SABC television studios in Auckland Park. Picture: KEVIN SUTHERLAND
SABC television studios in Auckland Park. Picture: KEVIN SUTHERLAND

The SABC’s board of directors could be declared delinquent as the embattled public broadcaster is trading under insolvent circumstances.

The main source of news for the majority of SA’s population is technically insolvent. Its falling revenues mean it cannot service its debt of almost R2bn.

The Companies Act states it is illegal for directors of an insolvent company to continue trading after they become aware of its insolvent status.

The broadcaster is struggling with a huge infrastructure maintenance backlog and an unsustainable wage bill.

The SABC recorded an unaudited loss of R483m in the 2018/2019 financial year. A year earlier it incurred a loss of R622m. Over the past decade it has made a profit in only three years, from 2011 to 2013. Those years had the lowest investment in content, according to an SABC presentation to parliament.

The corporation’s dire financial situation worsened during the 2018/19 financial year and it ended March 2019 with a cash balance of just R72m.

It has requested a R3.2bn government guarantee to stay afloat and to pay off some of its debt, but its bid for funding has so far been unsuccessful.

It applied for government funding as far back as November 2017, but the Treasury has been reluctant to agree to it.

It wants the broadcaster to first meet preconditions, such as removing noncore and nonperforming activities, maximising advertising revenues and clawing back expenditure on content.

SABC CEO Madoda Mxakwe said the public broadcaster’s turnaround strategy is being hampered by a lack of funds. He believed the strategy could yield results in 18 to 24 months.

Briefing parliament’s select committee on public enterprises & communication on Wednesday, CFO Yolandi van Biljon said that in December 2018 the Companies and Intellectual Property Commission (CIPC) issued a notice to the corporation in terms of the Companies Act to show cause regarding reckless trading or trading under insolvent circumstances.

“A response was provided to the commission, however, the commission indicated that the situation will be monitored closely. CIPC is following up on this matter on a monthly basis,” said Van Biljon.

“Trading under insolvent circumstances is accepted to mean that a company does not meet the solvency and liquidity test criteria. Currently the SABC is unable to pay its debts, in some cases in arrears of six months.

“This will be directly contravening the Companies Act, and if that is the case, may lead to liability for the directors.”

The Companies Act states that a company must not carry on its business recklessly, with gross negligence, with intent to defraud or trade under insolvent circumstances.

Acquiring new debt may also increase the risk of negligence on the part of directors.

The SABC owes R554m to state signal distributor Sentech, which could suspend its service at any time, which would lead to a blackout. The broadcaster owes MultiChoice’s SuperSport division R259m and various content providers R174m.

Van Biljon said several major content providers of key programming have ceased production and are retaining content until outstanding payments have been received.

“The public broadcaster relies heavily on these programmes to generate advertising revenue and the inability to invest in content negatively affects the financial sustainability of the SABC and the local production industry. Should this crisis not be addressed as a matter of urgency, the SABC would be unable to operate and the ‘black-on-air’ scenario is a real and highly possible threat.”

Deputy communications minister Pinky Kekana said the department will continue working with all stakeholders to ensure that the SABC becomes sustainable and directors are not declared delinquent.

phakathib@businesslive.co.za