Awkward park: the SABC’s painful transition
The new leadership at Auckland Park says it’s serious about implementing job cuts, trimming management lard and improving content to try to balance the budget
The head honchos at the SABC are putting on a brave face. Though they acknowledge the depth of the crisis at the public broadcaster, they also say it is making progress in turning itself around.
Addressing an SA National Editors Forum meeting this week, CEO Madoda Mxakwe, flanked by COO Chris Maroleng and CFO Yolande van Biljon — all of whom joined the broadcaster this year — didn’t beat about the bush.
"We are in a very painful but necessary transition as an organisation," said Mxakwe.
The SABC is technically insolvent, is finding it difficult to pay suppliers, and, according to its latest annual report, its R7.26bn in expenses outstrip revenue by R640m.
The situation is untenable. To keep its head above water, the SABC has proposed a drastic jobs cut — close to 1,000, or about a third, of its permanent staff — to reduce its wage bill by R440m a year. It’s also looking to slash the number of freelancers it uses from 2,400 to half that figure.
Without a reduction in head count, overall expenditure is expected to rise to R7.64bn, while revenue is projected to rise to only R6.84bn. This would leave the broadcaster with an R804m operating loss for the year to end-March 2019.
Mxakwe said he and his leadership team have looked at the numbers, and have no choice but to make tough calls.
But while the group is facing an uphill climb, he remains optimistic. "Not all is lost," he said. "We are seeing green shoots."
Since the beginning of the financial year, the SABC has cut costs by R463m and, when measured quarter on quarter, there has been a 6% rise in revenue.
I thing think that question is above our pay grade. That question is probably for the chair and the ministerMadoda Mxakwe
Even so, Mxakwe knows he has a long road ahead. Management still has to enter formal negotiations with unions regarding retrenchments — something that is scheduled to start at the end of the month. And the group’s bloated management structure needs to be tackled.
Best practice in terms of human resource management is to have one manager to 250 employees. At the SABC, that ratio is one to 10. "In terms of the scope of control, this doesn’t make sense," he said.
The group’s latest annual report shows just how top-heavy the broadcaster is. It has 443 middle managers, who on average earn R1.17m each and collectively make up R518m of the wage bill.
The situation is similar at the junior management and supervisory levels, where a total of nearly 2,450 personnel earn a combined R1.7bn. By contrast, the "rest of staff" category comprises 471 people who account for 8.1% of staffing costs.
It was during the tenure of former COO Hlaudi Motsoeneng that the wage bill increased so drastically — from R1.82bn in the 2012/2013 financial year to the current figure of R2.54bn.
Mxakwe said the structure of the SABC itself — it has six tiers of management — is also an issue. "Imagine having one GM with only four people reporting to that person. It just doesn’t work from an organisational point of view."
The SABC’s structural issues are also evident in how its staff are used. Mxakwe gave the example of its sports operation: the person responsible for putting together sports broadcasts works Monday to Friday, which means a freelancer has to be brought in to take care of live sports broadcasts over weekends.
Mxakwe said the SABC’s "colleagues in Randburg" — referring to pay-TV operator DStv — do the same job very differently. Instead of bringing in weekend freelancers, DStv has a full-time person working on Saturday and Sunday.
The reliance on weekend freelancers partly explains why the SABC’s freelance bill has ballooned to more than R500m a year. Mxakwe said no structures have been in place to manage the freelance contracts, leaving the system open to abuse. "It was very ad hoc."
Cutting the wage bill is not the only way the SABC is reducing costs. Van Biljon said the broadcaster has done an audit of its properties to determine their condition, and is weighing up options for its extensive art collection.
Mxakwe ruled out disposing of any radio stations.
He and his management team also have to deal with a pension contingency of R760m and a medical aid provision of R1.06bn. Maroleng declined to provide details but said the group is committed to sorting out these issues.
Besides getting control of costs, the SABC is also trying to boost revenue. However, this is easier said than done. The difficult economy has put advertising revenue, which accounts for 75% of the total, under pressure. Mxakwe said the broadcaster has had to renegotiate contracts with some of its advertising partners because the current arrangements are not "mutually beneficial".
It’s also trying to reignite relationships with advertisers who have moved on. "We are aggressively engaging with the different clients so we can resuscitate all those relationships and contracts."
Boosting the top line is top of mind. "We want to make sure we increase revenue and tell the team every day, ‘let’s make more money’," said Maroleng.
Producing better content is key to this. But finding the money for that will prove difficult. With 46% of the budget going to salaries, there’s little left to play with.
Mxakwe and Maroleng want to change this. By cutting the wage bill, the SABC will increase the budget it can allocate to content. If it produces better content, it can attract larger audiences, which means it will be able to charge advertisers higher fees.
The way things stand, this is not happening. "We spend so little on the things that drive our vision," said Maroleng. The broadcaster wants to spend 50% of its budget on developing content.
What it means
The SABC must cut costs, and politically unpopular retrenchments are a big part of the plan
Maroleng said there is some progress in getting this right. Through a local third party, it has secured the rights to screen English Premier League games in SA. It is already on the way to breaking even on this, and will have made a profit by the time the season ends in May.
Mxakwe and Maroleng may be happy with the price the SABC is paying for these football rights, but they don’t like what the SA Football Association (Safa) is asking for the rights to broadcast Bafana Bafana games: R110m over three years. The dispute between the SABC and Safa has resulted in the football body pulling its games from the public broadcaster. Though no deal has been reached, Mxakwe said the SABC remains open to negotiating with Safa.
From a financing point of view it’s still unclear when — or even if — the SABC will get some kind of bailout. Mxakwe said it’s still in talks with the department of communications and the National Treasury on the issue.
If the SABC were to get a handout from the government, it would be the third since 2009.
Mxakwe is mindful of this. He pointed out that the last time the SABC got government guarantees, it had to commit to getting its own house in order by reviewing the costs of its noncore operations. That never happened, and it’s in no position to kick this can down the road again. "We are now in a situation where we have to do what’s right for the SABC."
Mxakwe and his team’s turnaround plans are brave and necessary. But they’re going to have to begin by dealing with communications minister Nomvula Mokonyane, who is not keen on a public entity retrenching 1,000 workers months before an election.
When asked if the retrenchments would be a way for the broadcaster’s board to force the government’s hand into giving it a financial guarantee, Mxakwe paused before saying: "We report to the board, and I think we are very clear in terms of what the strategic direction is at a board level. And I think that question is above our pay grade. That question is probably for the chair and the minister, and I don’t want to venture into the politics of what’s happening there.
"Our focus is to do what’s right for the SABC. Our eye is on ensuring that the SABC is financially sustainable."