SABC’s bail-out request will be Gigaba’s first test
The SABC is preparing to go, cap in hand, to the Treasury to stave off imminent financial collapse
Newly appointed Finance Minister Malusi Gigaba faces his first major test of fiscal prudence following this week’s ratings agency downgrade. The SABC is preparing to go, cap in hand, to the Treasury to stave off imminent financial collapse.
Mayihlome Tshwete, the spokesman for Gigaba, confirmed on Thursday that Communications Minister Ayanda Dlodlo had informed the minister that her department was preparing a "formal request" to the Treasury for a bail-out.
"They met yesterday. She [said] she’s going to approach Treasury for assistance," Tshwete said.
He would not specify if this would entail an emergency credit line, a guarantee for bank loans, government grants or a combination of all three.
"We will look at the application. I don’t want to predetermine what it’s going to say.
"But they have said they have a financial problem at the SABC and that she will be requesting Treasury to apply itself to an application."
A recent parliamentary inquiry blamed the financial crisis on the SABC’s executive and former board by authorising a slew of suspect contracts, paying consultants for work that could be done in-house and implementing a local content policy without considering the effect on advertising revenues.
After repeated assurances that it was on a sound financial footing, the state broadcaster admitted in March that it faced a financial crisis and that it was drawing on its reserves to meet operational expenses.
Several sources said on Thursday that the broadcaster had already run out of money to pay suppliers, freelancers and independent contractors. It would not be able to pay staff salaries at the end of April unless it was thrown a lifeline.
This leaves Gigaba between a rock and a hard place.
The SABC is considered too high-risk for lenders to extend emergency credit lines without government backing. But providing a government loan or guarantee to a state-owned entity (SOE) increases SA’s contingent liabilities.
This issue was flagged by S&P Global Ratings when it downgraded SA to junk status and will be closely watched by other agencies poised to publish their ratings reviews.
Mayihlome said Gigaba and Dlodlo were acutely aware that any lifeline for an SOE had to be money well spent. "Both the minister of communications and Treasury have serious concerns about lapses of governance at the SABC. What the minister of finance wants to see is better systems and better governance at SOEs — starting with the SABC. The financial challenges of SOEs is a priority."
Gigaba was anxious to stress "overextending ourselves in a manner that is not well thought through is not going to assist the economic condition of SA".
"While the department applies itself to the application there is also going to be very clear and very stringent expectations [from] Treasury and the ministry of communications."
The SABC’s public mandate was "not open ended".
"We don’t have an open-ended budget. We don’t want to recklessly increase the contingent liabilities that we currently have. We have to make sure we don’t throw money into a bottomless pit."
SABC spokesman Kaizer Kganyago and interim board chairwoman Khanyisile Kweyama did not respond to requests for comment. The communications ministry had not commented by time of publication.