENT PRODUCERS’ ORGANISATION BRIEFING; SABC BRIEFING ON PREMIER SOCCER LEAGUE DEAL / FRAUD WHISTLEBLOWING

Chairperson: Mr G Oliphant (ANC)

Documents handed out:
Independent Producers Organization (IPO) presentation
IPO on Future of South African Content in a new Broadcasting and Convergence Environment
SABC Presentation
South African Broadcasting Corporation (SABC) Board 2007 – Candidate Shortlist

Audio recording of meeting

SUMMARY
The Independent Producers Organisation explained that they represented over a hundred small production companies and individual producers. They supplied all the local content for television apart from news and sport. They were responsible for documenting the cultural history of the country. However, the industry was in a precarious position. There was a serious problem with sustainability. Many survived from one contract to another but a number of companies had failed. A major issue was the practice of the broadcasters, of which the South African Broadcasting Corporation was the dominant player, to take the intellectual property rights. This was not in line with the practice in some other countries. The Corporation had a domineering attitude towards the producers. There was only limited negotiation taking place. The profit margins for local producers were lower than in many other countries.

Members felt that further discussion was needed on the complex issues raised. There was a legal requirement for an independent production sector. There was a perception that if the books balanced, then everything was fine, but there did seem to be some micro management problems. The South African Broadcasting Corporation was making a sizeable profit, and more should be channelled to the producers.

The South African Broadcasting Corporation explained that it was in an ongoing consultation process with producers, and there had been very few complaints recently. A monopoly of white-owned houses had been broken, and there were more groups recognised by the Corporation than just the Independent Producers Organisation. It wished to provide benefits for all South Africans both in terms of demographics and in terms of spreading work throughout the country. The amount of local content was increasing steadily, and exceeded targets. It was acting as a catalyst for the transformation process in the industry. The SABC felt that it was entitled to a share of the intellectual property rights as it invested in production houses and shared some of their costs. It could not be compared to other public broadcasters due to its heavy dependence on commercial funding.

Members felt that a fair price should be paid for a good product. They recognised the good work that was being done, but feared that producers might have to compromise standards in order to keep costs manageable.

The Committee was briefed on the current situation regarding the television rights for soccer matches. The procedure around the renewal of the contract had been conducted in bad faith, and was currently the subject of arbitration. An agreement had been reached between the SABC and SuperSport which would see the public broadcaster showing 110 matches exclusively and 33 in conjunction with SuperSport. Temporary arrangements had been made for radio rights. It was alleged that the major motivation of the Premier Soccer League to change the contract was the commission payable to members who had led the negotiations. There had been serious misrepresentations of the facts in the printed media, and several examples were mentioned.

Members felt particularly strongly about the need for radio coverage. They agreed that matches should be shown to the general public but also felt that the deal with SuperSport brought more value to the Premier Soccer League. More discussion would be needed on this issue.

The SABC noted that thematter of Mr Mafika Sihlali had been raised by the SABC’s Internal Audit division. The investigation was still underway, and had been delayed by legal constraints. The report had been leaked to the press, which had further delayed matters. This was one of three major cases of fraud under investigation. It was not possible that all members of such a big organisation would always act honestly.

Members had mixed feelings over the need for whistle blowers. Their actions were protected by law, but some members felt that the SABC should have been allowed to investigate the matter fully before it was made public. There was a call for Mr Sihlali to be suspended pending the outcome of investigations, but the SABC Board felt that there needed to be more clarity on the accusations before taking this action. Other security concerns had also been discussed with the police. It was agreed that a full report would be made to the Committee by the full Board once the matter had been resolved.

The Committee considered a list of 63 nominations for the new Board of the South African Broadcasting Corporation. This was whittled down to 37 people, who would all be interviewed by the Committee.

MINUTES
The Chairperson welcomed the delegation from the Independent Producers’ Organisation (IPO). He had met with their Chairperson before on the issues they wished to raise. The IPO had agreed to meet the South African Broadcasting Corporation (SABC) to deal with the matters in question. The joint presentation about to be made to the Committee was an outcome of this meeting. The SABC would also report back on the issue of broadcasting rights for Premier soccer league matches, and on the Mafika Sihlali affair. Candidates for the new SABC Board would be short-listed. A meeting had been held with the current Board in April. A handover report would be compiled on the transition from the old Board to the new, which would last for two to three months. The process should start by the end of September. There was also one vacancy on the Independent Communications Authority of South Africa (ICASA), which needed to be filled by 17 August.

Independent Producers’ Organisation presentation
Ms Desiree Markgraaff (Chairperson, IPO) said that her organisation represented the producers of local content. She introduced the members of the delegation, and listed some of their current projects. The IPO represented mostly small to medium enterprises (SMEs). The Producers’ Alliance (TPA) represented smaller companies. They produced all the local content for South African television apart from news and sports programmes. They represented over a hundred production entities and individual producers, and generated approximately 80% of local content being produced outside the national broadcasters. The producer’s role was to initiate and manage projects, and to supervise the productions.

She said they had not come to Parliament lightly. Generally they would solve their own problems. They tended to be creative individuals. However, the challenges were becoming increasingly more difficult. They were in a precarious position. They were buoyant regarding local content, but still faced a delicate situation. All their eggs were predominantly in one basket. They produced culture and created popular culture, and took this responsibility seriously. It was important for the nation. One reason for their presence at this meeting was the relationship of IPO members with broadcasters, especially the public broadcaster. Their real concern was the sustainability of the industry. The business model was not conducive to growth. IPO members were service providers to the broadcasters. However, the terms and conditions of the relationship were largely created b the broadcasters, and it was a suffocating environment. They were at the meeting to seek the Committee’s support.

Ms Markgraaff explained that the role of the producers was to be the eyes, ears, and mouthpiece of society in terms of culture and history. It was up to them to find the stories and to create a cultural memory. They investigated matters and inspired the nation. They were agents for mainstream arts and culture, and for guarding the nation’s heritage. They were not only the suppliers of cultural information, but the custodians of culture. They were helping to nurture and create diversity. They were emotive and dealt with sensitive issues. The sector had to be deep, invested and committed.

Ms Markgraaff said that the production industry was not only the preserve of arts and culture. It was a big business industry, and a supplier of local content, dealing with issues from education to drama. A Deloitte survey had estimated the worth of the audiovisual industry at R 5.5 billion. There had bee a definite increase since that survey, and there were currently some R12 billion in economic activities.

She said that sustainability was a crucial challenge. Production companies could not operate on a “fly by night” basis. They needed to create employment in an atmosphere where most people were employed on a freelance basis. There was a need to speed up transformation. Initiatives like the Accelerated Growth Initiative in South Africa (ASGISA) were being used, and many opportunities had been generated.

However, Ms Markgraaff continued, there were blockages. The production sector needed to capture the country’s cultural heritage. This was often an expensive process involving a lot of travel. There was also an issue with intellectual property rights. It was a more alluring industry than many others, and there was scope for skills training and development, but often the companies were thin at the top. Intellectual depth was needed. Content choice was a critical issue. SMEs must be self-sustaining, and real jobs must be created.

She said that the industry had to be seen in a global context. There was an increased demand for this kind of television production throughout the world. The broadcast situation was changing. Rigid cultural identities were being watered down, but this type of programme still found a niche market. The influence of broadcasters was an important factor. The IPO was moving into the centre of the process. It was important for the industry to be viable. There was massive gearing up in the industry, particularly in countries such as Brazil. Business skills were becoming critical. There was a global democratisation of content, but in other ways the democratic nature was being lessened as those companies with means could dominate the market. It was imperative to strengthen local service providers.

Ms Markgraaff said that the South African industry had a need for a new strategy. Local and regional broadcasters would soon be on the scene. However, at present the SABC determined the trade although this tendency was changing. It was a solid industry with creative and business acumen. Accountability was needed.

She said that there were transformation challenges. She agreed that equity transfer was taking place, but this was needed throughout the industry. The industry was a product of the political history of the country, and the producers were only now reaching an understanding of how the industry had developed. There were few rewards for the people involved, and there was a lack of stability and growth. The IPO, TPA and the South African Screen Foundation were all developing Broad-Based Black Economic Empowerment policies. These had been agreed to and were now being implemented. Although there was a legacy of fragmentation in the industry, there was a new unity of purpose evident.

Ms Markgraaff explained that the nature of television in the country had changed. In the past, content from the United States had been king. Now, nearly 80% of the most popular television shows in the country were local. This was in line with the Broadcasting Act of 1999. The initiative to develop local content had been supported by the advertising industry. The SABC and the production houses were seen as partners, and the SABC was responding to the needs of the audience. The producers responded to the needs of the broadcasters. However, the production sector was not financially stable. There was heavy investment in technology and advertising, but very little into the production centre.

Ms Markgraaff said that there were many small issues involved. The main body of production companies were small outfits with limited infrastructure and resources. There was an element of randomness in the industry. Often a business died on completion of a project. Finance for research and development was limited. Companies struggled to access capital due to perceived high risk. There was no clear business model. To date the most successful and longest running local programmes were the soap operas. Recording the cultural history of the country could not be left in the hands of transient companies. They could also not rely on donor funding. There was an annual process to commission programmes. The broadcasters were tough on the trade, and there was a lot of competition. Intellectual property rights were an issue, as was the margin of predetermined profit. There was no predicted rollover from one project to the next, and this led to problems of sustainability.

Ms Markgraaff continued that this was not an industry of poverty. Over R7 billion was spent annually on advertising. It was difficult to get the facts surrounding this spending. The SABC had increased its advertising revenue from R1 billion to R 7.7 billion on current figures. This suggested that advertisers were realising the value of the audience.

She said that the industry was rooted in South Africa. It had a responsibility to deliver on the content required by the audience. However, this was not happening despite the income being generated. Limiting factors were the lack of negotiations with the SABC, the audience and investment. There were blockages in three critical areas, namely the terms of trade, the ownership of intellectual property rights and the question of secondary rights. There was a changing perspective internationally regarding production houses’ rights. The experiences of Channel 4 in the United Kingdom (UK) showed that the public broadcaster could not own the rights. This made for a better climate for producers.

Ms Markgraaff revealed that the IPO members dealt with all broadcasters, but the SABC was the dominant player. Many meetings had been held, and a way forward had been mapped out. There had been a meeting in June, which had been attended by the Chairperson of this Committee. The SABC executive and the IPO delegation had agreed on the way forward. There had been much agreement of the growth of the industry, empowerment, the creation of sustainability and other issues.

She said that there were areas of disagreement. Although both parties agreed on the need for total empowerment, the IPO was finding it hard to implement the policy. In the SABC’s current operating model, the production sector was treated as extended employees of the SABC. They therefore had limited negotiating power, and suffered from a lack of independence. Profit margins were limited to 6 to 10%. The producers had to take the risks. Independent producers sent 100% of their output to broadcasters. The SABC was worried about the state of transformation in the industry. The process had to be managed carefully. The production houses were under pressure from ICASA and under fiscal pressure. Intellectual property rights were a complex issue.

Ms Markgraaff said that increased control was at the core of the problems. Many small companies could not manage their businesses. The broadcasters played a mixed role. Negotiations were needed to help the situation, but producers were negotiating from a weak base.

She said that it was hard to differentiate between standards. Intellectual property rights had no capital value. The broadcasters did not exploit these. Producers wanted the rights to be carved up as needed. The SABC had not specified the nature of its income from sales. The total package was R3.9 billion of a total income of R9.9 billion. There was a tragic under-utilisation, and the rights could be used to boost the industry.

Ms Markgraaff said that the terms of trade needed to reflect business plans. Intellectual property rights had to accrue back to the producers. This would allow for greater independence, and would increase the value of intellectual property.

She sketched the way forward. Negotiations were difficult, and she understood that rights would be protected. It was hard for producers to sit as equals with the SABC in particular. They needed the Committee to interrogate the broadcast model. This would see the birth of a brighter and better industry. She then invited other members of the IPO delegation to address the Committee.

Mr U Zanenkosi (TPA) said that he had done some work with the British Broadcasting Corporation (BBC). The ITC, which was their equivalent of ICASA, held a different policy. The public service broadcaster established the terms of trade, but the intellectual property rights belonged to the producer unless they were specifically included in the sale. This had implications too when spin-off programmes were produced. South Africa did not have the capital to compete on a global scale. Many people were involved in production. Broadcasters often supplied start-up capital for producers. South African companies were far behind the latest technology. It was tricky when companies could not afford to invest in the latest software. There was no free import or export of programming. There was a new colonisation in the form of American culture. People were not taking their own culture seriously. The producers had a responsibility to sell ourselves.

Mr M Mbeki (President, IPO) said that his company, Endemol, was one of 26 members of a worldwide group based in the Netherlands. It was the only branch in Africa. He could compare figures to the rest of the world. The gross profit margins for the group were 26%. Endemol Netherlands, which had developed the Big Brother concept, generated profits of 42%. The figure in Belgium was 32%. Endemol Portugal, which was about the same size as the South African operation, generated 27%. Endemol South Africa worked on a profit margin of just 6%. Therefore the local industry was not sustainable. Investors could earn more money by letting their money draw interest in the bank. The programme Isidingo had been successfully exported from 2002 until 2006 to a number of African countries, the USA and Barbados. The SABC had earned R4.5 million from these sales, of which only R136 thousand had been given back to the production house, which represented just 3% of the takings.

Ms Carol Bouwer (Executive Producer, LB Productions) said that her company only managed a single programme. Her biggest concern was with the small businesses. The SABC had introduced a great policy to encourage black producers and many companies had sprung up, but 70% of these had closed. She would like to see incentives for resourceful companies. The maximum contract length given was 39 weeks per annum, which left companies without income for three months.

Discussion

The Chairperson invited the Members to question the delegation.

Ms D Smuts (DA) said that the problems would not be resolved at this meeting. It was a pleasure to meet the IPO delegation, and interesting information had been shared. It was set in law that there had to be an independent production sector. Opening up the industry should take care of the problems, and she felt that ICASA should perhaps address the issues. She asked what incentives were offered by the Departments of Trade and Industry (dti) and Arts and Culture.

Mr R Pieterse (ANC) felt that it seemed to be a macro management issue. If the books were balancing then people assumed that all was well in an organisation, whereas micro management was needed. He asked if producers had different agreements with the other channels in terms of intellectual property rights. The impending arrival of digital channels would present further options, he felt. There were consequences of the SABC not being properly funded. Income was needed, and the onward selling of programmes was one opportunity to generate revenue. If the fiscus covered all the SABC’s costs, then it would be able to pay production houses more.

Mr M Mohlalonga (ANC) said that the SABC’s Annual Report would address these issues. It was intriguing that it was agreed that the SABC must make money but was the public broadcaster. He asked what the driving policies of the broadcasters were. The SABC reported a profit of R3.5 billion but was still squeezing some producers. There was a need to support the local industry, and fair deals were essential. A code of good practice was needed.

Ms Markgraaff replied that incentives were in the final stages of being decided. An amount of between R300 million and R600 million would be made available as rebates for local productions of film and drama. There would be a local onus on the investment portion of this funding. The intellectual property rights had to vest in the producer. The chain of the title of rights was complicated, including production staff, writers and actors. There was some funding from Arts and Culture. There was support from the National Film and Video Foundation, but this was outside of the broadcast environment. There was some funding from the IDC, but there was also a rights issue there.

She said that the relationships with all broadcasters were similar and dissimilar. All took the intellectual property rights, but she hoped that the SABC would change this policy. There were different agreements with the different broadcasters on other issues. The advent of new channels would help, and she hoped that there would be a code of good practice with them. They would not have the same mandate as the SABC, and much of their work would be in the form of repackaging of material.

Ms S Vos (IFP) asked if there was some idea of the combined annual worth of secondary rights. She asked if it was a contractual obligation to hand over the rights. If so, it seemed like a form of blackmail. She asked how this situation compared to Australia or Canada.

Mr K Khumalo (ANC) said that there was a historical problem with the structure and mandate of the SABC. Its commission was to educate and entertain the public. The SABC’s revenue was not being channelled back to the producers, and this was creating problems. Many film and video companies had collapsed. There was no bargaining council, and the broadcasters were left to determine the conditions. A body like that was needed. There was nowhere else for producers to go. The structure and commission of the SABC made it hard for the producers, and this had a ripple effect on the economy. The Committee would engage the SABC on behalf of the IPO. There were exciting possibilities. Some of the shows were generating more revenue on the overseas market. He felt that the SABC should be engaged separately. They would need another round of discussions, and the Portfolio Committee on Arts and Culture should be involved. Independent producers were caught between two camps.

The Chairperson said that the process was one of work in progress, but the concerns were noted. Feedback was needed from the SABC. The Committee had a limited capacity to deal with these problems. They needed a proper profile of the IPO and the TPA. To a large extent they were dealing with casual labour. He did not know about the terms of trade. Business was a funny thing, and exploitation did happen. Studies had to distinguish between developed and developing countries. The UK had a real public broadcaster in that the BBC derived revenue only from licence fees. The SABC was practically a monopoly. They would have to grapple with this matter. It seemed that the SABC agreed on the issues. He said that the Committee would like to have a copy of a code of practice.

South African Broadcasting Corporation presentation

The Chairperson welcomed the Deputy Chairperson of the SABC Board, Ms Christine Qunta, who introduced her delegation. She apologised for the absence of the Chairperson as he was attending a Board meeting.

Ms Qunta said that there was a relationship with the IPO. Then the current Board had been appointed in 2004; the relationship had been fairly tense and fractious. There had been two or three big producers who had monopolised the market. These companies were white owned. The SABC had pressed for transparency and had tried to avoid fronting. Blacks had no role in creative work, and the SABC had been unhappy about this. The IPO was one of several organisations. The SABC was engaging with all of them. An annual meeting was held, the first of these in 2004. A range of issues had been discussed. A follow-up meeting had been held in 2005. In 2006 the whole industry had been represented for the first time and there had been very few complaints. In fact, the producers had applauded the Board’s initiatives. There was much more work now and the monopoly had been broken. In particular, black women were getting opportunities. She recognised the right of the IPO to come to the Committee.

Adv Dali Mpofu (Group Chief Executive Officer, SABC) said that the SABC engaged South African producers in numerous ways. These included meetings with the various bodies, national workshops, genre specific training and master classes. He had statistics on BBBEE. Another concern was that the majority of companies were located in the same area, and they wished to see a greater spread throughout the region. The SABC had stepped up the engagement process, and was a primary partner. These meetings were institutionalised.

He took personal responsibility for the broader issues, while day to day matters were dealt with by the content manager. Focused conferences were held. Provincial roadshows were held, and had become an important part of the engagement process in the previous eighteen months.

Adv Mpofu said that close to 60% of content was being produced at source, in excess of the ICASA quota of 40%. Only news and sports programmes were produced internally at the SABC. They interacted with inter alia the IPO, TPA and Black Filmmakers Network. The July meeting had included other organisations and talent agencies. Empowerment issues were addressed across the value chain. They were concerned that ordinary people should be empowered. All workers in the industry had to benefit.

He listed some principles that had been adopted at the April meeting. Intellectual property was an important part of these. There was a change in the global media environment. There was inherent value in intellectual property, and the originator should be acknowledged. The business relationship should afford the maximum common benefit. He agreed that a sustainable industry had to be built. The principles had been adopted at a broad level, and various working groups had been established. One of these was dealing with intellectual property rights.

Adv Mpofu showed the Committee a graph which indicated a steady increase in the amount of local commissioning of programmes. Foreign purchases were decreasing. The ratio of local content to imported programming was currently 70:30, but this was moving towards a ratio of 83:17. This data would be included in the SABC’s annual report. The process was being performance managed. Annual meetings were held with the Board, three meetings a year with the Chief Executive Officer (CEO), Chief Operating Officer (COO) and Divisional Executive. Monthly meetings were held with the Content Manager.

He said that the SABC had to manage commercial realities such as funding. There was an obligation to the different constituencies. The cake had to be split evenly. There were many competing claims. He noted that there was a change in the industry. Pay television licences would come into effect during November. The Transformation Charter of the SABC pledged material support. They could not prescribe the format of transformation to the producers. The process had to include other broadcasters. The long term goals were to facilitate growth, including new players, other provinces and women. The SABC wanted to drive the transformation process. The use of technology was being tackled. The question was how to pitch and train. The SABC had implemented disability guidelines. Capacity building was taking place.

Adv Mpofu asked what kind of public broadcaster was needed, and what the funding model should be. He accepted the model proposed by ICASA wholeheartedly. The SABC was hamstrung by structural issues. Comparative studies were being conducted on other developing countries. He admitted that the SABC was one of the worst placed broadcasters in terms of its reliance on commercial funding. It had changed the landscape. Other channels had determined that local content was a competitive factor. This implied a huge sacrifice, but it was required by the Broadcasting Act.

Adv Mpofu said that there had to be a particular environment, and a driving force was needed. The SABC was acting as a catalyst. There would be a standard that all pay-TV channels would support local content. The ownership of intellectual property rights had to be seen in this context. Value did not fall from trees. One could not expect the SABC to invest in technology when the value derived from it, went elsewhere. If the SABC supplied 50% of the funding to a particular producer, then it should expect to take 50% of the copyright. There had to be an analysis of cost as well as profit. In terms of growth, there had to be an individual development strategy. Margins were not the only factor as the SABC’s investment in production houses was an equalising factor.

Ms Qunta consulted with her delegation, and there were no further issues.

Discussion

The Chairperson said that the Committee would not respond to everything at this stage, but wished to set the basis of the way forward. Broadcasters and producers depended on each other. The Committee would look to find a solution, and there were proposals.

Mr Mvuzo Mbebe (Group Executive, Commercial Enterprises, SABC) said that the SABC did have the feeling, and understood the industry. A strategy was needed and input was needed from the industry. There was a need to benchmark the issue of intellectual property with other broadcasters. The BBC, for example, followed a policy of producing 50% of its programming internally. It reserved 25% for external productions and the balance was open to both internal and external bids. The SABC produced no programming except news and sport. The two models could not be juxtaposed. Intellectual property had to be seen in its totality. Protection was needed for indigenous stories. He asked how the intellectual property rights of all stakeholders in the chain could be protected. The SABC was prepared to fund research in this field, and a common benchmark was needed.

Mr Khumalo said that some issues demanded a response. A bargaining council was needed. The funding model had to be looked at, as well as the issue of intellectual property. There was commercial rivalry between the production houses. The issue of fronting had been addressed, and internal fronting was an issue. There was an assumption that some companies might not be BEE compliant. Another meeting was needed on this issue. He noted the meetings between the SABC and the IPO. Most production was done in house.

The Chairperson agreed that the Committee needed to discuss the issue of fronting and BEE compliance.

Mr Pieterse said that this was work in progress, and could take up to four years to resolve. He hoped that he would see results from this work soon. A fair price should be paid for a good product. It took months of work to complete a production, and he wanted to know who carried the costs during this time. All the local productions were good, but it seemed to him that some corners might be cut to make ends meet.

Mr Oliphant said that the problems were not unique to the SABC. The production sector had to be supported, and the country needed this sector.

Ms Qunta agreed on the way forward. Consultations would continue.

Briefing on Premier Soccer League – South African Broadcasting Corporation Rights Negotiations

Adv Mpofu gave the Committee a recap on the events surrounding the broadcasting rights for Premier Soccer League (PSL) matches. A detailed background had been sketched at a recent joint meeting between this Committee and the Sport and Recreation Portfolio Committee. There had been new developments subsequently. It was mainly a contractual issue, and this had been referred to independent arbitration. The matter was in the public interest.

Adv Mpofu said that the current contract had been negotiated during 2002. Television broadcast rights had been sold to the SABC for a selected number of matches. The SABC had negotiated gatekeeper rights. It was worth over R500 million over the five-year period. On renewal, the SABC had the first right of refusal and a matching right on any other bids. An ex gratia payment of R10 million was made at the time as the PSL was broke. The SABC was the PSL’s biggest financier.

He said that as the contract neared its completion, there should have been negotiations in good faith six months before the expiry date. This was the basis of the SABC’s expectations. The matter had little to do with financial issues, but was about terms and conditions and the negotiation process. It had been referred to arbitration.

Adv Mpofu explained that a meeting had been held in December 2006. Optimal prices had been discussed. A letter had been sent to the PSL in February 2007 requesting the dates of negotiations and a price request. However, the PSL had then sent out an Invitation to Tender document. It did not enter into negotiations with the SABC. While the arbitration process was underway, the PSL was already making offers to other broadcasters. A court interdict was issued prohibiting negotiations with other parties until 25 May. The PSL had then gone out and tendered, and struck a deal with SuperSport on the expiry of the interdict. The gatekeeper rights were also given to SuperSport.

He said that various political organisations had become involved. He wrote a letter to the PSL while returning from the joint meeting at Parliament in June, and a meeting with the PSL was held on 25 June. They had agreed to ensure that the public interest would be catered for while the legal battle continued. Weeks of negotiation had followed. A deal was reached whereby the SABC was granted the right of showing 143 games. Of these 110 would be exclusive to the SABC and the remaining 33 would be shared with SuperSport. The SABC would produce its own matches, a move which prevented the need to retrench a number of workers employed by the SABC to cover soccer matches. There had been bilateral negotiations in terms of radio rights, and he expected this matter to be resolved soon. Arbitration was continuing on the retention of rights.

Adv Mpofu sketched the way forward. There would still be some limit to public access. There was no control over which game would be shown on which channel. This agreement did not negate the renewed negotiations between the SABC and the PSL.

He was concerned about some serious misinformation that had been released to the public. Some of this was about co-ownership issues involving SuperSport. There had also been some blatant untruths released. One was that the SABC had only shown 75 matches in the previous season, while this was actually 106. Another was that the SABC had paid R300 million for the rights to show Monday night matches from the English Premiership. No price was on the table, but he expected that the rights for this would only cost 10% of this figure, and would be spread over a three-year contract period. It was not true that the SABC was not willing to pay as much as SuperSport would, nor that the SABC had missed contractual deadlines, and particularly not true that President Mbeki had intervened to force a settlement.

Adv Mpofu said that the SABC had retained three senior counsels to conduct the arbitration process. It was their opinion that the SABC had a chance of success in excess of 50%. They were also optimistic that the SABC would regain the gatekeeper rights.

Mr Ashwin Trikamjee (Board Member, SABC) remarked that there would be a fair price for a fair product.

Discussion

The Chairperson said that the record needed to be set straight. The previous presentation by the SABC had not been at a full Committee meeting. The public took the matter seriously. He thanked Adv Mpofu for his leadership, and wished the SABC good luck during the arbitration process.

Ms Smuts likened the matter to a frog and prince story. The kiss of SuperSport had added value to the frog of soccer coverage. At the same time, the viewers had to be looked after. The Ministers of Communication and Sport and Recreation could nominate a list of “must show” matches. She apologised for missing the joint meeting due to very late notice being given. She felt that commerce had done sport a lot of good. She asked if there was an updated list of matches to be covered.

Mr Pieterse agreed with the Chairperson. Radio rights should be set bilaterally. There had been no radio coverage on the Charity Cup despite statements being made that this would be the case even on the day before the match. Agreements were not being kept. He noted from the print media that Mr Trikamjee had played an important role in keeping heads cool during negotiations. The Board had taking a controlling role, and he thanked them for that. If the first right of refusal and matching rights provisions had been in the original contract, then he asked how the PSL could ignore the provisions so blatantly. His understanding of the agreement offered by SuperSport was that they would offer matches to the free-to-air channels. Costs per match had been reduced from R450 thousand to R410 thousand per match in the SuperSport offer.

Ms Vos said that her constituents did not live in an ideal world. Most citizens did not have access to the dedicated sports channels. It was advisable to consider the needs of the public. There needed to be an anti-siphoning measure. She asked if there would be a time delay on co-broadcast matches. She felt this would not be appropriate.

Mr Khumalo said that this was a tripartite agreement between SuperSport, the SABC and the PSL. One negative effect was on radio coverage. The majority of people were in rural areas or were on the move during matches, and they were not being considered. The SABC should have entered into negotiations on radio rights. The SABC did not have a dedicated sports channel. Its mandate was to entertain, to inform and to educate. He asked why they had not approached the National Treasury in order to obtain funds to secure the rights. They now had to navigate a thunderstorm. There were dire consequences if the SABC was sidelined from soccer coverage, especially in the build-up to the 2010 World Cup. He noted that there were four million blind persons in South Africa, and they were reliant on radio.

Mr Mohlalonga said that radio rights were the subject of bilateral discussion. The SABC considered that the rights were deemed to themselves, but he wondered if other channels could do radio coverage as well. The SABC operated in a commercially competitive environment. Even the IPO members were looking for the best deal. The PSL had options, and their actions had led to dramatic consequences. It was not only a sporting issue, but there were also other public interest issues to be considered.

The Chairperson was worried about the continued misrepresentation of the facts by the print media. The public should be given the true facts and they could make their own judgements. It was interesting that the South African Communist Party opposed the privatisation of national interests in this case. He agreed that the public broadcaster needed to follow a mixed funding model.

Ms Qunta asked why there was a blatant disregard for the contract between the SABC and the PSL. She was also wondering about this. The offer by SuperSport should have been referred to the SABC before the deal was concluded.

Mr Trikamjee said that the only issue seemed to be the R150 million commission which was payable to the members of the PSL who had concluded this new contract. Five persons would share in this. The SABC contract would only have been a renewal and would not have attracted the commission. He observed a behaviour pattern aimed at sidelining the SABC. He asked why the process of tendering could be concluded in just five days. He added that there were eighteen million radio listeners in the country, and they were in all areas. They were being excluded. Even in the agreement, the SABC had reserved the rights to talk. The radio rights were far more imperative than the television rights.

The Chairperson said that the Committee did not have to finalise the matter today.

Adv Mpofu said that sport was a matter of national interest. It showed that there was a gap in the regulation. Even the rugby saga would have been awarded on this basis. He thanked the IFP for its support. He emphasised that the 110 exclusive matches would be televised live. The 33 shared matches would also be shown live. However, he feared that SuperSport might keep the most important matches for themselves and only give the SABC the crumbs. Internal arrangements had been made. The Telkom Charity Cup had been broadcast on seven radio stations, as had the first round of Supa8 matches. All were covered on SABC radio, and a temporary arrangement was in place until Sunday. This could be extended.

The Chairperson said that he would take advice from the Sport and Recreation Portfolio Committee, and the PSL’s side of the story must be heard as well. The actions of the print media made it difficult to follow the facts of the matter.

Briefing on Matters Arising from South African Broadcasting Corporation Audit Report

The Chairperson then asked the SABC to address the issue of the Mafika Sihlali affair.

Ms Qunta said that the SABC was a big organisation, with some 4 500 employees. Many of these were at the head office at Auckland Park. It was predictable that some would not comply with regulations and turn to corruption and fraud. The Board had tried to strengthen its internal audit division. The Head of Internal Audit was directly responsible to the Head of Audit. Ongoing investigations were being done. A fraud investigation was still dragging on. The issue surrounding Mr Sihlali was one of three big investigations underway.

When the allegations surfaced, the Board had issued an immediate instruction to investigate the alleged fraud. They would need to protect the audit staff. The process had been initiated, but issues of constitutional rights had been raised. The accused party had to be given a chance to respond. Internal Audit had completed its report, and the Audit Committee had met the previous week. It had deliberated the issue, and the Board had meet the following Monday to make a decision. They had decided to accept the legal advice that Mr Sihlali should have the chance to respond. The report had been leaked to the Mail & Guardian newspaper by an employee. This matter was also under investigation. Mr Sihlali had been made aware of the accusations before the charge of fraud had been considered.

Ms Qunta said that the SABC encouraged the practice of whistle blowing, but not if this was done out of malice. The matter should first have been considered by the Board before being made public. Instead all had been revealed by the press, including lies and untruths. The SABC wanted to follow the normal legal processes. The same applied in the other two major investigations. Mr Sihlali needed the opportunity to respond. Investigations by Mr A Maraleck were still being conducted. If the allegations were true, or if prima facie evidence was found, a disciplinary hearing would be held. Legal advice would be taken.

Discussion

Ms Smuts suggested that the whistle blower might have leaked the information before it went to the Board because this person felt uncomfortable with what the response might be. Mr Sihlali was the head of legal services at the SABC. The allegations of malpractice and fraud extended over a long period, and she was disgusted that nothing had been done. She understood the argument of his rights, but felt that he should be suspended pending the conclusion of the investigation. There was a prima facie case, and a threat of intimidation had been mentioned in the report. The inquiry should proceed under optimum circumstances. She asked how it came to be that petrol bombs were found on SABC property. This discovery by Gauteng police had been reported in the press. The house of Ms Oosthuizen, Head of Internal Audit, had been set alight. What the report revealed was truly worrying.

Mr Khumalo was disappointed that the Board had failed to act on the information leak. He saw a parallel with the Sisulu report. Board members had been appointed by this Committee. He asked who could have leaked the report. There had been a prior investigation into the Chief Financial Officer (CFO) regarding a dubious integrated technology tender, and this had been in the public domain. It was unfortunate that the affairs of Mr Sihlali had to be investigated. The CEO had to make a firm decision on the matter. If the CFO and Chief of Legal Services were accused of such major offences, they should be suspended. The Committee should recall the Board as soon as possible once the investigation had been completed. A bad impression was being made. All would be affected if the Board did not take a direction. As the new Board was about to be appointed, all candidates should declare their interests with the SABC. Otherwise nothing could be done now. The Board had to investigate the accusations.

Mr Pieterse felt that the media had an agenda by selecting the photographs they did of public figures. If persons did not sit in the same circle as sinners, then the mud would be less likely to stick. He enquired about the association of senior legal personnel with the CEO. Aspersions had first been cast and then a relationship had been found. The case could drag on forever. Mr Maralack had done good work previously. There would be no benefit if the case dragged on interminably.

Mr M Kholwane (ANC) hoped that the whistle blower would not be made the target. Full reports should be compiled on all cases. He was disappointed at continuing leaks. He could not be sure of the cause of these leaks. A full report was needed first, and then suspension could be considered if warranted. He was pleased that the Board had not bowed to pressure. One could not stop walking down the road just because of barking dogs.

Ms L Yengeni (ANC) said that those members nominated for the new Board should reveal their interests in the SABC, and if they were involved with any tenders.

The Chairperson suggested that responses should be held over until the Committee could meet with the full Board.

Mr Mohlalonga said that the SABC delegation should rather respond now, as it was a juicy story. It was already in the public domain. The Board should be more rigorous in its oversight role. It should be determined at what point suspension of Mr Sihlali became appropriate, whether before or after the investigation.

Ms Smuts noted that Mr Khumalo had named a person under the protection of Parliamentary privilege. There were further implications of the naming of the person named. She was sorry to hear of the arguments against the leakage of information. There was a law to protect whistle blowers. That person had perhaps thought that the Board would suppress the report and had therefore made it public. There had been a fight over the Sisulu report. Material in the public interest could not be kept out of the public domain. It seemed that there was protection for the outrageous activities which had been alleged. She and other Members of Parliament regularly received information from whistle blowers.

Mr Kholwane said that the issues must be separated. He hoped the person who leaked the report was not a whistle blower. A clear understanding was needed on how the information had been leaked. Certain issues were not suitable for public airing. Parties were used to operating with leaked information, but the Committee would only work with information from the source.

The Chairperson undertook to consult with the SABC delegation during the lunch break on how the matter should be tackled.

Afternoon session:

When the meeting resumed, Ms Qunta said that it was not extraordinary that some members of the SABC did not comply with regulations. She wished she could say that 100% of the staff acted correctly, but this was not the case. The Board tried to minimise wrongdoing by means of internal controls. They tried to protect the Internal Audit section as part of the discharge of their fiduciary duties. They had acted promptly in this case. Opinions had been obtained from Senior Counsel. The provision of labour law did enshrine certain rights. This is why the case had take a month to be investigated initially, but once this had reached a certain point, the Audit Committee had acted within a week. The leak had then occurred, and had delayed the case by a month. The accused had gone to court to suppress publication of the report. She was reasonably satisfied that the Board and management had acted swiftly.

Ms Qunta continued that the matter of the petrol bombs was being dealt with by the Chairperson of Internal Audit. The Acting Chief Operational Officer had asked the South African Police Services to advise the SABC on security matters. Physical protection had been offered to officials.

The matter of the leakage fell under the Protected Disclosures Act. There were some hurdles, and not all leaks were protected. The Board was attending to the matter. The person who made the leak knew what was happening as it had occurred the day after the Audit Committee meeting. The intention had seemed malicious. It might be the intention to create hype around the situation.

She said that the SABC was following the law and was protecting its organisational assets. This would achieve the best outcome. The Board did not approve of leaking, and would take action. The Gobodo report had come from information which had been passed personally. She said that she did not disagree with whistle blowing if sufficient attention was paid to the meeting. She made an undertaking that as soon as the report was finished, a summary would be sent to the Committee. She expected this to happen by the end of September 2007.

Ms Qunta said that a disclosure had been made on the company interests of the Group CEO and Mr Sihlali. She noted the request that persons nominated for the new Board should declare their interests in the SABC.

She said that the issue of suspension was under the jurisdiction of the Constitution. There was also applicable labour legislation, which had to be followed. This followed international best practice. If someone was likely to interfere with evidence and witnesses, then there was a compelling case to suspend the accused party. Each case was different. Things were being taken care of, and the Board had asked for another two weeks to investigate further.

The Chairperson said that the Committee would stay in touch with the Board. The handover report should be submitted by the end of September 2007.

Short listing of Candidates for the New South African Broadcasting Corporation Board

The Committee was presented with a list of 58 nominations for the new Board of the SABC. Nominations were made by the ANC, DA and IFP. The nominated persons on the consolidated list were:

Mr B Ackers
Mr S Dzengwa
Mr Y Gounden
Mr SJ Kgomo
Adv NY Memani-Balani
Ms F Moodley
Prof AN Nevhutanda
Mr N Rau
Dr WP Rowland
Mr NT Balolyi
Ms J Nwokedi
Ms C Qunta
Ms B Thompson
Ms BA Tema
Ms MCC Majake
Ms A Gilwald
Mr S Mkhungo
Mr W Mfebe
Ms N Bulbulia
Ms L Lloyd
Mr A Mbeki
Mr Z Jaffer
Mr ML Masilela
Mr C Msomi
Ms M Mohlala
Mr E Funde
Dr S Gulube
Prof AM Habib
Mr R Howard
Mr M Seleone
Mr OI Shongwe
Mr M Tshume
Mr BP Vundla
Mr M Judin
Mr MJ Kgamedi
Ms K Mkhonza
Mr B Khumalo
Prof M Mmusi
Mr CT Ngcukana
Mr P Raleigh
Prof B Pityana
Ms F Lagadien
Mr S Steenkamp
Adv P Tlakula
Ms M Bhengu
Mr A Trikamjee
Dr M Yoyo
Mr L Mtimde
Mr S Mahlangu
Dr DK Golding
Ms PM Green
Mr MR Ramayite
Mr LM Mojela
Ms GT Serobe
Dr F Ginwala
MS RA Smith
DR DM Rajah
Mr S Rasethaba

Ms Smuts said that a sifting procedure should be adopted.

Mr Khumalo presented the revised list. The following persons were added to the original list:

Ms S Buli (CV number 69)
Ms Mandela-Lohlale (CV number 96)
Prof J Kock (CV number 108)
Mr S Shezi (CV number 110)
Mr B Dhlamini (CV number 142)

The following ANC nominations were withdrawn:

Mr Dzengwa (2), Ms Moodley (6), Prof Nevhutanda (7), Mr Masilela (23), Prof Pityana (41), Mr Ramayite (52), Ms Mojela (53), Mr Rasethaba (58) and Ms Mandela-Lohlale.

Ms Smuts said the Committee should examine the candidates to see who would bring something to broadcasting. Those who had support across the three parties should be accepted.

The Chairperson said that the interviews were a stepping stone to selecting the final Board.

Mr Khumalo said that Mr Howard had impeccable credentials from his Congress of South African Trade Unions experience. He did not want to discuss the merits of the candidates at this stage.

Ms Vos announced that the IFP would drop the following nominations:

Mr Steenkamp (43), Ms Thompson (13), Mr Mkhungo (17) and Mr Baloyi (10).

Ms Smuts said that the DA would drop the following nominations:

Mr Ackers (1), Ms Majake (15), Mr Kgomo (4), Dr Yoyo (47) and Prof Mmusi (38).

Ms Vos emphasised that there was a need for the Committee to be seen to be following the terms of the Broadcasting Act. They should find the candidates agreed to by all parties, and then to find the necessary skills.

Mr Khumalo felt that as many of the nominees as possible should be interviewed.

Ms Smuts said there was a problem in corporate governance at the SABC. Expertise was needed.

The Chairperson said it could be taken for granted what the provision of the law was.

Mr Khumalo said it would be unfortunate if more people were to be dropped at this meeting. They could convince the Committee of their merits at the interview. He did not know what the problem was. The ANC had proposed their names, and had made reductions. They could still cut off one or two names. The other parties should follow suit. It would, however, be wrong to drop those candidates with the necessary talents.

Mr Pieterse noted that there were still 42 names on the list. It would take a week to interview all these people, but the Committee must not act in a hurry.

Mr Mohlalonga suggested a shortlist of 36 names.

More names were then dropped. Ms Smuts dropped Ms Mahlangu (40, Ms Tema (14), in agreement with the IFP, and requested to drop Mr Judin (34). As Mr Judin was also nominated by the IFP, and Ms Vos did not agree to drop his name, he was retained.

Mr Khumalo further removed the names of Mr Gounden (3), Ms Nwokedi (11), Mr Mfebe (10), Mr Ngcukana and Ms Buli. This left a final list of 37 people.

It was agreed that the following people would be invited for interviews:

Adv NY Memani-Balani
Mr N Rau
Dr WP Rowland
Ms C Qunta
Ms A Gilwald
Ms N Bulbulia
Ms L Lloyd
Mr A Mbeki
Mr Z Jaffer
Mr C Msomi
Ms M Mohlala
Mr E Funde
Dr S Gulube
Prof AM Habib
Mr R Howard
Mr M Seleone
Mr OI Shongwe
Mr M Tshume
Mr BP Vundla
Mr M Judin
Ms K Mkhonza
Mr B Khumalo
Mr P Raleigh
Ms F Lagadien
Adv P Tlakula
Ms M Bhengu
Mr A Trikamjee
Mr L Mtimde
Dr DK Golding
Ms PM Green
Ms GT Serobe
Dr F Ginwala
Ms RA Smith
Dr DM Rajah
Mr B Dhlamini
Prof J Kock
Mr S Shezi

The Chairperson said that all the curricula vitae had been checked. Dr Gulube nominated himself, but someone else had nominated him before the cut off date. The interview process would start on 21 August 2007 and should be concluded in four days. Ms Gilwald would be interviewed at a later date, as she was in the UK at present.

The meeting was adjourned.