They said we’d Never be United but We Defied the Odds, because there’s No other Nation like Ours.
Annual Report 2014
Vision Broadcasting for Total Citizen Empowerment.
Mission To be a people centred, content driven, technology enabled, strategically focused and sustainable public service broadcaster. Values Conversations and partnerships. Restoration of human dignity. Building a common future. Mandela becomes president. SA wins the Rugby World Cup. 1994 1995 The Truth and Reconciliation Commission. Aids Activist Nkosi Johnston. South African actress Charlize Theron wins an Oscar. Announcing the host of the 2010 FIFA Soccer World Cup. 1998 The 1st South African in space, Mark Shuttleworth. 2001 2002 Contents
th This is the 77 Annual Report of the 6 List Of Abbreviations/Acronyms South African Broadcasting Corporation (SOC) Limited, referred to as ‘SABC’, ‘the Corporation’ or ‘the Company’ 8 SABC at a Glance (Registration Number: 2003/023915/06). 10 SABC Radio Stations It is tabled in Parliament in terms of the Broadcasting Act, No 12 SABC TV Channels 4 of 1999, as amended, and the Public Finance Management 13 Organisational Structure Act, No 1 of 1999, as amended. 14 Foreword by the Chairman REGISTERED OFFICE ADDRESS: 15 Composition of the Board Henley Road, Radio Park, 19 Group Executives Auckland Park, Gauteng, 2006 20 Provincial Offices and Leadership POSTAL ADDRESS: 21 Group Chief Executive Officer’s Overview Private Bag X1, Auckland Park, 27 Strategic Overview Johannesburg, Gauteng, 2006 28 Legislative and Other Mandates CONTACT DETAILS: 30 SABC Performance Tel: +27 11 714 9111 Fax: +27 11 714 3219 32 Remembering Madiba Email: [email protected] 34 Situational Analysis Website: www.sabc.co.za 34 Service Delivery and Organisational Environment EXTERNAL AUDITORS: 35 Key Policy Developments and Legislative Changes Auditor General SA 37 Strategic Outcome Oriented Goals Lefika House, 300 Middel Street Delivery on Predetermined Objectives Brooklyn, Pretoria, 0001 38 Tel: +27 12 426 8000 40 Summary of Financial Information 42 Revenue Collection/Commercial Enterprises BANKERS INFORMATION: ABSA Limited, 43 Delivery on the Mandate: Compliance with Licence ABSA Towers East 3rd Floor Conditions 43 170 Main Street, Johannesburg SABC Radio 46 SABC TV 49 GROUP COMPANY SECRETARY: SABC News and Current Affairs 51 Ms Theresa Geldenhuys SABC Sport Tel: +27 11 714 3910 52 Universal Access Fax: +27 11 714 3219 Mobile +27 83 679 9585 Email: [email protected] SA mourns the passing of Madiba. SA hosts the 2010 FIFA Soccer World Cup. South African movie Tsotsi wins an Oscar. 2013 2010 Aids Activist Nkosi Johnston. South African actress Charlize Theron wins an Oscar. Announcing the host of the 2010 FIFA Soccer World Cup. The 1st South African in space, Mark Shuttleworth. 2006 2004 2004
52 Industry Development 88 Annual Financial Statements 52 Technology 90 Statement of Responsibility and Confirmation of the 54 Marketing Initiatives: Building the SABC Brand Accuracy of the Annual Report 55 Memorable Events 91 Report of the Auditor-General to Parliament on the 56 Complaints SABC (SOC) Ltd 57 Stakeholder Engagement 97 Statement of Financial Position as at 31 March 2014 59 Achievements and Awards 98 Statement of Profit and Loss for the year ended 62 SABC Governance 31 March 2014 64 Governance 99 Statement of Comprehensive Income for the year 64 Portfolio Committee ended 31 March 2014 64 Executive Authority 100 Statement of Changes in Equity for the year ended 64 The Accounting Authority/Board 31 March 2014 65 Report of the SABC Board 101 Statement of Cash Flows for the year ended 66 Attendance of Board Meetings 31 March 2014 74 Risk Management 102 Notes to the Annual Financial Statements for the year 74 Internal Control ended 31 March 2014 74 Internal Audit and Audit Committee 146 In Remembrance 76 Compliance with Laws and Regulations 76 Fraud and Corruption Honouring Men and Women who contributed to the SABC 76 Minimising Conflict of Interest 76 Code of Conduct 5 76 Health, Safety and Environmental Issues 76 Report by the Company Secretary 77 Social Responsibility 79 Audit Committee Report 80 SABC Human Resources 82 Human Resources Management References South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
List of Abbreviations Acronyms
AFCON Africa Cup of Nations ANC African National Congress AGM Annual General Meeting AGSA Auditor General of South Africa ASA Advertising Standards Authority ASASA Advertising Standards Authority of South Africa AUB A frican Union of Broadcasters BA Broadcasting Act BBBEE Broad-Based Black Economic 6 Empowerment BBC British Broadcasting Corporation BCCSA B roadcasting Complaints Commission of South Africa CAPEX Capital Expenditure CAATS Computer-Aided Audit Tools CCC Customer Competency Centre CCMA C ommission for Conciliation, Mediation and Arbitration HD H igh Definition CCTV Closed Circuit Television HDTV H igh Definition Television CHAN Orange African Nation Championships ICASA Independent Communications Authority of South CI Corporate Identity Africa CNN Cable News Network ICC International Cricket Council COMESA Common Market of Eastern and ICT Information and Communications Technology Southern Africa IEC Independent Electoral Commission CSI Corporate Social Investment IFFM Independent Forum for Faith and Media CTIJF Cape Town International Jazz Festival IFRS International Financial Reporting Standards CUME Cumulative Audience IKB Informal Knowledge Building DAF Delegation of Authority Framework IP Internet Protocol DAB Digital Audio Broadcasting ISP Internet Service Provider DoC Department of Communications IT Information Technology DSAT Digital Satellite LPT Low Power Transmitters DStv Digital Satellite Television LSM Living Standards Measurement DTH D irect to Home (Satellite Distribution) MTEF Medium Term Expenditure Framework DTT Digital Terrestrial Television MOI M emorandum of Incorporation DVR D igital Video Recorder M EAP Employee Assistance Programme MPC onetary Policy Committee EBU European Broadcasting Union NAB National Association of Broadcasters ECA Electronics Communications Act NCA National Credit Act EE Employment Equity NCC National Consumer Commission FMPPI Framework for Managing Programme NEPAD New Partnership for Africa’s Development Performance Information NICSA National Interfaith Council of South Africa FY Financial Year NFVF National Film and Video Foundation GE Group Executive NYSDP National Youth Skills Development Program GG Government Guarantee OB Outside Broadcast GIS Geographical Information System ODI One Day International GL General Ledger OECD Organisation for Economic Co-Operation and HCS Human Capital Services Development 0ur local soap production Isidingo featured on SABC3.
PAA Public Audit Act No. 25 of 2004 SEA Screen Excellence Awards PanSALB Pan South African Language Board SED S ocio Economic Development PBS Public Broadcasting Services SETA Sector Education and Training Authority PCC Portfolio Committee on Communications SOC State Owned Company PCS Public Commercial Services SOE State Owned Enterprise PFMA P ublic Finance Management Act No. 1 of 1999 SSP Super Special Projects PGM Provincial General Managers STB Set-Top Box PPE Property, Plant and Equipment TAMS Television Audience Measurement Survey PPP Public Private Partnerships TV Television PAA Public Audit Act No. 25 of 2004 TVBMS Television Broadcast Management System RAMS Radio Audience Measurement Survey USAID U nited States Agency for International Development RBF Radio Broadcast Facilities VHF V ery High Frequency RFP Request for Proposal VOD Video on Demand ROI Return on Investment WASPA Wireless Application Service Providers Association SAARF South African Audience Research Foundation 15+ Over 15 years of age SABC South African Broadcasting Corporation (SOC) Limited SABS Sou th African Bureau of Standards A note on terminology SACU Southern African Customs Union • References in this Annual Report to the Broadcasting Act are to the Broadcasting Act No. 4 of 1999, as amended. SADC S outhern African Development Community • References to the Public Finance Management Act (PFMA) SAFA South African Football Association are to the Public Finance Management Act No. 1 of 1999, as 7 SAFTA South African Film and Television Awards amended. SAMRO South African Music Rights Organisation • References to the Companies Act are to the Companies Act No. SANS South African National Standards 71 of 2008, as amended. SAN Storage Area Network • Reference to the Interim Board of the SABC is to the Interim Board that was appointed on 25 March 2013. SAP System Application and Products in Data Processing • Reference to the SABC Board is to the SABC Board that was SAQA South African Qualifications Authority appointed on 25 September 2013. SARB South African Reverse Bank • Reference to King III is to the King III Code on Corporate SATMA South African Traditional Music Awards Governance. SCM Supply Chain Management At A Glance | South African Broadcasting Corporation [SOC] Ltd
“While children need to be guided they also have an entrenched right to be whatever they want to be and that they can achieve this only if they are given the space to dream and live out their dreams.” - Nelson Mandela
8 SABC 9 At A Glance At A Glance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Showcasing Our Platforms
Showcasing our 18 Radio Stations and 4 TV Channels
The media landscape is forever evolving due to competition and convergence between broadcasting, telecommunications, new media and digital terrestrial TV. To many who have limited access to information technology and other more advanced media platforms, radio remains a critical source of information. In this regard, the SABC’s Radio stations continue to serve this large section of the South African population and the PBS Radio stations remain a core tool to deliver the Corporations’ public service mandate.
What follows is a brief outline of the Radio stations and TV channels of the SABC.
10 SABC Radio Stations
Ikwekwezi FM is a home, which provides relevant information that caters for the needs and tastes of the isiNdebele-speaking community of South Africa. It is acknowledged by its listeners as their primary source of news and information. Average weekly audience: 1.668 million adults (15+)
Lesedi FM caters for the Sesotho-speaking community. It is a needs-driven participatory radio station that provides programming that touches on issues with a direct bearing on the development of its listeners. Average weekly audience: 4.024 million adults (15+)
Ligwalagwala FM seeks to reflect a more urban and aspirational lifestyle. It prides itself on being an upbeat radio station that speaks to young, motivated, upwardly mobile black siSwati-speaking people. Average weekly audience: 1.537 million adults (15+)
Lotus FM’s target market is the South African Indian community. The station caters for young and old that straddles three religious denominations: Hindu, Islam and Christian. It broadcasts in six languages, .7 .8 87 –106 even though English is the main language of broadcast. Lotus FM offers an engaging mix of information, education and entertainment programmes, which serve to reflect the strong value system of its dynamic audience, whilst promoting a proudly South African radio brand within the context of Total Citizen Empowerment. Average weekly audience: 329 000 adults (15+)
Motsweding FM’s core philosophy is the personal empowerment and development of its listeners. It is an aspirational station that embodies the ambitions of being worldly and cosmopolitan. It broadcasts from Mmabatho in Setswana and its listeners depend on the station for their education and entertainment. Motsweding FM has a massive spillover listenership in neighbouring Botswana. Average weekly audience: 3.387 million adults (15+)
Munghana Lonene FM broadcasts in xiTsonga. It supports the aspirations of its listeners whilst ensuring contemporary norms and values. The station places emphasis on listener participation and actively seeks expert opinion, commentary and advice on various topical issues. Average weekly audience: 1.074 million adults (15+)
Phalaphala FM broadcasts in Tshivenda. Its programming philosophy is underpinned by a desire to inspire its listeners, with a special focus on women and emerging entrepreneurs. Listeners are given a platform to share knowledge and expertise across a range of subjects and issues. The station broadcasts from Polokwane and talks to the young aspirant and upwardly mobile black people living in the Limpopo Province. Average weekly audience: 907 000 adults (15+) Radio 2000 is a cosmopolitan national radio station that broadcasts in English. It reflects and unites South Africa’s diverse cultures with the intent of strengthening democracy and nation-building through key offerings of adult contemporary music, lifestyle programming, sport and events of national importance. Radio 2000 provides content that is high quality and engages audiences in healthy discussions and debates on a wide range of subjects, empowering and uplifting to the citizens of South Africa. Average weekly audience: 868 000 adults (15+)
RSG is a contemporary radio station that represents the modern all-inclusive Afrikaans audience. RSG provides for a progressive, forward thinking, loyal and strong family orientated audience that is proudly Afrikaner in the new South Africa. Average weekly audience: 1.917 million adults (15+)
SAfm broadcasts in English, delivering credible and up-to-the-minute news coverage alongside relevant, informed analysis of current affairs. The station goes on to explore broad themes and subjects relevant to its target market. In the process, it delivers the information in a manner that benefits all South Africans. The station targets discerning, mature and sophisticated listeners nationally. Its focus is primarily on decision- makers seeking insightful and enabling information to keep themselves informed. Average weekly audience: 558 000 adults (15+)
Thobela FM dedicates its programming to promoting the growth of its listeners, the dynamic modernisation of culture and enhancing individual economic development. It broadcasts in Sepedi. Average weekly audience: 3.288 million adults (15+)
Tru FM views youth and youthfulness as an opportunity, and young people as a resource. It broadcasts in IsiXhosa and English and creates a platform for young people to express themselves. Tru FM empowers its listeners - the youth - to improve their quality of life as well as focusing on their self-development. Average weekly audience: 243 000 adults (15+)
Ukhozi FM is the nation’s largest radio station. It focuses on edutainment and infotainment, guided by its philosophy that prioritises upliftment, growth and development. Broadcasting in IsiZulu, Ukhozi FM is a leading station with audiences in excess of over 6 million over the last decade. Average weekly audience: 7.563 million adults (15+)
Umhlobo Wenene FM broadcasts in isiXhosa. It serves its listeners with honour and integrity by continuously providing global entertainment, education and information that inspires a culture of personal growth and development. Average weekly audience: 5.359 million adults (15+)
X-K FM targets the San people of Platfontein in the Northern Cape. This community consists of the !Xu (who make up 64% of the listeners) and the Khwe (who constitute the remaining 36%), who fall into LSM 1 to 6. Just under a third of the station’s listeners are aged between 16 and 24, 34% are between 25 and 34, 15% are between 35 and 49 and 30% are over 50. 59% of households in the area earn under R500 per month, 32% earn between R500 and R899, and 5% earn between R900 and R1 399. Average weekly audience: 6 000 adults (15+)
5FM broadcasts in English. It is the entertainment powerhouse for South African youth, offering the most popular contemporary music and entertainment. Average weekly audience: 2.021 million adults (15+)
Good Hope FM broadcasts out of Cape Town, in English. It encapsulates the City’s urban culture of fun, energy and funkiness. It entertains and actively engages Capetonians through music, relevant lifestyle news and events. It is well positioned to serve its audience and its lifestyle, because it specialises in showcasing 11 events and public concerns. Average weekly audience: 682 000 adults (15+)
METRO FM South Africa’s largest commercial radio station, broadcasts in English, thereby strongly influencing young urban adults that lead pragmatic and successful lifestyles. Though primarily a music station, METRO FM also delivers credible and unbiased news reporting that keeps its listeners involved and informed. Average weekly audience: 6.532 million adults (15+) At A Glance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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Local travel production Mooi Loop featured on SABC2.
Sabc TV Channels
SABC1 is a full spectrum, free-to-air channel that represents youthful dreams, their aspirations and reflects a society that is constantly in motion and progressive. The channel broadcasts in English, isiZulu, isiXhosa, siSwati and isiNdebele. Coverage via the terrestrial transmitter network accounts for 91.2% of the population. The channel is also available via satellite on the DStv and Vivid direct-to-home (DTH) digital satellite platforms. Average weekly audience: 29.5 million adults (15+)
SABC2 is a full spectrum, free-to-air channel, defined by a focus on cultural customs and traditions. Of importance to the channel is a focus on community and family values and activities. The channel broadcasts in English, Afrikaans, Sesotho, Setswana, Sepedi, Xitsonga and Tshivenda. Coverage via the terrestrial transmitter network covers 92.5% of the population, and the channel is also available via satellite on the DStv and Vivid DTH digital satellite platforms. Average weekly audience: 26.7 million adults (15+)
SABC3 is a full spectrum, free-to-air channel whose main focus is entertainment and information format for cosmopolitan viewers. It broadcasts mainly in English, with 10% of other languages. Coverage via the terrestrial transmitter network covers 82.1% of the population. The channel is also available via satellite on the DStv and Vivid DTH digital satellite platforms. Average weekly audience: 21.1 million adults (15+)
SABC’s 24 Hour News Channel was launched on DStv Channel 404 in August 2013. The channel offers continuous content update and breaking news. It is a seamless fusion of live journalism and current affairs programming throughout the day. Since its launch the channel has produced more than 16 304 minutes of news and 6 336 minutes of current affairs. The channel broadcasts mainly in English, with African language bulletins provided for in the evening slots. Organisational Structure
DoC Minister of Communications
The Board
Company Secretary Ms Theresa Geldenhuys Group Chief Executive Officer Chief Audit Executive Vacant Ms Lorraine Francois
chief financial officer chief operations officer Vacant Vacant
Head: Sport GE: News Vacant Vacant
Ge: Radio GE: Television Mr Leslie Ms Verona Ntloko Duwarkah
Ge: Stakeholder Relations and provinces Mr Hlaudi Motsoeneng
GE: Risk and GE: GE: Commercial GE: Human Governance Technology Enterprises Capital Services Mr Itani Mr Sipho Mr Anton Mr Jabulani Tseisi Masinga Heunis Mabaso
Head: Legal Affairs Head: Procurement Head: Strategy 13 Ms Mbulu Nepfumbada Mr Madoda Shushu Vacant Governance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Foreword by the Chairman
The Interim Board of the SABC was appointed at the Public Broadcaster on 25 March 2013 and served until the appointment of the new Board on 25 September 2013. As the Board we thank and acknowledge the contribution of the Interim Board in steering the SABC through a difficult time. 14 Looking Forward to the Next Financial Year (FY) The work done during the 2013/14 financial year provides a basis for the national public broadcaster to Ms Zandile Ellen Tshabalala deliver excellent public and commercial broadcasting services in the forthcoming financial year. Rapid and fundamental changes will take place in the media landscape during the 2014 to 2017 period; the most significant will be the launch of Digital Terrestrial Television (DTT). This does and will continue to pose significant challenges to the Corporation in terms of the DTT project and its funding. Over the medium term, the Corporation will focus on rebuilding the organisation, with the strategic thrust being the re-alignment of the operating model with the imperatives of digital broadcasting. In order to ensure that the SABC has the required staff to deliver against its mandate, the finalisation of the Skills Audit will assist the Board in implementing a structure that is aligned to the strategy of the Corporation. I would like to take this opportunity to thank my fellow Board members, the Parliament Portfolio Committee on Communications, the Shareholder, the National Treasury and most importantly, the women and men of the SABC, who make sure that the Corporation continues to function despite all the daily challenges they experience.
Z E Tshabalala Chairman of the SABC Board Composition Of The Board
Ms Zandile Tshabalala Prof Mbulaheni Obert Chairman Maguvhe Deputy Chairman
Mr King Thembinkosi Ms Rachel Kalidass Prof Bongani Khumalo Mr Ronnie Lubisi Bonakele
Mr Vusi Mavuso Ms Nomvuyo Memory Mr Krish Naidoo Dr Ndivhoniswani Mhlakaza Aaron Tshidzumba
Ms Hope Zinde Mr Christian (Tian) Olivier Mr Hlaudi Motsoeneng Mr James Aguma Acting Group Chief Acting Chief Operations Acting Chief Financial Executive Officer (GCEO) Officer (COO)permanently Officer (CFO) from 18 March 2014 appointed 8 July 2014 from 18 March 2014 15
Ms Noluthando Gosa Ms Lulama Mokhobo until 31 December 2013 Group Chief Executive Officeruntil 28 February 2014 At A Glance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
The SABC Board His experience, covering both the public and private sectors, with specific interest on education includes numerous positions The SABC Board is constituted in terms of the Broadcasting which he has occupied. He was the Director: Special Needs at Act, Act 4 of 1999, as amended, and has a unitary structure Kha Ri Gude Mass Literacy Campaign Department of Education, comprising twelve Non-Executive Directors and three Executive a teacher at Tshilidzini Special School, and a co-ordinator of the Directors. The Non-Executive Directors are appointed by the Workbooks Adaptation Task Team of the Department of Basic President on the advice of the National Assembly, and the Education and Training. Executive Directors are appointed by the Minister in consultation with the Board. He played an instrumental role in a number of significant improvements in the educational initiatives and developments The Non-Executive Directors must hold office for such period for the blind and partially sighted. He adapted the Department as the President may determine which period must not exceed of Basic Education’s Annual National Assessments for the five years. Executive Directors have standard employee service Blind and was influential in designing Grade 2 Venda Braille. He contracts and are subject to the SABC’s conditions of service. initiated and participated in the development of unit standards Change in Directors leading to a diploma qualification in braille (SAQA level 5). On the approval of the President, the Interim Board was He has successfully served on a number of committees including appointed on 25 March 2013 and the permanent Board was being the Chairman of the African languages Committee under appointed on 25 September 2013. On 14 May 2014, the the auspices of Braille SA and a Board Member of the South President approved the appointment of Ms Leah Thabisile African Library for the Blind. Khumalo to replace Ms Noluthando Primrose Gosa, whose resignation became effective on 31 December 2013. Mr King Thembinkosi Bonakele 16 What follows is a list and profiles of the members who served BJuris; LLB (University of Fort Hare); and MBA (GIBS). on both the interim and the current SABC Board during the year Mr Bonakele is a Commissioner at the Competition Commission. under review: He has held various positions at the Commission’s core Ms Ellen Zandile Tshabalala divisions over the past ten years including being the Deputy Commissioner, Head of Mergers, Head of Compliance and Chairman Senior Legal Counsel. BCom; Post Graduate Diploma in Labour Relations (UNISA); Mr Bonakele established the Commission’s cartels division and International Licentiate Diploma in Banking (Institute of Bankers); has worked on all of the Commission’s major cases over the Corporate Governance and Risk Management Certificate past ten years, including the bread and flour and construction (Milpark Business School). bid-rigging cartel cases, Telkom and SAB abuse of dominance Ms Tshabalala is a strategic management consultant with cases and a number of high-profile mergers. He has been extensive experience in international business, economic involved in negotiating most of the Commission’s ground- diplomacy, banking, strategic management, project advisory breaking settlements and helped develop the Commission’s and development as well as investments advisory. She currently Corporate Leniency Policy as well as the Construction Fast serves as National Ambassador responsible for government Track Settlement Policy. relations at the Institute of People Management. Mr Bonakele is an admitted attorney and previously practised Her career spans over 30 years, mostly in senior management with Cheadle Thompson and Haysom in Johannesburg largely for corporates and state owned companies in South Africa in the areas of labour law, regulation and health and safety. He including Standard Bank, Transnet Ltd, PortCon Consulting, has also spent a year working in corporate finance and antitrust and South African Post Office. She has also worked extensively groups at Clifford Chance, the worlds largest law firm in their in the fields of geostrategic advisory, risk, education and New York office. He occasionally teaches competition law at community work. She has made an enormous contribution the University of Fort Hare, Wits University and is a fellow of in trade and investments negotiations with countries and the University of Johannesburg’s Centre for Competition, businesses abroad on behalf of African states and companies. Regulation and Economic Development. He publishes academic journals and writes for newspapers and business She has served on numerous international structures and was magazines on competition matters. the Chairman of the Council at Durban University of Technology between 2002 and 2006. Ms. Tshabalala currently serves Mr Bonakele currently serves as the Vice Chairperson of the on governance boards of a number of corporates and State African Competition Forum (ACF) and is a member of the Owned Companies including Presidential Advisory Council International Competition Network Steering Group. He is also on Broad Based Black Economic Empowerment (BBBEE); the Chairperson of the Board for the Buffalo City Development Sishen Iron Ore Company – CDT; Transnet SOC Limited; Agency (BCDA). Transnet Foundation; Cape Empowerment Limited; Ascension Properties; Port Shepstone Harbour Development Company; Ms Noluthando Primrose Gosa and Moral Regeneration Movement (MRM). Resigned 31 December 2013 Prof Mbulaheni Obert Maguvhe BA (Hons) in Communications (University of Fort Hare); MBA Deputy Chairman (University of New Brunswick, Canada); International Certificate in Regulation (City University of London, UK). PhD in Education (University of Pretoria); MEd (Boston College, Massachusetts, USA); Diploma in Special Education (UNISA); Ms Gosa is the Chairman and CEO of Akhona Properties as BEd (University of the Witwatersrand); BA Education (University well as Chairman of Akhona-Broll Properties. She serves on of the North); Certificate in Assessor Training. the Boards of Investec Asset Management and Broll Properties Group, amongst others. She is a Commissioner in the National Prof Maguvhe is an Associate Professor at the University of Planning Commission and is a former Commissioner in the South Africa in the Department of Inclusive Education. He is Broadcasting Complaints Commission and Councillor of the the Co-founder of the South African National Association of the South African Telecommunications Regulatory Authority, a Blind and acted as its Executive Director. He held the positions predecessor to ICASA. of Programme Manager and Programme Coordinator for Education and Training at the Council. Ms Rachel Kalidass Mr Vusumuzi Mavuso BCom (Hons); Certificate in the Theory of Accountancy (CTA) Post Graduate Diploma in Public and Development Management (University of Natal); BCompt (UNISA); CA (SA). (University of the Witwatersrand). Ms Kalidass has 15 years of extensive experience in internal and Mr Mavuso was a member of the Gauteng Provincial Legislature external auditing, financial management, corporate governance until 1998. He has held many positions in the public service from and risk management. She is currently the Managing Director of Municipal Manager to Regional Director at municipal levels. R Kalidass and Associates, a practice of Chartered Accountants Mr Mavuso has held key positions of Deputy Director General and Business Consultants. (HOD) of the Department of Development and Planning in Local Her previous Audit Committee positions include the Government, as well as the Public Service Commissioner for Mpumalanga Provincial Legislature, Mpumalanga Provincial Gauteng. He is a change management specialist and strategist Department of Education, Mpumalanga Provincial Department with vast experience in local government as a consultant. of Health, Mpumalanga Tourism and Parks Agency (MTPA), Mr Mavuso prides himself as a multi linguist (who can speak five Mpumalanga Gambling Board (MGB), Inkomati Catchment official languages). Management Agency (ICMA), Mpumalanga Economic Growth Agency (MEGA), NEHAWU Investment Company as well as Ms Nomvuyo Memory Mhlakaza the Ehlanzeni District Municipality. She previously served as National Diploma in Human Resources Management (Technikon the Chairperson of the Audit Committee of the Mpumalanga Northern Gauteng); BTech in Human Resources Management Shared Services Audit Committee Cluster comprising Office of (Tshwane University of Technology); Leadership Development the Premier, Department of Safety and Security, Department of Course; and an Advanced Leadership Development Course. Co-operative Governance amongst others. She currently serves as a Member on Boards and Committees Ms Mhlakaza is currently employed as a Senior Manager in the of various institutions including the National Youth Development office of the Chairperson of the National Youth Development Agency (NYDA), Free State Gambling Board, South African Agency. She has experience in human resource management National Parks (SANPARKS) and the National Library of including industrial relations, workplace skills development South Africa (NLSA) as well as the Business Process Review plans, staff training and the design and development of training Committee of the Department of Water Affairs. She is a member materials. of the South African Institute of Chartered Accountants (SAICA), Mr Krish Naidoo Independent Regulatory Board of Auditors (IRBA), the Institute of Internal Auditors (IIA) and Institute of Directors (IOD). BProc (University of Durban Westville); MLitt (University of Aberdeen, UK); Attendance Certificate in Banking Law and Prof Bongani Augustine Khumalo Financial Markets (Nelson Mandela School of Law and the Advanced Executive Programme (AEP) (SBL, UNISA); MA University of the Witwatersrand). (Fairfield University); MBA (Henley Management College); and Mr Naidoo is a practising Attorney and has extensive experience Diploma in Broadcast Journalism (AACC Nairobi); DAdmin in the fields of human rights, administrative law, mining and Honoris Causa (University of Fort Hare). commercial law. He worked for Armscor as the Senior Manager Prof Khumalo is the Chief Executive of Gidani (Proprietary) of Corporate Communications and gained experience in liaising Limited and the Chairman of Bongani Rainmaker Logistics and with the Diplomatic Corps and the Parliamentary Defence Gravitas Group. He is a patron of the South African Business Committee. He participated in programmes relating to defence Coalition on HIV/AIDS (SABCOHA) as well as the Professor and has written articles for the media and defence journals on Extraordinaire and Chairman of the Africa Centre for HIV/AIDS issues of defence. Management at the University of Stellenbosch since 2004. He was a Founding Member of the National Association of Prof Khumalo was an Honorary Professor in the Department of Democratic Lawyers and a Founding Member of the National Industrial Psychology and later at the Africa Centre. He was an Sports Congress. He chaired the soccer unity talks to form the Honorary Fellow of the University of Warwick. He is the former SA Football Association. Deputy Chief Executive of Eskom. He served as a Presidential Advisor on HIV/AIDS and Rural Development reporting to the Dr Ndivhoniswani Aaron Tshidzumba Chairman of the South African National AIDS Council (SANAC). BA (Hons); MA; PhD in Communication (North West University); He is the Founder and former Publisher of Aboveboard (Africa’s Post Graduate Diploma in TV Production (NEMISA); Certificate Global Chronicle on Governance, Leadership and Ethics). in Public Relations (Allenby Campus); and BA UED (University He was previously the Chairman of the School of Business of Venda). Leadership (SBL) at UNISA. He was the Chairman of Transnet Limited and he also served on the Board of Anglo Platinum as Dr Tshidzumba is currently a lecturer in Broadcasting at an Independent Non-Executive Director. the Journalism Department of the Tshwane University of Technology. He is a Facilitator at the Business School of the He is currently a Member of the Board of Afrika Tikkun and a North West University in the field of Graphic Design, Public scholar in economic and management sciences. Relations Management and Visual Programming. 17 Mr Mashangu Ronny Lubisi He was the Chief Executive Officer of NEMISA. He managed the BCom (University of Zululand); BCompt Honours (UNISA); CTA Multi-Media centre, in charge of Research, Sound and Video (UNISA), CA (SA). Productions at the Intelligence Academy. Dr Tshidzumba was a Lecturer in the Department of Communication (North West Mr Lubisi is currently the Managing Director of MRL Incorporated, University), where he taught broadcasting for Radio and TV, an accounting firm he founded. Mr Lubisi, with his vast financial Computer Literacy, and Media Ethics, to mention but a few. background, has held positions in finance at various institutions including the University of Venda, Gobodo Incorporated, and He taught Media Studies, Graphic Design and Computer Vodacom to name a few. Literacy as an Educator at the Hurlingham and Chelsea College in London. He gained experience as a camera person, studio He is a member of the South African Institute of Chartered coordinator, video editor, script writer, floor manager, and in Accountants and Public Accountants and Auditors Board since video transfers and logging, video productions and training 2000. At A Glance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
new camera interns. He was a Teacher at the Mmabatho High Mr Olivier joined the SABC in 1989 as Chief Clerk: Budgets School and the Riverlea High School. in the Finance Division. After five months he was promoted to the position of Accountant: TV-Productions. In 1991 the Ms Mabalwa Hope Zenda Zinde SABC decentralised the finance function and Mr Olivier was BA in Social Science (University of the North). allocated to the TV News Division as Management Accountant. After six years at News he was asked to move to TV Licences Ms Zinde has extensive experience in the field of Journalism, as Financial Manager and promoted to General Manager: Communications, Media Relations, Campaign Management, Finance and Operations of the TV Licence Division a year Strategy and Concept Development for Marketing, Advertising later. In January 2010, he was seconded to the office of the and Promotions as well as Stakeholder Relations. CFO to assist with the annual budget planning process, cash She was part of the team responsible for the transformation of flow modelling and financial performance reporting during the Radio RSA to Channel Africa Radio, the transformation of Radio Government Guarantee period. South Africa to SAFM and the enhancement of programming Mr Hlaudi Motsoeneng and the look and feel of SABC AFRICA. She participated in the formation of the Communication Workers Union. Ms Zinde was Acting Chief Operations Officer (COO) (permanently appointed 8 July 2014) a member of the group of five representing staff at the SABC Board under the late Dr Ivy Matsepe-Cassaburi. National Certificate in Generic Management NQF Level 5 (Prodigy); the Thompson Foundation Certificate in Radio Ms Zinde is a member of the Marketing and PR Event Design Journalism; the SABC Leadership Development Programme and Management, as well as the Channel Africa Radio (GIBS); and the Analysis of Contemporary Social Issues Transformation Committee. (University of Witwatersrand). 18 Executive Members of the Board Mr Motsoeneng first joined the SABC in the early 1990’s as a freelance journalist with commitment and passion for quality Ms Lulama Mokhobo news and for broadcasting. He was appointed as a full- Group Chief Executive Officer (Group CEO) time trainee journalist early in 1995. He has made a positive (until 28 February 2014) contribution to the SABC as a journalist, as a producer of news BA (UBLS); Diploma in Education (UBLS); and MSc in and current affairs and as Executive Manager. He is focused Instructional Technology (Utah State University, USA). and deliverables-driven and has worked through the ranks to achieve his present position of Acting Chief Operations Officer. Ms Mokhobo left her position as the Group Chief Executive Officer of the SABC. She first joined the SABC as the Head of His exceptional abilities in Stakeholder Management were PBS in 2005, and later became the Division’s Group Executive identified by the Free State Provincial Government where he responsible for SABC1, SABC2 and the 15 radio stations. worked as a Media Liaison Officer to the MEC for Cooperative Governance and Traditional Affairs. In this role, he served as Prior to that Ms Mokhobo ran the Communications divisions a critical link between the Department and its Stakeholders, of Eskom, the South African Post Office and the PR division of playing a pivotal role as an advisor to the MEC. DaimlerChrysler SA. She is a former head of educational TV and radio of the now defunct Bop Broadcasting Corporation where He has received the certificate of positive role models awarded she pioneered the use of broadcast content to help redress (Free State Youth Commission); and the Special Recognition the educational imbalances that were created by the apartheid Certificate (QwaQwa Campus of the University of the North and system. QwaQwa Community). She was one of the members of MidiTv, which won the first free- Mr James Rogers Aguma to-air broadcast licence (eTV) and later became its Director of Acting Chief Financial Officer (CFO) Audit, Compliance and Head of Gauteng operations. She has, (from 18 March 2014) amongst other accolades for her work, received recognition BCom (Hons) (MUK); BCom; PGDA (University of Cape Town); for the Robert M de Keiffer excellence Award (USA); the Martin PGCTA (Natal) CA (SA); ACMA; CGMA. Luther King Award for humanitarian work (USA); the Eskom Manager’s Award and more recently the Black Business The Minister approved the appointment of Mr James Aguma as Executive Circle Award (BBEC). She has been awarded an the Acting CFO with effect from 18 March 2014. Mr Aguma joined honorary membership of the Wits University’s International the SABC in March 2013 as General Manager: Strategic Support Golden Keys Society. from the Auditor General SA, where he was employed as a Senior Manager. Mr Aguma has extensive public sector experience in She has served on a number of Boards including that of a working with Government departments and State Owned Entities. JSE‑listed company and is a current trustee of the Nelson His experience includes strategy development, governance, Mandela Children’s Fund. Ms Mokhobo served as a Board financial and performance reporting, risk management and Member on the SABC Foundation. compliance with laws. Mr Christian (Tian) Olivier He has worked with PricewaterhouseCoopers on local and international clients including Momentum Group, Gensec Bank, Acting Group Chief Executive Officer Standard Bank, Rand Merchant Bank, USAID, the World Bank, (from 18 March 2014) Swedish Development Agency, Bristol Meyers Squibb and the Acting Chief Financial Officer European Union. (until 18 March 2014) BCom; BCom (Hons); and MCom (Business Management) (RAU). The Minister approved the appointment of Mr Tian Olivier as the Acting Group Chief Executive Officer with effect from 18 March 2014. Until then, he was the Acting Chief Financial Officer from 13 September 2012 to 18 March 2014. Group Executives
Mr Christian (Tian) Olivier Mr Hlaudi Motsoeneng Mr James Aguma Acting Group Chief Acting Chief Operations Acting Chief Financial Executive Officer (GCEO) Officer (COO)permanently Officer (CFO) appointed 8 July 2014
Ms Theresa Geldenhuys Ms Lorraine Francois Mr Sipho Masinga Company Secretary Chief Audit Executive Group Executive: Technology
Mr Vincent Tsoenyane Mr Jabulani Mabaso Mr Anton Heunis Mr Itani Tseisi Acting Group Executive: Group Executive: Group Executive: Group Executive: Stakeholder Relations Human Capital Services Commercial Enterprises Risk and Governance and Provinces
Mr Leslie Ntloko Ms Verona Duwarkah Mr Jimi Mathews Ms Mbulu Nepfumbada Group Executive: Group Executive: Acting Group Executive: Head: Legal Affairs Radio Television News 19
Mr Philly Moilwa Mr Madoda Shushu Ms Bessie Tugwana Ms Iris Cupido Acting Head: Strategy Head of Procurement Acting Head of Sport Chief Executive Officer: SABC Foundation At A Glance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Provincial Offices and Leadership
Provincial Gener al Managers
SABC operations are enhanced through established nine Provincial Offices that are situated throughout the country. These Offices are led by Provincial General Managers who mainly exercise oversight. Resources are fully deployed in these parts of the country ranging from PBS Radio Stations, Radio Broadcast Facilities, Music Recording Studios, Logistics, Finance Support Ms Mamontha Motaung Ms Nada Wotshela Function, Human Capital Support function, Radio Acting PGM: Free State PGM: Western Cape Sales. 20 and Northern Cape The importance of these offices is that they bring about provincial relevance and feel in news, programming and reflect life and culture of the people of different geographical areas. The establishment of the SABC 24 Hour News channel has added more capacity with regard to covering events of importance in the Provinces, thereby keeping provincial people informed and this in keeping with SABC’s overall mandate. The Provinces are generally acknowledged as important communication hubs, as they service the remotest areas of South Africa. In essence Mr Zola Yeye Ms Zamambo Mkize Provincial Offices provide viable broadcast PGM: Eastern Cape PGM: Kwazulu Natal platforms, hence most radio stations are located in Provinces. The SABC’s Vision of ‘Broadcasting for Total Citizen Empowerment’ takes effect in nation building initiatives with involvement of Provincial Offices, while many CSI initiatives continue to make a difference in the lives of ordinary citizens. During the year under review, the SABC also focussed on ensuring that provincial facilities are upgraded to the required standards. This included fast tracking of submissions on property projects in order to ensure speedy implementation thereof. Mr Quinton Lenyai Mr Alwyn Kloppers Management in Provinces through various out- PGM: Mpumalanga PGM: Hatfield and Gauteng reach programmes undertaken during the year under review, upheld the SABC brand with cred- ibility. Provinces are indeed strategic delivery cen- tres for the SABC.
Ms Tshamaano Makuya Mr Tlotlo Seru PGM: Limpopo PGM: North West Group Chief Executive Officer’s Overview
“Vision without action is just a dream, action without vision just passes the time, but vision with action can change the world.” – Nelson Mandela
Mr Christian (Tian) Olivier Executive Summary The SABC’s vision of Broadcasting for Total Citizen Empowerment was noticeably portrayed in the public broadcaster’s performance delivery for the year under review. Outstanding achievements were realised in the areas of, amongst others, TV, radio, mandate delivery, governance and the liquidity status of the organisation. SABC TV continued to provide the most watched channels in the country, effortlessly meeting the public service mandate and delivery of public value. Audience loyalty remained strong, particularly in respect of local dramas on SABC1, with 19 out of the 20 most watched programmes being from SABC TV. Radio showed steady growth despite the rapidly changing environment with new entries in the media landscape, including digital media. Most of the SABC Radio stations posted healthy audience growth figures during the financial year. Radio’s successes are further reaffirmed by the fact that eight out of the top 10 favourite stations nationally, come from the SABC stable. Significant progress was made during the year under review in terms of creating stability and discipline in the organisation. Key focus areas include the overall improvement in governance processes and policies as well as the huge effort that went into clearing and correcting findings in the SABC’s disclaimer audit qualification. During the last quarter of the year under review, Group Executive 21 Committee meetings were held on a weekly basis to clear long outstanding matters and to focus on business strategies that will assist the public broadcaster in delivering on its goals and objectives. All Board Sub-committees were functional and contributing to the Corporation’s business. The Audit Sub-Committee of the Board assisted greatly in managing and clearing audit findings. At A Glance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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Clips of the extensive news coverage of the passing of Mr Nelson Mandela.
The highlight of the year was unquestionably the SABC’s Service Delivery financial performance with the organisation’s early repayment The mandate of the SABC is encapsulated in legislative and of its Government Guaranteed loan, saving R34m in interest. At regulatory prescripts and the prevailing operating environment. the end of the 2013/14 financial year, the SABC posted a profit Its broad objectives are set out in the SABC Charter which, after tax of R651m, a landmark achievement attributable mainly amongst others, requires the public broadcaster “to provide, to revenue growth, improved cost management and enhanced in its public broadcasting services, radio and TV programming working capital management. that informs, educates and entertains.” December 2013 was dominated by the passing of former During the year under review the SABC successfully delivered President, Mr Nelson Mandela and as the Public Service on its mandate of educating, informing and entertaining the Broadcaster the SABC played a critical role in reflecting and nation. honouring the former President’s legacy as an icon of the epic South African struggle for liberation. The TV Division broadcast Television 19.5 hours of live tribute programming between 8th and 15th December 2013 on SABC1 and SABC3. The SABC2 channel As part of the SABC’s strategy to retain and grow audiences was set aside for use by News, for the latest breaking news in a multi-channel environment, SABC1, SABC2 and SABC3 around the announcement of Madiba’s passing, his memorial managed to successfully revive and revamp their programming service, the lying in state and the funeral in Qunu. At the apex pillars, introducing fresh titles in genres such as drama and of SABC Radio highlights was the extensive coverage of the comedy, informal knowledge building (IKB) their entertainment passing of Mr Mandela, where the SABC’s 18 radio stations programming. The public broadcaster made a cash investment played a pivotal role in breaking the sad and shocking news, of R937m in TV programming of which 74% (R693m) was local whilst keeping listeners informed about developments as they content – an unrivalled achievement. Repeat programming (2nd unfolded. SABC Radio created the glue that united a nation and 3rd runs) only made up 6% of total broadcasting for local in mourning. Radio presenters expertly supported grieving content and 4% in international programming – the remainder listeners and the public. (90%) of programmes were 1st runs. The channels exceeded its ICASA licence conditions targets on local content on SABC1 For all its efforts the SABC received formal and informal and SABC2, as well as on local languages other than English, accolades for the excellent content and facilities it provided during performance period (05:00 to 23:00). during the broadcast of the activities that were linked to Mr Mandela, and they range from local viewers, the SABC’s Radio opposition broadcasters to the many international clients (EBU, CNN, BBC, CCTV, et al) who broadcast on TV, radio and digital SABC Radio remains the voice of our rainbow nation and media. The success of delivering on the project is attributed to continues to educate, inform and entertain the majority of South the professional and expert cooperation between the various Africans in their mother tongue. During the final quarter of the SABC Divisions. period under review, SABC Radio ensured the promotion and entrenchment of democracy through voter education especially The SABC has several reasons to celebrate its performance for the ‘born frees’ as well as those people who had never voted. but the year under review saw the organisation also having to Radio continues to drive the development of home grown artists overcome many challenges and difficulties which hampered and their music through extensive airplay, interviews, inclusion service delivery in certain areas. in performance line-up at events and through music awards ceremonies like the annual METRO FM and Xitsonga Music The SABC made a cash investment of R530m in Sport for Awards ceremonies. The SABC has performed above ICASA’s the year under review of which R450m was paid for Sport minimum requirements for South African music. SABC Radio Rights – an amount that will increase every year owing to the delivers broadcasting in more than the 11 official languages as demand from the public to see sporting events on the public some stations also broadcast in languages of minority groups - broadcaster’s platform. Funding to broadcast these events is, X-K FM broadcasts equally in !Xintali and Khwedam and Lotus however, a challenge. FM broadcasts mainly in English with daily broadcasts in Urdu, Tamil, Gujirathi and Hindi. Universal Access News The SABC continues to work closely with Sentech to enable more citizens to have access to its services. The period under The SABCs News and Current Affairs Division produces on review saw the successful rollout of low power transmitters a daily basis 12 TV news bulletins and 10 TV current affairs (LPT). The aim was to provide more citizens with access to shows on SABC1, SABC2 and SABC3 every week. On Radio SABC services, particularly those in the rural areas, whilst the SABC produced 1 255 Radio News bulletins in all the eleven reducing the costs associated with transmitting the signal. official languages on 18 radio stations every week. In this regard, SABC News plays a critical role in providing high quality, reliable Pillars and unbiased news and current affairs services within South Africa. On its newly launched SABC 24 Hour News channel, the Financial Performance Division produced 16 304 minutes of news and 6 336 minutes The SABC is delighted to announce that it realised excellent of current affairs programming. Since its launch last year the financial results for the period under review. Detailed information channel has overtaken well established news platforms such as regarding the financial results may be viewed in the statements Sky, CNN, BBC and Al Jazeera. included under the Finance Section. Salient points are: Sport Revenue During the year under review, the SABC was the home and Total gross revenue for FY2013/14 was R445m (6.5%) higher platform of the 2014 Orange African Nations Championship than budget. This represents an increase of R531 (8%) (CHAN) held in South Africa. All 32 matches were broadcast live compared to the previous year. on SABC TV channels between January and February 2014. Other notable soccer productions included the international Expenses 23 friendly between Swaziland and Bafana Bafana, the Operational expenses were R468m (8%) higher than budget international friendly match between Bafana Bafana and Spain compared to the R7m higher than budget spending of the and the production of an entertaining match between Kaizer previous year. Year-on-year expenses grew by R207m (3%) from Chiefs legends and Liverpool legends. One of the highlights last year. was when sporting fans joined hands in making history at the inaugural Nelson Mandela Sports and Culture Day, to celebrate Capex and honour the former President, Mr Mandela. For the first time The total value of approved capital projects was R2bn by year in South African history, soccer and rugby were played on the end. Value of new projects approved during the year was same day and at the same venue. R539m. A cash budget of R465m (Internal and Government funds) was made available for these projects and by the end of the financial year only R104m was used. At A Glance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Loans the SABC and a two-year project plan that focused on the major Cash levels continued to improve during the year due to the qualifications that lead to the disclaimer was implemented. improvement in days to collect from debtors and the under Additional accounting resources were contracted to assist spending in a number of areas. At the end of the year cash with the volume of work needed to resolve the qualifications balances were above R1.4bn and liquidity ratios positive. of TV content and Fixed assets (PPE). National Treasury was Audit Disclaimer also engaged to assist with the accounting treatment of TV licence revenue. The Audit committee of the Board met monthly At the end of the previous financial year the SABC received a to monitor progress and provide support. The table below disclaimer audit opinion. This required the urgent attention of indicates the work done during year one of the plan.
Resolved In process of resolution
Key Areas of Implemented In Progress Concern in 2013 1. Property Plant Reconfiguration of the structure to centralise control of the Finalisation of the verification of 32.9% of the and Equipment fixed assets management accounting function in the CFO’s remaining assets. office is complete. Reconciliation between PPE asset register and the GL A service provider was appointed to assist with asset has to be completed. verifications and update the asset register. Approval and implementation of the draft fixed asset 67.1% of assets have been verified. policy. 24 A draft fixed asset policy and standard operating procedure Finalisation of the recruitment of dedicated and document has been developed. experienced staff to monitor asset management. 2. Intangible Reconfiguration of the structure to centralise control of the Reconciliation between intangible asset register and Assets fixed assets management accounting function in the CFO’s the GL has to be completed to resolve immaterial (computer office is complete. misstatements. software) A service provider is appointed to assist with asset Approval and implementation of the draft fixed asset verifications and update the asset register. policy. Majority of intangible assets have been verified. Finalisation of the recruitment of dedicated and A draft fixed asset policy and standard operating procedure experienced staff to monitor asset management. has been developed. 3. Licence fee Implementation of inspectorate service to validate the data RFP process to source providers for GIS still in revenue base and aid in recovery of fees due is completed. progress. and related receivables The mechanisms to determine potential license fee holders’ still in progress. Action plan to obtain above information and verify the authenticity still in progress. Drafting of policies and procedures still in progress. 4. Programme, A service provider was appointed to assist with asset The process to ensure that all tapes and storage film and sports verifications and update the asset register. devices that hold these rights are stored in a central rights place still in progress. Recruitment of a CA (SA) resource is done. All current and prior year transactions have been captured on the asset register and accounted for correctly in the financial system. Stock counts were performed at year end. A draft policy and standard operating procedure to manage Approval and implementation of the policy and programme, film and sports rights has been developed. standard operating procedure to manage programme, film and sports rights. Staff training on PFMA and IFRS relating to this area is done. 5. Trade and other The debtor’s management function is centralised and the Enhancements to the financial system to support Receivables debtor’s book has been cleaned up. accurate ageing of debtors. The credit policy has been developed and approved. Credit insurance has been implemented. 6. Irregular Key vacancies in procurement have been filled. Implementation of a robust performance management expenditure Monthly reporting mechanisms per division to detect and regime to enforce accountability and address non- report on irregular and fruitless and wasteful expenditure have performance. been developed. Vendor database being continuously cleaned up with updates of legislated supplier documentation. 7. Taxation Reconfiguration of the structure to centralise taxation Recruitment of additional skilled resources to increase management and reporting in the CFO’s office is complete. the capacity in the tax function. A process for withholding tax on royalty payments to foreign Reopening and resubmissions of tax returns from suppliers has been implemented. 2009 to take into account adjustments to financial records arising from the audit clean up exercise. 8. Expenditure The qualification relating to the attachment of supporting Suitable controls are in the process of being documentation to journals in the financial system has been implemented. resolved. 9. Post retirement The post-retirement medical aid liability valuation was - valuation recalculated incorporating all the necessary employees. SABC Leadership and delegates from Mozambique.
As a result of focusing all the financial resources on the major • M inority languages; qualification areas, a number of new risks emerged during • E stablishment of independent producers outside of major the current year’s audit that also need attention. These items cities; include the following matters of emphasis: • N ews coverage of events of importance in the Provinces; • T axation The SABC has depleted its historical assessed losses. It • S ABC’s brand visibility across all Provinces; now in a tax paying position. The SABC will have to mitigate the risk of cash outflows relating to income tax payments by • Involvement of provincial sports bodies in development engaging in tax planning activities. The tax function is being matters; reinforced with additional resources. • R eligion; and • Third Party Revenue • Y outh development matters. The SABC has engaged in transactions with a number of third parties that result in remittances of revenue to the Human Capital company. The contracts did not require the entities to provide independent assurance that the remittances were complete. People issues centred around a variety of Human Resources To mitigate the risk of under declaration of revenue due to (HR) areas. These included, amongst others: the SABC, the company will include the requirement for audit • The skills audit assessing the levels of skills that internal staff certificates in future contracts with third parties. as well as the independent contractors possess, and knowing what developmental areas needed more attention; Technology • T he filling of executive vacant positions; During the year under review, the SABC continued to embrace the transformation towards digital technologies that will improve • Dealing with salary anomalies; and the lives of South African citizens. The SABC successfully • Reviewing policies and procedures. implemented infrastructure and system upgrades to be able to carry the services, in preparation for DTT migration. Addressing the audit findings relating largely to records management and internal controls, and the re-anchoring of Marketing performance management as a tool for improving organisational 25 SABC Marketing continued to position the Public Broadcaster performance. favourably both internally and externally to build and restore An action plan to address the recommendations raised by the the corporate brand reputation by, amongst other strategies, skills audit report was developed and implemented. Learning driving transversal support for all SABC sub-brands to assist in interventions were focused on getting employees ready for meeting audience share and revenue targets. digital migration. As a result, a larger percentage of the training focused on the use of smarter technology and the translation Stakeholder Management of learning to improvements in business results and customer During the period under review SABC Executives undertook a satisfaction. road-show and visited all nine Provinces. In the sessions that Programmes such as the ICT training programmes, employee were held with the involvement of external stakeholders some of study assistance schemes to enhance higher educational the issues that were highlighted included inter alia. learning, internships, learnerships and work integrated learning At A Glance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Strategic Overview
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Behind the scenes of the SABC News production.
were given priority to ensure the SABC has the skills and talent Looking Forward for a dynamic and evolving techno-paced industry and thereby Broadcasters globally are undergoing profound transformation, support the readiness for digital migration. caused by shifts in the world economy, new technologies, Challenges changes in audience behaviour and increasingly complex competitive environments. Within this context the SABC At the time of releasing the 2012/13 annual results it was stated reshaped its future with a strategic plan that is guided by a very that challenges revolved mainly around clearing the SABC’s clear sense of direction and focus. Sustaining and reinvigorating disclaimer audit qualification it had received from the Auditor the SABC is important because it is now functioning in a digital General. Excellent progress was made during the past year to world, in which information is delivered on increasingly diverse review and implement policies and processes to enhance the platforms and from increasingly diverse sources. internal control framework. The SABC has a statutory mandate to reach and serve all As part of its public service mandate the SABC must include South African audiences. To better match the changing needs sport programming in its list of broadcast offerings. The sport it and expectations of its audiences, the Public Broadcaster offers is clearly defined as sport of national interest, as well as has committed itself to refining and refocusing its portfolio of developmental and minority sports. These events are of national services. Delivering high-quality programming and content, interest (popularity) and enjoy widespread public recognition spanning a range of genres accessible across multiple platforms (participation), with a particular focus on culture, nation building, is a primary focus for the SABC for the next number of years. the African agenda and restoring of human dignity. Funding of these events remains a challenge for the SABC. In Conclusion previous years the cash flow forecasts allowed for a certain I wish to thank the Shareholder and the SABC Board for amount that could be funded from internal cash funds, but the their continuous support during the past year, as well as our SABC could not fund the full amount required. committed leadership and employees who are dedicated to making the SABC a world-class Public Broadcaster. My final Going Concern gratitude goes to the millions of SABC viewers and listeners The Company continues to trade as a going concern. Assets who tune into our channels and stations on a daily basis – may totalled R2bn and cash and cash equivalents were R1,4bn at the SABC continue to inspire and make a difference in your year end. lives.
C Olivier Acting Group Chief Executive Officer Strategic Overview
Advertising campaign aimed at encouraging the public to voice their opinions in the reviewing of the Editorial Policies.
The SABC’s strategy, captured in its 2013 to 2016 Corporate fusion of live journalism and current affairs programming Plan, places the development and delivery of public throughout the day. The channel is quintessentially and service content in the digital environment at the centre of unashamedly African in its live and factual offerings. all its activities. The plan focusses on audiences, editorial Notwithstanding delays in implementation of Digital integrity, prioritising the development of local content, telling Terrestrial Television (DTT) in South Africa, the SABC authentic South African stories and providing creative and has ensured that its technical infrastructure as well as innovative content to the country’s diverse audiences. content provision are ready for switch-on. In 2010, National Treasury provided the SABC with a On the policy and regulatory front, the SABC embarked Government Guarantee (GG) amounting to R1.472bn. This on a process of reviewing its Editorial Policies, in line with GG has played a dominant role in the SABC’s financial the Broadcasting Act. One of the main objectives of the strategy. Worth noting is the fact that the SABC utilised only reviewing process is to ensure that the SABC’s Editorial R1bn of the GG through its Nedbank loan. Over and above Policies are relevant to the current broadcasting and this, the SABC has been able to repay the loan earlier media environment and are crafted to enable the than originally planned. This came about as a result of SABC to fulfil the objectives of the Broadcasting Act. improved cost management following the implementation of the turnaround strategy and better working capital Owing to the profound transformation that the management. By the end of September 2013, the SABC broadcasting industry is undergoing globally and had paid back the loan in full, thereby saving R34m in taking into account the shifts in the world economy, interest charges. new technologies, changes in audience behaviour and increasingly complex competitive environments, In addition, the SABC’s cash reserves have improved the SABC has to review and revise its current significantly during the period under review and were Corporate Plan annually. The organisation needs to 27 adequate to meet its needs. Current assets were enough to reshape its future with a strategic plan that is guided cover all current liabilities. by a very clear sense of direction and focus. To this The SABC continues to participate in digital multi- end, the SABC has devised exciting strategies and platforms for the provision of content and to deliver on opportunities for the next number of years in order its public mandate. This provides citizens with access to to respond to the transforming broadcasting and broadcasting services in all 11 official languages. In addition media environment. to its existing TV channels and radio stations, the SABC With sound management and keeping within the further strengthened its delivery on news and current pre-determined financial parameters the SABC affairs programming through the launch of the SABC 24 will be in a position to deliver on its public service Hour News Channel, broadcasting on DStv’s channel 404 mandate. from the 1st of August 2013. The channel offers a seamless At A Glance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Legislative and Other Mandates
The South African Broadcasting Corporation (SOC) Limited (‘The SABC’) is a Schedule 2 (Major Public) entity in terms of the Public Finance Management Act 1 of 1999, as amended. Founding and Current Legislation and Policies
28 The SABC is a successor in title to the previous state- controlled African Broadcasting Corporation, which was formed in 1927 and incorporated the South West African Broadcasting Corporation (which has since become the Namibian Broadcasting Corporation). As it exists today, the SABC was established through an Act of Parliament in 1936, which has since been replaced by the Broadcasting Act 4 of 1999. The affairs of the SABC are conducted in accordance with the Companies Act 71 of 2008, as amended. The Broadcasting Act further defines the business of the SABC in terms of two distinct services - the Public Broadcasting Services (PBS) and Public Commercial Services (PCS), which are administered separately. In Celebrating our diversity by broadcasting in all official keeping with this requirement, the SABC’s accounting languages. systems have been configured to account for each group of services (15 PBS radio stations and two TV • R eflect both the unity and diversity of the cultural and channels; three PCS radio stations and one TV channel) multilingual nature of South Africa, its regions and according to IFRS accounting principles. audiences; Both PBS and PCS services are required to adhere to • P rovide programming for children, women, youth and the SABC Charter, as well as to the letter and spirit of people with disabilities; the Public Broadcasting Service Mandate espoused through licence conditions accorded to individual radio • Br oadcast national, developmental and minority stations and TV channels. sports; • D evelop talent and showcase South African content; Public Broadcasting Service and Mandate • P rovide independent news of high quality. The mandate of the SABC as a Public Broadcaster is embedded in legislation, regulations, policies, codes of In executing its mandate, the SABC is also guided, conduct and licence conditions, amongst others. These among others, by the: include the: • P ublic Finance Management Act (PFMA), Act No. 1 of • Constitution of the Republic of South Africa Act No. 1999 as amended; 108 of 1996, as amended; • C ompanies Act No. 71 of 2008 as amended; • Broadcasting Act No. 4 of 1999, as amended; • K ing III Report on Corporate Governance for South • Independent Communications Authority of South Africa; Africa Act No. 13 of 2000, as amended; and • S outh African National Treasury Regulations; and • Electronic Communications Act No. 36 of 2005, as • S ABC’s Delegation of Authority Framework (DAF). amended In addition to the legislative and regulatory requirements, Arising from the above, the SABC is therefore enjoined the SABC has a Board that is charged with the control to: and direction of its affairs, as defined by the company’s • Ensure access of its services to all citizens throughout Memorandum of Association (MOA) and Articles of the country; Association and codified in the shareholder compact incorporating a materiality framework. This ensures that • Inform, educate and entertain; the SABC complies with the statutory and public policy prescripts. • Make services available in all official languages; The Sabc Charter The broad objectives of the SABC are as set out in its Charter, which is contained in Section 8 of the Broadcasting Act. These are: • To make its services available throughout the Republic; • To provide sound and TV broadcasting services, whether by analogue or digital means, and to provide sound and TV programmes of information, education and entertainment funded by advertisements, subscription, sponsorship, licence fees or any other means of finance; • To acquire from time to time a licence or licences for such period and subject to such regulations, provisions and licence conditions as may be prescribed by the Authority; • To provide, in its public broadcasting services, radio and TV programming that informs, educates and entertains; • To be responsive to audience needs including the needs of the deaf and the blind and account on how to meet those needs; • To provide other services, whether or not broadcasting or programme supply services, such services being ancillary services; • To provide TV and radio programmes and any other material to be transmitted or distributed by the common carrier for free-to-air reception by the public subject to Section 33 of the Act; • To provide to other bodies by such means and methods as may be convenient, services, programmes and materials to be transmitted or distributed by such bodies and to receive from such other bodies services, programmes and materials to be transmitted by stations of the Corporation for reception as above; • To commission, compile, prepare, edit, make, print, publish, issue, circulate and distribute, with or without charge, such books, magazines, periodicals, journals, printed matter, records, cassettes, compact disks, video tapes, audio-visual and interactive material, whether analogue or digital and whether on media now known or hereafter invented, as may be conducive to any of the objects of the Corporation; • To establish and maintain libraries and archives containing materials relevant to the objects of the Corporation and to make available to the public such libraries and archives with or without charge; • To organise, present, produce, provide or subsidise concerts, shows, variety performances, revues, musical and other productions and performances and other entertainment whether live or recorded in connection with the broadcasting and programme supply services of the Corporation or for any purpose incidental thereto; • To collect news and information in any part of the world and in any manner that may be thought fit and to establish and subscribe to news agencies; • To carry out research and development work in relation to any technology relevant to the objects of the Corporation and to acquire by operation of law, registration, purchase, assignment, licence or otherwise copyright and designs, trademarks, trade names and any other intellectual, industrial and commercial property rights; • To nurture South African talent and train people in production skills and carry out research and development for the benefit of audiences; 29 • To develop, produce, manufacture, purchase, acquire, use, display, sell, rent or dispose of sound recordings and films and materials and apparatus for use in connection with such sound recordings and films; and • To develop and extend the services of the Corporation beyond the borders of South Africa. Performance | South African Broadcasting Corporation [SOC] Ltd
“There can be no keener REVELATION of a SOCIETY’S SOUL than the WAY in which it TREATS ITS CHILDREN.” - Nelson Mandela
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SABC SABC 31 Performance Performance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Remembering Madiba Honouring the Legend
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Tribute to Madiba For the period under review, the tragic passing of the From the 5th to the 16th of December 2013, the SABC doyen of our democracy, the former President Mr teams worked tirelessly on the formidable task of Nelson Mandela, put the SABC’s broadcast capability producing the live programmes for the TV platforms on to the test. SABC Marketing along with SABC TV and SABC1 and SABC3, as well as specialist content from SABC Radio ensured that the on-air elements were the various genres. The SABC delivered programmes correctly used and executed. The SABC installed that celebrated Madiba in programmes like Shift, branding to commemorate the passing of Tata Madiba Generations, Muvhango, 3-Talk, Yo-TV, Hectic 99, in all its buildings including the Provincial Offices. Expresso and Mzansi Insider. As the Public Service Broadcaster, the SABC played At the apex of SABC Radio highlights was the a critical role in reflecting and honouring the former extensive coverage of the passing of our beloved Tata President Mr Mandela’s legacy as an icon of the epic Madiba, where the SABC’s 18 radio stations played a South African struggle for liberation, following his pivotal role in breaking the sad and shocking news, passing in December 2013. whilst keeping listeners informed about developments The TV Division broadcast 19.5 hours of live tribute as they unfolded. SABC Radio created the glue that programming between 8th and 15th December 2013 united a nation in mourning. Radio presenters expertly on SABC1 and SABC3. The SABC2 channel was set supported grieving listeners and the public. aside for use by News, for the latest breaking news The music playlist reflected music befitting of the around the announcement of Madiba’s passing, his sombre mood. Tributes poured in and were shared memorial service, the lying in state and the funeral in with the nation and the world via live streaming. In the Qunu. days leading up to the funeral, all PCS and PBS Radio ,
stations continued to share every new development with audiences. Transversal partnerships with TV saw a smooth and constant flow of information from News aided Radio stations that also created loyalty beyond the main media. Digital and social media platforms became hugely successful extensions of these stations. The financial achievement was against the backdrop of the SABC having embraced its public service role in covering the passing and funeral of 33 former President Mr Mandela. As a sign of respect, commercial activity was suspended across all SABC services for an initial period of two days, after which the gradual resumption of advertising was limited to ensure it was in keeping with the sombreness of the nation still in mourning. The special programming received excellent ratings, and the SABC received accolades nationally and internationally for its great work. Performance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Situational Analysis
Service Delivery process, a number of business units within the SABC and Organisational implemented structural changes in order to improve and streamline business operations. Environment A talent management strategy which will be developed in the The environment within which the SABC next financial year will be focused on developing employees on operates is not only determined by the the job, ensuring that the right people, with the right skills and Broadcasting Regulatory Framework, but is capabilities, are in the right roles and are focused on the right also defined by the broader economic context activities. and the constantly changing broadcast media and Information and Communications Future Sustainability of the Technology (ICT) environment. This dynamic environment is characterised by migration Corpor ation from analogue to digital transmission, the use The last phase of creating a sustainable public broadcaster of the internet as a global media platform as for the future is highly dependent on the outcome of the ICT 34 well as the emergence of new technologies and Policy Review process, which was established by the Minister media players, which has resulted in audience of Communications to appraise all ICT industries, broadcasting, and revenue fragmentation. telecommunications, etc., owing to matters such as the convergence of technologies and the challenges faced by the The SABC has previously set itself three major broadcasting industry. The policy review process will inform strategic milestones, to be achieved in three Independent Communications Authority of South Africa’s phases, to turn it around. These are to: (1) stabilise (ICASA) review of regulations. These processes will assist in the Corporation as a going concern in compliance dealing with critical policy and regulatory matters affecting with the Government Guarantee; (2) rebuild the the SABC, e.g. the SABC’s funding model, its public service Corporation by realigning its operating model mandate, governance and other related statutory issues. with the imperatives of the digital broadcasting Furthermore, it will assist in reviewing regulations that have been environment; and (3) create a sustainable public impacting negatively on the SABC, such as the “Must Carry” broadcaster for the future. Regulations, Sports Regulations and challenges of competition What follows next is brief feedback on implementation from new-platform services. of these milestones. Media Environment and Audience Stability of the Corporation Share This is evidenced by stability in leadership, which During the 2013/14 financial year, SABC TV continued to commenced with the appointment of the Interim and provide the most watched channels in the country, effortlessly then permanent Board of Directors in September meeting the public service mandate and delivery of public value. 2013. Key executive appointments were also made, The network continued to dominate the broadcast landscape inter alia in Human Capital Services, Risk, Technology, by retaining 53.6% of all the adult audience share in the country and Procurement Services. during prime time and 48.6% of the adult audience share The Corporation’s three executive directors positions during the reporting period. Audience loyalty remains strong, were, however, vacant at the end of the financial year. particularly in respect of local dramas on SABC1, with 19 out The recruitment process to fill the positions of Group of the 20 most watched programmes across all channels Chief Executive Officer, Chief Financial Officer and Chief nationally, being from SABC TV. Operating Officer will commence early in the new financial SABC Radio continued to show steady growth despite the year. This will contribute further to the stability of the rapidly changing environment with new entrants in the media Corporation. landscape, including the digital media. The relentless investment Of significance is the financial stability achieved through in audience research aimed at thoroughly understanding the early repayment of the Nedbank loan. As a result of audience behaviour and drivers for consumption, coupled with improved cost management following the implementation recruitment of top talent and on-air product improvements, of the turnaround strategy and better working capital remained SABC Radio’s recipe for success. As such, SABC management, the Corporation was able to pay back the Radio remains the voice of our rainbow nation and continues to loan in full at the end of September 2013 saving the SABC educate, inform and entertain the majority of South Africans in R34m in interest. During the 2013/14 financial year, despite their mother tongue. facing considerable challenges, the Corporation achieved its SABC Radio increased its share of the national audience by milestone of stabilising the SABC. 1.4%, from 67.4% last year to 68.8% during the year under In a broadcast environment characterised by increased review. At 59.1%, PBS Radio contributed the largest share competition, the SABC continued to deliver the most-watched towards the overall SABC share performance, while PCS TV channels and listened-to radio services in the country. delivered 9.7%. Most of the SABC Radio stations posted healthy audience Rebuilding the Corporation growth figures during the financial year. Ukhozi FM and METRO The SABC has embarked on the process of developing a FM need special mention. Both stations reached new record new operating model, which responds to future demands high weekly audience levels during this period. METRO FM and challenges of the digital environment. After a consultation exceeded the 6.6 million mark in one of the surveys released while Ukhozi FM shot past the 7.7 million audience mark. Collectively PBS Radio delivers programmes on a weekly basis that address these two brands reach more than 14 million listeners per week. the challenges facing the nation, promotes nation-building SABC Radio’s successes are further reaffirmed by the fact that and social cohesion. These themes are aligned to the above- eight out of the top 10 favourite stations nationally come from mentioned programming drivers and include but are not limited the SABC stable. to the following: The South African market is already showing signs of the • M oral Regeneration; broadcasting ecology and broadband-enabled technologies • H ealth; merging to create a more complex, much broader market for media audience consumption. While this new ecosystem shows • E ducation; an expanded base of players, devices and a global menu of content, this does not suggest that conventional broadcasting • J ob Creation; will disappear. There will, however, be continued pressure from • H uman Rights; new alternatives. • X enophobia and Racism; For audiences, control and flexibility are crucial especially when it comes to their digital TV services. The SABC is currently • Cr ime and Stability; exploring partnerships for the provisioning of on-demand • A rts and Culture; services. • S ports and Recreation; In the competitive environment to attract and retain audiences the industry continued to investigate the matter of audience • L abour; measurement and share. The National Association of • H eritage and Tourism; Broadcasters (NAB), supported by the SABC and other broadcast members, initiated various work streams to establish • A frican Renaissance; and a credible new audience measurement structure. This followed • Sc ience and Technology. the independent audit findings in April 2013 that the integrity of the TV Audience Measurement Survey Panel (TAMS) had Liquidity Status been compromised, followed by the subsequent resignation of the NAB from the Board of the South African Audience At the end of March 2014, the SABC showed a cash position Research Foundation (SAARF). Changes to the TAMS panel, of R1.4bn. The Commercial Enterprises Division had a including the expansion of the panel from 1 800 households to successful year in terms of revenue performance. Year-on- 2 800 households (effective weekly reporting sample of 2 500 year revenue growth of 8% was achieved through classical households), resulted in improved TV audience research. advertising and sponsorship and tighter credit management ensured an improvement in the SABC’s working capital. The Delivering On Mandate healthy revenue performance was in spite of the increasingly fragmented audiences and the competitive South African media As the Public Service Broadcaster, the SABC embraces its landscape in which the SABC operates. mandate but is also limited by the capacity of its funding model. Funding to deliver on the mandate is derived from a combination In June 2013, the Minister of Communications approved a 6% TV of commercial advertising and sponsorship revenues, TV licence tariff increase for the SABC effective from 1 September licence fees, government grants and other revenues. 2013. The annual fee for a domestic business dealer and lessor licence increased by R15 from R250 to R265. Concessionary There are high expectations on the SABC to deliver on all TV licences, granted to those over the age of 70 years as well mandatory obligations. Justifiable discretion is needed to as to receivers of social grants from the State, increased by R4 prioritise mandates that contribute the most value, as well as from R70 to R74 per annum. Additional revenue of R17,2m was the extent to which any particular mandate should be pursued. realised through this tariff increase. Consideration is thus given to achieving the best mix of mandate and licence condition deliverables. Of particular note are nation Key Policy Developments and building elements such as social cohesion and the reality of multiple languages in South Africa. Legislative Changes During the year under review, the SABC successfully delivered The SABC has been participating in the ICT Policy Review on its public service mandate. SABC TV channels continued to process established in 2013 by the Minister of Communications. exceed their targets on local language for languages other than The process is still ongoing and is intended to culminate into 35 English during the period under review. The channels notably policy recommendations for the Minister by the ICT Panel. The performed above the set target on local content for SABC1 and policy process is intended to review existing legislation and SABC2, based on regular reports to ICASA, which covered the regulatory framework against the backdrop of convergence following aspects: of technologies in the ICT sector and new communication platforms. The SABC in response to the Green Paper made • The different genres broadcast in prime time; submission to the ICT Panel wherein it raised various critical • P ercentage of South African TV content; and legislative and regulatory issues that affect its business such as the following: • The use of each official language, including minority languages. • Funding of SABC Mandate Due to a lack of capacity within the industry, delivery on marginalised languages on TV continues to constitute a major • Licensing framework of its services challenge. • Review of the subdivision of SABC into PBS and PCS Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Strategic Outcome Oriented Goals
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In studio with Lesedi FM Presenter, Chomane Chomane.
• Review of ICASA regulations such as Sports and Must Carry broadcasting can respond to the demands or needs of its Regulations to state but a few. consumers. • Universal service and access During the period under review, the SABC completed its readiness plans for DTT migration. Infrastructure and systems The SABC further made submission to Parliament on the were put in place to broadcast the existing and future TV Electronic Communications Act (ECA)’s amendment bill process channels and radio stations. on various issues affecting the organisation such as provincial broadcasting, signal distribution, universal service and access. The SABC partnered with stakeholders such as South African Bureau of Standards (SABS) to develop the SANS 862 STB DTT Readiness and Digitisation of standards, which were published in December 2013. In the Internal Broadcasting Value addition, the SABC worked with other free-to-air broadcasters to finalise the South African standard for interactive applications Chain on the DTT platform. The digital age has redefined the paradigm of broadcasting ser- There are still a few matters to be resolved before DTT could be vices. Several characteristics describe the current environment launched, such as the signal distribution tariffs from Sentech, of broadcasting services: ubiquity, accessibility, convenience, direction from the Shareholder in terms of policies that guide localisation and personalisation. These characteristics mean STB control. that broadcasters are now able to distribute and access more information than ever before, with a level of personal interaction previously never imaginable in communication media. The broadcasting environment of the future will have a theme of co-existence. Content, network and service providers will all co-exist, while actively competing against each other. Thus it is the SABC’s challenge as the Public Broadcaster to effectively respond to these environment changes. The success or failure of future broadcasting technology will depend on the quality of broadcasting content and how quickly and effectively Strategic Outcome Oriented Goals
The SABC Board of Directors identified the following strategic was R26m (6%) less than budget. Year-on-year revenue was goals that were to be achieved within the period under review: R531m (8%) higher, expenses R251m (4%) higher and net financing income were R41m (129%) higher. This resulted in a surplus that Putting Broadcasting at the was R321m (219%) higher than the previous year. Forefront Headcount remained stable throughout the year and the Audience Attraction and Retention, Stakeholder Corporation’s leave liability reduced significantly. Overtime costs Management increased owing to unplanned events such as the broadcasting of former President, Mr Nelson Mandela’s passing and funeral This goal refers to the SABC’s audience share on TV and Radio, during December 2013. DTT migration and new channel rollout, driving key policies to enable the SABC to compete within the changing broadcasting Operating Model landscape, as well as restoring the integrity of the SABC brand Simple and Easily Understood and reputation. For the SABC to meet its public service mandate efficiently Although the SABC did not reach its TV audience share target, and effectively, it is essential that the Corporation is structured it still continued to dominate the broadcast landscape in all appropriately and that clearly defined, appropriate and distinct adult audience share during Prime Time and all adult audience business processes, standard operating procedures and share during Performance Period. Radio exceeded its audience guidelines are documented for all areas of the business. share target and continued to show steady growth. Migration of the SABC’s existing TV channels and radio stations could not The divisions implemented their respective operating models. take place owing to the delay in the national launch of DTT in Further organisational alignment, subject to approval by South Africa. The Corporation is, however, ready to do so once various governance structures and consultation with relevant DTT is launched. stakeholders, are to be implemented in 2014/15 financial year. The SABC continued to provide input to drive changes to key policies and legislation, including The Electronic Building a Digital SABC Communications Act, as amended and ICT Policy review. Enhanced Public Service Bringing Editorial Integrity Back During the period under review, the SABC completed News and Current Affairs its readiness plans for DTT migration. Infrastructure and systems were put in place to broadcast the existing and In promoting democracy, the Public Broadcaster is obliged to future TV channels and radio stations. provide extensive coverage of elections and to ensure that the public receives immediate and comprehensive information. Improved Governance and Risk Since 1994, the SABC has established an outstanding track record for its comprehensive and unbiased coverage of the Management elections. Governance The SABC obtained approval of its elections broadcasting plan The SABC is committed to maintaining high standards as well as funding from National Treasury for the broadcasting of integrity, professionalism, fairness and ethical thereof. Pre-election programming included: town hall outside behaviour in all its business relationships, hence broadcasts, breakfast shows, studio and panel discussions the Anti-Fraud and Corruption Programme. This involving political parties and candidates, media analysts/ is supported by the Comprehensive Governance experts, phone-in programmes featuring experts on various Framework with the purpose of defining a set fields of government, electoral issues, the Election Commission of responsibilities and practices, policies and and political parties. procedures, exercised by Board and management and other personnel to provide strategic direction Bulletins and current affairs programmes were carried out on and ensuring that organisational objectives are all Public Service radio stations. Special slots in existing current achieved, risks are managed, and resources used affairs programmes were introduced. responsibly and with accountability. The SABC further strengthened its delivery on news and The CURA risk system enhancements and related current affairs by launching the SABC 24 Hour News channel. training were conducted during the period under Economical, Efficient and Effective review, covering risk champions and senior Organisation Revenue officials in all Provinces and Divisions. Risk management reports were tabled at the Group 37 Enhancement and Cost Management Executive Committee, where the implementation It remains one of the SABC’s main goals in the short to of risk management assurance is provided. medium term to become a financially sustainable Corporation, Risk discussions were conducted in the by growing its revenue through a number of traditional and process of considering business transactions. innovative new sources, whilst at the same time managing its Risk management reports were tabled costs prudently. Cost management also includes containing and discussed at the Risk Committee and headcount costs, reducing the Corporation’s leave liability as Audit Committee of Board. Strategic risk well as overtime costs. assessments were held with the Board. For the period under review, revenue of R7.2bn was R445m (6,5%) higher than budget. Expenses of R6.7bn was R475m (8%) higher than budget. The Corporation’s surplus of R468m Performance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14 Delivery On Predetermined Objectives Performance Information by Key Performance Area Key Performance Indicators Key Deliverable FY2013/14 Planned Target FY2013/14 Actual Achievement Key Performance Area: GOAL 1A - Putting Broadcasting at the Forefront (Audience Attraction and Retention). Strategic Objective: Managing the attrition of the SABC audience share against set targets. SABC TV Audience Share, 53% 48.6% All Adults in Performance period. SABC Radio Audience Share. 67% 69.2% Strategic Objective: DTT migration and new channel rollout. Migrate existing SABC TV Migrate SABC1, SABC2 and SABC3 on to DTT The SABC’s technical infrastructure is ready to migrate existing channels to the Digital Terrestrial Platforms. TV channels to DTT. Platform. Launch New SABC DTT TV Launch 1 of Public Private Partnerships The 24 Hour News channel was launched in August 2013 and channels. (PPP)/PCS model channel plus fully funded is being broadcast on DStv on channel 404. New TV channels Parliamentary channel. (apart from SABC 24 Hour News Channel) could not be launched on the DTT platform. Migrate existing Radio services Migrate a total of 19 existing SABC Radio Sta- The SABC’s technical infrastructure is ready to migrate existing 38 and launch additional services. tions to DTT. Radio Stations to DTT. Strategic Objective: Motivate and drive key policy reviews that affect the SABC’s ability to compete within the changing broadcasting landscape. An ICT Policy that enables the Drive amendments to Must Carry regulations, The SABC participated and provided input on the following: SABC to compete. DTT channel licensing and SABC funding model. • ECA Amendment Bill; and • ICT Green Paper (including matters on the Must Carry Regula- tions and SABC funding model). Strategic Objective: Restoring the integrity of the SABC brand and reputation. Improve overall SABC brand Obtain a brand health composite score of 2. The brand health study was completed and brand score of 3.8 positioning and equity aligned to was achieved which was better than target. corporate vision and plan. Strategic Objective: Drive the marketing of SABCs DTT rollout. Identify and launch effective Through-the-line campaign for SABC DTT chan- Through-the-line campaigns for SABC DTT channels could not campaigns to create awareness nels while simultaneously promoting DTT/brand be implemented. of DTT platform. platform. Key Performance Area: GOAL 1B - Putting Broadcasting to the Forefront (Stakeholder Management). Strategic Objective: To create a positive link between SABC, stakeholders, audiences and communities at large. Engagement of stakeholders to Define and implement a coherent stakeholder Stakeholder plan not developed. enhance business processes. plan that is measured against the outcomes of a A perception survey was completed during FY2012/13. perception survey. Key Performance Area: GOAL 2 - Bringing Editorial Integrity Back (News and Current Affairs). Strategic Objective: National and Local Government Elections. To provide balanced, accurate Develop the broadcast plans for the national The SABC developed its elections’ broadcast plan which was and relevant coverage of the elections and secure budget. Commence with approved by the Corporation’s governance structures. SABC National and Local Government pre-election programming. secured the necessary funding for the elections. Pre-election Elections and to broadcast the programming was broadcast on TV and Radio. results of those elections. Key Performance Area: GOAL 3 - An Easily Understood Operating Model Supported by Appropriate Organisational Design. Strategic Objective: Operating model and organisational design that assigns accountability to those charged with execution. Efficient organisation. Align the SABC operating model and Following consultation sessions with organised labour and organisational structure with the requirements of potentially affected staff, a number of Divisions implemented their efficient DTT operations. respective operating models. Strategic Objective: An efficient organisation that is ably supported by adequate skills to effectively implement DTT operations. Develop staff and content supplier Implement appropriate training programmes. A DTT training plan was drafted and evaluated against the Skills DTT skills; Develop e-skills education content for broadcast Audit. Subsequently the DTT training plan was implemented. Align content development to and eLearning initiatives. enable e-skills training, Collaborate with e-skills provid- ers. Key Performance Area: GOAL 4A - Economical, Efficient and Effective Organisation (Revenue Enhancement). Strategic Objective: Restoring SABC liquidity status to that of going concern. Total SABC Financial Revenue R6,801bn R7,126bn* achieved per annum. Classical Advertising Revenue. R4,934bn R5,184bn* Sponsorship Revenue (Sales, R475m R498,8m Sport, Programming, Education). TV Licence Revenue. R941m R927,9m Other Revenue including R451m R515m Government Grants. *These figures excludes Trade Exchange Key Performance Indicators Key Deliverable FY2013/14 Planned Target FY2013/14 Actual Achievement Key Performance Area: GOAL 4B - Economical, Efficient and Effective (Cost Management). Strategic Objective: Reduce Organisational Costs. Cost Effective and Efficient R6,302bn R6,495bn Organisation. Headcount management. Maintain the current headcount of 3 654 staff. Headcount as at the end of March 2014 – 3 620. The SABC completed a Determine optimal organisational skills and headcount Skills Audit in order to determine organisational skills. incorporating envisioned DTT operating model. Performance management. Instil a performance management culture across all Performance contracts were concluded with senior management. levels within the organisation. Consultation with organised labour on the Performance Management Policy in order to include employees in the Bargaining Unit took place but was not finalised. Leave liability reduction by 20% Accumulated leave liability at end FY2013/14 was 117 860 days. This was a reduction in the quantum of leave decrease of 16%. days accumulated across the organisation of 140 130 days (Feb 2013). Overtime reduction from expendi- 10% Overtime costs showed an increase of 3.1% year on year. ture incurred in FY 2012/13. Key Performance Area: GOAL 5 - Building a Digital SABC (Enhanced Public Service). Strategic Objective: Universal Access - increase rollout of service delivery through cost effective modern digital technologies (Funding Dependent). SABC broadcast infrastructure Target for FY2013/14 is 70%. Infrastructure ready to carry 70% of DTT Services. (digital broadcast and produc- tion studios) ready to carry full complement of 12 TV channels and 19 Radio stations on stadby for launch.
Increase the TV footprint to 100% 28% DTT. DTT TV coverage is at 82%. through: 84% coverage through DTT and 5.3% DTH. DTH TV covers the remainder of the population not covered by DTT i.e. 18%. 16% Coverage through DTH. Increase Radio footprint to 100% 100% DTT. Combination of DTT and DTH ensures 100% coverage on radio footprint. by FY2015/16 via DTT. A sustainable Internet Protocol Implement an approved New Media Policy. New Media Policy not implemented. Portfolio. Mobile broadcasting (Radio, TV): Develop a mobile broadcast strategy. A mobile broadcast strategy was not developed. Launch of digital mobile broad- The current radio content is, however, being streamed. casting (Within existing Services). Enable access to broadband con- • Develop multi-playout capability to suit varied access The strategy could not be executed. nectivity and appropriate content formats, through the Set Top Box as part • Collaborate with content suppliers in appropriate of e-learning via internet access content development. and interactive educational content. Key Performance Area: GOAL 6 - Improved Governance And Risk Management (Governance). Strategic Objective: Embedding risk management into the day to day operations of the Corporation. Enterprise-wide operations and 1) Roll out CURA Enterprise Risk Management 1) The CURA enhancement and related training were conducted, covering unit business decision processes, software training to all Divisions, Provinces and units risk champions and senior officials in all provinces and Divisions. general management activities to enable compliance. backed by risk management 2) Divisional risk management staff to undertake 2) Risk management function attended the Institute of Internal Auditors’ analysis and mitigations. international best practice training. Conference that shaped the review and development of existing and new risk management and governance frameworks respectively. 3) Monitor implementation through strategic and 3) Risk management reports were tabled at the Group Executive Committee. operational risk reports tabled monthly at Divisional Risk discussions were conducted in the process of considering business 39 and Group Executive levels. transactions. 4) Board monitoring applied through quarterly Risk 4) Risk management reports were tabled and discussed at the Risk Subcommittee meetings. Committee and Audit Committee of Board. Strategic Risk assessment was held with Board. Strategic Objective: An improved organisational internal control environment. The number of significant internal 20% of all audit findings. During the period under review significant findings made up 83% of all audit findings. findings. Performance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Summary of Financial Information
Performance against budget A number of the previous year’s figures had to be restated due to the work done relating to the audit qualifications raised in 2012/13. The accounting treatment for Sport production costs was also changed to bring it line with the production costs of other “live” productions e.g. News and Radio. Revenue Performance
Company results FY2013/14 FY2012/13 (restated) Sources of revenue Actual Budget Variance Actual Budget Variance R’000 R’000 R’000 R’000 R’000 R’000 TV advertising revenue 3 604 037 3 344 075 259 962 3 329 236 3 788 759 (459 523) Radio advertising revenue 1 580 581 1 589 657 (9 076) 1 473 312 1 398 297 75 015 Sponsorship revenue 498 842 474 399 24 443 410 470 462 990 (52 520) Trade exchange 110 800 121 188 (10 388) 138 694 157 267 (18 573) Gross TV Licence fees 927 882 940 526 (12 644) 913 838 924 267 (10 429) Government grants 196 278 171 319 24 959 262 352 160 161 102 191 Other revenues 109 137 39 810 69 327 87 447 128 230 (40 783) Content and commercial exploitation 36 330 37 121 (791) 32 288 68 794 (36 506) 40 Revenue websites 5 553 1 764 3 789 2 752 5 363 (2 611) Other income 175 310 79 793 95 517 63 210 72 997 (9 787) Total gross revenue 7 244 751 6 799 652 445 099 6 713 599 7 167 125 (453 526)
Total gross revenue for FY13/14 was R445m (6.5%) direct collection costs amounted to R790m, R28m, (4%) higher than budget. This represents an increase of better than budget. Year-on-year net TV licence revenue R531 (8%) compared to the last year. grew by R11m (1%). As per the Broadcast Act, TV licence • T V advertising revenue was R260m higher than revenue may only be used for public broadcast services and budget and improved by R275m (8%) on the last is transferred net of direct collection costs (postage, paper, fiscal. Despite a decline in audiences, TV advertising sms, paypoint and debt collection fees) and overheads performed well because of successful initiatives to (salaries, IT-systems, marketing and internal costs) from the regain advertiser confidence and innovative trading Audience Services division to PBS Radio and TV platforms. mechanisms. • The revenue recognised from government grants for • Radio advertising performed as expected and was educational programmes were higher than budget due to lower than budget by a mere R9m. Radio audience an increase in spending on local educational programmes. continued to improve from last year’s overall share Revenue recognised from grants for the upgrade of outdated of 67.4% to 69.3% resulting in year-on-year revenue analogue technology was lower than budget because of growth of R107m (7%), attributable to the extensive lower than budget investment in capital equipment. audience reach of SABC stations and more effective • Other revenues from mobile services, merchandise sales, trade marketing. facility rentals and TV channel carriage fees were R69m • S ponsorship revenue was R24m higher than budget as higher than budget. Eight months’ revenue and costs for a result of having a more flexible sponsorship policy in the newly launched SABC 24 Hour News channel were not place and improved performance by the Sales Team. The budgeted for. growth on last year was R88m (21%). • The sale of content and programme rights was on target and • T rade exchange revenue was lower than budget by R10m improved by R4m from last year. because of lower performance in TV programme trade • S ABC website content and maintenance improved during exchanges. the year resulting in better than expected revenues. Website • The collection of TV licences was R13m lower in view of revenues doubled from last year. a decrease in the sale of TV sets and consumers being • Other income mainly from the supply of services at special under financial pressure. Gross revenue managed to grow broadcast events resulted in an above budget performance by R14m (1.5%) from last year. Net TV licence revenue after of R95m (a growth of R112m, 178%). Expense Performance Company results FY2013/14 FY2012/13 (restated) Operational expenses Actual Budget Variance Actual Budget Variance R’000 R’000 R’000 R’000 R’000 R’000 Amortisation of Prog. Film and Sport RIghts 1 328 069 1 412 016 83 947 1 418 944 1 619 265 200 321 Impairment of Prog. Film and Sport Rights 9 978 36 (9 942) 8 187 36 (8 151) Net Impairment of Trade Receivables (30 479) - 30 479 2 189 - (2 189) Mobile Revenue Costs 22 519 - (22 519) - - - Broadcast Costs 340 109 481 007 140 898 532 845 512 446 (20 399) Signal Distribution and Linking Cost 554 456 568 993 14 537 515 414 557 220 41 806 Employee Compensation and Benefit Expenses 2 513 718 2 178 888 (334 830) 2 152 765 1 944 849 (207 916) Productivity Gains - (391 757) (391 757) - (480 525) (480 525) Marketing Costs 135 293 152 939 17 646 123 261 210 097 86 836 Revenue Collection Costs 972 021 885 902 (86 119) 913 200 1 042 977 129 777 Professional and Consulting Fees 69 158 97 904 28 746 62 382 182 862 120 480 Personnel Costs 68 212 82 538 14 326 79 765 145 070 65 305 Operational and Administrative costs 481 609 527 737 46 128 447 356 515 676 68 320 Other (profits)/loss (302) 201 503 482 380 (102) Total operational expenses 6 464 361 5 996 404 (467 957) 6 256 791 6 250 353 (6 438) Operational expenses were R468m (8%) higher than budget communication methods e.g. sms, e-mails and the newly compared to the R7m higher than budget spending of last year. Year- introduced TV licence “app” for smartphones. Compared to last on-year expenses grew by R207m (3%) from last year. year the Audience Services division managed to contain the cost The amortised cost of TV, film and programmes and sport rights was of collecting TV licences as it grew by only R2m (1.5%). R84m (6%) lower compared to budget. The accounting treatment of Professional and Consulting fees of R69m were R29m lower than production costs for live Sport events was changed at year-end to budget, year on year expense was R7m more than previous year align with other live productions e.g. Radio and News. Actual costs this was mostly due to increase in audit fees due to prior year were recorded against various other expense items but the budget errors which needed to be re-audited. Legal fees has decreased for live Sport productions of R174m was not re-allocated to those year on year and consulting fees has increased year on year expense items. due to additional accounting services to clear the TV content TV production costs were R16m lower than a budget of R1bn. Year- qualification. on-year TV production costs increased by R17m (2%). During the year Personnel costs were lower than budget by R14m with an local productions cost R754m, foreign productions R208 and current underspending on training of R14m. External courses were affairs productions for News cost R28m. New programmes (1st runs) underspent by R7m and decreased from the previous year. The accounted for 89% of the costs and repeated programmes (2nd or lower than expected spending on Capex resulted in less training 3rd runs) only 11% of the costs. on new technology systems. Spending on the management The rights to broadcast mandated sport events was R104m (45%) development programme was also lower following last year’s higher than budget. Total rights fees were R338m of which R285m focus on this area. was spent on local rights and R52m on foreign rights. Year-on- Operational and administrative costs were R46m lower than year the investment in Sport rights decreased by R103m in view of budget. A number of items were lower than budget. This includes changes in the annual sport calendar e.g. the 2012 London Olympic maintenance (R23m), communication costs (R9m), operating games and AFCON 2013 tournament. leases (R32m) and electricity (R12m). Compared to last year Impairment of programme, film and sport and the impairment of trade other operational expenses increased by R51m (12%). Areas receivables are not budgeted for and relate to broadcast rights that that increased included electricity R1m (1%), municipal rates and expired before the material could be used or where the material was services R5m (27%), software licences R10m (36%), maintenance not suitable for broadcasting. R10m (21%), after hour transport costs R5m (32%), TV stock value adjustments R11m (100%), security R3m (8%) and insurance R2m Broadcast costs were R118m (25%) lower than budget in view of a (25%). decrease in the provision made for music royalties relating to the “Needletime” legal case. The Supreme Court of Appeal ruled that the Capex Budget percentage of revenue to be paid for music royalties be lowered from The total value of approved capital projects was R2bn by year 7% to 3%. The adjustment of the provision also resulted in lower year- end. Value of new projects approved during the year was R539m. on-year spending. A cash budget of R465m (internal and government funds) was Signal and linking costs were lower than budget by R14m as fewer made available for these projects and by the end of the financial low power transmitters were activated during the year due to the year only R104m was used. planned change to DTT transmissions. Expenditure increased year- on-year by 7% due to an annual inflation related increase. Production Budget Non-permanent employee costs grew by R84m (30%) and was Funds made available for TV productions were underspent R69m higher than budget by year-end. Independent contractor fees by R63m (6%). Local programmes received 74% of the total (freelance fees) were R68m (25%) higher than budget and increased production budget. The local content production budget of by R87m (35%) compared to the previous year. In TV, Radio and R763m was underspent by R70m (9%). The investment made by Sport, fees were increased to retain on-air talent. The SABC 24 Hour the SABC in local content production increased by R100m (20%) News channel is produced using independent contractors due to the year on year. limited duration of the supply contract with DStv. The revenue and Foreign content received 26% of the budget. The budget of cost of the News channel were not budgeted for. R237m was overspent by R6m (3%) because of a weaker Rand Permanent employee compensation and benefits were R267m (14%) Dollar exchange rate. higher than budget. Year-on-year employee costs grew by R276m The amount paid for sport rights totalled R450m. This was (15%). Basic salaries increased by R112m (11%). The effective salary R44m (11%) higher than allocated during the budget. Events increase was 9% after wage negotiations. The budget assumed an not budgeted for included the Winter Olympics, ICC cricket and increase of 5.65%. The higher than planned increase also resulted in various soccer events. other staff benefits (e.g. pension fund and leave costs) being higher. Loans Adjustments for the actuarial valuation of post employment benefits Cash levels continued to improve during the year due to the amounted to R91m and were not budgeted for. These valuations improvement in days to collect from debtors and the under increased by R17m from the previous year. Arbitration awards of R9m spending in a number of areas. At the end of the year cash decreased by R2m. balances were above R1.4bn and liquidity ratios positive. The Units were required to increase revenues or reduce expenses during Nedbank loan and some of the digital OB-van leases were paid in the year in an effort to further improve the cash position of the SABC. full during the year. “Productivity gain” targets were allocated to each business unit, but 41 improvements achieved are reflected against the specific revenue or The Audit Disclaimer expense line item. At the end of the previous financial year the SABC received a Marketing costs were R18m (11.5%) lower than budget and R12m disclaimer audit opinion. This required the urgent attention of the (10%) higher than the previous year’s spending. The marketing/ SABC and a two year project plan was implemented that focused revenue ratio improved slightly from 1.8% to 1.9% year-on-year. on the major qualifications that led to the disclaimer. Additional Investment in revenue generation campaigns for TV, Radio, Sport accounting resources were contracted to assist with the volume and the News channel increased after the finalisation of the marketing of work needed to resolve the qualifications of TV content and agency tender. fixed assets. National Treasury was also engaged to assist Revenue collection costs were R86m (10%) higher than budget in with the accounting treatment of TV licence revenue. The Audit view of higher TV advertising and sponsorship revenues. TV licence Committee of the Board met monthly to monitor progress and collection costs were R41m (23%) lower in view of lower than budget provide support. The table on page 17 indicates the work done revenues and saving made on paper and postage by using cheaper during year one of the plan. Performance South African Broadcasting Corporation [SOC] Ltd | | SABC Annual Report 2013|14
Revenue Collection Commercial Enterprises Compliance with Licence Conditions
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Presenters of our popular magazine show Top Billing.
Group Sales Key strategic initiatives included operating model improvements to ensure the segregation of duties within Commercial Enterprises had a successful year in terms of Commercial Enterprises, the establishment of a Business revenue performance, more streamlined operations, and Intelligence unit, and more robust and effective governance. improved governance. In line with the strategic objective of restoring the integrity of Year-on-year revenue growth of 9% was achieved through the SABC brand and reputation, SABC Marketing appointed classic advertising and sponsorship and together with creative agencies to position the SABC and its sub-brands tighter credit management ensured an improvement in more prominently. SABC working capital. The healthy revenue performance The launch of the SABC 24 Hour News Channel on DStv was in spite of the increasingly fragmented audiences and on 1 August 2013 provided Group Sales with an additional the competitive South African media landscape in which the platform from which to generate revenue. Advertising sales SABC had to compete. began in September 2013 and marked the start of innovative The revenue achievement was against the backdrop of the Group Sales revenue strategies and trading models that will SABC having embraced its public service role fully in covering cater for the advent of DTT and an SABC multi-channel TV the passing and funeral of former President Nelson Mandela and multi-platform environment. in December 2013. As a sign of respect, commercial activity The independent audit findings in April 2013 that the integrity was suspended across all SABC services for an initial of the TAMS audience research had been compromised period of two days, after which the gradual resumption of resulted in the subsequent resignation by the National advertising was limited to ensure it was in keeping with the Association of Broadcasters (NAB) from the Board of the sombreness of the nation still in mourning. SAARF. The NAB, supported by the SABC and other The more competitive environment saw a further decline in broadcast members, initiated various work streams to SABC TV audience share. Radio audience share remained establish a credible new audience measurement structure. stable. Digital media platforms did not achieve their full Changes to the TAMS panel included the expansion of the revenue potential. The primary hurdle was insufficient panel from 1 800 households to 2 800 households (effective tangible audience attraction by the SABC digital media weekly reporting sample of 2 500 households), which platforms. resulted in improved TV audience research. Delivery on the Mandate Compliance with Licence Conditions
SABC R adio require that the Public Broadcasting Service radio stations broadcast a weekly average of 40% South African music with For the 2013/14 financial year, SABC Radio continued to show the exception of Lotus FM, which has to deliver a minimum steady growth, despite the rapidly changing environment with quota of 20%. The commercial stations have to broadcast 25% new entrants in the media landscape including the digital South African music. media. The relentless investment on audience research aimed at thoroughly understanding audience behaviour and drivers for % Local Music consumption, coupled with recruitment of top talent and on-air Average % ICASA % product improvements, remain Radio’s recipe for success. Station FY 2013/14 Quota Delivery as per the Public Service Mandate PCS Radio programming is underpinned by the following: 5FM 34 25 • T he National Development Plan; Good Hope FM 34 25 • South African Constitution: Bill of Rights; METRO FM 34 25 • Regulatory Framework: ICASA licence conditions; PBS • Legislative Framework: The Broadcasting Act; SAfm 53 40 • South Africa’s Five National Priorities: Tru FM 64 40 - J ob creation; Lotus FM 25 20* - Health; RSG 85 40 - Education; Munghana Lonene FM 71 40 - R ural Development; and Lesedi FM 74 40 - Fi ght Against Crime. Radio 2000 68 40 • A need to respond to the triple challenge of: poverty, X-K FM 80 40 unemployment and inequality; Umhlobo Wenene FM 68 40 • The SABC mandate to inform, educate and entertain; and Ligwalagwala FM 69 40 • Mill ennium Developmental Goals. Motsweding FM 62 40 PBS Radio delivers on weekly basis, programmes that address Phalaphala FM 68 40 the challenges facing the nation and that promote nation- Thobela FM 63 40 building and social cohesion. These themes are aligned to the Ukhozi FM 63 40 above-mentioned programming drivers and include but are not Ikwekwezi FM 71 40 limited to the following: • M oral Regeneration; *ICASA has reduced the music quota of Lotus FM to 20%. • H ealth; • Education; • Job Creation; • H uman Rights; • X enophobia and Racism; • Cr ime and Stability; • A rts and Culture; • S ports and Recreation; • Labour; • Heritage and Tourism; • A frican Renaissance; and 43 • Sc ience and Technology. Radio Performance of South African Music SABC Radio continues to drive the development of home grown artists and their music through extensive airplay, interviews, inclusion in performance line-up at events and through music awards ceremonies like the annual METRO FM and Xitsonga Music Awards ceremonies. The SABC has generally performed above ICASA’s minimum requirements for South African music. The list below provides Mafikizolo performs a medley of their hits during a annual average music percentage per station. The Regulations performance at the 2014 METRO FM Music Awards. Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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In studio with RSG Radio Presenter, Lynette Francis during her programme Praat Saam.
ICASA Genre Licence Conditions: The Performance of the SABC PBS Radio Stations against ICASA genre licence conditions News (Daily) Curr Aff (Daily) Ikb Education Children Drama Station Mon-Fri Sat Sun Mon-Fri Sat Sun Weekly Weekly Weekly Weekly
ICASA Quota 60 60 60 60 60 60 180 300 60 150
SAfm 99 95 94 332 332 332 1 443 376 107 217 RSG 112 64 61 207 86 71 1 729 325 80 292 Munghana Lonene FM 80 80 71 121 88 70 1 267 343 67 143 Lesedi FM 88 61 61 200 83 71 956 313 98 162 Ikwekwezi FM 129 71 70 130 62 64 1 128 345 129 268 Ukhozi FM 87 67 68 169 74 91 2 574 286 155 189 Phalaphala FM 85 85 76 115 78 60 2 541 310 147 221 Ligwalagwala FM 99 60 60 112 60 60 1 870 353 375 219 Motsweding FM 104 61 60 116 79 65 1 616 291 81 146 Thobela FM 196 110 80 120 60 60 1 750 420 420 160 Umhlobo Wenene FM 84 79 74 154 87 74 890 281 382 157
ICASA Quota 60 60 60 60 60 60 180 No quota No quota 150
Lotus FM 74 74 74 91 84 65 611 - - 184
ICASA Quota 30 30 30 30 30 30 180 300 15 No quota
X-K FM 73 50 50 110 55 55 1586 731 572 -
ICASA Quota 60 60 60 30 30 30 60 120 30 No quota
Tru FM 74 60 60 53 30 60 2022 315 50 -
*Radio 2000 is a facility service with no local content quotas Use of Official Languages on Radio SABC Radio delivers broadcasting in more than the 11 official languages as some stations also broadcast in languages of minority groups. PBS Stations: • X-K FM broadcasts equally in !Xintali and Khwedam; • Lotus FM broadcasts mainly in English with daily broadcasts in Urdu, Tamil, Gujirathi and Hindi. PCS Stations: METRO FM, 5FM and Good Hope FM broadcast as prescribed in English. Programming Highlights SABC Radio remains the voice of our rainbow nation and continues to educate, inform and entertain the majority of South Africans in their mother tongue. In an effort to promote unity and social cohesion, SABC Radio launched its campaign of celebrating ‘20 Years of Inspiring the Local artists join Radio 2000 in singing for Madiba. Nation’ in line with the country’s commemoration of 20 years of freedom. Both stations reached new record high weekly audience levels during this period. METRO FM exceeded the 6.6 million mark During the final quarter of the period under review, SABC in a RAMS* survey, while Ukhozi FM shot past the 7.7 million Radio ensured the promotion and entrenchment of democracy weekly listenership. Collectively these two brands reach more through voter education especially for the ‘born frees’ as well as than 14 million listeners per week. Umhlobo Wenene FM also those people who had never voted. Radio, in partnership with reached new heights reaching over 5 million weekly listeners. News and Current Affairs, held public debates with the different Lesedi FM has broken through the 4 million audience barrier. political parties as they launched their election manifestos. The SABC Radio’s successes continue with eight out of the top 10 following represents but not limited to some of the programming list of favourite stations nationally coming from the SABC stable. highlights Radio delivered during the financial year under review. Radio content promoted social cohesion by celebrating major The following table represents a summary of week cume audience performance by station for the measurement period October to calendar events such as: December 2013 as per SAARF RAMS: • The January 8th address of the ruling party; Week’s Audience Performance • The State of the Nation Address and the budget speech Station Oct – Dec 2013 (000) broadcast live across all the 15 PBS Radio stations; PCS • H uman Rights Day; METRO FM 6 532 • F reedom Day Celebrations; 5FM 2 021 • W orkers Day; Good Hope FM 682 • Youth Day; PBS • N elson Mandela Day; and Ukhozi FM 7 563 Umhlobo Wenene FM 4 359 • W omen’s Day. Lesedi FM 4 024 Radio has successfully carried sporting codes of national Thobela FM 3 288 importance (soccer, cricket, rugby and athletics) through Motsweding FM 3 387 promos, interviews, the build-up and live commentary together RSG 1 917 with review of matches. Munghana Lonene FM 1 074 The SABC’s flagship of educational programming highlighted Ligwalagwala FM 1 537 both curriculum-based and informal educative topics from a Ikwekwezi FM 1 668 wide range of social, political and economic issues. Phalaphala FM 907 Tru FM 243 Key Achievements SAfm 558 The South African Audience Research Foundation (SAARF) Lotus FM 329 report states the number of adults aged 15+ to be 37 214 000. Radio 2000 868 X-K FM (not reflected in RAMS) 6 Radio reaches 33 176 000 adults aged 15+ on a weekly basis 45 (RAMS Aug-Dec 2013). * NOTE: Source: SAARF RAMS (October-December 2013). SABC Radio exceeded the national audience share target with Looking Forward a share of 69%. This represents an increase from the previous year’s share of 67.4%. At 59.1% PBS Radio contributed the The SABC has begun the programme of expanding the FM largest share towards the overall SABC share performance transmitter networks in order to deliver fully on its mandate. This while PCS delivers 9.6%. It should be noted that from a public will see the SABC Radio services being accessed by more South value perspective, PBS Radio’s audience share is under- Africans in languages of their choice. represented as the portfolio broadcasts programmes to SABC Radio eagerly awaits the dawn of a new era in digital children under the age of 15 years is not measured. SAARF only broadcasting and the resulting opportunities this will create for measures audiences from 15 years upwards for commercial broadcasters and our consumers. Radio will continue to provide advertising purposes. Most of the SABC Radio stations posted all citizens of South Africa with content that is relevant, impactful positive audience growth during the financial year but the two and aimed at changing lives. We will strive to form part of all our radio giants Ukhozi FM and METRO FM need special mention. consumers lives along their journey from cradle to grave. Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Espresso, the morning breakfast show presenting team.
SABC TV The language quotas for the SABC1 and SABC2 are: During the year under review, SABC TV continued to be the • A minimum number of hours of programming in languages 46 most watched TV channels in the country, effortlessly meeting other than English, excluding marginalised languages, in prime their public service mandate and delivery of public value. The time (18:00 to 22:00); network continued to dominate the broadcast landscape by • A minimum number of hours of programming in marginalised retaining 53.6% of all adults audience share in the country languages, in prime time; during prime time and 49% of all adults audience share during the performance period. • A minimum number of hours of programming in languages other than English, including marginalised languages, in prime Compliance to Licence Conditions time; and The ICASA quotas serve as a yardstick for the Regulator • A minimum number of hours of programming in languages to measure the SABC’s delivery against its public service other than English, including marginalised languages, in objectives as stipulated in the Broadcasting Act. performance period. TV Performance for Local Content ICASA’s Quota The channels generally complied with the licence conditions Launguage Delivery Current Performance with a notable over-performance on local content by SABC1 and SABC2 during the 2013/14 financial year. During TV Performance Period Current performace vs ICASA’s quota In terms of the licence conditions, the Corporation must provide the following information to ICASA, in respect of its TV channels 41:00 on an annual basis: SABC1 56:12:51 • The different genres broadcast in prime time; Other than English • Percentage of South African TV content; and SABC2 41:00 • The use of each official language including minority languages. Other than English 42:29:32 The channels continue to strive towards providing prime time quality entertainment for the diverse language and cultural During Prime Time groupings of South Africa. Current performace vs ICASA’s quota SABC1 Full Day Total other 18:12 SABC Local Content Prime Time than English 14:53 ICASA’s overall local content quotas: 55% for PBS and 35% for PCBS 1:48 Marginalised 0:26 74.78 SABC1 77.25 16:24 Other than 14:26 61.59 English SABC2 78.82 SABC2 37.42 19:36 SABC3 Total other 45.50 than English 19:41 1:54 Average % Marginalised 1:35 Language on TV 18:06 The SABC TV channels exceeded their targets on local Other than 18:05 language for languages other than English during performance English period (05:00 to 23:00). Delivery on marginalised languages Average hours/min per week continues to be a challenge, due to a lack of capacity within the industry to delivery thereon. Source: Broadcast Schedules (1 April 2013 - 30 March 2014) Our local soap production 7de Laan featured on SABC2.
Progr amming Highlights TV continued to play a key role in nation-building by providing South Africans with trusted, relevant information about national Audience loyalty remains strong, particularly on local dramas, and local developments, these include: with 19 out of the 20 most watched programmes being from SABC TV. The table below depicts the performance of SABC • Live broadcast on SABC2 of President Jacob Zuma dramas. addressing the nation, marking Women’s Day; • South Africa’s farewell to one of its most revered and distinguished judges, Chief Justice of the Constitutional Court, Performance of SABC Dramas Honourable Justice Pius Langa. His funeral was broadcast Share live on SABC2; Ranked Programme Title Channel Genre % • SABC2 partnered with the Department of Education to produce and broadcast live the National Teaching Awards; 1 Generations SABC1 Soaps 65.4 • The Miss World Special premiered live on Saturday 28 2 Generations SABC2 Soaps 59.4 September 2013 at 14:00 and was repeated in prime time at 3 Streets of Mangaung SABC1 Drama 51.1 19:30; 4 Muvhango SABC1 Drama 54.2 • SABC Education hosted the matric results line and received over 390 000 sms’s from which 250 000 learners opt-in to 5 Ngempela SABC1 Drama 49.3 receive communication from SABC Education; 6 Amaza SABC1 Drama 47.8 • Roughing It Out and Takalani Sesame received certification 7 Hola Mpinji SABC1 Education 42.4 of recognition as quality programming for children at the 8 InterSEXions SABC1 Drama 43.9 Prix Jeunesse in Munich. The shows will be included in their catalogue and the Media Bar of the festival; 9 After Nine SABC1 Drama 40.2 • I am Woman was selected for screening at the Sonke Gender 10 Soul City SABC1 Drama 41.6 Justice Film Festival; 11 Society (Drama) SABC2 Drama 43.3 • The Food and Agriculture organisation of the UN Regional 12 Society SABC1 Drama 42.5 Conference for Africa requested that SABC Education nominate and send a representative for the education series 13 Tempy Pushas SABC1 Drama 40.8 Living Land to attend the 2014 Conference to be held in 14 Loxion Lyric SABC1 Drama 42.0 Tunisia; 47 15 Shakespeare in SABC1 Drama 41.3 • Live Broadcast of The Public Protector’s Nkandla report; Mzansi • Broadcast the Independent Electoral Commission (IEC) Code 16 Big Mommas: Like eTV Movies 50.9 of Conduct; and Father Like Son • Broadcast the South African Reserve Bank Monetary Policy 17 Ugugu no Andile SABC2 Drama 40.3 Committee (SARB MPC) 2014. 18 Skeem Saam SABC1 Drama 46.3 Key Achievements 19 Untold Stories: Love SABC2 Drama 41.3 As part of the SABC’s strategy to retain and grow audiences Stories in a Time of in a multi-channel environment, SABC1, SABC2 and SABC3 HIV and AIDS managed to successfully revive and revamp their programming 20 Entabeni SABC1 Drama 40.8 pillars, introducing fresh titles from the 2011 Request for *Source TAMS 2013/14: Top 20 Programmes Across Channels performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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Local drama production, Geraamtes in die Kas.
Proposal (RFP) Book in genres such as drama and comedy, to action to encourage South African youth to recognise that informal knowledge building and entertainment programming. multilingualism is a catalyst for a better democratic change. Languages used in the homes of South African citizens are a Adherence to and maintenance of the SABC’s editorial policies valuable resource for social cohesion and economic success of has seen SABC Religion meet with a number of religious the rainbow nation. communities such as the Independent Forum for Faith and Media (IFFM), Islamic community, National Interfaith Council SABC1 partnered with Leading Women, a company dedicated of South Africa (NICSA), the Jewish community and Hindu to inspire and empower women in the country. A seminar was community on the current editorial policies. hosted in partnership with SABC1 to discuss Women and Entrepreneurship inspiring young South African women to Through SABC Education’s cross collaboration with PBS Radio, become entrepreneurs in contemporary South Africa. A viewer 9 x 24 minute financial awareness programmes were produced competition was held on Selimathunzi giving four young women and broadcast across nine of the SABC PBS Radio Stations in winners a chance to attend the seminar. a partnership with the Financial Services Board. SABC partnered with the Department of Higher Education to Looking Forward execute an awareness campaign targeting learners who did SABC TV business strategy is aimed at remaining competitive, not receive admission to Institutions of Higher Learning to use effective and sustainable in the increasingly competitive alternatives like Further Education and Training (FET) Colleges environment. The Division has identified the following key areas and Universities of Technology, in January and February 2014. of focus as it moves into the new financial year: SABC Education rolled out the promotional campaign for the • Implementation of the revised TV operating model; annual Baba Indaba Expo across the three channels. The Expo • Enhancing the content value chain through operational th th took place from the 25 to 27 of October 2013 at the Sandton efficiency; Convention Centre. • Revised channel value proposition; SABC Education, in partnership with National Youth Skills • Content commercialisation; Development Programme (NYSDP), attended the Macufe • E nhanced marketing strategies; and Mangaung African Career and Cultural Festival from 11th to 13th October 2013. • Implementation of a multi-platform management strategy. SABC1 partnered with the Pan South African Language Board (PanSALB) for Heritage Month. The campaign encouraged the youth of South Africa to be proud of their heritage, by speaking their mother tongue in a campaign themed ‘Free your Language, Free your Heritage’. The campaign was a call Sabc News And Current Affairs The News and Current Affairs Division is a content provider for all the 18 SABC radio stations, four TV channels and digital media. The Division has extensive news capabilities and resources with nine bureaus across South Africa and three international offices in Zimbabwe, Kenya and the United States of America. Investment in technology has given SABC News extensive gathering capacity. The service is created in terms of the SABC Charter in the Broadcasting Act and follows the prescripts of the Broadcasting Complaints Commission of South Africa’s (BCCSA) Code of Conduct and the SABC’s Editorial Code. Compliance to Mandate In terms of the Broadcasting Act, the SABC is obliged to broadcast programming that, amongst others: • Reflects South African attitudes, opinions, ideas, values and SABC Ndebele News presenters. artistic creativity; • Displays South African talent in educational and entertaining broadcast live, and took precedence on all SABC platforms, programmes; which resulted in programming interruptions; and • Offers a plurality of views and a variety of news, information • T he confirmation programming which was carried on all SABC and analysis from a South African point of view; and platforms was followed by special breaking news bulletins, • Advances the national and public interest. regular news updates, obituary, documentaries, in-depth The uniqueness of South Africa’s history also drives the and extensive coverage of all aspects on life of Mr Mandela, functionality and focus of the Division. This is recognised in its memorial services and the funeral. Editorial Policies which include the following directives: For all its efforts the SABC received formal and informal • To heal the divisions of the past and establish a society based accolades for the excellent content and facilities it provided on democratic values, social justice and fundamental human during the broadcast of the activities that were linked to Mr rights; Mandela, and they range from local viewers, the SABC’s • T o improve the quality of life of all citizens and free the potential opposition broadcasters to the many international clients (EBU, of each person; and CNN, BBC, CCTV, et al) who broadcast on TV, radio, and digital media. The success of delivering on the project is attributed to • T o build a united and democratic South Africa able to take the professional and expert cooperation between the various its rightful place as a sovereign state in the family of nations. SABC Divisions. News and Current Affairs Performance On Radio the Division produced 1 255 radio news bulletins in Informed by these imperatives, the News and Current Affairs all the 11 official languages on 18 radio stations every week. Division produces on a daily basis 12 TV news bulletins and In this regard, SABC News and Current Affairs plays a critical 10 TV current affairs shows on SABC1, SABC2 and SABC3 role in providing high quality, reliable and unbiased news and every week, while on its newly launched SABC 24 Hour News current affairs services within South Africa. Significant growth channel the Division produced 16 304 minutes of news and in the popularity of SABC News Online demonstrates the cross 6 336 minutes of current affairs programming per month. Our platform demand for SABC news content. This approach total emission time on TV increased this year from 2 541:15:58 has made it possible for citizens to find SABC news content to 2 980:48:50 mainly because of former President Mandela’s everywhere, any time. mourning period and funeral and other broadcasts related to it. Key Achievements Programming Highlights In a rapidly changing media environment, where new For the funeral, the SABC had to fulfil two functions. The first technologies are being embraced by audiences with astonishing function was that of being the host broadcast service provider speed, the launch of the SABC 24 Hour News channel has and the second function was that of the public service mandate. gone a long way in ensuring that the SABC maintains a strong connection with audiences and keep pace with their changing The role of the host broadcaster required the SABC to manage TV production for all of the public events associated with the funeral for the benefit of international broadcasters and distribution by Sentech to the rest of the world. The second role was 100% for the consumption of the 49 people of South Africa. These were the live events associated with the funeral, and the production and treatment of those events on air. The other aspect was content provision to mark the solemn occasion, which the nation was going through. The pillars of our coverage included the To the left: Official opening of the SABC 24 Hour News Channel by the guest of honour the Prime Minister following: of Lesotho, Honourable Tom Thabane.
• T he President’s official announcement To the right: President Jacob Zuma, former Minister of Communications, Mr Yunus Carrim and SABC Board of the passing of Mr Mandela which was Chairman, Ellen Tshabalala signing the National Anthem at the Launch of the SABC 24 Hour News Channel. Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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News and Current Affairs program Special Assignment Presenter Ashraf Garda.
needs. The launch of the SABC 24 Hour News channel has Since its launch last year the channel has overtaken well ensured that the Division is able to: established news platforms such as Sky, CNN, BBC and Al • Deliver compelling News and Current Affairs that is informative, Jazeera. While our channel has increased its audiences month educational and entertaining on a 24 hour basis; on month and has taken a second position on the satellite platform, the channel has also managed to increase its average • Provide an African perspective on global issues; evening/night time audience between 18:00 and 24:00 by 34% • Provide a platform for national dialogue and nation building; in the last quarter, a sure indication that the channel is moving and in the right direction. • Enhance the SABC network capability to attract and retain audiences. Looking Forward It has also ensured that SABC News and Current Affairs exploits SABC News and Current Affairs regards the success of the last its expanded presence across all platforms and its network of financial year as a foundation on which to build for the future. international bureaus and cross media journalists. It has built on As the new financial year unfolds, the channel will increase the the trust and authority of SABC journalism that distinguishes it speed at which it breaks news as well as being a reference point in a crowded news market. for any news development in South Africa and beyond. The Division also plans to continue to act as a platform for the Average Evening/Night Time Audiences commemoration of national events and celebrations. In this Between 18:00 and 24:00 regard, SABC News and Current Affairs will continue to bring to Jan the nation the following key national events: Feb 5 988 • The State of the Nation Address (SONA); March 6 564 SABC News • Budget Speech; 7 090 • Human Rights Day commemorations; 19 500 eNCA 19 750 • Heritage Day celebrations; 25 104 • Youth Day; 1 338 • Women’s Day; 1 130 BBC World • The awarding of National Orders; and 2 157 • T he Nelson Mandela Foundation Annual Lecture, amongst 1 445 others. CNN Newa 1 746 These initiatives link directly to the Division’s preparations for 4 965 South Africa’s 20th anniversary of democracy in 2014. As part of promoting democracy, the Public Broadcaster is obliged 2 063 to provide extensive coverage of elections and to ensure that AL Jazeera 1 760 the public receive immediate and comprehensive information. 1 998 Since 1994 SABC News and Current Affairs has established an outstanding track record for its comprehensive and unbiased 3 923 coverage of the elections. Sky News 4 462 7 026 SABC Sport Compliance and Licence Conditions The current ICASA Regulations on Sports of National Interest that was gazetted on 7 April 2010 (No.330797) lists the following sporting codes as national sporting events: Listed Events Summer Olympics Paralympics All Africa Games Commonwealth FIFA World Cup Africa Cup of Games Nations IRB Rugby World Cup ICC Cricket World ICC T20 Cricket Cup World Championship Comrades Marathon Two Oceans Mara- Super 15 Rugby South Africa welcomes home their Olympic Heroes. thon COSAFA Cup CAF Champions CAF Confederations continent, as Pirates reached the finals of this respected African League Cup Telkom Charity Cup MTN 8 Cup Telkom Knockout tournament. The Orlando Pirates match against Zamalek on Nedbank Cup Currie Cup MTN 40 (cricket) SABC1 attracted over 2.6 million viewers. The Confederations Cup took place in June and viewers were Working within the confines of a limited budget and increasing treated to 16 live matches from Brazil: 14 on SABC1 and two on financial challenges on sports rights, SABC Sport effectively SABC2. The coverage concluded with a live broadcast of the final complied with ICASA’s mandate, with 95% of all sports acquired match between Brazil and Spain on both TV and radio. during the 2013/14 financial year being sports of national interest. SABC Sport partnered with the Department of Sport and Recreation for the broadcast of the prestigious 2013 SA Sports Sport Programmes Awards that took place in Sun City. Sun City was also the venue for the Nedbank Golf Challenge, which was broadcast on SABC’s Excluding magazine programmes and minor once-off programmes four radio stations, namely Motsweding FM, Radio 2000, RSG, Sport Genres and SAfm. Other sports awards broadcasts included the PSL 2% Awards and the Gauteng Sports Awards. 2% 2% 3% 2% 5% Key Achievements The rights to selected matches for the 2013 International Cricket Champions (ICC) Trophy were secured. On radio, Radio 2000 covered the matches with ball-by-ball commentary. SABC Radio also covered the Protea’s outbound tour to Pakistan, 30% 59% 95% with ball-by-ball commentary on Radio 2000 and live reports on SAfm, RSG, Tru FM and all nine African Languages Stations (ALS). SABC Radio also assisted in the delivery of the Springbok Rugby Tour to the United Kingdom and France. In order to meet mandate delivery, SABC Sport acquired the rights to the Pakistan, India and Australia cricket Inbound Tours. National Interest Soccer Beach Soccer Cricket broadcasts concluded with the live transmission of the Cricket Winter Olympics Other South African matches for the Twenty20 World Cup held in Rugby Tennis Bangladesh. Athletics The acquisition of exclusive rights from Athletics South Africa (ASA) enabled the SABC to broadcast eight hours of live Programming Highlights Comrades Marathon action on SABC2 as well as live digital streaming, the latter receiving an overwhelming response from During the year under review, the SABC was the home and outside the borders of South Africa. platform of the 2014 Orange African Nations Championship (CHAN) held in South Africa. All 32 matches were broadcast live Negotiations were also concluded for the rights to broadcast the on SABC TV channels between January and February 2014. Mandela Day Marathon on TV, radio and all SABC digital media Other notable soccer productions included the international platforms. Another marathon making its debut on SABC was friendly matches between Bafana Bafana and Swaziland, Bafana the inaugural Legends Marathon held in East London where two Bafana and Spain and the production of an entertaining match SABC radio stations took part, Umhlobo Wenene FM and Tru FM. between Kaizer Chiefs Legends and Liverpool Legends. SABC Sport acquired the rights for the delayed broadcast of One of the highlights was when sporting fans joined hands the Springboks 2013/14 season, which included three inbound in making history at the inaugural Nelson Mandela Sports and matches against Italy, Scotland and Samoa. Similar rights were Culture Day, to celebrate and honour the former President, Mr also secured for the Inbound Rugby Tour against Australia and Mandela. For the first time in South African history, soccer and New Zealand. All matches were broadcast live on radio. rugby were played on the same day and at the same venue. The During the year under review, rights were concluded for mandated 51 live broadcast of the triple header, made up of a Legends match, and special events, which include the 2014 Winter Olympics the international friendly between Bafana Bafana and Burkina in Sochi, the 2014 Youth Games in China, the 2016 Summer Faso and the Castle Rugby Championship match between the Olympics in Rio de Janeiro and the 2014 Commonwealth Games Springboks and Argentina was a huge success. in Scotland. Sub-licences were acquired for the 2014 ICC Celebrations began a week prior to this event, with an international Twenty20 tournament in Bangladesh and Super Rugby for radio. match between Bafana Bafana and Nigeria attracting an Looking Forward impressive 3.7 million viewers for the SABC. In a public sphere where there are a variety choices in the During the period under review, soccer continued to be the most broadcast arena, SABC Sport will continue to fulfil its public popular and dominant sport on SABC platforms. The acquisition mandate of bringing audiences together for sporting events of of the CAF Champions League rights enabled SABC Sport to National Interest as well as events of a Public Interest, on a free- broadcast 13 Orlando Pirates matches at home and across the to-air platform. Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
The following key events have been planned for broadcast on TV and radio for the forthcoming financial year: • T wo Oceans Marathon • FIFA World Cup 2014, Rio de Janeiro Technology • Castle Rugby Inbound Tour • Co mrades Marathon • Durban July During the year under review, the SABC continued • Commonwealth Games, Glasgow to embrace the transformation towards digital technologies that will improve the lives of South • C ricket Inbound: SA vs. West Indies African citizens. • Africa Cup of Nations, Morocco At the same time, the ICT industry continued its • ICC Cricket World Cup 2015, New Zealand and Australia journey towards digital convergence and a citizen • PSL Soccer Matches centred approach. This will enable access to multiple • All Africa Games, Brazzaville technological platforms from single devices i.e. mobile devices, vehicle entertainment systems and • Ba fana Bafana matches connected TVs/set top boxes/gaming consoles that Radio will continue to play a pivotal role in covering sport of National manage the entire home entertainment experience. Interest outside the borders of South Africa and rights have been secured for the: The SABC has to respond to environmental changes in order to remain relevant. In keeping with this, the • Protea tour to Sri Lanka SABC evolved to improve the service offering, improve 52 • Protea tour to Zimbabwe for the triangular series against Zimbabwe access to its services and create an audience focus and Australia foundation on which broadcasting exists. • Protea tour to New Zealand and Australia Innovations • S pringbok tour to New Zealand And Australia The Division successfully implemented infrastructure • Cu rrie Cup and system upgrades to be able to carry the services, • Super Rugby (home and away) in preparation for DTT migration. • N edbank Golf Challenge 2014 The project planning of building the Storage Area SABC Sport will continue to provide viewers and listeners with Network (SAN), digital play-out centre for DTT and compelling sport coverage. Rights have already been acquired for the the Digital Library got underway during the 2013/14 IRB Rugby World Cup 2015 to take place in England as well as the financial year and they are targeted for completion in Summer Olympics in 2016 to take place in Rio de Janeiro. the next financial year. Other projects to improve the DTT offering are scheduled to commence in the next financial year. The SABC, in conjunction with NAB, commenced Universal Access with the Digital Audio Broadcasting (DAB+) trial. The SABC continues to work closely with Sentech to enable more The system assesses the efficiencies of distributing citizens to have access to its services. The period under review saw multiple audio streams from one multiplex carrier. the successful rollout of Low Power Transmitters (LPT). The aim was to The technology is spectrum efficient and allows more provide more citizens with access to SABC services, particularly those services to be broadcast in the currently spectrum in the rural areas, whilst reducing the costs associated with transmitting congested metropolitan areas. the signal. The SABC also completed the mobile TV trial, which is The solution lay in Direct to Home (DTH) satellite services, as per the the video alternative to DAB+. The success of both trials Cabinet approved Broadcast Digital Migration (BDM) policy. DTH is accorded the SABC an ability to compete fairly against focused on providing the SABC services via a satellite platform ensuring rival alternatives presented by telecommunication 100% availability of all services, irrespective of where the citizen resides. companies. This means that the SABC now has an The DTH project is in its planning stages. increased capability using the very high frequency The expansion and optimisation of the current FM transmitter network (VHF) spectrum after analogue switch-off. In essence, is also in its planning stages and expected to provide more citizens with the SABC is ready for the migration. access to radio services in the next financial year. Internet Protocol Portfolio In a bid to increase its audience share, the SABC continued to work on new and appealing methods Industry Development of delivering content during the period under review. In 2004, the SABC developed a Policy and Procedure Manual for Though there is still more work to be done, some Local Content. The Policy identified three key priorities with respect to successes were registered. the development and transformation of the local production industry. A new Internet Service Provider (ISP) was appointed The policy has been reviewed in light of industry trends and national during the 2013/14 financial year. The virtual objectives and a TV Transformation Charter has been implemented. environments and connected workflows i.e. content The Charter ensures greater emphasis on Broad Based Black delivery were activated during the period under review. Economic Empowerment (BBBEE) and Preferential Procurement Policy With the advent of streaming of content from existing Framework Act (PPPFA) best practice. To further strengthen growth radio stations in real time on the internet, the SABC and transformation of the independent TV production industry, the TV website’s capability was improved during the 2013/14 division is ensuring compliance by all its content service providers. financial year to allow for this aspect. The Corporation SABC TV has concluded a three year training and mentorship is now on par with industry players in terms of versatility partnership with the National Film and Video Foundation (NFVF). In total, of platforms for providing content. the programme will provide an opportunity for 90 people comprising of An important innovation for the SABC during the year 45 women and 45 youth through the production of their ideas. Twenty under review was the setting up of the Research and films annually will be broadcast on SABC1 in its Open Window slot. Development unit under the Technology Division. The Inside one of our TV Outside Broadcasting (OB) Vehicles. unit will focus on technologies that directly impact on the Achievements audience experience. The unit will source and conduct The highlight of the Technology Division during the trials of IP content delivery and Video on Demand (VOD) period under review was the provision of the world class technologies, which when successful, will be launched equipment, facilities and skills during the coverage of the in the next financial year. passing of Mr Mandela and providing the digital feed to Digital Terrestrial Television all international media houses for the events. (DTT) The rebuilding of the fire damaged Henley studios and the adjacent administrative blocks had begun during During the period under review, the SABC completed the year under review. During the process of restoring its readiness plans for DTT migration. Infrastructure and the facilities, productions that were housed in Henley systems were put in place to broadcast the existing and studios remain on course and a 99.9% of the on-air future TV channels and radio stations. broadcast target was achieved. This contributed to The 2013/14 financial year saw the successful conclusion the audiences at home viewing an uninterrupted, of projects relating to the: seamless, entertaining, informing and educating • DTT set top box user interface; programming as usual. • D TT Electronic Programme Guide production system In addition, to the above, the SABC produced further and integration into the TV scheduling system (TV high quality and ground breaking productions BMS); which included the Orange 2014 African Nations • Trial of interactive programmes for the DTT platform; Champions as the host broadcaster and the installation of systems and infrastructure towards • F inalisation of the free-to-air Rules of Operations the launch of the SABC 24 Hour News channel. Manual; • Upgrading of the DTT head end from eight standard Looking forward definition channels to 12 standard definition channels Technology Division has identified the following and a high definition channel; key areas of focus for 2014/15 • B usiness cases developed for sub-title systems, • Prioritisation of digital migration project and to upgrade of DTT head end to accommodate additional ensure seamless launch of digital broadcasting four HD channels as well as redundancy measures; services on DTT as well as DTH platforms; and • Conclusion of the DTT tariffs negotiations with • Information request for the digital operations centre. Sentech SOC and DTT rules of operations with In collaboration with the South African Bureau of the broadcasters; Standards (SABS), the SABC played an active role in • The licensing and the rollout of analogue the development of SANS 862 STB standards, which FM transmitters to increase the terrestrial was published in December 2013. In addition, the SABC footprint for FM radio; 53 worked with other free-to-air broadcasters to finalise the • Facilitation of the Digital Audio Broadcasting South African standard for interactive applications on (DAB+) trial with NAB, Sentech and broad- the DTT platform. casting industry players; The signal distribution tariffs and policy direction that • Development and implementation of a will guide Set-Top-Box (STB) control are some of the multiplatform infrastructure and a multi- few issues that need resolution before DTT switch on. playout capability to suit varied access During the next financial year, the SABC will continue formats; to work with stakeholders to address the challenges • Implementation of a New Media Policy refered to above, improving the existing infrastructure, to enable a sustainable Internet Protocol complete the DTT laboratory, develop the digital Portfolio; and operations centre and build on the successful trial held to test the technology readiness to stream video content • Enhancement of Real Estate and on the internet. Logistics, TVOB and Talent Management strategy. Performance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Marketing Initiatives
54
Rebranding our Outside Broadcast (OB) Units.
Building the SABC Brand of the TV on-air transversal imaging, the 2013 AFCON During the 2013/14 financial year, SABC Marketing campaign, Mandela campaign, Women and Heritage continued to position the SABC favourably both internally months’ campaigns. and externally to build and restore the corporate During the last quarter of the period under review, the brand reputation by, amongst other strategies, driving SABC rolled out its ‘20 years of inspiration’ campaign transversal support for all SABC sub-brands to assist in using its extensive audience reach, on highlighting the meeting audience share and revenue targets. achievements in the ‘20 years of democracy’. Critical to the marketing of brand SABC and its Radio Other projects included the marketing of the SABC 24 and TV brands, has been the appointment of advertising Hour News channel 404 on DStv. The second phase of agencies. On the 2nd September 2013 the SABC the campaign (outdoor) was rolled out with key outdoor, announced the appointment of four advertising agencies street pole and Gautrain sites. These assisted with brand to partner with all brands within the SABC stable. visibility. Openco, King James II, Tsalena Media and DDB South One of the highlights on the SABC Marketing calendar Africa (Pty) Ltd were appointed to service the following was its participation in the 20 Year Anniversary Edition of portfolios: the SABC mother brand, transversal brands Brands and Branding, a leading publication detailing the as well as SABC TV channels and SABC Radio stations. brand landscape in South Africa. The SABC’s four page The appointment of these communications partners will contribution underlined the strength, value and constancy assist the SABC to deliver on its business objectives, of brand SABC and its contribution to the economy and through compelling marketing campaigns. social fabric of the country. SABC Marketing is in the process of developing a During the year under review, the SABC was the premium measurement tool to track the return on investment (ROI) sponsor of the ‘Future of Media - The Sandton Debates’ for marketing spend as well as campaign effectiveness. and was entitled to prominent branding on all collateral. During the period under review, a formula for the The event was well attended by the media industry calculation of the SABC Brand Score was established. players with over 300 delegates across TV, radio, print, This was as a result of a research that was conducted online, out of home and advertising agencies who met to with a sample of viewers and the findings formed part of discuss and debate the future of media and new trends the formula. affecting the different mediums. SABC Marketing appointed an independent media monitoring company, to track the rand value (ROI) SABC was also the platinum sponsor of ‘Promax/BDA for free publicity generated across all media for brand Africa 2013’. This conference is the world’s foremost SABC, SABC Radio Stations, SABC TV channels, SABC educative forum, which facilitates the showcasing of Audience Services, SABC Education, SABC Sport as promotion, marketing and design of all electronic media. well as SABC News. Since the monitoring commenced Promax/BDA Africa 2013 provided a great platform to in September 2013 until the end of the financial year, the showcase the SABC along with all of its sub-brands total AVE (Advertising Value Estimate) for SABC Marketing amongst peers from both local and international (all brands included), amounted to R811 406 694. This broadcasters, along with on-air production companies. includes print, broadcast and online media. The role of the SABC extends beyond its mandate. This is Throughout the year under review, the SABC sought evident in its involvement in assisting to develop projects relevant and significant opportunities to position that have a significant positive impact on society. One brand SABC by means of through-the-line marketing such project is the Cape Town International Jazz Festival th campaigns, sponsorships, brand experiences and (CTIJF). The SABC was the broadcast sponsor of the 14 th publicity interventions to address the negative brand and 15 CTIJF. This partnership talks to shared values perception. Some of these included the second phase and skills transfer. The SABC was also a co-sponsor of the festival’s training and development programme, during • T he 13th Annual METRO FM Music Awards was hosted at the week leading up to the festival. The SABC’s sponsorship the ICC in Durban. The event drew large crowds and was a contributed towards the annual free Community Concert as resounding success. The station rewarded local artists and well as the ‘Golf with a Cause’ day, which was held in support musicians for their valuable contribution to the local music of the Cape Caddy Foundation and the Lalela Project, which industry during a glitzy event attended by the crème-de-la- seek to uplift township children through arts. crème of South Africa’s entertainment and record industry. The event was broadcast live on SABC1, METRO FM, Ukhozi SABC was the media partner of the 8th annual South African FM and Radio 2000 while all SABC sister stations promoted Traditional Music Achievement (SATMA) Awards. A number of different build-up phases which culminated into the award print media representatives were successfully hosted in the and gala ceremony held on Saturday, the 1st of March 2014; Eastern Cape Province (East London) during this two day event and this ensured extensive media coverage of the event. • RSG, in a first-ever for Radio, the station conducted a special arts festival where listeners could attend a national arts festival SABC Audience Services launched a campaign to create free of charge. Over a period of four days, the festival offered awareness for the importance of viewers updating their a variety of plays, musical theatre productions, debates, residential addresses, and another campaign was utilised story-telling features, comedy slots, satire, poetry readings to communicate the TV licence tariff increase along with a and even food stalls. Top Afrikaans artists participated in the benefits proposition in order for viewers to see value beyond festival and RSG even had two live shows, broadcast from the the increase. M1 Studios in Auckland Park; A gradual increase was measured throughout the year in terms • Ukhozi FM’s annual birthday bash at the Royal Showgrounds of viewers sourcing content from the SABC digital offerings in Pietermaritzburg continues to be a hot favourite with the (the SABC online portal – www.sabc.co.za; SABC News - station’s listeners. Attendance at the event exceeded the www.sabc.co.za/news, the SABC social media platform on 50 000 mark; Facebook, the Twitter platform - www.twitter.com/SABC portal as well as the SABC portal on YouTube – www.youtube.com/ • Ukhozi FM and Umhlobo Wenene FM held the Vuth’umlilo sabc). Maskandi Music Festival in Kokstad. The SABC websites generated approximately 49 million page • SABC Radio ensured that the crowds were entertained at the views for 2013/14 financial year by offering a cross pollination annual J&B Met and Vodacom Durban July horse races; of content on the bouquet of SABC websites. The YouTube • Ukhozi FM and UMhlobo Wenene FM have also established an portal in particular, was popular with SABC viewers as the site annual Gospel Music Festival that they hold at Kokstad on the boasted about 18 000 subscribers with 26 551 581 views of border between the Eastern Cape and KwaZulu-Natal. This videos uploaded to the SABC portal for the period under review event has now become the house-hold event in the region; resulting in approximately 152 850 985 estimated minutes • Thobela FM held a successful Gospel Music Festival in watched. Polokowane; Many other events of national interest were also streamed live. • SABC Radio was there when local and international Jazz SABC TV Brand Activations musicians and music lovers descended on CTIJF; • Munghana Lonene FM rekindled their annual xiTsonga Music Brand awareness was a key driver for the Division during the Awards and held a very successful awards evening. This event financial year, with nationwide branding entrenching the brand was back by popular demand as it assists in the development in the hearts and minds of South Africans: of xiTsonga music. The musicians have now become prolific • SABC1 has a total of 29 taxis branded across South Africa. as the station can now boast a playlist that comprises of 20% The taxis are on the busiest taxi routes in Gauteng and KZN to 30% xiTsonga music; with efforts of driving awareness of channel programming. • Phalaphala FM also held the Tshivenda Music Awards and it • SABC1 has a total of 36 street pole adverts across the country. was a resounding success; • SABC2 had Full Wrap Quantum Taxis around the country • UMhlobo Wenene FM continued with the Buyel’eKhaya Music including, 5 taxis in Durban, 10 taxis in Gauteng, 5 taxis in Festival in East London; Cape Town and 5 in the Eastern Cape. • Motsweding FM celebrated their 50th birthday celebration in • SABC2 has Billboard holdings in Soweto (Chris Hani Road: style with an all-South Africa gospel and choir line-up; Klipvalley, Rockville) and KwaZulu Natal (M4 Southern • Motsweding FM set the tone by being the first SABC Radio Freeway, facing traffic from the South Coast towards DBN station to launch a contemporary ‘reality radio’ concept CBD). programme. Ten bridegrooms and their brides competed for • SABC3’s Top Billing’s Dream Home Competition, saw the a coveted winner-takes-all lobola prize of R50 000 as part of viewer winner, Mohamed Kajee, walk away with a home worth the station’s celebration of 50 years; over R5m, a luxury car worth over R700 000 plus a R100 000 • Motsweding FM did a successful launch of the station’s CI. shopping spree. The two-day launch with internal and external stakeholders in the North West was a resounding success. The station held Memor able Events a music festival that notched attendance of paying patronage 55 Radio stations continue to extend their powerful touch beyond of about 5 000; and the airwaves by giving listeners access to world quality events • RSG, as the second oldest radio station in the country organised by them. Staying relevant is of utmost importance celebrated 75 years with a series of events across the country; and a key objective is to make the station brand more tangible while providing a platform for listeners to interact with the SABC Radio continued to support local music by sponsoring popular on-air personalities that they idolise. and promoting the following: • M oshito Annual Music Conference; Radio offers a myriad of events ranging from smaller and more personal to lavish affairs attracting huge audience participation • South African Traditional Music Awards; and media attention. Most events aim to develop or showcase • C rown Gospel Awards; and local music and talent. The following were some of the • S pring Explosion Music Festival. successful events hosted by Radio during the financial year: Performance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Stakeholder Complaints
Complaints against SABC services are referred by Upheld Cases a number of bodies, some statutory and others self-regulatory. These include the Broadcasting July 2013 Complaints Commission of South Africa (BCCSA), The soapie All My Children on SABC3 failed to provide the Advertising Standards Authority of South audience advisories of PG13. No fine was imposed. Africa (ASASA), the Wireless Application Service Providers Association (WASPA), and the National August 2013 Consumer Commission (NCC). In two instances on Radio News bulletins on SAfm, During the 2013/14 financial year, the largest there was unfair identification in alleged terror acts of number of complaints was received via the the perpetrators being Islamic. Fine of R10 000 for each BCCSA, which adjudicates content-related instance was imposed. complaints. There were also seven from the NCC, 56 September 2013 but none from any of the other bodies listed. A drama serial on Lotus FM unfairly criticised the state of Broadcasting Complaints Israel with no adequate balance. No fine was imposed. Commission Of South Africa Financial indicators on various TV News bulletins were During the period under review, 149 complaints wrongly reflected. No fine was imposed. against SABC services were finalised by the BC- Special Assignment imputed that the Universal Church CSA. Of these complaints, 143 were dismissed, of the Kingdom of God was involved with pastors who and six were upheld. Of those upheld, fines were engage in drug-dealing. A corrective programme resulted issued for two matters. Details of the upheld cas- in no fine being imposed. es appear below: March 2014 BCCSA Complaints by Month 2013/14 Expresso on SABC3 did not correctly broadcast conditions relating to an SMS competition, resulting in viewers who were not Nedbank clients being excluded while they incurred the expense of responding. A fine of Apr R10 000 was paid by the production house concerned.
May National Consumer Commission For the period under review, all the complaints that were referred to the SABC via the NCC were around issues Jun related to TV licence fee collections. All the matters referred were satisfactorily resolved. In almost all cases, Jul these related to licencees not being correctly informed about the requirements related to owning and disposing of a TV set. Aug BCCSA Complaints Comparative by Year Sep
Oct 2011/12
Nov 2012/13 Dec
2013/14 Jan
Feb 0 40 80 120
Mar Complaints Dismissed 0 5 10 15 20 Upheld Stakeholder Engagement
DTV presenter, Candice Morgan, entertains the crowd at the Zwakala Be Heard Awards.
For the period under review, the SABC continued with The SABC also partnered with J4JOY Foundation, one of the stakeholder engagement. This was evident with numerous external stakeholders in their initiative of building classrooms interactions held with, among others, people with as well as houses for destitute families. The partnership disabilities, community organisations, state organs as well culminated in the building of 20 classrooms in Madwaleni as international stakeholders. Primary and Mqanduli schools in the Eastern Cape. People People with Disabilities The SABC as the Public Service Broadcaster, has Following the establishment of a working and advisory a responsibility to serve the public. It fulfils this committee comprising of representatives from Disabled responsibility by participating in socio economic projects People of South Africa (DPSA) and the SABC in the and programmes in communities, to help further the previous financial year, the committee drafted the terms development of its citizens and promote nation building. of reference, including finalising the plan of action for the Disability Month. Other issues covered by the committee To achieve this, the focus was on the following themes: included promos developed by DPSA highlighting issues • Education; affecting disabled people, procurement opportunities • Health; and frequency of committee meetings. • Arts and culture; The annual ‘Zwakala Be Heard Awards’ which promote • Moral regeneration; the use of South African Sign Language, was held • Human rights; during the year under review. The awards ceremony was well attended and as a media partner the SABC • Community development; provided coverage of the awards. • Heritage; • Fighting crime; and Community Organisations 57 • Job creation. During the period under review, the Stakeholder Relations and Provinces Division was instrumental During the year under review, the SABC identified and in signing several Memorandum of Understanding participated in a number of projects in assisting indigent (MoU)’s between the SABC and external rural communities and schools. organisations these included the following MoU’s: This was done with the support of both external • J4JOY Foundation - partnership to build 1 000 stakeholders and SABC platforms. For example SABC classrooms and houses; in partnership with Mphohadi Business Ventures (MBV Group) handed over computers and uniforms in two • Rotary Foundation - creating of awareness on schools in the Free State, namely Metsimatso and Thabo health issues; Bosiu in Qwa Qwa. Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
• China Central Television (CTV); • Z ambian Broadcasting Corporation; and Achievements • R adiodiffusion TelevisieIvoirienne (Ivory Coast) And Awards For the period under review, the SABC hosted and held strategic deliberations with the following international bodies and institutions on aspects of broadcasting that chiefly encompassed relationship building, content exchange, training and news exchange: • Embassy of Germany; • Embassy of China; • Embassy of Jamaica; • Radio Mozambique; • U niversity of South California (USA); • China National Radio (CNR); Children join in digging the foundation for the Nelson Mandela Children’s Hospital. • CBS 2 News (USA); • Temple University (USA) – School of Media and 58 Communications; • South African Literacy Awards (SALA) - promotion of African literacy; • V P Records (Jamaica); • N elson Mandela Children’s Hospital Trust (NMCHT) - to assist • Television Jamaica (TVJ); in raising funds for children’s hospital; and • Japan Broadcasting Corporation (NHK); • A frican Musicians Against HIV and Aids (AMAHA) - partnership • Mauritius Broadcasting Corporation; to build houses for destitute families. • Seychelles Broadcasting Corporation; Government Relations • Federal Radio Corporation of Nigeria (FRCN); In pursuit of strengthening relationships between the SABC • Televisao Publica de Angola (TPA); and Government in general, the SABC engaged with various Provincial Government structures on SABC editorial processes, • Zambian Broadcasting Corporation; during the period under review. • Central China Television Africa (China); The SABC continued to engage with Government • Botswana Television; Communication and Information System (GCIS) on access to • Radiodiffussion Television du Burkina; their events, interaction with media outlets and the diversified content needs of the SABC. • Lesotho Ministry of Local Government, Chieftainship and Parliamentary Affairs; The Division facilitated the drafting of an MoU to partner with Gauteng Enterprise Propeller (GEP) with the view to assist the • L esotho Communication Authority; SABC with its mandate of assisting SMME’s. • University of Switzerland; Interaction with Stakeholders in • Media Commission of Kenya; Provinces • Lesotho National Broadcasting Services; During the period under review, SABC’s Executives undertook • Liberian Broadcasting Service (LBS); a road-show and visited all nine Provinces. In the sessions that • N amibian Broadcasting Corporation; were held with the involvement of external stakeholders, some of the issues that were highlighted included inter alia: • Embassy of the United State of America; • Minority languages issues; • Embassy of Serbia; • E stablishment of independent producers outside of major • Embassy of the Republic of Italy; cities; • E mbassy of the Republic of China; • N ews coverage of events of importance in the Provinces; • Embassy of the Republic of Japan; • S ABC’s brand visibility across all Provinces; • Embassy of the Republic of Liberia; • Involvement of provincial sports bodies in development • Embassy of the Republic of Zambia; and matters; • Embassy of the Republic of Ivory Coast. • R eligious matters; and Local Content Bodies • Y outh development matters. During the period under review, the SABC met representatives International Relations of the South African Music Rights Organisation (SAMRO) to During the period under review, the relationship with international review the distribution of payment of royalties to the artists. bodies and institutions were cordial and the SABC was able to The SABC has committed itself to be in constant discussion send a representative to international conferences in Tanzania with all role players in the industry to address all challenges and Ivory Coast to represent the SABC. raised especially for a sector that is at the centre of SABC’s The following MoU’s were drafted and reviewed by both product development and sustainability. respective parties and await signatures: Achievements And Awards
5FM’s Afternoon Drive Show team from ‘The Fresh Drive’.
The SABC continued to build its business on the • METRO FM: News and Actuality Show Commercial - foundation of excellence, top-drawer on-air talent, high METRO FM Talk: Sports Show, 083 Sports @ 6; quality productions, well researched topics, entertaining and engaging presentation styles which sought to keep • Motsweding FM: Content Producer PBS - Keabetswe listeners glued to their radio sets. Awards form a valuable Essence Moumakwe, KeNako Afternoon Drive; tool to gauge our successes in this regard and for the year • Munghana Lonene FM: Drama Programme PBS - under review, the SABC continued to rake in accolades Mina ha Mina, On-Air-Packaging PBS - Summer Cup from all corners of the media landscape and the world. Campaign; SABC Radio Awards • Radio 2000: Night Time Show PBS - One Night with the King; The following list provides a summary of the Radio awards for the period under review. SABC Radio once again • RSG: News and Actuality Producer PBS - Mia Malan triumphed at the 4th MTN Radio Awards by walking away and Darren Taylor; with a more than 30 awards covering a broad spectrum of categories including the following: • SAfm: News and Actuality Presenter PBS - Ashraf Garda; Weekend Radio Show PBS - Intune SAfm • 5 FM: Afternoon Drive Show Commercial - The Fresh Economic Freedom; Drive; • Thobela FM: Promotion Stunt/Event PBS - Special • 5 FM: Top 40 - Radio Show Commercial; mention • G ood Hope FM: On-Air-Packaging Commercial; • Ukhozi FM: scooped the coveted PBS Station of the 59 Year Award for the second time in a row; the Best • Ikwekwezi FM: Radio Documentary - Ubikhazi/ Cattle Breakfast show PBS - Vuka Mzansi; the Music Dowry; Show PBS - Sigiya Ngengoma; the Afternoon • L esedi FM: Afternoon Drive Presenter PBS - Ba2cada; Drive Show PBS - Sibonakaliso, News Bulletin Reader PBS - Nokwazi Mbhele, Programme • L esedi FM: Best Sports Commentator - Thabo Khofa; Innovation, Ukhozi meets Community Radio; • L igwalagwala FM: Community Project PBS - Special and mention Sports Commentator Sabelo Zulu; • Umhlobo Wenene FM: managed to scoop the • L otus FM: Breakfast Presenter BPS - Zaid Bhoola , News coveted My Station Award for the first time, and Actuality Show PBS - Mangaung (Newsbreak); traditional music presenter also won the Best Traditional Music Presenter, Daytime show PBS - SJL Radio. Performance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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SABC Education TV Drama Skeem Saam.
Other Radio Awards SABC TV Awards • 5FM: nominated for awards in five categories at the World SAFTAS Radio Summit which took place in Los Angeles in May 2013; SABC TV’s programmes received 24 nominations and 22 • 5FM won awards in four categories at the annual Best of awards at the annual SAFTA. The following provides a summary Joburg Awards ceremony; and of the TV awards for the period under review: • S.A. Hip Hop Awards - 5FM’s ‘The Stir Up’ presented by Drama: Ms Cosmo was voted as the Best Hip Hop Radio Show and received an award in recognition of this achievement. • Best Supporting Actor in a TV Drama - Akhumzi Jezile as “Ngulube” Tempy Pushas; • METRO FM was chosen as winner in the category ‘Coolest Radio Station of the Year’ in the Annual Sunday Times • Best Writing team TV Drama – Athos Kyriakides and Thuso Generation Next Survey. 5FM moved to second position after Sibisi, Room 9; occupying the number 1 spot for 7 consecutive years; • Best Director TV Drama – Libby Dougherty and Tebogo Malope - Tempy Pushas; • B est Editor of a TV Drama – Jack Esterhuizen and Lindi Goosen, Room 9; • B est Make-up and hair of a TV Drama – Jenny Sprawson, High Rollers; and • Best Costume Design of a TV Drama – Martha Sibanyoni, High Rollers. Soapies: • B est TV Soap (public vote) - 7de Laan. Comedy: • B est Actor in a TV Comedy – Obed Baloyi as “Tsutsuman” Ga Re Dumele; • B est Actress in a TV Comedy – Tsholo Monedi as “Tiny” Skwizas Season 2; and Best Music Show: Jam Sandwitch Royal Soapie Award for outstanding couple, went to Isidingo.
• Best Art Direction of a TV Comedy – Amanda Scholtz, Those Royalty Soapie Awards Who Can’t. Hosted in early 2014 where two of SABC’s soapies received a Education: number of awards: • Best TV Drama - InterSEXions Season 2 produced Quizzical Isidingo: Pictures; • Outstanding Couple - Tema Sebopedi and Motlatsi Mafatshe; • Best DOP / Cinematographer of a TV Drama - Intersexions and Season 2 Tom Marais; • Outstanding Male Villain - Robert Whitehead. • B est Actor in a TV Drama - Siyabonga Thwala as Musa in 7de Laan: InterSEXions Season 2; • Outstanding Supporting Actor - Hennie Jacobs; • Best Actress in a TV Drama - Tina Jaxa as Nokuthula in InterSEXions Season 2; • Outstanding Supporting Actress - Annelize van der Ryst; and • Best Supporting Actress in a TV Drama - Harriet Manamela as • Outstanding Newcomer - Simoné Nortmann. Meike Maputla in Skeem Saam; and Screen Excellence Awards • Best Sound Designer of a Feature Film - Nothing for Mahala - Jim Petrak. InterSEXions: Entertainment: • Best TV Drama Series • Best Variety Programme: Bitten; • Best TV Series 61 • Best Music Show: Jam Sandwich; Other Awards: • Best Talk Show: Life with Thami; and • The ‘Old Mutual Two Oceans’ SABC Sport team received an • Best Factual/Educational Programme: Centrum Guardian accolade in the form of a certificate ‘A Gift of a Star’; Project 2012. • The SABC won a silver award at MediaTech for innovation; and Religion: • Best Youth and Children’s programme: Big Up. • Three Promax/BDA Africa Awards for work submitted by the SABC TV channels. • S pecial mention - Certificate: I’m Woman. Governance | South African Broadcasting Corporation [SOC] Ltd
“There are times when a Leader must Move out Ahead of the flock, go off in a New Direction, confident that he is Leading his People the Right Way.” - Nelson Mandela
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SABC SABC 63 Governance Governance South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Governance
64 SABC Leadership and employees engage.
Portfolio Committee The Accounting Authority/Board During the year under review, the SABC Role and Function of the Board Board appeared three times before the Parliamentary Portfolio Committee on The Board is the Accounting Authority of the SABC in Communications: terms of the PFMA and constitutes the fundamental base of corporate governance in the SABC. Accordingly, the • 2 3 April 2013 SABC must be headed and controlled by an effective and • 15 October 2013 efficient Board, comprising of Executive and Non-Executive • 4 February 2014 Directors, of whom the majority must be Non-Executive Directors in order to ensure independence and objectivity Executive Authority in decision-making. The Board of the SABC has absolute responsibility for the performance of the entity and is Shareholding accountable for such performance. The Government of the Republic of South The Board Charter sets out the roles, duties and Africa is the sole shareholder of the SABC. The responsibilities of the Board as well as salient corporate shareholder representative is the Minister of governance principles. Communications. The role of the Board includes the following activities: Shareholder Compact • Providing strategic direction and leadership; In terms of the Treasury Regulations issued in • Determining the goals and objectives of the company; accordance with the PFMA, the SABC must, in consultation with its Executive Authority (the • Approving key policies including investment and risk Minister of Communications) annually conclude a management; Shareholder Compact documenting the mandated • R eviewing the company’s goals and strategies for key performance measures and indicators to be achieving its objectives; attained by the SABC as agreed between the Board and the Executive Authority. • A pproving and monitoring compliance with corporate plans, financial plans and budgets; The relationship between the Shareholder and the • R eviewing and approving the company’s financial Board is preserved, as the Board is responsible for objectives, plans and expenditure; ensuring that proper internal controls are in place and that the SABC is effectively managed. • Considering and approving the annual financial statements and notices to the Shareholder; The SABC Board attended eight meetings with the Ministry of Communications during the year under review: • Ensuring good corporate governance and ethics; • 4 April 2013 • E nsuring that the Shareholder’s performance objectives • 17 July 2013 are achieved and that this can be measured in terms of the performance of the SABC • 30 July 2013 • E nsuring that the SABC complies with and is operating • 4 October 2013 in accordance with all applicable laws, regulations, • 8 October 2013 government policies and codes of business practice, • 9 December 2013 regulations and instructions prescribed in terms of • 27 February 2014 legislation; • 18 March 2014 • M onitoring and reviewing performance and effectiveness of controls; • Ensuring effective, prompt and open communication with the Shareholder and relevant stakeholders with Report of the SABC Board for the Year Ended substance prevailing over form; 31 March, 2014 • Liaising with and reporting to the The Board of Directors is pleased to present the 77th Annual Report of the South Shareholder; African Broadcasting Corporation SOC Limited for the financial year ended 31 • Guiding key initiatives; and March 2014. • Approving transactions beyond the The annual financial statements comprise the consolidated annual financial authority of management. statements of the Corporation and its subsidiaries, (together referred to as the group), and of the Company for the year ended 31 March 2014. Delegation of Authority These annual financial statements are presented in accordance with the The Board has the authority to lead Companies Act 71 of 2008 (as amended), the Broadcasting Act 4 of 1999 (as and control the business of the SABC, amended), the Public Finance Management Act 1 of 1999 (as amended) and in including the authority to delegate accordance with International Financial Reporting Standards. its powers. Its aim is to ensure that The profit before tax for the year for the SABC Group amounted to R469m the SABC remains a sustainable and (2013: R152m). The improvement is mainly due to improved revenues R7.1bn viable business. (2013: R6.7bn) and other income R171m (2013: R60m). Its responsibilities are supported by a well-developed governance structure Share Capital and Shareholder of Board Committees and a clear No changes to the authorised or issued share capital during the year review. The and comprehensive DAF. The Board Government of the Republic of South Africa is the sole shareholder of the SABC delegates the management of the day- Limited. The shareholder’s representative is the Minister of Communications. to-day operations of the Corporation to the Group Chief Executive Officer Dividends (Group CEO). The Group CEO is assisted by the Group Executive No Dividends were declared or paid during the year under review. Committee (EXCO). The DAF, which Going Concern has undergone an extensive review, assists in the control of the decision- The SABC will continue to trade as a going concern in the foreseeable future. making process and does not dilute The entity has made decent revenue gains, generated cash from its operations the duties and responsibilities of the and has been profitable. Board. It is important to register that the Interim Board of the SABC was appointed on Board Induction and 25 March, 2013 until the appointment of the new Board on 25 September 2013. The Interim Board steered the SABC through a difficult time. For that reason, we Orientation acknowledge and thank them for steadying the ship. As the new Board, we will All new Board Members are taken continue to ensure that the following, among others, are achieved: through an induction programme • C orporate governance is maintained; that is designed to enhance their understanding of the SABC’s legislative • Financial and internal controls and risk measures are entrenched and framework, its governance processes maintained; and the nature and operations of its • The culture of fruitless and wasteful expenditure is totally eradicated; business. • The cost to income ratio is reversed as cost growth has far outpaced revenue Continuous training is also provided on growth; and request to meet the needs of Directors. Directors are made aware of new laws • Content procurement practices are aligned to the attraction of advertising and regulations on an ongoing basis. spend. Board Evaluation The year under review was both challenging and rewarding for everyone at the SABC. There has been progress in many areas, including in terms of The performance of the Board and stabilisation of the organisation, as well as prudence in spending, cost reduction individual Directors is evaluated and implementation of strict financial and internal controls. These have begun to annually. The performance of Board yield healthy financial returns, with significant savings being realised. Committees is evaluated against their 65 Terms of Reference. The Governance I would like to take this opportunity to thank the Shareholder, the Parliamentary and Nomination Committee is Portfolio Committee on Communications (PCC), National Treasury, my fellow responsible for the evaluation of Board members and the men and women of the SABC, who made sure that the Executive Management. Performance Corporation continued to function despite the daily challenges they experienced. Contracts were finalised with Executive and Senior Management. Performance Contracting will be implemented throughout the SABC in Z E Tshabalala the next financial year. Chairman of the SABC Board Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Attendance At Board Meetings responsibilities, delegated authority and meeting requirements of the Committee. Board meetings are scheduled annually in advance. Special meetings are convened as and when necessary to address Following is the list, terms of reference, composition and record specific issues. Directors or external committee members who, of meeting attendance of SABC Board Committees. on an exceptional basis, cannot physically attend meetings may communicate electronically. The record of attendance of the Acquisitions and Disposals Committee Board meetings during the period under review are reflected The Acquisitions and Disposals Committee was established to below: replace the Finance, Investment, Procurement and Technology Interim Board Committee. The Committee comprises five independent Non- Executive Directors. Members Attendance - Meetings held: 16 (7 Scheduled; 3 Emergency; The roles and responsibilities of the Committee include: 5 Special and 1 Induction) • Reviewing the long-term and short-term funding plan, for Z E Tshabalala (Chairman)1 16 submission to the Board; N P Gosa1 (Deputy Chairman) 8 • Monitoring the current funding plan of the Corporation to G P Duda2 - enable it to fulfil both its commercial and public mandates in M R Lubisi1 16 line with the corporate goals; V G M Mavuso1 15 • Reviewing and recommending the annual capital and L P Mokhobo 16 operating budget to the Board for approval; 66 G H Motsoeneng 15 • Recommending the limits applicable to counter-parties to C Olivier3 15 the Board, and monitor and review all borrowings made by 1. Interim Board appointed 25 March 2013 the Corporation, and the guarantees and sureties issued on 2. Suspended (effective 13 September 2012) behalf of the Corporation; 3. Acting CFO (effective 13 September 2012) • Reviewing funding and solvency implications of transactions New Board and make recommendations to the Board; Members Attendance - Meetings held: 19 • Reviewing the capital investment process, monitor total Group (3 Scheduled, 3 Emergency; 9 capital expenditure; Special; 2 Strategy and 2 Induction) • Reviewing and approving any capital project, or the Z E Tshabalala (Chairman)1 18 procurement of any capital or the commencement of any capital project item included in the approved budget of the M O Maguvhe1 18 (Deputy SABC, above R100m up to R200m; Chairman) K T Bonakele1 14 • Reviewing and recommending to the Board the commencement of any capital project or the procurement of G P Duda2 8 - any capital item the cost of which exceeds R200m; N P Gosa1 3 5
1 • Reviewing the performance of all investments and acquisitions R Kalidass 14 made; B Aug Khumalo1 15 • Reviewing and recommending to the Board the opening of 1 M R Lubisi 15 new offices or new regional offices within the borders of the V G M Mavuso1 18 Republic of South Africa; 1 N M Mhlakaza 15 • Reviewing and recommending to the Board for approval the L P Mokhobo5 15 opening of new offices or new regional offices outside the G H Motsoeneng 18 borders of the Republic of South Africa; K Naidoo1 19 • Reviewing and recommending to the Board regarding the C Olivier4 6 17 SABC’s investment strategy; N A Tshidzumba1 15 • Evaluating and recommending to the Board regarding business cases for new ventures or projects; M H Z Zinde1 15 J R Aguma7 - • Approving the criteria and guidelines for investments and approve investments within its delegated authority; 1. Appointed 25 September 2013 2. Suspended (effective 13 September 2012) • Reviewing the budgetary processes adopted by management 3. Resigned (effective 31 December 2013) for effectiveness, integrity and adherence to the objectives of 4. Acting CFO (effective 13 September 2012) the Board and the Public Finance Management Act (PFMA); 5. Left (effective 28 February 2014) • E nsuring compliance with the reporting and budget 6. Acting GCEO (effective 18 March 2014) submission deadlines set by the SABC; 7. Acting CFO (effective 18 March 2014) 8. Dismissed (effective 19 March 2014) • Reviewing the Group’s procurement policies for alignment with the BBBEE Charter and procurement policy guidelines Board Committees set by Government from time to time; Board Committees exist in order to assist the Board in • Reviewing the Bid Adjudication Committee processes for discharging its responsibilities. This assistance is rendered effectiveness and integrity and ensure group-wide adherence in the form of recommendations and reports submitted to thereto having regard to the principles of the Group’s Board. Each Committee operates within the ambit of its defined procurement policies; Terms of Reference that set out the composition, role, and • Reviewing the appropriateness of the Bid Adjudication • D etermining whether the financial implications of the Committee’s processes to the needs of the individual entities transaction will be and how much money will the Corporation within the Group having due regard to the operational make/stand to lose by supporting/rejecting the proposal; and dynamics of each entity and to implement such measures as • D etermining whether the proposal before the Committee are deemed necessary to ensure the functional effectiveness contains all relevant information in sufficient detail and is of these processes; the Committee satisfied that it has sufficient, appropriate • Reviewing the effectiveness of the Bid Adjudication Committee information to enable it to thoroughly probe the decision and and implement such measures as are deemed necessary to make a recommendation to the Board. ensure that this structure is functionally effective; Two Committee meetings were held during the financial year. • Considering and approving the write-off resulting from These were attended by the Group Chief Executive Officer, the the impairment of assets up to an amount of R20m, and Acting Chief Operating Officer, the Acting Chief Financial Officer recommend for approval by the Board of any amount over and other relevant corporate officials. R20m; The attendance of Members at Committee meetings was as • Reviewing disposals made by EXCO in accordance with the follows: authority granted to it by the Board; New Committee • Reviewing and recommending to the Board for approval the Members Attendance - Meetings held: 2 writing off of assets above R15m (at book value) to remove (2 Scheduled) them from the asset register; M O Maguvhe (Chairman) 2 • Reviewing and recommending to the Board for approval the K T Bonakele - writing off of stock (at book value) above R15m to remove R Kalidass 2 them from the asset register; N A Tshidzumba 2 • Reviewing and recommending to the Board for approval the M H Z Zinde 2 sale of moveable assets at book value from R10m to R16m 1 and for Board to recommend approval by the Shareholder for Z E Tshabalala 1 assets above R16m; L P Mokhobo1 2 2 1 • Subject to the provisions of the Public Finance Management G H Motsoeneng 1 Act (PMFA), reviewing and approving any sale or disposal of C Olivier1 3 4 2 assets, the cost of which shall not exceed R50m per item; J R Aguma5 - • Reviewing and recommending to the Board for approval the 1. Attends by Invitation write-off resulting from the impairment of assets, up to an 2. Left (effective 28 February 2014) amount of R20m; 3. Acting CFO (effective 13 September 2012) 4. Acting GCEO (effective 18 March 2014) • Reviewing and recommending to the Board for approval 5. Acting CFO (effective 18 March 2014) the entering into any agreement for the lease/hire/rental of property, where the cumulative value and the term are above Audit Committee R25m per annum/ five years; During the term of the Interim Board, the Committee comprised • Reporting to the Board on the extent to which the Technology three independent Non-Executive Directors. One Independent division has achieved its objectives during the relevant period; Advisor attended the meetings but did not have any voting • Ensuring that the Corporation employs technology, which rights. With the appointment of the new Board, the Committee enables it to fulfil both its commercial and public mandates in comprises five independent Non-Executive Directors. Members line with the corporate goals; collectively have sufficient qualifications and experience to fulfil their duties and have sufficient understanding of financial • Ensuring that the technology employed by the Corporation is reporting, internal financial controls, external audit process, appropriate and able to support the strategic objectives of the internal audit process, corporate law and information technology Board, including in a converged or multi-channel environment; governance. • Recommending to the Board the approval of policies, which The roles and responsibilities of the Committee include: fall within its mandate and identify, evaluate and report to the • Serving as the Audit Committee for the SABC Group; Board on any risks associated with the technology of the Corporation; • Recommending the appointment of the External Auditors and overseeing the external audit process; • Overseeing the development of the disaster recovery plan • Monitoring the internal control system to protect the SABC’s put in place by the Corporation and advise the Board on the interests and assets; adequacy and suitability thereof; • Reviewing the accuracy, reliability and credibility of financial • Advising the Board generally on purchasing decisions reporting and recommends the annual financial statements 67 involving the acquisition of technology or systems; and the Annual Report, as presented by management, • Determining whether the proposed transaction is in line together with the External Auditors’ report, for approval by the with the strategic objectives approved by the Board for the Board; Technology Division and the SABC generally; • Reviewing any accounting and auditing concerns raised by Internal and External Audit, the annual financial statements • Determining whether the proposed transaction is in line with and the various reports to Shareholder; the public broadcasting mandate set out in Section 10 of the Broadcasting Act and the corporate goals; • Ensuring that an effective Internal Audit function is in place and that the roles and functions of External Audit and Internal • Determining whether the proposed transaction been budgeted Audit are clear and co-ordinated to provide an objective for and whether the business aspects of the decision are overview of the operational effectiveness of the Corporation’s fundamentally sound; systems of internal control, risk management, governance and reporting; Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
• Reviewing the activities of the Internal Audit Department, the Finance, Investment and Procurement effectiveness thereof and the adequacy of available Internal Audit resources; Committee During the term of the Interim Board, the Committee • Evaluating the independence, objectivity and effectiveness of comprised three independent Non-Executive Directors with the External Auditors; the appointment of the new Board on 25 September 2013 • Ensuring that the Corporation has implemented an effective the Committee was then replaced with the Acquisitions and policy and plan for risk management that will protect the Disposals Committee. Corporation’s ability to achieve its strategic objectives; The roles and responsibilities of the Committee included: • Ensuring that a combined assurance model is applied; and • Reviewing the long-term and short-term funding plan, for • Obtaining assurance for information technology (IT) as it submission to the Board; relates to the management of IT assets, governance and controls, risks and disaster recovery. • Monitoring the current funding plan of the Corporation to enable it to fulfil both its commercial and public mandates in Refer to page 79 for the report of the Audit Committee detailing line with the corporate goals; how it carried out its functions. • Reviewing and recommending the annual capital and Ten Committee meetings were held during the financial year. operating budget to the Board; These were attended by the External Auditors, the Group Chief Executive Officer, the Acting Chief Financial Officer, the Acting • Monitoring the financial performance of the Corporation Chief Operating Officer, the Chief Audit Executive and other against its budget on a quarterly basis; relevant corporate officials. The Chief Audit Executive and the 68 • C onsidering and approving the Treasury Manual for approval External Auditors have unrestricted access to the Chairman by the Board; of the Committee and to the Chairman of the SABC. The attendance of Members at Committee meetings was as follows: • Recommending the limits applicable to counter-parties to the Board, and monitoring and reviewing all borrowings made by Interim Committee the Corporation, and the guarantees and sureties issued on Members Attendance - Meetings held: 6 behalf of the Corporation; (5 Scheduled; 1 Special) • Reviewing funding and solvency implications of transactions M R Lubisi (Chairman) 6 and making recommendations to the Board; N P Gosa 3 V G M Mavuso 6 • Reviewing the capital investment process, monitor total group Z E Tshabalala3 5 capital expenditure; L P Mokhobo3 5 • Reviewing and recommending to the Board the G H Motsoeneng3 4 commencement of any capital project or the procurement of G P Duda1 - any capital item the cost of which exceeds R100m; C Olivier2 3 6 • Subject to the provisions of the Public Finance Management M Mazwi4 4 Act (PMFA), reviewing and approving any sale or disposal of 1. Suspended (effective 13 September 2012) assets, the cost of which shall not exceed R50m per item; 2. Acting CFO (effective 13 September 2012) • C onsidering and approving the write-off of bad debt(s), from 3. Attends by Invitation R5m up to an amount of R10m, and recommending for 4. Independent Advisor approval by the Board of any amount above R10m; and New Committee • C onsidering and approving the write-off resulting from Members Attendance - Meetings held: 4 the impairment of assets, up to an amount of R20m, and (4 Scheduled) recommending for approval by the Board of any amount over M R Lubisi (Chairman) 4 R20m. R Kalidass 3 Four Committee meetings were held during the financial year. N M Mhlakaza 1 These meetings were attended by the Group Chief Executive K Naidoo 4 Officer, the Acting Chief Operating Officer, the Acting Chief Financial Officer and other relevant corporate officials. The N A Tshidzumba 2 attendance of members at Finance, Investment, Procurement 1 Z E Tshabalala 2 and Technology Committee meetings was as follows: V G M Mavuso1 2 L P Mokhobo1 4 4 Members Attendance - Meetings held:4 G H Motsoeneng1 3 V G M Mavuso (Chairman) 4 C Olivier1 3 5 4 M R Lubisi 3 G P Duda2 7 - Z E Tshabalala 4 J R Aguma6 - N P Gosa1 2 1 3 1. Attends by Invitation L P Mokhobo 2 1 2. Suspended (effective 13 September 2012) G H Motsoeneng 3 3. Acting CFO (effective 13 September 2012) C Olivier1 2 4 4 4. Left (effective 28 February 2014) J R Aguma5 - 5. Acting GCEO (effective 18 March 2014) 1. Attends by Invitation 6. Acting CFO (effective 18 March 2014) 2. Acting CFO (effective 13 September 2012) 7. Dismissed (effective 19 March 2014) 3. Left (effective (28 February 2014) 4. Acting GCEO (effective 18 March 2014) 5. Acting CFO (effective 18 March 2014) Governance and Nominations Committee • Developing, evaluating and reviewing the corporate governance structures, policies, practices and procedures of The work of the Governance and Nominations Committee the Corporation and implementing such structures, policies, covers the relevant functions of the previous Human Resources, practices and procedures as the Committee deems to be in Nomination and Governance Committee. The Committee keeping with the tenets of good corporate governance; comprises four independent Non-Executive Directors. • Reviewing and evaluating regularly the balance of skills, The roles and responsibilities of the Committee include: knowledge and experience and performance and effectiveness • Regular reviewing of the size, structure and composition of of the Board and its Committees, making recommendations the Committees of the Board, with due regard to the legal to the Board with regard to any adjustments that it considers requirements, skills and expertise required for effective appropriate, and approving the section in the Annual Report performance of each Committee; dealing with the performance of the Board; • E nsuring that appropriate succession planning is in place for • Establishing and ensuring implementation of an induction both Executive and Non-Executive Directors of the Board; programme for new appointees to the Board; • Evaluating succession-planning arrangements for Executive • Approving a performance and evaluation measurement Directors to ensure that these are orderly and calculated to framework to monitor the effectiveness of the Board, Board maintain an appropriate balance of diversity, skills, knowledge Committees, individual Directors, the GCEO, CFO and COO; and experience; • Reviewing and, where appropriate, making recommendations • A nnually reviewing the key data indicators of listed successors to the Board about actual or potential conflicts of interest for direct reports of the Group Chief Executive Officer to affecting any Member of the Board, carry out an annual determine their status on the succession plan and readiness review of declarations of conflicts of interest by the Board, to assume a role as the need arises. Such data should and approving a report to the Shareholder on how the include the performance evaluation outcomes and outputs of Corporation’s Policy on Conflicts of Interest has been applied management conversations; during the year; • S upervising the administration of the Corporation’s policies • Preventing any Human Capital practices that will result in relating to actual or potential conflicts of interest affecting unauthorised, irregular, fruitless and wasteful expenditure and Members of the Board; losses from criminal conduct and expenditure not complying with legislation; • Preparing a description of the role and capabilities required for particular appointments to the Board and for identifying • Ensuring compliance with the relevant and applicable labour and nominating candidates for the approval of the Board for related legislation; recommendation to the Minister and the President; • Being responsible for the oversight and monitoring of the • M aking recommendations to the Board for the continuation Human Capital management strategies and implementation (or not) in service of any Director as an Executive or Non- within SABC, and ensure that these are beneficial to the Executive Director; Corporation and employees; the continued existence of the Corporation; and to ensure a return on investment for the • R eviewing and, where appropriate, making recommendations Shareholder; to the Board about proposed appointments to the Boards and Committees of Subsidiary Businesses including the exercise • Ensuring that there is rigorous probing of strategic plans of shareholder rights to remove a Director, the nomination of and investment proposals, by asking ‘what if’ and ‘why not’ Group representatives to sit on the Boards of subsidiaries; questions, and by challenging the assumptions underlying strategy; • A pproving conditions of employment and all benefits applicable to the Group Chief Executive Officer, Chief Financial Officer, • Ensuring that a proper strategic planning process is Chief Operating Officer and the terms and conditions of the implemented; severance of employment of such individuals. • In conjunction with the Board, setting the parameters within • A ssisting the Group Chief Executive Officer in the selection which Management develops strategy, which may include of the Chief Financial Officer and Chief Operating Officer ensuring that short-term and longer-term strategies are when vacancies occur provided that the appointment of such balanced and that it provides a platform for sustainability; persons would remain the decision of the Minister; • Ensuring that the strategies are aligned with the purpose of the • In consultation with the Board, and subject to the approval of business, the prevailing culture and ethics and the interests of the Minister, determining the remuneration for the Executive the SABC’s stakeholders; and Directors, on appointment, having regard to the remuneration • Instituting regular and formal board strategy reviews or strategy policy; audits and examine progress towards the predetermined • M aking recommendations in respect of the fees and/or objectives and evaluate current performance in the light of remuneration of the Non-Executive Directors to the Board these predetermined objectives. 69 from time to time, which Directors’ fees and/or remuneration Two Committee meetings were held during the financial year. shall be subject to the approval of the Minister; The attendance of members at Governance and Nominations • R ecommending to the Board for its approval, appropriate Key Committee meetings was as follows: Performance Indicators (KPIs) for the Executive Directors at New Committee the beginning of each financial year; Members Attendance - Meetings held: 3 • D etermining and agreeing with the Board the policy for the Z E Tshabalala (Chairman) 3 remuneration of the Executive Directors; M O Maguvhe 3 • When appropriate, considering reports and presentations by K T Bonakele 3 the Audit Committee, the Risk Committee; or the Social and B Aug Khumalo - Ethics Committee; Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Human Resources, Nomination and Members Attendance - Meetings held: 4 Governance Committee Z E Tshabalala (Chairman) 4 The Human Resources, Nomination and Governance N Gosa 3 Committee existed during the period of the Interim Board, and M R Lubisi 4 comprised four independent Non-Executive Directors. With the V G M Mavuso 4 appointment of the new Board, the Committee was replaced L P Mokhobo1 4 with the Human Resources and Remuneration Committee and G H Motsoeneng1 4 the Governance and Nominations Committee. C Olivier1 2 The roles and responsibilities of the Committee included: 1. Attends by Invitation • Recommending to the Board on the appointment of New Human Resources and Remuneration Executive Directors; Committee • Ensuring that the structure, size, composition, skill sets and performance of the Board and its Committees are regularly With the appointment of the New Board, the Human Resources reviewed and maintained at levels which are appropriate; and Remuneration Committee was established and took over the relevant functions of the Human Resources, Governance • Evaluate succession-planning arrangements for members of and Remuneration Committee. The Committee comprises six the Board and the Group Executives, to ensure that these are independent Non-Executive Directors. orderly and calculated to maintain an appropriate balance of diversity, skills, knowledge and experience; The roles and responsibilities of the Committee include: 70 • Reviewing and, where appropriate, making recommendations • Ensuring that the structure, size, composition, skill sets and to the Board about actual or potential conflicts of interest performance of the Corporation are regularly reviewed and affecting any member of the Board, carry out an annual maintained at levels which are appropriate; review of declarations of conflicts of interest by the Board, and approving a report to Shareholders on how the Corporation’s • Evaluating succession-planning arrangements for Group Policy on Conflicts of Interest has been applied during the Executives, to ensure that these are orderly and calculated to year; maintain an appropriate balance of diversity, skills, knowledge and experience; • Having responsibility for the oversight and monitoring of the human capital management strategies and implementation • Reviewing the CVs of short-listed candidates for appointment within the Corporation; to vacant Group Executive positions and recommending the appointment of the preferred candidate to the Board for • Approving conditions of employment and all benefits approval; applicable to the Group Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Group Executives and the • Reviewing and recommending to the Board proposed terms and conditions of the severance of employment of such appointments to the Group EXCO; individuals; • Approving conditions of employment and all benefits • Approving the general material terms and conditions of applicable to the Group Executives of the Corporation; and employment to be applied for all employees; the terms and conditions of the severance of employment of such individuals; • Determining, agreeing and developing the Corporation’s general policy on executive and senior management • Assisting the Group Chief Executive Officer in the selection of remuneration; the Group Executives when vacancies occur and when new positions are created; • Considering and recommending the Human Capital Policies and reviewing the prevailing industrial relations policies and • Approving the general material terms and conditions of the Corporation’s strategies in respect thereof in order to employment to be applied for all employees of the Group; ensure that the appropriate policies are applied; • R eviewing the specific application of the Remuneration Policy • Developing, evaluating and reviewing the corporate with regard to Group Executives and make a recommendation governance structures, policies, practices and procedures to the Board for approval; of the Corporation and implement such structures, policies, practices and procedures as the Committee deems to be • Laying down the ranges within which approval of the appropriate in keeping with the tenets of good corporate remuneration of the General Managers and Heads of Business governance; Units can be determined by the Group Chief Executive Officer for the Committee’s approval; • Approving a performance and evaluation measurement framework to monitor the effectiveness of the Board, Board • A ssisting the Board in its oversight of the Remuneration Committees, individual Directors and the Group Chief Policy and its application to the Group Executives all Group Executive Officer; employees, the review of the remuneration philosophy of the Group, the adoption of annual and longer-term incentive • Ensuring compliance with the relevant and applicable Labour plans, and the determination and approval of levels of reward Related Legislation; and to the Group Executives; • Assuming responsible for the oversight and monitoring of the Human Capital management strategies and implementation • A pproving the general retirement policies of the Group and within the SABC, and ensuring that these are beneficial to any changes in such policies or to the rules of the retirement the Corporation and employees; the continued existence of funds; and the Corporation; and to ensure a return on investment for the • Considering and recommending the Human Capital Policies, Shareholder; and reviewing the prevailing industrial relations policies Four Committee meetings were held during the financial year. and strategies in respect thereof in order to ensure their The attendance of Members at the meeting is reflected below: appropriate application. New Committee has achieved its objectives during the relevant period;
Members Attendance - Meetings held: 4 • D evelop proposed policies for consideration by the Board on news and current affairs programming, which ensure that B Aug Khumalo 4 (Chairman) SABC’s news and current affairs content is fair, balanced, R Kalidass 3 accessible, accurate, compelling, professional, authoritative M R Lubisi 3 and in line with the Constitution of South Africa, the Broadcasting Act and other relevant legislation; V G M Mavuso 4 • A ssist the Board to preserve the Corporation’s editorial N M Mhlakaza 2 independence and integrity and ensure that the Corporation Z E Tshabalala 4 does not allow commercial, political or personal considerations K Naidoo1 2 to influence its editorial decisions; and N A Tshidzumba1 1 • R eview the editorial policies of the Corporation from time to L P Mokhobo1 3 time to ensure that they remain appropriate to its operational
1 needs and the fulfilment of its statutory and regulatory G H Motsoeneng 2 obligations and mandates. C Olivier1 3 4 1 Three Committee meetings as well as a Programming Summit J R Aguma7 - were held during the financial year. The attendance of Members 1. Attends by Invitation at these meetings is reflected below: 2. Left (effective 28 February 2014) Interim Committee 3. Acting CFO (effective 13 September 2012) 4. Acting GCEO (effective 18 March 2014) Members Attendance - Meetings held: 3 5. Acting CFO (effective 18 March 2014) N P Gosa (Chairman) 2 Public Broadcasting Services Committee (PBS M R Lubisi 2 Committee) V G M Mavuso 3 Z E Tshabalala 3 During the term of the Interim Board, the PBS Committee 1 absorbed the functions of the News Committee and L P Mokhobo 3 comprised four independent Non-Executive Directors. With the G H Motsoeneng1 3 appointment of the new Board, the PBS Committee comprises C Olivier1 2 2 six independent Non-Executive Directors. The Group Chief Executive Officer, the Acting Chief Financial Officer and the 1. Attends by Invitation Acting Chief Operating Officer and other relevant corporate 2. Acting CFO (effective 13 September 2012) officials attend the meetings. New Committee The role of the Committee is to ensure that the SABC delivers on Members Attendance - Meetings held: 3 its obligations as provided for in the Public Broadcasting Service Charter of the Corporation. In this regard, the Committee must, M H Z Zinde (Chairman) 2 within the context of Public Services: K T Bonakele 3 1 • Be made available to South Africans in all the of ficial languages; N P Gosa - V G M Mavuso 2 • Reflect both the unity and diverse cultural and multilingual nature of South Africa and all of its cultures and regions to Z E Tshabalala 1 audiences; N A Tshidzumba 2 M O Maguvhe2 1 • Strive to be of high quality in all of the languages served; L P Mokhobo2 4 1 • Provide significant news and public affairs programming, which G H Motsoeneng2 2 meets the highest standards of journalism, as well as fair and 2 3 5 unbiased coverage, impartiality, balance and independence C Olivier 2 from government, commercial and other interests; J R Aguma6 - • Include significant amounts of educational programming, 1. Resigned (effective 31 December 2013) both curriculum-based and informal educative topics from 2. Attends by Invitation a wide range of social, political and economic perspectives, 3. Acting CFO (effective 13 September 2012) including, but not limited to, human rights, health, science, 4. Left (effective 28 February 2014) early childhood development, agriculture, culture, technology, 5. Acting GCEO (effective 18 March 2014) religion, justice and commerce and contributing to a shared 6. Acting CFO (effective 18 March 2014) South African consciousness and identity; Public Commercial Services Committee (PCS 71 • Enrich the cultural heritage of South Africa by providing Committee) support for traditional and contemporary artistic expression; During the term of the Interim Board, the PCS Committee • Strive to provide a broad range of services, targeting absorbed the related functions of the News Committee. It particularly children, women, the youth and the disabled; comprised four independent Non-Executive Directors. With the • Include programmes made by the Corporation as well as those appointment of the new Board, the PCS Committee comprises commissioned from the independent production sector; six independent Non-Executive Directors. The Group Chief Executive Officer, the Acting Chief Financial Officer and the • Include national sports programming as well as developmental Acting Chief Operating Officer and other relevant corporate and minority sports; officials attend the meetings. • Review the Sports Broadcasting Rights; The role of the Committee is to ensure that the SABC delivers on • Report to the Board on the extent to which the News Division its obligations as provided for in its Public Commercial Service Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Charter. In this regard, and within the context of Commercial Risk Committee Services, the Committee must: During the term of the Interim Board, the Committee comprised • Be subject to the same policy and regulatory structures as three independent Non-Executive Directors. One Independent outlined in the Act for commercial broadcasting services; Advisor attended the meetings but did not have any voting • Comply with the values of public broadcasting service in the rights. With the appointment of the new Board, the Committee provision of programmes and service; comprises five independent Non-Executive Directors. • Commission a significant amount of their programming from The role and responsibilities of the Committee are: the independent sector; • Monitoring the SABC’s compliance with statutory and • Subsidise the public services to the extent recommended by legislative obligations and fiduciary responsibilities; the Board and approved by the Minister; • Confirming that the SABC has appropriate controls in place • Be operated in an efficient manner to maximise the revenues to identify and implement legislative and regulatory changes, provided to the Shareholder; which will affect its operations; • Report to the Board on the extent to which the News Division • Monitoring that management and administration of the has achieved its objectives during the relevant period; products and services are conducted in accordance with relevant legislation, regulation, governing rules and within the • Develop proposed policies for consideration by the Board terms of any delegation; on news and current affairs programming, which ensure that SABC’s news and current affairs content is fair, balanced, • Reviewing significant breaches, or potential breaches, of accessible, accurate, compelling, professional, authoritative regulation and the steps taken to ensure that the underlying and in line with the Constitution of South Africa, the root causes of any regulatory control failures are being 72 Broadcasting Act and other relevant legislation; addressed; • Assist the Board to preserve the Corporation’s editorial • Assisting in identifying, evaluating, mitigating, and monitoring independence and integrity and to ensure that it does not the business risks that the Group faces during the course of its allow commercial, political or personal considerations to operations, its exposure to significant risk, and the adequacy influence its editorial decisions; and of the identification of risk; • Review the editorial policies of the Corporation from time to • Reviewing the SABC’s risk appetite and future risk strategy, time to ensure that they remain appropriate to its operational particularly for economic (i.e. risk-based) capital, liquidity needs and the fulfilment of its statutory and regulatory and reputation, but also for operational risk, and to make obligations and mandates. recommendations on risk appetite to the Board; to review the principal risk policies for consistency with the Group’s Three Committee meetings and a Programming Summit were risk appetite and to approve any material changes to these held during the financial year. The attendance of Members at policies; these meetings is reflected below: • R eviewing the risk profile against its risk appetite and strategy Interim Committee and review the drivers of the changes, if any, in the risk profile Members Attendance - Meetings held: 3 and their implications for liquidity and going concern status; N P Gosa (Chairman) 2 • W ith input from the Audit Committee, as appropriate, reviewing M R Lubisi 2 the adequacy of the Group’s processes and the effectiveness V G M Mavuso 3 of controls over the determination of the compliance with the Z E Tshabalala 3 requirements of the Government Guarantee; L P Mokhobo1 3 • Reviewing the design, completeness, and effectiveness of the G H Motsoeneng1 3 risk management framework relative to the enterprise-wide C Olivier1 2 2 risk management policy, and plans for management of the significant risks activities; 1. Attends by Invitation 2. Acting CFO (effective 13 September 2012) • Reviewing the adequacy and quality of the risk management function and the effectiveness of risk reporting (including New Committee timeliness and risk events); Members Attendance - Meetings held: 2 • Developing and refining the SABC’s enterprise-wide appetite N A Tshidzumba (Chairman) 2 for risk, in conjunction with the full Board; and K T Bonakele 3 • E valuating the risk of exposure to fraud, reviewing policies, N P Gosa1 - and procedures in place to minimise, or detect fraud, and V G M Mavuso 2 making recommendations to the Board to enhance such Z E Tshabalala 1 policies and procedures. M H Z Zinde 2 Four Committee meetings were held during the financial year. M O Maguvhe2 1 The attendance of Members at these meetings is reflected L P Mokhobo2 4 1 below: 2 G H Motsoeneng 2 Interim Committee C Olivier2 3 5 2 Members Attendance - Meetings held: 2 J R Aguma6 - M R Lubisi (Chairman) 2 1. Resigned (effective 31 December 2013) N P Gosa1 1 2. Attends by Invitation V G M Mavuso 2 3. Acting CFO (effective 13 September 2012) Z E Tshabalala2 1 4. Left (effective (28 February 2014) L P Mokhobo2 2 5. Acting GCEO (effective 18 March 2014) G H Motsoeneng2 - 6. Acting CFO (effective 18 March 2014) C Olivier2 3 1 M Mazwi4 - 1. Resigned (effective 31 December 2013) • In conjunction with the Risk Committee, oversee and review 2. Attends by Invitation the anti-corruption and bribery practices; 3. Acting CFO (effective 13 September 2012) • R eview the policies and processes for managing non-financial 4. Independent Advisor risks affecting the business, including relationships with New Committee stakeholders (principally colleagues, partners, customers, local communities, non-governmental organisations, Members Attendance - Meetings held: 2 regulators, shareholders and suppliers), and the impact of the K T Bonakele (Chairman) 2 SABC’s activities on its general business reputation; N P Gosa1 - • P romote environmental policies that relate to the activities M R Lubisi 2 where the SABC has its most significant environmental impacts V G M Mavuso 2 in respect of energy management and climate change, water K Naidoo 2 quality, resource productivity (including leakage and waste); Z E Tshabalala2 2 and L P Mokhobo2 4 2 • In conjunction with the Risk Committee, review and make G H Motsoeneng2 2 recommendations to the Board with respect to the SABC’s C Olivier2 3 5 2 Health and Safety Policies and review the procedure for reporting and investigating accidents, incidents and accidents J R Aguma6 - at work. 1. Resigned (effective 31 December 2013) 2. Attends by Invitation Three Committee meetings were held during the year under 3. Acting CFO (effective 13 September 2012) review. The attendance of members at these meetings is 4. Left (effective 28 February 2014) reflected below: 5. Acting GCEO (effective 18 March 2014) Interim Committee 6. Acting CFO (effective 18 March 2014) Members Attendance - Meetings held: 1 Social and Ethics Committee V G M Mavuso (Chairman) 1 During the term of the Interim Board, the Committee N P Gosa 1 comprised four independent Non-Executive Directors. With M R Lubisi 1 the appointment of the new Board, the Committee comprises Z E Tshabalala 1 seven independent Non-Executive Directors. L P Mokhobo1 1 The role and function of the Committee is to monitor and G H Motsoeneng1 1 oversee the Corporation’s activities, having regard to any C Olivier1 2 1 relevant legislation, other legal requirements, or prevailing codes of best practice, with regard to matters relating to the 1. Attends by Invitation following functions: 2. Acting CFO (effective 13 September 2012) • The Social and Economic Development goals of the New Committee Corporation, including by ensuring that the goals and Members Attendance - Meetings held: 2 purposes of the ten principles set out in the United Nations N M Mhlakaza (Chairman) 2 Global Compact Principles are an integral part of the business 1 strategy, day-to-day operations, and organisational culture; N P Gosa - B Aug Khumalo 2 • The United Nations Global Compact Principles are M O Maguvhe 2 incorporated in the decision-making processes of the Board; K Naidoo 2 • The Corporation advances the United Nations Global Z E Tshabalala 2 Compact Principles and the case for responsible business M H Z Zinde - practices through advocacy and outreach to peers, partners, 2 clients, consumers, and the public at large; V G M Mavuso 1 L P Mokhobo2 4 2 • Review and make recommendations to the Board with respect G H Motsoeneng2 2 to the Corporation’s Social Economic Development; C Olivier2 3 5 2 • M onitor Social Economic Development Initiatives; J R Aguma5 - • A ssist the Board in discharging its responsibility to ensure that 1. Resigned (effective 31 December 2013) BBBEE is pursued and implemented throughout the SABC; 2. Attends by Invitation • Review the Corporation’s standing in terms of the goals and 3. Acting CFO (effective 13 September 2012) purposes of the promotion of equality and the prevention of 4. Left (effective 28 February 2014) unfair discrimination; 5. Acting GCEO (effective 18 March 2014) 73 6.Acting CFO (effective 18 March 2014) • Review the SABC’s standing in terms of its support of the four strategic objectives in respect of the International Labour Directors’ Remuneration Corporation Protocol on decent work and working conditions; Non-Executive Directors receive fees for their contribution • M onitor the SABC’s employment relationships, and its to the Board and the Committees on which they serve. The contribution towards the educational development of its Shareholder determines the rate in consultation with National employees; Treasury. Non-Executive Directors are also reimbursed for out- of-pocket expenses incurred on the Corporation’s behalf. • Review recommendations on ethical matters made by Management or other external sources and to make Further information on Directors remuneration can be found in recommendations to the Board whether, and if so, to what the Annual Financial Statement note 41 (xi) Directors and other extent, these should be applied to the SABC; key management personnel remuneration Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
74 M1 Recording Studios at the SABC.
Company Secretarial Function risk matters. The Audit Committee played an oversight role on the assurance of the system of risk management and internal Directors have unrestricted access to the advice and services of control effectiveness. Both Risk and Audit Committees have the Company Secretary as well as the Secretariat Department. contributed immensely to the effectiveness of the system of risk The Directors are entitled to obtain independent professional management. advice at the SABC’s expense should they deem this necessary. Progress has been registered in the increased effectiveness of The Company Secretary, together with other assurance the system of risk management, which in turn gives comfort in functions, monitors the SABC’s compliance with the the management of risks. These can be substantiated by the requirements of the PFMA, Companies Act and other relevant financial performance, amongst others, of the Corporation since legislation. the establishment and implementation of the risk management function and risk management framework respectively, four Reporting To Stakeholders years ago. In order to present a balanced and understandable assessment of its position, the SABC is continuously striving to ensure that Internal Control reporting and disclosure to stakeholders are relevant, clear In accordance with the Public Finance Management Act and effective. It places great emphasis on addressing both (PFMA), Section 51 (1) (a) (i), read with Treasury Regulation 27, positive and negative aspects in order to demonstrate the long- the accounting authority must ensure that the South African term sustainability of the organisation. The King III Report and Broadcasting Corporation SOC Limited (SABC) has and National Treasury Regulations are used in compiling the Annual maintains an effective, efficient and transparent system of Report. financial, risk management and internal control. Stakeholder Relations In acknowledging the challenges within the internal control environment, the SABC assigned the Internal Control function In addition to the interests of the government as shareholder, the to the Risk Management and Governance Division. For the year SABC recognises the legitimate interest of specific government under review, the Division has designed and developed the departments, employees, consumers, suppliers, the media, Internal Control Framework in order to implement and maintain policy and regulatory bodies, trade unions, non-governmental an adequate and effective control environment, which supports groups and local communities, in its affairs. Communication the strategic and operational goals and objectives of the and interaction with these and other stakeholders are ongoing SABC. The Integrated Internal Control Framework (Framework) during the year and are addressed through various channels, will be applied to all of the SABC’s operational and financial depending on their different needs. controls across all the SABC subsidiaries, divisions, provinces, processes and projects. The Framework is complemented by Risk Management the Enterprise Risk Management Framework (ERM Framework) In ensuring effective risk management within the organisation, and the Fraud and Corruption Prevention Strategy and other the SABC developed a Risk Management Policy and relevant policies. It must be noted that Board approved the Risk Management Framework, which contains the risk framework subsequent to year-end and the implementation of management strategy. The Framework requires formal annual the framework will be in the 2014/2015 financial year. risk assessments in addition to the risk assessments that are embedded in the day-to-day operations of the organisation. Internal Audit And Audit During the year under review, the annual risk assessments were Committee conducted, to determine key risks that may affect achievement of SABC objectives. The risks identified were assessed and Mandate and Purpose of Internal Audit used to guide the efforts of Internal Audit, and determine the The mandate of the SABC Group Internal Audit is determined resources required to manage them. in terms of Section 51(1)(ii) of the PFMA which requires that the The Board’s Risk Management Committee played a vital SABC Board of Directors (Accounting Authority) must ensure oversight role, and advised both management and Board on that the SABC has and maintains a system of internal audit under Behind the scenes at SABC News. the control and direction of an Audit Committee complying with Details 2012/13 2013/14 and operating in accordance with regulations and instructions Internal Audit Reports Issued 41 (82%) 56 (90%) prescribed in terms of Sections 76 and 77’ of the Act. Internal Planned Audits Deferred 9 (28%) 1 (1.6%) deferred & Audit is an independent, objective assurance and consulting 5 (8.4%) replaced activity designed to add value and improve on organisational operations, in order to ensure that the Corporation accomplishes The department has now capacitated Quality Assurance its objectives by bringing a systematic, disciplined approach to and Improvement section (QAR), which conducts ongoing evaluate and improve the effectiveness of risk management, monitoring of the performance of the internal audit and the control and governance processes. periodic self-assessment as required by the Internal Auditing Standards (1300). The Internal Audit Charter, which is approved by the SABC Audit Committee and the Board, establishes the purpose, Group Internal Audit commenced with the consulting projects to scope of work, responsibility, accountability, independence and assist SABC Sport and Commercial Enterprises Management authority conferred by the Board on the SABC’s Internal Audit by facilitating a management internal control self-assessment. unit in terms of the PFMA as well as the International Standards Thereafter, it assisted management in identifying gaps in its for Professional Practice of Internal Auditing. business processes and internal controls with a view to improve the overall control environment over time. These projects are In line with the approved SABC Internal Audit Charter, the at an advanced stage and are planned for completion during PFMA, Internal Audit Professional Standards and Corporate 2014/15. Governance King III, the following are incorporated in the activities of Group Internal Audit: Internal Audit Overall Assessment of the • P rovide assurance on the adequacy and effectiveness of Internal Control Environment risk management processes, system of internal controls and Group Internal Audit executed audit projects based on the audit governance processes; coverage from the approved 2013/14 Risk Based Annual Audit • Investigations of possible misconduct/irregularities; and Plan. See the status of performance against the approved plan under the section above (Internal Audit Performance). • C onsulting services on corporate governance matters and elements impacting on the control environment. Management has committed itself to address the challenges in the internal controls environment (which had been found Internal Audit Performance to be inadequate and ineffective, and requiring significant improvements). To this end, it has commenced with three The Group Internal Audit continued to play its pivotal role in the major projects aimed at addressing AGSA’s 2012/13 Disclaimer governance pillar by executing audit projects against the Risk Report for Property, Plant and Equipment, Programme, Film Based Annual Audit Plan as approved by the Audit Committee and Sport Rights Management and Fixed Assets Management. whilst continuing to assist the Corporation in managing the Internal Audit completed 56 audit reports (41 last year) in terms fraud risk exposures by conducting forensic investigations of its approved Annual Audit Plan. 75 and reporting the findings to management accordingly. The department also executed continuous business monitoring The results and the audit opinions are reflected in the table projects to provide management with an alternative view below: on business risks and controls thereby assist in proactively monitoring of key risk areas within the Corporation to ensure the Year 2012/13 2013/14 achievement of the business objectives. Data analysis through No of reports issued 41 56 CAATS was conducted on critical transactions within Human Rating 3 and 4 Audit Opinions (Negative 73% 83% Resource, Procurement, Payroll and Sales and Marketing. Opinions) The following table presents the summary of performance for No. of Significant Findings 166 311 the year: 1 and 2 Audit Opinions (Positive Opinions) 27% 17% Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
The Forensic department of the Internal Audit Division is mandated to investigate the incidents reported and report back to the authority that gave them the mandate to investigate. Matters are then escalated, depending on the actions required to remedy the action. Minimising Conflict of Interest A Conflicts of Interest Policy was approved by the Board on 21 February 2013. As part of the improvements in this regard, an electronic reporting system has been developed; it went live in July 2013. All SABC employees are required to complete their declarations of interest online, and these are forwarded to their line managers for approval. The Procurement Division has enhanced monitoring of the SABC’s vendor management system during the current financial year. A third party risk management tool is utilised to screen directors of registered companies, to ensure that there is no conflict of interest. This includes companies owned by SABC employees. Code of Conduct During the financial period under review, the SABC Board 76 approved a Code of Business Conduct and Ethics. The aim Showcasing the diverse careers available at SABC. thereof is to ensure that every employee of the organisation shares in the same values and levels of accountability. Compliance with Laws and Health, Safety and Environmental Regulations Issues The SABC has continued to improve its compliance function in The SABC strives to be an employer of choice and have facilities order to increase levels of compliance to applicable laws and that accommodate all citizens, including those with disabilities. regulations. The compliance function forms a critical component During the year under review, the SABC received a letter of of the combined assurance framework. A number of projects good standing from the Compensation Commissioner for are being initiated internally that will assist in promoting and effectively managing Injuries on Duty (IOD) as required by the enhancing the organisation’s levels of compliance. Compensation for Occupational Injuries and Diseases Act. As a public entity, adherence to sound governance principles No fatal or disabling IOD’s occurred at the SABC. However, is of utmost importance. To this effect, regular measurement 28 IOD’s were reported in 2013/14 and subsequently against the PFMA and King III Code of Conduct is carried out to communicated to the Department of Labour, as opposed to the ensure that deficiencies are identified and corrective measures 23 IOD’s that were reported in 2012/13 financial year. are implemented. In addition, the SABC completed Occupational Health and Fraud and Corruption Safety (OHS) audits in all its offices across the country. The Board of Directors, Group Executive Management, Senior Improvements were identified and the plan to implement them Management and employees at all levels, have adopted the was developed. highest standard of honesty, propriety, personal integrity Water tests were done regularly to ensure that the tap water in and accountability towards fraud and corruption, theft and the SABC head office and selected Provincial buildings were maladministration. clear of algae and cholera. Waste is disposed of according The SABC has reviewed and updated its Anti-Fraud and to classification and smoking in SABC buildings is restricted Corruption Policy and Strategy to continue prevention, detection to designated areas. The SABC successfully conducted and response to fraud and corruption. Fraud awareness an evacuation drill at head office as well as documented the programmes were implemented in the organisation to introduce disaster management plan as required by legislation. the fraud and corruption policy and whistleblowing policy. Employees and SABC stakeholders may report fraud and corruption through the established Hotline 0800 372 831, or to the Chief Audit Executive, or the Group Executive: Risk and Governance in line with the Whistle Blowing Policy. Report by the Company Secretary Such reports may be made verbally or in writing. Employees In my opinion, as Company Secretary, I hereby and stakeholders who wish to make a written report are invited confirm that, in terms of the Companies Act 71 of to use the following format: 2008, for the year ended 31 March 2014, the South African Broadcasting Corporation SOC Limited, has • The background and history of the concern (giving relevant lodged with the Registrar of Companies all such dates); returns as required of a public company in terms of the • The reason you are particularly concerned about the situation; Companies Act, and all such returns are true, correct and and up to date. • The extent to which you have personally witnessed or experienced the problem (provide documented evidence where possible). Johannesburg Reported allegations do not have to be proven beyond July 2014 reasonable doubt, only that there are reasonable grounds for concern. Social Responsibility
SABC and Gift of the Givers distribute food parcels.
The SABC Foundation was established as a Section 21 These initiatives are: education, health, community company (NPC in terms of the Companies Act 71 of 2008). The development, arts and culture, environment, women Foundation functions as a vehicle for the SABC to showcase and children. To this end, the division has formed its philanthropic efforts towards South Africans as the Public partnerships with community-based companies e.g. Service Broadcaster. Its mandate is to be actively involved in J4JOY (building of classrooms), and MBV Group, communities, and contribute to a better South Africa with its which have assisted in our back to school campaign focus areas being: in Qwaqwa Free State. • Preservation and promotion of Arts and Culture; The other CSI projects undertaken by the Division • Advancement of Training and Education; were the construction and handing over of a five • P romote Health and Welfare; bedroom house for a family of 19 in Klipgat, Gauteng Province. J4JOY was a partner in this project. • Promote Community and SMME Development; SABC Radio, within the context of SABC Radio • Promote Job Creation; and Cares, has engaged in several CSI activities, • F ocus on Nation Building Initiatives. including the following: Further to this the SABC Foundation focusses on adding value • L esedi FM donated 100 wheelchairs to Soweto through strategy, co-ordination of partnerships, fund‑raising residents during the station’s 52nd birthday, and and monitoring of all CSI and SED projects within the SABC 100 blankets during Freedom month to the (SOC) Ltd. The SABC Foundation acts as the coordinator and elderly people in Tweespruit; maintains the focus of the projects that will operationally reside • Ligwalagwala FM, SABC Mpumalanga and within the TV Channels, Radio Stations, Business Units, and J4JOY Foundation handed over a house to Provinces. The Foundation also provides a strategic framework, the Mkhabela family of Magogeni on Friday support and structure to the various corporate social initiatives. the 27th of September 2013; The Foundation ensures that the SABC’s CSI speaks with one 77 voice, aligned and focused to the strategy and Corporate Plan • Ukhozi FM handed over two houses to the as determined by the Corporation, as well as a number of key Masikane family, who had suffered severe national priorities which are shared by the majority of South loss due to the unfortunate flooding; Africans. • U mhlobo Wenene FM, in partnership with J4JOY Foundation, built and handed These focus areas form part of the overall SABC strategy of over five fully furnished and electrified acting as a catalyst for contributing and assisting in transforming classrooms to Mpako Senior Secondary society (across all 9 provinces) by spearheading initiatives and/ School in Mqanduli; or programmes that can have positive sustainable outputs on the challenges faced by society. Governance | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
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SAfm hands out school shoes and bags to local communities.
• Lotus FM donated 80 wheelchairs and 21 480 shoes • Munghana Lonene FM built and handed over a fully to school children from previously disadvantaged furnished house to orphans and donated 1 000 blankets communities; to the needy; • Thobela FM donated a total of 1 000 blankets to Judy’s • Radio 2000 visited Joubert Park as part of 67 Minutes Paradise (home for people living with disabilities) in of Love. The Station provided meals to more than 2 000 Tauyatswala Village, and to various Drop-in Centres in homeless individuals from disadvantaged communities; Mankweng; • Good Hope FM’s annual Keep Cape Town Warm CSI • O n Mandela Day, Tru FM broadcast from the Masizakhe initiative, in partnership with ABSA, culminated in the Children’s home in Mdantsane and donated necessary brand collecting and handing over non-perishable food, resources; 8 821 pieces of clothing, 333 pairs of shoes, more • X -K FM distributed 115 free radio sets to the community than R10 000 in cash and 6 485 blankets to needy of Platfontein; communities and individuals; • S Afm gave away 4 000 blankets to street kids over the • 5FM hosted a Youth Day event in Soweto. The event winter period; was a fundraising car wash and raised R135 245 for its • Ligwalagwala FM ran a competition that was aimed Youngblood5 charity towards Education; and at encouraging tertiary level students to read books, • METRO FM entered into a partnership with Chancellor newspapers and other sources of information to expand House Holdings who donated R500 000 to build their knowledge. They were asked general knowledge and furnish a house for a child-headed family from and current affairs questions and the winner each day Umgababa in KZN. METRO FM sourced furniture and walked away with R12 000 that went towards their collected money to buy appliances and other necessities tuition. Five students won a total of R60 000 donated to ensure the house would be 100% habitable. towards their studies; • Phalaphala FM ran a campaign to collect shoes and the handover event took place in Thohoyandou on the 27th March 2014 where 1 260 pairs of shoes were handed to 40 schools; Audit Committee Report Report of the Audit Committee in terms of Regulations 27(1)(7)(b) and (c) of the Public Finance Management Act, 1 of 1999, as amended The Audit Committee reports that it has adopted appropriate formal Terms of Reference as its charter, which was approved by the Board of Directors and has performed its responsibilities as set out in the Terms of Reference. In conduct of its duties and responsibilities, the Audit Committee has reviewed the following: • The effectiveness of the internal control systems; • The effectiveness of the Internal Audit function; • T he risk areas of the entity’s operations covered in the scope of the internal and external audits; • The adequacy, reliability and accuracy of the financial information provided to management and other users of such information; • A ccounting or auditing concerns identified as a result of both internal and external audits; • The entity’s compliance with legal and regulatory provisions; • The activities of the Internal Audit function, including its annual work programme, coordination with the external auditors, the reports of significant investigations and the responses from management to specific recommendations; and • T he scope and results of the external audit function, its cost effectiveness, as well as independence and objectivity of the external auditors. The Audit Committee is also responsible for: • R eporting to the Board of Directors and the Auditor-General where a report implicates any member(s) of the Accounting Authority of fraud, corruption or gross negligence; • C ommunicating any concerns it deems necessary to the Board of Directors, and the Auditor-General, if appropriate; • C onfirming the Internal Audit Department’s Charter and Internal Audit Plan; • E ncouraging communication between Members of the Board, Senior Executive Management, the Internal Audit Department and the External Auditors; • C onducting investigations within its terms of reference; • C oncurring with the appointment and dismissal of the Chief Audit Executive; and • Approving the Internal Audit Work Plan. The Audit Committee is satisfied that internal controls and systems are being implemented and that the controls and systems already implemented have functioned effectively during the period under review. The Audit Committee considers the Corporation’s implemented internal controls and systems appropriate in all material respects to: • R educing the Corporation’s risks to an acceptable level; • M eeting the business objectives of the Corporation; • E nsuring the Corporation’s assets are adequately safeguarded; and • E nsuring that the transactions undertaken are recorded in the Corporation’s records. The Audit Committee has evaluated the annual financial statements of the South African Broadcasting Corporation SOC Limited for the year-ended 31 March 2014 and concluded that these comply in all material respects, with the requirements of the Companies Act, 2008 (Act no 71 of 2008), as amended, the Public Finance and Management Act, 1999 (Act no 1 of 1999), as amended, the Broadcasting Act, 1999 (Act No 4 of 1999), as amended and Statements of International Financial Reporting Standards. The Audit Committee concurs that the adoption of the going concern premise is appropriate in preparing the annual financial statements. At their meeting of 18 September 2014 the Audit Committee has therefore recommended the adoption of the Annual Financial Statements by the Board of Directors. 79
Mr M R Lubisi Chairman of the Audit Committeeb Resources | South African Broadcasting Corporation [SOC] Ltd
“Our human compassion binds the one to the other not in pity or patronisingly, but as human beings who have learnt how to turn our common suffering into hope for the future.” - Nelson Mandela
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SABC SABC 81 Human Resources Resources South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Human Resource Management
Our local drama production Muvhando featured on SABC2.
82 Overview From the 2012/13 financial year, the average number of days reduced by 18 000 (13.2%) and the average During the period under review, people issues centred leave liability by R10m (5.6%) year on year. This is an around a variety of Human Resources (HR) areas. These achievement based on the fact that the staff compliment included, amongst others: remained stable over the year under review, yet we • The skills audit assessing the levels of skills that internal managed to reduce the liability as well as employees staff as well as the independent contractors possess and exercising their encashment option each year. knowing what developmental areas needed more attention; The revised leave policy on capping the value and days • T he filling of executive vacant positions; at 45 days and reducing the old leave to zero needs to be • D ealing with salary anomalies; implemented through urgent conclusion of consultations with organised labour in order to maintain the liability at • R eviewing policies and procedures; and acceptable levels. • A ddressing the audit findings relating largely to records The non-compulsory accumulated leave and encashable management and internal controls, and the re-anchoring leave have now been combined into one leave category of performance management as a tool for improving to enable employees to encash more leave in order to organisational performance. reduce the liability. Performance Against the Corporate At the end of the period under review the headcount was Plan at 3 620 staff members. The independent contractors (freelancers) supplemented the human resource The SABC had planned to reduce the leave liability by 5% from gaps. The freelancers are critical to service delivery the 2012/13 financial year. In the financial year 2012/13 and the at the SABC. As a result, a Freelance Desk under the period under review the leave liability was reduced considerably stewardship of the Human Capital Services Division will as shown in the table below due to leave encashment and vacation be established in the new financial year to ensure that the leave taken. freelancers are managed effectively. 2012/13 Leave Liability - Days ‘000 2013/14 Workforce Planning Framework and Recruitment Apr 134 117 In the past years, the Corporation reduced the number of employees thereby creating a serious human resource May 138 121 shortage which led to either high overtime or freelance costs. This staff shortage also led to piecemeal and 138 Jun 123 ad hoc resource requests by the different business 134 areas because many skilled employees were becoming Jul 117 overworked. Aug 139 In the period under review, the organisation continued to 123 implement the divisional structures that were approved. Sep 144 As a result the recruitment activity was very high. 127 Additional to this, the SABC 24 Hour News channel was 148 launched on the DStv platform which brought with it an Oct 131 increased level of recruitment activity. 153 Nov 130 In order to ensure that the organisation manages its 148 headcount and overtime costs prudently, in the next Dec 124 financial year, HR will develop an integrated workforce 136 planning framework to ensure that there is a scientific Jan 112 way to determine adequate and appropriately skilled 140 talent in each business unit and that there is balance Feb 114 between the numbers in core business against those in 127 support areas. Mar 118 Managing the Challenges which will be developed in the next financial year, will focus on In the reporting year, the SABC was still operating under developing employees on the job, ensuring that the right people Government Guarantee conditions, which included reducing with the right skills and capabilities are in the right roles and are headcount. This led to staff being asked to perform additional engaged and focused on the right activities. The report also roles, working more overtime and thus becoming overworked raised the fact that the success of the Corporation will depend and burnt out. This had a bearing on the morale of employees. on its ability to recruit and retain executive management and The statistics in the wellness clinic showed about 598 of other key employees as our unique service experience depends depressive episode cases in the year under review, which on them. represents a 29% increase from 2012/13 . An action plan to address the recommendations raised by While effective during this financial recovery time, the conditions the skills audit report was developed and implemented. It is of the Government Guarantee were impacting the Corporation’s important to note that two months before the release of the productivity, and making it difficult for payment of performance report, the organisation had appointed four (4) executives in bonuses. Employees started feeling unappreciated because Human Capital Services, Procurement, Risk and Governance, they could not be incentivised, and that caused high employee and Strategy. dissatisfaction. 25 senior managers completed the Executive Development In the new financial year, the organisation will see the re- Programme (EDP) at Gordon Institute of Business Science. Their introduction of the Performance Incentive Scheme to propel learning interventions were focused on getting the employees the drive to embed the culture of performance management ready for digital migration. As a result, a larger percentage of throughout the Corporation. The Recognition and Reward the training focused on the use of smarter technology and the Framework has been approved for implementation in the new translation of learning to improvements in business results and year, and this will assist in driving and rewarding the excellent customer satisfaction. performance at all levels of the organisation. Programmes such as the ICT training programmes, employee The delays in the completion of the disciplinary case of the study assistance schemes to enhance higher educational Chief Financial Officer (CFO) and the court cases of the Group learning, internships, learnerships and work integrated learning Executive: News and Current Affairs and the former GE: were given priority to ensure the SABC has the skills and talent Content Enterprises meant that most positions were occupied for a dynamic and evolving techno-paced industry thereby in an acting capacity. It was unfortunate in that in the latter part supporting the readiness for digital migration. of the period under review, the Group Chief Executive Officer resigned. The organisation also continued to invest in employee development, youth development programmes and promotion Highlights of learning interventions that assist government in the A skills audit, which had been commissioned by the organisation eradication of poverty, employee upliftment and employment to determine the levels of existing skills and knowledge profiles creation whilst ensuring that the SABC achieves its public for particular individuals or groups or job families, was conducted service mandate. within the organisation. The audit was also conducted in order During the period under review, the SABC invested to identify the gaps, if they exist, between the skills requirements approximately R40m in employee development. This equates of the organisation and existing skills. to an approximate investment of R21 000 per employee. The aggregated results of the skills audit highlighted the fact The table below demonstrates the impact that learning that employee development must be accelerated and people intervention had on the skills development agenda of the SABC management processes must be streamlined to meet the and gives a summary of the highlights of each of the training challenges of digital migration. The talent management strategy, interventions implemented during the year under review.
Intervention Highlight Internships - 132 interns were recruited in the various professional • 15% absorbed by the SABC disciplines to gain workplace learning experience. Learners were • 17 employed externally also exposed to entrepreneurial and work readiness programmes • 26% employment creation for 2013 internship programme Employee study assistance schemes 243 employees and their children were supported to pursue formal studies with institutes of higher learning. Recognition of prior learning (RPL) 91 employees who had no formal qualifications were put through the RPL and they all achieved the qualifications Learnerships Employees and unemployed youth participated in registered learnerships. Youth from the sound technology Learnerships were absorbed into the SABC internship programme. ABET 20 employees enrolled for adult literacy and numeracy skills programmes. 83 Executive, Management and Leadership programmes 25 Senior Managers completed EDP Continuous Professional Development Over 120 employees were registered with SAQA accredited bodies to professionalise their careers. Workplace Skills Plan (WSP) The SABC has achieved 72% of the WSP. Of the total participants: • 83% of participants were black • 53% were females and • 3% were employees with disabilities Accreditation The SABC has been fully accredited by the MICT SETA to facilitate the Sound Technology NQF L5 programme. To assist staff with global exposure, students from the North Western University in Switzerland participated in mini exchange programmes and visits to the SABC. Resources | SABC AnSouth African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Performance Management • Kidney, Diabetes and Hypertension (Salt) Care Campaigns; Fr amework and Performance management is critical for the long-term retention • Lifestyle Challenge - including managing a healthy life. of employees and crucial for continuous business improvement, The belief in the organisation is that these and other illnesses especially in such a highly competitive and fast-paced impact the productivity of employees and as a result there were environment like the SABC. Training, mentoring, coaching and huge efforts to create awareness for both preventive and cure building on individual strengths is key and must be done in a management purposes. This approach to health and wellness deliberate and planned manner. Performance management was shared with the employees during the different campaigns, provides us with that tool, to assess capability levels and gaps workshops and events. where development is needed. A performance management system which covers the Policy Development setting of targets and standards, employee development and The Auditor General as well as the Group Internal Audit reports, periodic competency-based appraisals was implemented highlighted the lack of timeous review of HR policies, which then for management level staff only, but due to lack of some impacted on their relevance, appropriateness as well as legislative fundamental aspects such as a performance incentive scheme and regulatory compliance. A project plan was developed to and adequate training, it was not implemented as expected. By review all HR policies to ensure that they are benchmarked, the end of the year under review, consultation was still ongoing compliant with legislation and support transformation in preparation for implementation within the bargaining unit and/ imperatives, and are applied fairly and consistently. While or non-management employee levels. some policies were developed and consulted with organised labour, it did appear that their implementation was met with 84 Employee Care resistance because organised labour asserted that they were Human resources are responsible for the stabilisation and growth not adequately consulted. As a result the following policies were of the organisation. All employees and the many independent reviewed and continued to be consulted with organised labour contractors (freelancers) represent the organisation to its in order to ensure adequate buy-in: clients, communities and other stakeholders. It is therefore • Disciplinary Procedure and Code; essential that they get supported in their wellness and personal development. • Recruitment and Selection; From a wellness and healthy lifestyle management perspective, • Performance Management Policy and Framework; the organisation provides chronic disease screening and a • Employment Equity; 24 hour employee assistance programme. This ensures that employees are supported in adopting a preventative approach • Acting in Higher Grades; and to illness, and their psychological well-being is ensured. • Leave. For example, during the passing of the former President Mr The length of time it took to consult with organised labour was Mandela, a team from our Wellness Department provided unusually long and this was raised during consultation in the support to the News crew in all those regions that were going to spirit of maintaining harmonious employee relations. At the end be active during the production. of the financial year, some of the approved policies were being Employee visits to the clinic that related to Health and Wellness, implemented. Occupational Health and Employee Assistance Programme All policies will be reviewed in the new financial year to ensure (EAP) increased during the reporting year in the following core that they are relevant and recent. These will be used to service areas that were provided: induct employees into the values and ways of working in the • Occupational Health Care 3 835 visits; organisation. • P rimary Health Care 3 956 visits; and Improving Governance and • E mployee Assistance 1 839 visits. Internal Controls The employees of the organisation are not immune to the tough The skills audit report and the Auditor General highlighted a challenges that are faced by South African citizens and the world concern on records management of employee information, as a result of economic downturn. Financial management and which led to the credibility of information being in question. To issues relating to interpersonal relationships, stress and work address this, the HCS has embarked on a project to reconstruct related challenges continue to impact the workplace. Evidence employee files, create a Standard Operating Procedure (SOP) shows that many employees have to stretch their rand by taking for record keeping of employee files and safe storage of records. care of their siblings or relatives who are unemployed and We are recruiting a Shared-Services Manager to lead the unit. unable to support themselves. Where appropriate, employees This will ensure consistent application of human resource were referred for professional help. In the new financial year, processes and procedures throughout the Corporation. interventions will be implemented to assist employees to The project of creating standardised human resource manage the stress levels as well as cope with financial processes within the SABC was instituted through process management. The Corporation will continue to share with its mapping, standardisation, and the development of SOP’s and staff all government initiatives for alleviating unemployment and implemented through a change management process. Process addressing poverty. automation was started in the period under review and will be The Health and Awareness calendar for 2013/14 included the continued into the new financial year to ensure effective, user- following: friendly processes within HCS. • Blo od Donation Drive; • P regnancy and STI/Condom Campaign; • Cancer (especially breast and skin cancer), TB and HIV/AIDS Awareness; Hr Oversight Statistics Personnel Compensation and Benefits by Division
Total Permanent Personnel No. of Average Division Expenditure Expenditure % of Total Employees (R’000) (R’000) (R’000) Expenditure Commercial Enterprises 321 276 205 642 64.0 311 661 Group Services 912 300 511 217 62.9 512 998 News 705 589 510 876 72.4 960 532 Provincial Operations 182 328 64 360 46.3 178 474 Radio 900 216 189 069 23.6 365 518 SABC Sport 581 301 32 329 5.6 60 647 Technology 1 132 336 463 429 40.9 939 494 Television 2 317 463 161 867 7.0 305 531 TOTAL 6 784 920 2 158 789 31.8 3 620 596 Personnel Compensation and Benefits Level
Permanent Personnel No. of Average Level % of Total Expenditure (R’000) Employees (R’000) Expenditure Top Management 30 597 1.4 11 2 782 Senior Management 116 660 5.4 73 1 598 Middle Management 404 775 18.8 441 918 Junior Management 448 427 20.8 595 754 Supervisory Levels 964 433 44.7 1 946 496 All other Personnel 193 895 9.0 554 350 TOTAL 2 158 789 100.0 3 620 596 Personnel Compensation, Benefits and Performance Rewards
Performance Rewards vs Level Performance Rewards Expenditure (R’000) Total Expenditure Top Management - 30 597 - Senior Management - 116 660 - Middle Management - 404 775 - Junior Management - 448 427 - Supervisory Levels - 964 433 - All other Personnel - 193 895 - TOTAL - 2 158 789 - * No performance rewards were paid out in the year under review. Personnel Compensation, Benefits and Training Costs
Permanent Personnel Training Training No. of Average Training Division Expenditure Expenditure Expenditure Employees Costs (R’000) (R’000) % of Total Expenditure Commercial Enterprises 3 985 205 642 1.9 188 21 Group Services 7 084 511 217 1.4 334 21 News 7 189 510 876 1.4 339 21 Provincial Operations 3 479 64 360 4.1 164 21 Radio 3 900 189 069 2.1 184 21 SABC Sport 401 32 329 1.2 19 21 Technology 9 522 463 429 2.1 449 21 Television 4 941 161 867 3.1 233 21 TOTAL 40 501 2 158 789 1.9 1 910 21 Personnel and Vacancies by Division
2012/13 2013/14 85 % of Division No of Approved No of Vacancies Vacancies Personnel Posts Personnel Commercial Enterprises 325 324 311 12 4.0 Group Services 444 529 512 17 3.2 News 953 993 960 33 3.3 Provincial Operations 192 183 178 5 2.7 Radio 371 379 365 14 3.7 SABC Sport 51 53 60 3 5.7 Technology 969 968 939 29 3.0 Television 336 321 305 16 5.0 TOTAL 3 641 3 750 3 620 130 3.5 Resources | SABC AnSouth African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Employment and Vacancies
2012/2013 2013-/2014 % of Level No of Approved No of Vacancies Vacancies Personnel Posts Personnel Top Management 9 14 11 3 21.4 Senior Management 62 76 73 3 3.9 Middle Management 428 476 441 35 7.4 Junior Management 605 618 595 23 3.7 Supervisory Levels 1 943 1 991 1 946 45 2.3 All other Personnel 594 575 554 21 3.7 TOTAL 3 641 3 750 3 620 130 3.5 Employment Changes
Employment Employment Level Level at Beginning Appointments Terminations at End of Movements of period Period Top Management 9 4 4 2 11 Senior Management 62 12 5 4 73 Middle Management 428 14 34 33 441 Junior Management 605 24 40 6 595 86 Supervisory Levels 1 943 106 112 9 1 946 All other Personnel 594 47 33 (54) 554 TOTAL 3 641 207 228 - 3 620 Reasons for Employees Leaving
% of Total no Reasons Number of Employees leaving Death 14 6 Resignation 126 55 Dismissal 8 4 Retirement 55 24 Ill Health 2 1 Expiry of Contract 21 9 Other 2 1 TOTAL 228 100 Employment Equity Target and Status African Coloured Indian White Level Current Target Current Target Current Target Current Target Male Top Management ------Senior Management 6 6 - - - - 1 1 Professional Qualified 189 170 2 16 26 23 60 60 Skilled 1 112 1 084 22 121 54 53 285 253 Semi-Skilled 61 51 5 5 - - - - Unskilled ------TOTAL 1 368 1 311 134 142 80 76 346 314 Female Top Management - 1 ------Senior Management 1 2 2 2 1 1 - - Professional Qualified 114 115 22 20 13 14 41 42 Skilled 964 996 153 164 73 73 269 232 Semi-Skilled 34 38 4 4 - - 1 2 Unskilled ------TOTAL 1 113 1 152 181 190 87 88 311 314
Diversity will continue to define organisational strength, with candidates from the designated groups and persons with especially in light of the diversity of SABC’s audience base. disabilities, in order to improve the Employment Equity profile of The Corporation is committed to providing equal opportunities the Corporation. to all employees and aims to build a diverse, high-quality staff When it comes to Employment Equity, the SABC met and profile. Employment Equity is promoted through proactive, exceeded set EE targets, except for females. Currently, 82% of long-term focus, rather than reactive, short-term compliance our employees are black, and 47% are female. The organisation only. In the next financial year programmes such as succession has not achieved its target of 50% female employees, and planning will be in place and/or rolled out into all areas of the therefore the recruitment of females will remain an area of focus organisation. A consented effort will be made to fill vacancies going forward. Disabled Employee Employment Equity Target and Status
Male Female Level Current Target Current Target Top Management ---- Senior Management ---- Professional Qualified 2 5 2 5 Skilled 33 33 43 61 Semi-Skilled 2 2 1 3 Unskilled ---- TOTAL 37 40 46 69
An employment equity survey and focus group discussions were conducted in the middle of 2013 to determine what employment barriers, especially those in the disability categories, exist within the organisation. The outcomes of this research formed the foundation of the employment equity plan submitted to the Department of Labour. The content of this plan will be integrated into the talent management strategy to ensure a proactive, business approach to employment equity.
Labour Relations: Misconduct and Disciplinary Action
Action Number Verbal Warning 3 Written Warning 3 Final Written Warning 9 Dismissal 5 TOTAL 20 SABC Staff communicates in sign language. Galvanise Employee Relations with Organised Labour Talent Management and Retention We will develop a talent management and succession planning There is a consented effort to improve employee relations process. In this regard, we will recruit the right skills and deploy with the different unions, and to foster inclusivity as well as them in the right place, in a manner which promotes the stakeholder relations at all levels. Employment Equity plan of the SABC. We will also develop a Constructive employee relations are fostered through compelling employee value proposition to ensure attraction and employee-related policies, the communication of these policies retention of critical talent. to employees and constant monitoring that all policies and practices comply with the applicable legislation. Constructive Embed the Culture of Performance Management consultation is always encouraged with the employees through We are going to institutionalise our Performance Management their recognised trade unions in order to consistently encourage Policy with revised tools, including thresholds and stretch and promote acceptable conduct that creates a culture that targets. In the process, we will introduce a performance incentive supports the growth of the company. scheme to drive performance excellence and motivation of staff. We expect our employees to contribute to our higher purpose Optimise the Learning and Development model and, in return, we honour our obligation to treat them with fairness and respect. As a result of this mutual respect, SABC is We are going to develop a Workplace Skills Plan and Programmes working to correct imbalances in all its forms. The SABC is of the that supports sustainability and readiness for the migration to view that equal skills, effort and experience should be met with digital age. This will help to address the developmental areas equal reward. As a result, during the reporting period the unions that were identified in the Skills Audit report. and management continued to work towards addressing the Review all HR policies and procedures salary anomalies. For the long term the SABC plans to conduct salary benchmark for all positions, thereby ensuring fair pay. All our HR policies will be reviewed to ensure that they are benchmarked, they support the transformation agenda and are Looking Forward compliant with relevant legislation and regulations. 87 The following areas will receive prioritised attention in order to Improve Internal Controls and Governance improve HR delivery efficiencies: We will continue to create HR process automation in order Integrated Workforce Planning to achieve process standardisation thereby eliminating inconsistencies. As part of the process, we are going to set We will formulate and implement an integrated SABC Workforce up the HR Shared Service Centre, which will handle all HR Plan that addresses current and future business goals. Further, administration issues and records to improve data integrity we will formulate and implement role profiles, processes and and usability for HR Analytics. This will help drive the culture of practices to facilitate correct placement of skills. adherence to business ethics, policies and procedures. Financials | South African Broadcasting Corporation [SOC] Ltd
“Education is the most powerful weapon which you can use to change the world.” - Nelson Mandela
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Annual Annual 89 Financial Statements Financials South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Statement of Responsibility and Confirmation of the Accuracy of the Annual Report
The Directors of the South African Broadcasting Corporation SOC Limited (SABC) are responsible for preparation of the annual financial statements, to maintain a sound system of internal control and to safeguard the shareholder’s investment and the SABC’s assets. In presenting the accompanying financial statements, International Financial Reporting Standards (IFRS) and applicable accounting policies have been used, while prudent judgements and estimates have been made. In order for the Directors to discharge their responsibilities, management is in the process of developing and will continue to maintain a system of internal 90 controls, which is aimed at reducing the risk of error or loss, in a cost effective manner. Such systems can provide reasonable, but not absolute, assurance against material misstatement or loss. The Directors meet periodically, primarily through the Audit Committee, with the external and internal auditors and executive management to evaluate matters concerning accounting policies, internal controls, auditing and financial reporting. The SABC’s internal auditors independently evaluate the internal controls and coordinate their audit coverage with the external auditors. The Auditor-General is responsible for reporting on the financial statements. Both external and internal auditors have unrestricted access to all records, property, personnel and systems as well as to the Audit Committee. Based on the information and explanations given by management and the internal auditors, and on comment by the external auditors on the results of their audit conducted for expressing their opinion, the Directors are of the opinion that the internal accounting controls are inadequate. The financial records were relied on for preparing the financial statements and maintaining accountability for assets and liabilities. As the Directors have reviewed the Corporation’s financial budgets for the year to 31 March 2014, and in the light of the current financial position, they consider it appropriate that the annual financial statements be prepared on the going- concern basis. The Auditor-General has audited the annual financial statements of the Corporation and his report appears on pages 91 to 95. Against this background, the Directors of the Corporation accept responsibility for the annual financial statements, which were approved by the Board of Directors on 18 September 2014 and are signed on its behalf by:
Z E Tshabalala Chairman
C Olivier Acting Group Chief Executive Officer
Annual Financial Statements Report of the Auditor-General to Parliament on the SABC (SOC) Ltd
Report on the Consolidated and Basis for Qualified Opinion Separate Financial Statements Licence Fee Revenue and Related Receivable Introduction 6. The South African Broadcasting Corporation (SOC) Limited 1. I have audited the consolidated and separate financial (SABC) generates revenue from TV licence fees, which statements of the South African Broadcasting Corporation should be recognised once the recognition criteria is met (SOC) Limited and its subsidiaries set out on pages 97 to 145, in accordance with the International Financial Reporting which comprise the consolidated and separate statements Standards, IAS 18, Revenue. The SABC did not record of financial position as at 31 March 2014, the consolidated revenue on an accrual basis, as required by the accounting and separate statements of profit and loss, consolidated and standard but rather recorded the revenue on a cash basis. separate statements of comprehensive income, statement of In addition, the SABC made use of agents to collect a changes in equity and statement of cash flows for the year significant amount of cash for TV licenses without obtaining then ended, as well as the notes, comprising a summary any assurance report from an independent auditor to confirm of significant accounting policies and other explanatory the correctness of the amount paid over to the SABC by the information. respective agents. Due to the lack of adequate systems in place to maintain records of TV licence fees I was unable to The Board of Director’s Responsibility for the obtain sufficient appropriate audit evidence for the amounts Consolidated and Separate Financial Statements disclosed as TV licence fees stated at R927 882 000 (2013: 2. The board of directors, which constitutes the accounting R913 838 000) in note 26 to the separate and consolidated authority, is responsible for the preparation and fair financial statements. I was unable to confirm the correct presentation of these consolidated and separate financial amount by alternative means. Consequently, I was unable statements in accordance with the International Financial to determine whether any adjustments to the TV licence fee Reporting Standards (IFRS), the requirements of the Public revenue, related other receivable balance and any impairment Finance Management Act of South Africa, 1999 (Act No. 1 thereof, as disclosed in notes 26 and 14 to the separate of 1999) (PFMA) and the Companies Act of South Africa, and consolidated financial statements, were necessary. I 2008 (Act No. 71 of 2008), and for such internal control as was also not able to determine the consequential impact the accounting authority determines is necessary to enable that the required adjustments would have on the surplus the preparation of consolidated and separate financial for the period and the accumulated surplus. This limitation statements that are free from material misstatement, whether equally applies to the comparative figures in the separate and due to fraud or error. consolidated financial statements. Auditor-General’s Responsibility Property, Plant and Equipment 3. M y responsibility is to express an opinion on these 7. T he SABC did not review the useful lives of all assets included consolidated and separate financial statements based on my in property, plant and equipment at each reporting date audit. I conducted my audit in accordance with the Public in accordance with the International Financial Reporting Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), Standards, IAS 16, Property, plant and equipment. In the general notice issued in terms thereof and International addition, the SABC went through a detail asset verification Standards on Auditing. Those standards require that I exercise during the year and matched the assets verified comply with ethical requirements, and plan and perform and owned by the SABC to the asset register. During this the audit to obtain reasonable assurance about whether the exercise a significant number of assets that had been verified consolidated and separate financial statements are free from on the premises of the SABC could not be matched to the material misstatement. asset register as at 31 March 2014. As result I was unable 4. An audit involves performing procedures to obtain audit to determine the correct net carrying amount of property, evidence about the amounts and disclosures in the plant and equipment and depreciation and impairment consolidated and separate financial statements. The stated at R1 385 016 000 (2013: R1 611 934 000) (2012: procedures selected depend on the auditor’s judgement, R1 815 731 000) and R308 889 000 (2013: R295 456 000) including the assessment of the risks of material respectively in note 5 to the separate and consolidated misstatement of the consolidated and separate financial financial statements, as it was impracticable to do so. I statements, whether due to fraud or error. In making those was also not able to determine the consequential impact risk assessments, the auditor considers internal control that the required adjustments would have on the prior relevant to the entity’s preparation and fair presentation period error note 4, the surplus for the period and the of the consolidated and separate financial statements in accumulated surplus in the separate and consolidated order to design audit procedures that are appropriate in the financial statements. The misstatement equally applies to 91 circumstances, but not for the purpose of expressing an the comparative figures in the separate and consolidated opinion on the effectiveness of the entity’s internal control. financial statements. An audit also includes evaluating the appropriateness 8. T he SABC capitalised depreciation to the cost of of accounting policies used and the reasonableness of programme, film and sport rights where the future accounting estimates made by management, as well as economic benefits embodied in property, plant and evaluating the overall presentation of the consolidated and equipment were absorbed in the production of separate financial statements. programmes in accordance with the International 5. I believe that the audit evidence I have obtained is sufficient Financial Reporting Standards, IAS 16, Property, and appropriate to provide a basis for my qualified audit plant and equipment. As a result of the misstatement opinion. reported in paragraph 7 above, I was unable to determine the consequential impact that the required
Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14 Report of the Auditor General to Parliament on the SABC (SOC) Ltd (continued)
adjustments would have on the depreciation stated at R16 VAT. As a result the SABC now has unrecorded exposure 777 000 (2013: R28 947 000) in note 5 to separate and in respect of this output VAT. I was unable to quantify this consolidated financial statements, as it was impracticable to exposure as the amount of unrecorded TV license debtors do so. The misstatement equally applies to the comparative could not be accurately determined by management. I figures in the separate and consolidated financial statements. could not determine this exposure by alternative means. I 9. T he SABC did not assess property, plant and equipment was also unable to obtain sufficient and appropriate audit for impairment at the reporting date in accordance with evidence to confirm the correct application of the VAT Act the International Financial Reporting Standards, IAS 36, by the SABC in calculating their VAT liability in a number of Impairment of assets. There was no system in place on which other instances and could not determine the VAT liability by I could rely for the purpose of the audit, and there were no alternative means. Consequently, I was unable to determine satisfactory audit procedures that I could perform to obtain whether any further adjustment to the other payables, reasonable assurance that no assets should be impaired. included in trade and other payable which was stated Because of the nature of these assets, I was unable to confirm at R676 189 000 (2013: R654 773 000) (2012: R706 858 or verify by alternative means the value of the property, plant 000) in note 23 to the separate and consolidated financial and equipment. As a result I was unable to determine the statements, was necessary. This limitation equally applies correct net carrying amount of property, plant and equipment to the comparative figures in the separate and consolidated and depreciation and impairment stated at R1 385 016 000 financial statements. (2013: R1 611 934 000) (2012: R1 815 731 000) and R308 12. The SABC did not have adequate systems in place to ensure 889 000 (2013: R295 456 000) respectively in note 5 to the that the pay-as-you-earn liability is calculated in terms of the separate and consolidated financial statements, as it was requirements of Schedule Four to the Income Tax Act, which impracticable to do so. I was also not able to determine resulted in the pay-as-you-earn liability being understated 92 the consequential impact that the required adjustments by R1 942 626. In addition, the SABC uses the services of would have on the prior period error note 4, the surplus freelancers and other suppliers who may qualify as labour for the period and the accumulated surplus in the separate brokers, personal service providers or non-independent and consolidated financial statements. The misstatement contractors for tax purposes. The SABC did not have clear equally applies to the comparative figures in the separate and guidance and adequate systems to assess whether these consolidated financial statements. service providers were subject to employees tax as required Deferred Tax, Tax Payable and Income Tax by Schedule Four to the Income Tax Act. As a result, I was unable to assess whether the correct pay-as-you-earn was 10. The SABC did not have adequate systems in place to ensure deducted from these service providers, as required by the that the tax liability, income tax and deferred tax submitted tax law. I was unable to quantify this exposure by alternative for auditing are supported by accurate and complete means and to ensure the correct application of Schedule underlying accounting records and are calculated in terms Four to the Income Tax Act in general. In addition, in terms of the requirements of the Income Tax Act, 1962 (Act No. of the Income Tax Act, SABC can recover the pay-as-you- 58 of 1962). As a result the income tax was understated earn not deducted from the respective service providers by R28 839 644 (2013: R3 880 449), the deferred tax asset where applicable. Consequently, I was unable to determine was overstated by R99 926 635 (2013: R80 725 646) (2012: whether any further adjustment to the other payables and R77 937 659) and the tax liability was understated by R29 other receivables, included in trade and other payables and 162 337 (2013: R 19 523 682) (2012: R18 431 172) in the trade and other receivables, which was stated at R676 189 separate and consolidated financial statements. There 000 (2013: R654 773 000) (2012: R706 858 000) and R1 070 was a resultant impact on the surplus for the period and 660 000 (2013: R852 197 000) (2012: R877 346 000) in notes the accumulated surplus. In addition, I was unable to 23 and 14 respectively to the separate and consolidated obtain sufficient appropriate audit evidence for income financial statements, were necessary. I was also not able tax, deferred tax and the tax liability and to confirm it by to determine the consequential impact that any required alternative means. Consequently, I was unable to determine adjustment would have on the surplus for the period and whether any further adjustment to income tax, deferred tax the accumulated surplus. This limitation equally applies to and the tax liability stated at R182 887 000 (2013: -R290 the comparative figures in the separate and consolidated 445 000), R194 177 000 (2013: -R278 426 000) (2012: financial statements. R0) and R370 094 000 (2013: R68 902 000) (2012: R62 808 000) respectively in the separate and consolidated Deferred Government Grant financial statements, were necessary. I was also not able 13. The SABC did not recognise government grants for to determine the consequential impact that any further technology assets as income on a systematic basis over required adjustment would have on the disclosure in note the period in which the SABC recognised the related the prior period error note 4, 21, 33, 35, the surplus for the depreciation cost for which the grants were intended to period and the accumulated surplus. This limitation equally compensate in accordance with the International Financial applies to the comparative figures in the separate and Reporting Standards, IAS 20, Accounting for Government consolidated financial statements. Grants and Disclosure of Government Assistance. In Other Payables addition, the misstatement reported in paragraph 7 of this report also impacts the related cost of depreciation and 11. The SABC did not have adequate systems in place to ensure as a result the government grants income recognised. that the Value Added Tax (VAT) liability was calculated in Consequently, I was unable to determine the correct terms of the requirements of the VAT Act, 1991 (Act No. 89 deferred government grant balance and government grants of 1991), which resulted in the VAT liability being understated income for technology assets stated at R417 412 000 (2013: by R1 224 453. In addition the SABC does not record R 3 8 5 7 6 7 0 0 0 ) ( 2 0 1 2 : 4 5 2 3 5 7 0 0 0 ) a n d R 7 9 9 3 9 0 0 0 revenue in respect of TV license until the amount owed (2013: R79 263 0000) in notes 20 and 26 respectively to the is paid. As a consequence of this treatment the SABC separate and consolidated financial statements, as it was previously requested a ruling from the Tax Authorities to impracticable to do so. As a result of this I was also not able recognise the output VAT liability on cash basis. The ruling to determine the consequential impact that the required was provided, however it was only valid for a period of adjustments would have on the surplus for the period and time. As at the end of 2014 financial year, the SABC was the accumulated surplus. The misstatement equally applies not in possession of a valid ruling to support the continued to the comparative figures in the separate and consolidated treatment of excluding unpaid TV license from output financial statements.
Annual Financial Statements Annual Financial Statements Mobile Income expenditure as disclosed in note 43 to the separate and 14. I was unable to obtain sufficient appropriate audit evidence consolidated financial statements were necessary. for mobile income recorded as part of revenue, as internal Qualified Opinion controls had not been established for the recording of 17. In my opinion, except for the possible effects of the matters mobile income before their initial entry in the financial described in the basis for qualified opinion paragraphs, the records. As a result the corresponding mobile revenue consolidated and separate financial statements present collection cost that forms a significant part of the gross fairly, in all material respects, the financial position of the mobile income could also not be confirmed. I was unable to South African Broadcasting Corporation (SOC) Limited confirm these amounts by alternative means. Consequently, and its subsidiaries as at 31 March 2014, and their financial I was unable to determine whether any adjustment to mobile performance and cash flows for the year then ended, in income stated at R34 425 000 (2013: R10 202 000) in note accordance with the International Financial Reporting 26 to, and mobile revenue collection cost stated at R22 519 Standards, and the requirements of the PFMA and the 000 (2013: R0) in, the separate and consolidated financial Companies Act of South Africa. statements were necessary. As a result of this I was also not able to determine the consequential impact that the required Emphasis of Matters adjustments would have on the related other receivable, 18. I draw attention to the matters below. My opinion is not surplus for the period and the accumulated surplus. This modified in respect of these matters. limitation equally applies to the comparative figures in the Significant Uncertainties separate and consolidated financial statements. 19. With reference to note 40 to the separate and consolidated IFRS Disclosure financial statements, the SABC was a defendant in a number 15. I was unable to obtain sufficient appropriate audit evidence of lawsuits. At the time of this report, the ultimate outcome for the disclosure of the analysis of the age of trade of these matters could not be determined, and no provision receivables that are individually determined to be impaired for any liability that may result was made in the separate and as at the end of each reporting period in accordance with consolidated financial statements. the International Financial Reporting Standards, IFRS 7, Restatement of Corresponding Figures Financial statements: Disclosure. There were no controls in 20. As disclosed in note 4 to the separate and consolidated place to ensure that all receipts and credit notes related to financial statements, the corresponding figures for the year trade debtors were recorded in the correct ageing category ended 31 March 2013 and the opening balance as at 1 April against the initial invoices raised. I could not confirm the 2012 were restated as a result of errors discovered during ageing of trade receivables by alternative means, as it the period 31 March 2014 in the separate and consolidated was impracticable to do so. Consequently, I was unable financial statements of the SABC for the year ended 31 to determine whether any adjustment to the ageing of March 2013. trade receivables stated at R117 792 000 (2013: R204 778 000) in note 37 to the separate and consolidated financial Additional Matters statements was necessary. The misstatement equally 21. I draw attention to the matter below. My opinion is not applies to the comparative figures in the separate and modified in respect of this matter. consolidated financial statements. Other Reports Required by the Companies Act Irregular, Fruitless and Wasteful Expenditure 22. A s part of our audit of the separate and consolidated financial 16. Section 55(2) (b) (i) of the Public Finance Management statements for the year ended 31 March 2014, I have read the Act (PFMA), 1999 (Act No. 1 of 1999) requires the SABC director’s report, the audit committee’s report and the SABC to include particulars of irregular, fruitless and wasteful secretary’s certificate for the purpose of identifying whether expenditure in the notes to the annual financial statements. there are material inconsistencies between these reports Note 43 to the separate and consolidated financial and the audited financial statements. These reports are the statements was misstated as follows: responsibility of the respective preparers. Based on reading • The SABC incurred expenditure in contravention of the these reports I have not identified material inconsistencies supply chain management (SCM) requirements that were between these reports and the audited financial statements not included in irregular expenditure, which resulted in in respect of which I expressed a qualified opinion. I have irregular expenditure being understated by R11 872 173. not audited these reports and, accordingly, do not express an opinion on these reports. • The SABC disclosed irregular expenditure which did not satisfy the irregular expenditure definition of the Report on Other Legal and PFMA, which resulted in the irregular expenditure being Regulatory Requirements overstated by R166 936 047. 23. In accordance with the PAA and the general notice issued in • I was unable to obtain sufficient and appropriate audit terms thereof, I report the following findings relevant to the evidence to confirm the amounts condoned in relation reported performance information against predetermined to irregular and; fruitless and wasteful expenditure. As objectives for selected strategic goals presented in the a result irregular expenditure and fruitless and wasteful annual performance report, compliance with legislation expenditure were understated by R228 398 000 and as well as internal control. The objective of my tests was 93 R12 600 000 respectively. to identify reportable findings as described under each • T he SABC incurred expenditure in vain, which could have subheading but not to gather evidence to express assurance been avoided had reasonable care been exercised, that on these matters. Accordingly, I do not express an opinion were not included in the fruitless and wasteful expenditure. or conclusion on these matters. This resulted in fruitless and wasteful expenditure being PREDETERMINED OBJECTIVES understated by R514 088. 24. I performed procedures to obtain evidence about the In addition, the SABC did not have adequate systems in usefulness and reliability of the reported performance place to maintain complete records of irregular and; fruitless information for the following selected strategic goals and wasteful expenditure. Due to this lack of systems I was presented in the annual performance report of SABC for the not able to confirm the amount of irregular and; fruitless and year ended 31 March 2014: wasteful expenditure to be disclosed by alternative means. Consequently, I was unable to determine whether any • S trategic goal 1A: Putting broadcasting at the forefront further adjustments to irregular and; fruitless and wasteful pp. 38 (Audience attraction and retention) Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14 Report of the Auditor General to Parliament on the SABC (SOC) Ltd (continued)
• Strategic goal 1B: Putting broadcasting at the forefront STRATEGIC GOAL 1B: Putting broadcasting at the pp. 38 (Stakeholder management) forefront (stakeholder management) • Strategic goal 2: Bringing editorial integrity back Usefulness of Reported Performance pp. 38 (News and current affairs) Information • Strategic goal 4A: Economical, efficient and effective 32. The FMPPI requires the following: organisation pp. 38 (Revenue enhancement) • P erformance targets must be specific in clearly identifying • Strategic goal 5: Building a digital SABC the nature and required level of performance. A total of pp. 39 (Enhanced public service) 100% of the targets were not specific. 25. I am unable to report findings on the usefulness and reliability • Targets must be measurable. I could not measure the of the annual performance report of the trading subsidiaries required performance of 100% of the targets. as they were not prepared as required by section 55(2)(a) of • Indicators must have clear definitions so that data can the PFMA. be collected consistently and is easy to understand and 26. I evaluated the reported performance information of the use. It must further be possible to validate the processes SABC against the overall criteria of usefulness and reliability. and systems that produced the indicator, meaning that 27. I evaluated the usefulness of the reported performance the indicator must be verifiable. A total of 100% of the information of the SABC to determine whether it was indicators were not well defined, while 100% were not presented in accordance with the National Treasury’s annual verifiable. reporting principles and whether the reported performance This was due to a lack of proper systems and processes was consistent with the planned programmes. I further for performance planning and management to provide for performed tests to determine whether indicators and targets the development of performance indicators and targets 94 were well defined, verifiable, specific, measurable, time included in the corporate plan and shareholder’s compact. bound and relevant, as required by the National Treasury’s Framework for managing programme performance Reliability of Reported Performance Information information (FMPPI). 33. T he FMPPI requires auditees to have appropriate 28. I assessed the reliability of the reported performance systems to collect, collate, verify and store performance information of the SABC to determine whether it was valid, information to ensure valid, accurate and complete accurate and complete. reporting of actual achievements against predetermined objectives, indicators and targets. I was unable to 29. The material findings in respect of the selected strategic obtain the information and explanations I considered goals for the SABC are as follows: necessary to satisfy myself as to the reliability of the STRATEGIC GOAL 1A: Putting broadcasting at the reported performance information. This was due to forefront (audience attraction and retention) indicators and targets not being well defined, verifiable, Usefulness of Reported Performance specific and measurable. Information STRATEGIC GOAL 2: Bringing editorial integrity back 30. The FMPPI requires that: (news and current affairs) • Performance targets must be specific in clearly identifying Usefulness of Reported Performance the nature and required level of performance. A total of Information 75% of the targets were not specific. 34. The FMPPI requires the following: • Performance targets must be measurable. I could • Performance targets must be specific in clearly identifying not measure the required performance for 88% of the the nature and required level of performance. A total of targets. 100% of the targets were not specific. • Indicators must have clear definitions so that data can • Targets must be measurable. I could not measure the be collected consistently and is easy to understand and required performance of 100% of the targets. use. It must further be possible to validate the processes • Indicators must have clear definitions so that data can and systems that produced the indicator, meaning that be collected consistently and is easy to understand and the indicator must be verifiable. A total of 88% of the use. It must further be possible to validate the processes indicators were not well defined, while 88% were not and systems that produced the indicator, meaning that verifiable. the indicator must be verifiable. A total of 100% of the This was due to a lack of proper systems and processes indicators were not well defined, while 100% were not for performance planning and management to provide for verifiable. the development of performance indicators and targets This was due to a lack of proper systems and processes included in the corporate plan and shareholder’s compact. for performance planning and management to provide for Reliability of reported performance information the development of performance indicators and targets 31. T he FMPPI requires auditees to have appropriate systems included in the corporate plan and shareholder’s compact. to collect, collate, verify and store performance information Reliability of Reported Performance Information to ensure valid, accurate and complete reporting of actual 35. T he FMPPI requires auditees to have appropriate achievements against predetermined objectives, indicators systems to collect, collate, verify and store performance and targets. I was unable to obtain the information and information to ensure valid, accurate and complete explanations I considered necessary to satisfy myself as to reporting of actual achievements against predetermined the reliability of the reported performance information. This objectives, indicators and targets. I was unable to was due to indicators and targets not being well defined, obtain the information and explanations I considered verifiable, specific and measurable. necessary to satisfy myself as to the reliability of the reported performance information. This was due to indicators and targets not being well defined, verifiable, specific and measurable.
Annual Financial Statements Annual Financial Statements STRATEGIC GOAL 4A: Economical, efficient and the reliability of the reported performance information. This effective organisation (revenue enhancement) was due to indicators and targets not being well defined, Usefulness of Reported Performance verifiable, specific and measurable. Information Additional matters 36. Treasury regulation 30.1.3(g) requires the corporate plan 41. I draw attention to the matters below. and shareholder’s compact to form the basis for the Achievement of Planned Targets annual report, therefore requiring consistency of objectives, 42. R efer to the annual performance report on pages 38 to 39; indicators and targets between planning and reporting and paragraph 30 to 40 for information on the achievement documents. A total of 33% of the reported indicators and of planned targets for the year. This information should targets were not consistent with those in the approved be considered in the context of the material findings on corporate plan and shareholder’s compact. This was the usefulness and reliability of the reported performance because changes were made to the planned indicators and information reported in paragraphs 30 to 40 above. targets in the year. 37. The FMPPI requires that: Adjustment of Material Misstatements 43. I identified material misstatements in the annual perfor- • Performance targets must be specific in clearly identifying mance report submitted for auditing of the reported per- the nature and required level of performance. A total of formance information for strategic goal 4A: Economical, 40% of the targets were not specific. efficient and effective organisation (revenue enhancement). • Targets must be measurable. I could not measure the As management subsequently corrected only some of the required performance of 40% of the targets. misstatements, I raised material findings on the usefulness • Indicators must have clear definitions so that data can and reliability of the reported performance information. be collected consistently and is easy to understand and use. It must further be possible to validate the processes COMPLIANCE WITH LAWS AND REGULATIONS and systems that produced the indicator, meaning that 44. I performed procedures to obtain evidence that the the indicator must be verifiable. A total of 40% of the SABC and its subsidiaries complied with applicable laws indicators were not well defined, while 40% were not and regulations regarding financial matters, financial verifiable. management and other related matters. My findings on material non-compliance with specific matters in key This was due to a lack of proper systems and processes applicable laws and regulations as set out in the general for performance planning and management to provide for notice issued in terms of the PAA are as follows: the development of performance indicators and targets included in the corporate plan and shareholder’s compact. Strategic Planning and Performance Management Reliability of Reported Performance Information 45. A shareholder’s compact and corporate plan of each of the trading subsidiaries was not concluded in consultation with 38. T he FMPPI requires auditees to have appropriate systems the minister as required by Treasury Regulations 29.2.1 and to collect, collate, verify and store performance information section 52(b) of the PFMA. to ensure valid, accurate and complete reporting of actual achievements against planned objectives, indicators and 46. Effective, efficient and transparent system of internal targets. Adequate and reliable corroborating evidence control with respect to the process of performance could not be provided for 40% of the targets to assess the monitoring, measurement, review and reporting in relation reliability of the reported performance information. This to performance information and management was not in was due to indicators and targets not being well defined, place as required by section 51(1)(a)(i) of the PFMA. verifiable, specific and measurable. Annual Financial Statements, Performance Report STRATEGIC GOAL 5: Building a digital SABC (enhanced and Annual Report public service) 47. T he accounting authority did not submit the financial Usefulness of Reported Performance statements of the SABC and its subsidiaries for auditing Information within two months after the end of financial year, as required by section 55(1)(c)(i) of the PFMA. 39. The FMPPI requires that: 48. T he financial statements submitted for auditing were not • Performance targets must be specific in clearly identifying prepared in accordance with the prescribed financial the nature and required level of performance. A total of reporting framework and supported by full and proper 100% of the targets were not specific. records as required by section 55(1)(a) and (b) of the • Targets must be measurable. I could not measure the PFMA and section 29(1)(a) of the Companies Act. Material required performance of 100% of the targets. misstatements of assets, liabilities, revenue, expenditure • Indicators must have clear definitions so that data can and commitments identified by the auditors in the submitted be collected consistently and is easy to understand and financial statements were subsequently corrected and use. It must further be possible to validate the processes the supporting records were provided subsequently, but and systems that produced the indicator, meaning that the uncorrected material misstatements and supporting the indicator must be verifiable. A total of 100% of the records that could not be provided resulted in the financial indicators were not well defined, while 100% were not statements receiving a qualified audit opinion. 95 verifiable. Procurement and Contract Management This was due to a lack of proper systems and processes 49. S ufficient appropriate audit evidence could not be obtained for performance planning and management to provide for that contracts and quotations were awarded in accordance the development of performance indicators and targets with the legislative requirements as the SABC did not have included in the corporate plan and shareholder’s compact. an adequate procurement system/processes in place as Reliability of Reported Performance Information per section 51(1)(a)(iii) of the PFMA. 40. The FMPPI requires auditees to have appropriate systems 50. In instances where audit evidence was provided: to collect, collate, verify and store performance information • c ontracts and quotations were awarded to SABC to ensure valid, accurate and complete reporting of actual suppliers whose tax matters had not been declared by achievements against predetermined objectives, indicators the South African Revenue Service to be in order, as and targets. I was unable to obtain the information and required by the Preferential procurement regulations. explanations I considered necessary to satisfy myself as to Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Report of the Auditor General to Parliament on the SABC (SOC) Ltd (continued) Financial Position • goods, works or services were not procured through a resources are in place and that performance is monitored. procurement process which is fair, equitable, transparent 62. The SABC did not exercise adequate oversight responsibility and competitive, as required by section 51(1)(a)(iii) of the regarding financial and performance reporting and PFMA, in that SABC did not obtain the required price compliance and related internal controls. quotations. 63. The SABC developed action plans to address internal control • the procurement system/processes did not comply with deficiencies, however, it did not monitor the implementation the requirements of a fair SCM system, as per section of such action plans. 51(1)(a)(iii) of the PFMA, in that: 64. The leadership of the SABC did not establish and - the SABC did not always make awards to suppliers based communicate adequate policies and procedures to enable on criteria that are consistent with the original invitations and support understanding and execution of internal control for bids objectives, processes and responsibilities. - the SABC made awards to suppliers that did not score 65. The leadership of the SABC did not establish mechanisms the highest points in the evaluation process, as per the to communicate and hold individuals accountable for non- requirements of the SCM policy performance of internal control responsibilities. Expenditure Management 66. Actions were not taken in a timely manner to address the 51. T he accounting authority of the SABC did not take effective risks relating to the achievement of complete, relevant and steps to prevent irregular and fruitless and wasteful accurate financial and performance reporting. expenditure, as required by section 51(1)(b)(ii) of the PFMA. Financial and Performance Management Revenue Management 67. Reviewing and monitoring compliance with applicable laws 96 52. The SABC did not take effective and appropriate steps to and regulations were not effective. collect all money due, as required by section 51(1)(b)(i) of 68. Design and implementation of formal controls over the PFMA. information technology systems to ensure the reliability of 53. The SABC accounting records for revenue were not the systems and the availability, accuracy and protection of complete, as required by section 28 of the Companies Act information, were not adequate. and prescribed in regulation 25(3)(c) of the Companies Act. 69. The leadership of SABC did not implement proper record Asset Management keeping in a timely manner to ensure that complete, relevant 54. The SABC did not implement proper control systems to and accurate information was accessible and available to safeguard and maintain assets, as required by section 50(1) support financial and performance reporting. (a) of the PFMA. 70. The leadership of SABC did not prepare regular, accurate 55. The SABC accounting records for non-current assets were and complete financial and performance reports that were not complete, as required by section 28(1) of the Companies supported and evidenced by reliable information. Act and prescribed in regulation 25(3)(a)(i) of the Companies Other Reports Act. Investigations Consequence Management Completed during the Year 56. S ufficient appropriate audit evidence could not be obtained 71. An investigation was done on the Chief Financial Officer that the SABC took effective and appropriate disciplinary (CFO) during the 2012/13 financial period due to procurement steps against officials who incurred and/or permitted i r r e g u l a r i t i e s i d e n t i fi e d . T h e i n v e s t i g a t i o n w a s c o n c l u d e d o n irregular expenditure and fruitless and wasteful expenditure, 19 March 2014 and resulted in the dismissal of the CFO. as required by section 51(1)(e)(iii) of the PFMA. 72. The forensic unit conducted several investigations. The Other Matter investigations resulted in recommendations for disciplinary 57. The SABC did not consist of separate operation entities, and/or criminal proceedings to be instituted against the namely a public service and commercial service division, parties concerned. and did not have adequate accounting and administrative Investigations in Progress systems in place to ensure that the corporation functioned 73. The Public Protector conducted an investigation on various in separate operation entities, as required section 9 of the matters pertaining to the SABC and issued the report to Broadcasting Act, 1999 (Act No. 4 of 1999). the board of the SABC on 17 February 2014. The board INTERNAL CONTROL of the SABC commented on the report and issued their 58. I considered internal control relevant to my audit of the comments to the minister of Communications on 21 July financial statements, report on predetermined objectives, 2014. At the time of this report, the conclusion of the report and compliance with laws and regulations. The matters was still uncertain. reported below under the fundamentals of internal control 74. The forensic unit was conducting several investigations. are limited to the significant deficiencies that resulted in the The investigations were on-going and might or might not findings on the report on predetermined objectives and the result in disciplinary and/or criminal proceedings against the findings on compliance with laws and regulations included parties concerned. in this report. Leadership 59. The SABC experienced instability in leadership in recent years. There has been an improvement in the filling of vacancies in leadership positions in the period under review, however key executive positions remained vacant Pretoria as illustrated on page 13 of the annual report. 19 September 2014 60. The SABC had not established an effective organisation structure that places people with appropriate skills in appropriate positions. 61. The SABC did not implement effective human resource management to ensure that adequate and sufficiently skilled
Annual Financial Statements Statement of Financial Position as at 31 March 2014
GROUP COMPANY 31-Mar-14 31-Mar-13 1-Apr-12 31-Mar-14 31-Mar-13 1-Apr-12 Note R’000 R’000 R’000 R’000 R’000 R’000 Restated* Restated* ASSETS Property, plant and equipment 5 1 385 016 1 611 934 1 815 731 1 385 016 1 611 934 1 815 731 Investment property 6 9 220 17 978 18 195 9 220 17 978 18 195 Computer software 7 90 103 163 491 206 725 90 103 163 491 206 725 Defined benefit asset 8 155 657 69 202 155 277 155 657 69 202 155 277 Investment in subsidiaries 9 - - - 71 71 71 Available-for-sale financial assets 10 8 245 6 761 4 755 8 245 6 761 4 755 Prepayments 11 133 273 168 082 99 542 133 273 168 082 99 542 Deferred Tax 21 194 177 - - 194 177 - - Other non-current assets - - 513 - - - Total non-current assets 1 975 691 2 037 448 2 300 738 1 975 762 2 037 519 2 300 296 Programme, film and sports rights 7 726 733 657 359 710 057 726 733 657 359 710 057 Property held for sale 12 8 541 - - 8 541 - - Inventories 13 2 901 2 538 4 339 2 901 2 538 4 339 Trade and other receivables 14 1 065 261 851 591 877 545 1 070 660 852 197 877 346 Taxation - 14 093 - - 14 093 - Prepayments 11 195 363 57 213 148 136 195 306 57 168 148 100 Cash and cash equivalents 15 1 424 843 1 077 151 1 234 174 1 419 772 1 063 104 1 224 738 Total current assets 3 423 642 2 659 945 2 974 251 3 423 913 2 646 459 2 964 580 Total assets 5 399 333 4 697 393 5 274 989 5 399 675 4 683 978 5 264 876 EQUITY Share capital 16 1 1 1 1 1 1 Fair value adjustment reserve 17 6 982 5 772 3 141 6 982 5 772 3 141 Retained earnings 2 379 328 1 528 114 1 732 476 2 364 028 1 514 121 1 723 348 Total equity 2 386 311 1 533 887 1 735 618 2 371 011 1 519 894 1 726 490 LIABILITIES Perpetual debt instrument 18 27 390 27 390 27 390 27 390 27 390 27 390 Loans and borrowings 19 230 343 058 788 390 230 343 058 788 390 Deferred government grant 20 296 488 292 142 364 278 296 488 292 142 364 278 Deferred tax 21 - 278 426 - - 278 426 - Employee benefits obligation 22 937 938 864 350 650 417 937 938 864 350 650 417 Other non-current liabilities - 223 1 136 - 223 1 136 Total non-current liabilities 1 262 046 1 805 589 1 831 611 1 262 046 1 805 589 1 831 611 Trade and other payables 23 681 307 670 665 720 069 676 189 654 773 706 858 Employee benefits 22 160 621 152 713 147 285 160 621 152 713 147 154 Deferred income 24 201 509 86 028 106 181 201 509 86 028 106 181 Current portion of loans and borrowings 19 92 239 56 978 387 894 113 344 73 580 400 431 Tax payable 35 370 439 69 034 62 988 370 094 68 902 62 808 Current portion of deferred government 20 120 924 93 625 88 079 120 924 93 625 88 079 grant Provisions 25 123 937 228 874 195 264 123 937 228 874 195 264 Total current liabilities 1 750 976 1 357 917 1 707 760 1 766 618 1 358 495 1 706 775 Total liabilities 3 013 022 3 163 506 3 539 371 3 028 664 3 164 084 3 538 386 Total equity and liabilities 5 399 333 4 697 393 5 274 989 5 399 675 4 683 978 5 264 876 97
Annual Financial Statements Financials South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Statement of Profit and loss For the year ended 31 March 2014
GROUP COMPANY 31-Mar-14 31-Mar-13 31-Mar-14 31-Mar-13 Note R’000 R’000 R’000 R’000 Restated* Restated* Revenue 26 7 069 441 6 650 389 7 069 441 6 650 389 Other income 27 171 791 60 077 175 310 63 210 Amortisation of programme, film and sports rights 7 (1 328 069) (1 418 944) (1 328 069) (1 418 944) Net impairment (raised)/reversed of programme, film and 7 (9 978) (8 187) (9 978) (8 187) sports rights Amortisation of computer software 7 (76 713) (46 391) (76 713) (46 391) Net impairment reversed/(raised) of trade and other receiv- 30 479 (2 189) 30 479 (2 189) ables Broadcast costs (340 109) (532 845) (340 109) (532 960) Signal distribution and linking costs (554 456) (515 414) (554 456) (515 414) Employee compensation and benefit expenses 28 (2 513 718) (2 152 592) (2 513 718) (2 152 765) Depreciation and impairment of property, plant and equipment 5 (308 889) (295 456) (308 889) (295 456) 98 Marketing costs (135 293) (123 261) (135 293) (123 261) Direct revenue collection costs (972 021) (913 200) (972 021) (913 200) Mobile revenue collection costs 26 (22 519) - (22 519) - Professional and consulting fees 29 (68 531) (61 780) (69 158) (62 382) Other expenses - personnel costs other than employee compensation (68 218) (78 345) (68 212) (79 765) - operational (482 598) (446 574) (481 609) (447 356) Other profits/(losses) 31 302 (482) 302 (482) Operating profit before finance costs and tax 390 901 114 806 394 788 114 847 Net financing income 32 78 390 36 936 72 959 31 908 Finance income 32 125 959 153 963 125 037 152 689 Finance expenses 32 (47 569) (117 027) (52 078) (120 781) Profit before income tax 469 291 151 742 467 747 146 755 Income tax 33 182 640 (290 567) 182 877 (290 445) Profit/(loss) for the year 651 931 (138 825) 650 624 (143 690)
Annual Financial Statements Statement of Comprehensive income For the year ended 31 March 2014
GROUP COMPANY 31-Mar-14 31-Mar-13 31-Mar-14 31-Mar-13 Note R’000 R’000 R’000 R’000 Restated* Restated* Profit/(Loss) for the year 651 931 (138 825) 650 624 (143 690) 278 265 (89 017) 278 265 (89 017) Pension fund Actuarial loss 8 (667 195) (1 303 150) (667 195) (1 303 150) Change in paragraph 58 limit of IAS 19 - employee benefits 8 - 724 683 - 724 683 Expected return on plan assets 8 960 735 655 449 960 735 655 449 Post -employment medical benefits Actuarial loss 22 (16 759) (168 005) (16 759) (168 005) Gain in changes in fair value of available-for-sale financial assets 10 1 484 2 006 1 484 2 006 Income tax relating to gain on available-for-sale financial assets 33 (274) 625 (274) 625 Income tax relating to loss on pension fund actuarial valuation 33 (82 191) (21 555) (82 191) (21 555) Income tax relating to loss on post employment medical benefits 33 4 693 47 041 4 693 47 041 Other comprehensive income/(loss) for the year, net of tax 200 493 (62 906) 200 493 (62 906) Total comprehensive income/(loss) for the year 852 424 (201 731) 851 117 (206 596)
99
Annual Financial Statements Financials South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Statement of Changes in Equity Cash Flows For the year ended 31 March 2014
Fair value Retained Share capital adjustment Total earnings reserve R’000 R’000 R’000 R’000 GROUP Balance at 1 April 2012 (as previously reported) 1 3 141 1 115 781 1 118 923 Effects of changes recognised in accordance with - - 616 695 616 695 IAS8 Balance at 1 April 2012 as restated 1 3 141 1 732 476 1 735 618 Total comprehensive income for the year - 2 631 (204 362) (201 731) Balance at 31 March 2013 as restated 1 5 772 1 528 114 1 533 887 Total comprehensive income for the year - 1 210 851 214 852 424 Balance at 31 March 2014 1 6 982 2 379 328 2 386 311 COMPANY Balance at 1 April 2012 (as previously reported) 1 3 141 1 106 653 1 109 795 100 Effects of changes recognised in accordance with - - 616 695 616 695 IAS8 Balance at 1 April 2012 as restated 1 3 141 1 723 348 1 726 490 Total comprehensive income for the year - 2 631 (209 227) (206 596) Balance at 31 March 2013 as restated 1 5 772 1 514 121 1 519 894 Total comprehensive income for the year 1 210 849 907 851 117 Balance at 31 March 2014 1 6 982 2 364 028 2 371 011
Annual Financial Statements Statement of Cash Flows For the year ended 31 March 2014
GROUP COMPANY 2014 2013 2014 2013 Note R’000 R’000 R’000 R’000 Restated* Restated* Cash flows from operating activities Cash receipts from customers 7 143 306 6 868 553 7 138 514 6 867 749 Cash paid to suppliers and employees (6 648 582) (6 370 575) (6 638 191) (6 377 649) Cash generated from operations 34 494 724 497 978 500 323 490 100 Interest received 32 123 029 125 733 122 107 124 765 Dividends received 32 289 - 289 - Interest paid 32 (34 210) (73 929) (34 201) (73 929) Income taxes paid 35 (54 591) (1 850) (54 804) (1 680) Net cash inflows from operating activities 529 241 547 932 533 714 539 256 Cash flows from investing activities Proceeds from disposal of property, plant and equipment 36 2 550 40 2 550 40 Acquisition of property, plant and equipment 5 (101 261) (121 398) (101 261) (121 398) Acquisition of computer software 7 (3 194) (3 111) (3 194) (3 111) Net cash outflows from investing activities (101 905) (124 469) (101 905) (124 469) Cash flows from financing activities Repayment of loan from subsidiary 19 - - 4 503 4 065 Repayment of loans and borrowings 19 (166 667) (722 222) (166 667) (722 222) Instalment sale and finance lease paid during the year 19 (140 900) (54 026) (140 900) (54 026) Proceeds from government grant 20 227 923 195 762 227 923 195 762 Net cash inflows from financing activities (79 644) (580 486) (75 141) (576 421) Net increase/(decrease) in cash and cash equivalents 347 692 (157 023) 356 668 (161 634) Cash and cash equivalents at beginning of the year 1 077 151 1 234 174 1 063 104 1 224 738 Cash and cash equivalents at end of the year 15 1 424 843 1 077 151 1 419 772 1 063 104
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Annual Financial Statements Financials South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements For the year ended 31 March 2014
1 Significant Accounting Income’, the main change resulting from these amendments is a requirement for entities to group items presented in Policies ‘other comprehensive income’ on the basis of whether they (Including amended standards adopted in the are potentially reclassifiable to profit or loss subsequently current year) (reclassification adjustments). The South African Broadcasting Corporation IAS19, ‘Employee benefits’ was revised in June 2011. The SOC Limited is a company domiciled in South changes on the Group’s accounting policies has been to Africa. The consolidated financial statements of the immediately recognise all past service costs and to replace Company as at and for the year ended 31 March interest cost and expected return on plan assets with a net 2014 comprise the Company and its subsidiaries interest amount that is calculated by applying the discount (together referred to as the “Group” and individually rate to the net defined benefit asset or liability. See note 4 for as “Group entities”). The Group is South Africa’s the impact on the financial statements. national public service broadcaster. The group has applied the amendments to IFRS 7 Disclosures (A) Statement of Compliance - Offsetting Financial Assets and Financial Liabilities for the The consolidated and separate annual financial first time in the current year. The amendments to IFRS 7 statements have been prepared in accordance with require entities to disclose information about rights of offset International Financial Reporting Standards (“IFRS”) and related arrangements for financial instruments under 102 and in the manner required by the Companies Act of enforceable master netting agreement or similar agreement. South Africa, 2008, the Public Finance Management Act, The amendments have been applied retrospectively. As the No. 1 of 1999, as amended, and the Broadcasting Act, No. Group does not have any offsetting arrangements in place, 4 of 1999, as amended. the application of the amendments has had no material impact on the disclosures or on the amounts recognised in (B) Basis of Preparation the consolidated financial statements. The consolidated and separate annual financial statements are presented in South African Rands, rounded to the IFRS 10, ‘Consolidated financial statements’ builds on nearest thousand, and have been prepared on the historical existing principles by identifying the concept of control as the cost basis, except for certain financial instruments and determining factor in whether an entity should be included defined benefit asset and liability which are measured at fair within the consolidated financial statements of the parent value. company. The definition of control has changed such that an investor has control over an investee when a) it has power The preparation of consolidated and separate annual financial over the investee, b) it is exposed or has rights, to variable statements in conformity with IFRS requires management returns from its involvement with the investee and c) has the to make judgements, estimates and assumptions that affect ability to use its power to affect its returns. All three of the the application of policies and reported amounts of assets criteria must be met for an investor to have control over an and liabilities, income and expenses. The estimates and investee. Additional guidance has been included in IFRS 10 to associated assumptions are based on historical experience assist in the determination of control where this is difficult to and various other factors that are believed to be reasonable assess. under the circumstances, the results of which form the basis of making judgements about carrying values of assets and IFRS 11, ‘Joint arrangements’ focuses on the rights and liabilities that are not readily apparent from other sources. obligations of the parties to the arrangement rather than its Actual results may differ from these estimates. legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where The estimates and underlying assumptions are reviewed on the investors have the right to the assets and obligations for an on-going basis. Revisions to accounting estimates are the liabilities of an arrangement. A joint operator accounts recognised in the period in which the estimate is revised if for its share of the assets, liabilities, revenue and expenses. the revision affects only that period, or in the period of the Joint ventures arise where the investors have the rights to net revision and future periods if the revision affects both current assets of the arrangement; joint ventures were accounted for and future periods. under the equity method. Proportional consolidation of joint Judgements made by management in the application of IFRS arrangement is no longer permitted. that have a significant effect on the financial statements and IFRS 12, ‘Disclosure of interests in other entities’ includes estimates with a significant risk of material adjustment are the disclosure requirements for all forms of interests in other discussed in note 2. entities, including joint arrangements, associates, structured The accounting policies set out below have been applied entities and other off balance sheet vehicles. consistently for all periods presented in the consolidated IFRS 13, ‘Fair value measurement’, aims to improve annual financial statements, except where an amendment was consistency and reduce complexity by providing a precise required as a result of a change in IFRS. definition of fair value and a single source of fair value Amended standards adopted by the Group measurement and disclosure requirements for use across In the current year the Group has applied a number of new IFRSs. IFRS 13 defines fair value as the price that would be and revised IFRS issued by the International Accounting received to sell an asset or paid to transfer a liability in an Standards Board (IASB) that are mandatorily effective for an orderly transaction in the principal market at the measurement accounting period that begins on or after 1 January 2013. The date under current market conditions. Fair value under IFRS amended standards are presented below: 13 is an exit price regardless of whether that price is directly IAS1, ‘Presentation of financial statements’ was revised as observable or estimated using another valuation technique. part of the Annual Improvements to IFRSs’ 2009 -2011 Cycle Also, IFRS 13 includes extensive disclosure requirement issued in May 2012. In accordance with the amendment the which are to be applied prospectively from 1 January 2013. Group has presented a third statement of financial position In addition, transitional provisions were given to entities such as at 1 April 2012 without the related notes except for the that they need not apply the disclosure requirements set out in disclosure requirements of IAS 8 Accounting Policies, the Standard in comparative information provided for periods Changes in Accounting Estimates and Errors. before initial application of the Standard. In accordance with these transitional provision, the Group has not made any new IAS 1, ‘Presentation of Items of Other Comprehensive disclosures required by IFRS 13 for the 2013 comparative
Annual Financial Statements Annual Financial Statements period. Other than the additional disclosures, the application recognition. The asset is accounted for in accordance with the of IFRS 13 has not had any material impact on the amounts accounting policy applicable to that asset. Lease payments recognised in the consolidated financial statements. are accounted for as described in accounting policy (U). (C) Basis of Consolidation (iii) Subsequent costs (i) Subsidiaries Subsequent costs are included in the asset’s carrying amount Subsidiaries are all entities (including structured entities) over or recognised as a separate asset, as appropriate, only when which the group has control. The Group controls an entity it is probable that future economic benefits associated with when the Group is exposed to, or has rights to, variable returns the item will flow to the Group and the cost of the item can be from its involvement with the entity and has the ability to affect measured reliably. The carrying amount of the replaced part those returns through its power over the entity. Subsidiaries is derecognised. All other costs are charged to profit or loss are fully consolidated from the date on which control is during the financial period in which they are incurred. transferred to the Group. They are deconsolidated from the (iv) Depreciation date that control ceases. Depreciation is calculated on the depreciable amount, which (ii) Transactions eliminated on consolidation is the cost of an asset, or other amount substituted for cost, Intra-group balances and any unrealised gains and losses or less residual value. Depreciation is recognised in profit or loss income and expenses arising from intra-group transactions, on a straight-line basis over the estimated useful lives of each are eliminated in preparing the annual financial statements. part of an item of property, plant and equipment, from the date Unrealised losses are eliminated in the same way as unrealised that they are available for use. Leased assets are depreciated gains, but only to the extent that there is no evidence of over the shorter of the lease term or their useful lives unless impairment. it is reasonably certain that the Group will obtain ownership (iii) Changes in the Group’s ownership interests in existing by the end of the lease term. Land is not depreciated. The subsidiaries estimated useful lives for the current and comparative periods are as follows: Changes in the Group’s ownership interests in subsidiaries that • Buildings 3 - 60 years do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts • Broadcast equipment 3 - 40 years of the Group’s interests and the non-controlling interest are • Computer equipment 3 - 5 years adjusted to reflect the changes in their relative interests in the • Musical equipment up to 80 years subsidiaries. Any difference between the amount by which the • Office equipment 5 - 15 years non-controlling interests are adjusted and the fair value of the • Security equipment 5 - 10 years consideration paid or received is recognised directly in equity • Motor vehicles 5 - 20 years and attributed to owners of the Group. The useful lives, depreciation methods and current residual (D) Foreign Currency Translation values, if not insignificant, are reassessed annually and (i) Functional and presentation currency adjusted if appropriate. Items included in the financial statements of each of the The depreciation charge which constitutes part of the cost of Group’s entities are measured using the currency of the programme, film and sports rights is included in its carrying primary economic environment in which the entity operates amount. (“functional currency”). The Annual Financial Statements are (v) Derecognition presented in South African Rands, which is the Company’s Assets are disposed of or scrapped when no future economic and Group’s functional presentation currency. benefit is expected from the assets. The gain or loss on the (ii) Foreign currency transactions disposal or scrapping of property, plant and equipment is Transactions in foreign currencies are translated into the recognised in profit or loss, (refer to note 36). Gains and losses functional currency at the foreign exchange rate ruling at on disposal of an item of property, plant and equipment are the date of the transaction. Monetary assets and liabilities determined by comparing the proceeds from disposal with the denominated in foreign currencies at the reporting date carrying amount of property, plant and equipment. are translated at the foreign exchange rate ruling at that (F) Investment properties date. Foreign exchange differences arising on translation (i) Cost method are recognised in profit or loss. Non-monetary assets and Investment properties are properties which are held either liabilities that are measured in terms of historical cost in a to earn rental income or for capital appreciation or for both. foreign currency are translated using the exchange rate at the Investment properties are initially carried at cost or deemed date of the transaction. Non-monetary assets and liabilities cost including transaction costs. Subsequent to initial denominated in foreign currencies that are stated at fair value recognition, investments properties are measured at cost or are translated at foreign exchange rates ruling at the date the deemed cost less accumulated depreciation and impairment. fair value was determined. An investment property is derecognised upon disposal or (E) Property, Plant and Equipment when the investment property is permanently withdrawn (i) Owned assets from use and no future economic benefits are expected from Items of property, plant and equipment are initially measured disposal. Any gains and losses arising on derecognition of at cost. Subsequently, they are measured at cost less the property (calculated as the difference between the net accumulated depreciation and accumulated impairment disposal proceeds and the carrying amount of the asset) losses. Cost includes expenditure that is directly attributable is included in the profit and loss in the period in which the to the acquisition of the items. The cost of self-constructed property is derecognised. 103 assets includes the cost of materials, direct labour, and any (ii) Depreciation other costs directly attributable to bringing the asset to a Depreciation is charged to profit or loss on a straight line working condition in the manner intended by management. basis over the estimated useful lives of each of the investment Where parts of an item of property, plant and equipment have properties. The estimated useful lives for the current and different useful lives, they are accounted for as separate items comparative periods are as follows: (major components) of property, plant and equipment. • Investment properties 50 years (ii) Leased assets The useful lives, depreciation methods and residual values, if Leases in which the Group assumes substantially all the risks not insignificant, are reassessed annually. and rewards of ownership are classified as finance leases. An (iii) Fair value asset acquired by way of a finance lease is recognised at an amount equal to the lower of its fair value and the present value An external, independent valuation company, having of minimum lease payments at inception of the lease on initial appropriate recognised professional qualification and recent
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) experience in the location and category of property, has been (iii) Prepayments involved in determining the fair value of the properties for Payments made before the recognition criteria for an intangible disclosure purposes. The values are based on market values, asset are met, are recorded as Prepayments and classified as being the estimated amount for which a property could be current or non-current, depending on the estimated time of exchanged on the date of valuation between a willing buyer usage of the material. and a willing seller in an arms length transaction after proper (iv) Commitments marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Where arrangements have been executed for the future purchase of programme, film and sports rights, but the Valuations reflect, where appropriate, the type of tenants recognition criteria above have not been met, the arrangements actually in occupation or responsible for meeting lease are disclosed as Commitments (refer to note 39). commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception (v) Classification of their credit worthiness; the allocation of maintenance and Programme, film and sports rights are classified as current insurance responsibilities between the lessor and lessee; assets as they are expected to be realised in the Group’s and the remaining economic life of the property. It has been normal operating cycle. assumed that whenever rent reviews or lease renewals are (vi) De-recognition of programme, film and sports rights pending with anticipated revisionary increases, all notices Cost and accumulated amortisation of originated programme, and, where appropriate, counter notices have been served film and sports rights are derecognised after the estimated validly and within the appropriate time. number of showings. Cost and accumulated amortisation of Rental income from investment property is accounted for as acquired programme, film and sports rights are derecognised described in accounting policy (X). at the earlier of the expiry of the licence period or allowed 104 Where an item of property, plant and equipment is transferred number of showings. to/from investment property following a change in its use, the (vii) Other intangible assets cost and related accumulated depreciation (i.e. carrying value) Other intangible assets, including computer software not at the date of reclassification becomes its cost for accounting considered an integral part of property, plant and equipment, purposes and subsequent recording. are initially measured at cost and subsequently measured (G) Intangible assets at cost less accumulated amortisation (refer to note 7) and (i) Originated programme, film and sports rights impairment losses. Expenditure on internally generated brands Originated programme, film and sports rights, including work is recognised in profit or loss as an expense as incurred. commissioned from independent producers, are intangible (viii) Subsequent expenditure assets with finite useful lives and are stated at cost less Subsequent expenditure is capitalised only when it increases accumulated amortisation and accumulated impairment the future economic benefits embodied in the specific asset to losses. Cost comprises direct costs, including cost of which it relates. All other expenditure is expensed as incurred. materials, artist fees and production overheads. The amount (ix) Derecognition initially recognised for originated asset is recognised from the date when the intangible asset first meets the recognition Other intangible assets are retired when no future economic criteria listed below. benefits are expected from the assets. The gain or loss on retirement of other intangible assets is recognised in profit or Subsequent to initial recognition, originated assets are reported loss, (refer to note 36). Gains and losses on the retirement of at cost less accumulated amortisation and accumulated items of other intangible assets are determined by comparing impairment losses, on the same basis as intangible assets that the proceeds on retirement with the carrying amount of the are acquired separately. other intangible assets retired. Expenditure on research activities is recognised as an expense (x) Amortisation in the period in which it is incurred. Amortisation of programme, film and sports rights is charged to An originated asset arising from the development phase of an profit and loss on a straight-line basis based on the estimated internal project is recognised if, and only if, all the following number of future showings if each showing is expected have been demonstrated: a) the technical feasibility of to generate similar audiences. An accelerated method of completing the intangible asset so that it will be available for amortisation is used when the first showing is expected to be use or sale, b) the intention to complete the intangible asset more valuable than re-runs. and use or sell it, c) the ability to use or sell the intangible asset, d) how the intangible asset will generate probable future Amortisation of other intangible assets is charged to profit and economic benefits, e) the availability of adequate technical, loss on a straight-line basis based on the estimated useful financial and other resources to complete the development lives of such assets from the date that they are available for and to use or sell the intangible asset, f) the ability to measure use. The estimated useful life of computer software for the reliably the expenditure attributable to the intangible asset current and comparative period is between 2 and 10 years. during its development. Amortisation methods, useful lives and residual values if (ii) Acquired programme, film and sports rights not insignificant, are reassessed annually, and adjusted if appropriate Acquired programme, film and sports rights are intangible assets with finite useful lives and are stated at cost less (H) Property held for sale accumulated amortisation (refer to note 7) and accumulated Non-current assets (or disposal groups) are classified as impairment losses. Cost comprises actual acquisition cost assets held for sale when their carrying amount is to be plus language dubbing, where applicable. recovered principally through a sale transaction and a sale is Acquired programme, film and sports rights are generally considered highly probable. They are stated at the lower of recognised when the licence period begins, the cost of the their carrying amount and fair value less costs to sell. right is known or reasonably determinable, the material has (I) Investments in subsidiaries been accepted by the Group in accordance with conditions Subsidiaries are all entities (including special-purpose entities) of the licence agreement, and the material is available for its over which the group has the power to govern the financial first transmission. If at the date of signing, a substantial degree and operating policies to obtain benefits from the activities of of uncertainty exists about the availability of the material, the entity. The existence and effect of potential voting rights particularly if a licence agreement is signed for programme that are currently exercisable or convertible are considered material that does not yet exist, the asset is only recorded when assessing whether the group controls another entity. once the uncertainties are eliminated and the programme is Subsidiaries are consolidated from the date on which control received and available for broadcast. is transferred to the group. They are deconsolidated from the date that control ceases. Annual Financial Statements Annual Financial Statements Investments in subsidiaries are accounted for at cost less (iv) Financial assets at fair value through profit and loss impairment losses in the separate financial statements of the Financial assets are classified as fair value through profit company. and loss when the asset is held for trading or it is designated (J) Impairment of non-financial assets through profit and loss. A financial asset is classified as held The carrying amount of the Group’s assets, other than for trading if: a) it has been acquired principally for the purpose inventories are reviewed at each reporting date to determine of selling it in the near term; or b) on initial recognition it is whether there is any indication of impairment. If such indication part of a portfolio of identified financial instruments that the exists, the asset’s recoverable amount is estimated. Group manages together and has a recent actual pattern of short-term profit-taking; or c) it is a derivative that is not An impairment loss is recognised whenever the carrying designated and effective as a hedging instruments. A financial amount of an asset or, its cash-generating unit, exceeds its asset other than a financial asset held for trading may be recoverable amount. Impairment losses are recognised in designated as at fair value through profit or loss upon initial profit or loss. recognition if: a) such designation eliminates or significantly Calculation of impairment reduces a measurement of recognition inconsistency that The recoverable amount of non-financial assets is the greater would otherwise arise; or b) the financial asset forms part of their fair value less cost to sell and value in use. In assessing of a group of financial assets or financial liabilities or both, value in use, the estimated future cash flows are discounted to which is managed and its performance is evaluated on a fair their present value using a pre-tax discount rate that reflects value basis, in accordance with the Group’s documented risk current market assessments of the time value of money and management or investment strategy and information about the the risks specific to the asset. For an asset that does not grouping is provided internally on that basis, c) it forms part of generate largely independent cash inflows, the recoverable a contract containing one or more embedded derivatives and amount is determined for the cash-generating unit to which IAS39 permits the entire combined contract to be designated the asset belongs. A cash generating unit is the smallest as at fair value through profit and loss. group of assets that generates cash inflows from continuing Financial assets at fair value through profit and loss are stated use that are largely independent of the cash inflows of other at fair value, with any gains or losses arising on remeasurement assets or groups of assets. Impairment losses in respect of recognised in profit or loss. The net gain or loss recognised cash-generating units are allocated first to reduce the carrying incorporates any dividend or interest earned on the financial amount of goodwill allocated to the unit and then to reduce the asset and is included in the ‘other gains and losses’ line item. carrying amount of the other assets in the unit on a pro-rata basis. Derecognition Financial assets are derecognised when the contractual rights Reversals of impairment to the cash flow from the financial asset expire or when the In respect of non-financial assets, an impairment loss is Group has transferred substantially all the risks and rewards reversed if there has been a change in the estimates used of ownership of those financial assets. to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount (L) Impairment of financial assets does not exceed the carrying amount that would have A financial asset not carried at fair value through profit or been determined, net of depreciation or amortisation, if no loss is assessed at each reporting date to determine whether impairment loss had been recognised. there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss has (K) Financial assets occurred after the initial recognition of the asset, and that the Non-derivative financial assets comprise of investment in loss event had a negative effect on the estimated future cash securities, financial instruments with group companies, trade flows of that asset that can be estimated reliably. and other receivables and cash and cash equivalents. Objective evidence that financial assets (including equity Classification securities) are impaired can include default or delinquency by The group classifies its financial assets in the following a debtor, restructuring of an amount due to the Group on terms categories: at fair value through profit and loss, ‘held-to- that the Group would not consider otherwise, indications that maturity’ investments, loans and receivables, and available for a debtor or issuer will enter bankruptcy or the disappearance sale. The classification depends on the purpose for which the of an active market for a security. In addition, for an investment financial assets were acquired. Management determines the in equity security, a significant or prolonged decline in its fair classification of its financial assets at initial recognition. value below its cost is objective evidence of impairment. (i) Loans and receivables The Group considers evidence of impairment for receivables Loans and receivables are non-derivative financial assets and held-to-maturity investment securities at both a specific with fixed or determinable payments that are not quoted in asset and collective level. All individually significant receivables an active market. Loans and receivables are measured at and held-to-maturity investment securities are assessed for amortised cost using effective interest rate method, less any specific impairment. All individually significant receivables impairment. They are included in current assets, except where and held-to-maturity investment securities found not to be they have maturities greater than 12 months after the reporting specifically impaired are then collectively assessed for any date. These are classified as non-current assets. impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that (ii) Held-to-maturity investments are not individually significant are collectively assessed for Held-to-maturity investments are non-derivative financial impairment by grouping together receivables and held-to- 105 assets with fixed or determinable payments and fixed maturity investment securities with similar risk characteristics. maturities that the Group’s management has the positive In assessing collective impairment the Group uses historical intention and ability to hold to maturity. If the Group were to trends of the probability of default, timing of recoveries and the sell a significant amount of held-to-maturity financial assets, amount of loss incurred, adjusted for management’s judgment the whole category would be tainted and reclassified as as to whether current economic and credit conditions are available-for-sale and prevent the Group from classifying such that the actual losses are likely to be greater or less than investment securities as held-to-maturity for the current and suggested by historical trends. the following two financial years. An impairment loss in respect of a financial asset measured (iii) Available-for-sale financial assets at amortised cost is calculated as the difference between its Available-for-sale financial assets are non-derivatives that are carrying amount and the present value of the estimated future either designated in this category or not classified in any of cash flows discounted at the asset’s original effective interest the other categories. They are included in non-current assets rates. Losses are recognised in profit or loss and reflected unless management intends to dispose of the investment within 12 months of the reporting date. Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued)
in an allowance account against receivables. Interest on a derivative that is not designated and effective as a hedging the impaired asset continues to be recognised through the instrument. unwinding of the discount. When a subsequent event causes A financial liability other than a financial liability held for the amount of impairment loss to decrease, the decrease in trading may be designated as ‘fair value through profit or impairment loss is reversed through profit or loss. loss’ upon initial recognition if a) such designation eliminates Impairment losses on available-for-sale investment securities or significantly reduces a measurement or recognition are recognised by transferring the cumulative loss that inconsistency that would otherwise arise, the financial liability has been recognised in other comprehensive income, forms part of a group of financial assets or financial liabilities and presented in the fair value reserve in equity, to profit or both, which is managed and its performance is evaluated on or loss. The cumulative loss that is removed from other a fair value basis, in accordance with the Group’s documented comprehensive income and recognised in profit or loss is the risk management or investment strategy, or c) it forms part of difference between the acquisition cost, net of any principal a contract containing one or more embedded derivatives, and repayment and amortisation, and the current fair value, less IAS39 permits the entire combined contract to be designated any impairment loss previously recognised in profit or loss. as ‘fair value through profit or loss’. Changes in impairment provision attributable to time value are Financial liabilities at ‘fair value through profit or loss’ are reflected as a component of interest income. stated at fair value, with any gains or losses arising on If, in a subsequent period, the fair value of an impaired available- remeasurement recognised in profit or loss. The net gain or for-sale debt security increases and the increase can be loss recognised in profit or loss incorporates any interest paid related objectively to an event occurring after the impairment on the financial liability and is included in the ‘other gains and loss was recognised in profit or loss, then the impairment loss losses’ line item. is reversed, with the amount of the reversal recognised in profit Other financial liabilities 106 or loss. However, any subsequent recovery in the fair value of Other financial liabilities are subsequently measured at an impaired available-for-sale equity security is recognised in amortised cost using the effective interest rate method. other comprehensive income. The effective interest rate method is a method of calculating Financial assets and liabilities are offset and the net amount the amortised cost of a financial liability and of allocating presented in the statement of financial position only when the interest expense over the relevant period. The effective interest Group has a legal right to offset the amount and intends to rate is the rate that exactly discounts estimated future cash either settle on a net basis or to realise the asset and settle the payments, through the life of the liability or a shorter period, to liability simultaneously. the net carrying amount on initial recognition. The Group’s investments are recognised at amortised cost Derecognition which is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate Financial liabilities are derecognised when the obligation is (i.e. the effective interest computed at initial recognition of discharged, cancelled or expires. these financial assets). Receivables with a short duration are (N) Derivative financial instruments not discounted where the effect is not material. The Group uses derivative financial instruments to Calculation of impairment economically hedge its exposure to foreign exchange risks Impairment of trade receivables is established when there is arising from the purchase of foreign programme, film and objective evidence that the Group will not be able to collect all sports rights, capital equipment and certain operational amounts due according to the original terms of the receivables. expenses. In accordance with its treasury policy, the Group The amount of the impairment is the difference between the does not hold or issue derivative financial instruments for asset’s carrying amount and its fair value, being the present trading purposes. However, since the Group has elected not value of estimated future cash flows, discounted at the to apply hedge accounting, all derivative financial instruments original effective interest rate. The amount of the impairment is are accounted for as trading instruments. recognised in profit or loss. Derivative financial instruments are recognised initially at fair Reversals of impairment value and attributable transaction costs are recognised in An impairment loss in respect of financial assets carried profit or loss when incurred. Subsequent to initial recognition, at amortised cost is reversed if the subsequent increase in derivative financial instruments are measured at fair value. recoverable amount can be related objectively to an event The gain or loss on remeasurement to fair value is recognised occurring after the impairment loss was recognised. For immediately in profit or loss. financial assets measured at amortised cost and available- (O) Perpetual debt instrument for-sale financial assets that are debt securities, the reversal is Perpetual debt instruments relates to a non-repayable loan recognised in profit or loss. from the shareholder. On 1 February 1972, the Company’s An impairment loss in respect of an investment in an equity shareholder converted a long-term loan into permanent instrument classified as available-for-sale is not reversed capital. The permanent capital is not repayable. In terms of through profit or loss. the Exchequer Act, No. 66 of 1975, as amended, interest (M) Financial liabilities will be payable, in perpetuity, at a rate of 6.5% per annum on the capital amount. The instrument represents a financial Non-derivative financial liabilities comprise of loans and liability (in the form of perpetual debt) under IAS 32 - Financial borrowings, financial instruments with group companies, Instruments: Presentation, because of the underlying financial trading liabilities, finance lease liabilities and trade obligation to deliver cash in the form of future payments to the and other payables. Company’s shareholder. Financial liabilities are classified as either financial liabilities at (P) Loans and borrowings ‘fair value through profit or loss’ or ‘other financial liabilities’. Loans and borrowings are recognised initially at fair value Financial liabilities at ‘fair value through profit or loss’ less attributable transaction costs. Subsequent to initial A financial liability is classified as at ‘fair value through profit recognition, loans and borrowings are stated at amortised or loss’ when the financial liability is either held for trading or cost using the effective interest rate method. designated through this category. (Q) Inventories A financial liability is classified as held for trading if: a) it has Merchandise and consumables are stated at the lower of cost been principally for the purpose of repurchasing it in the near and net realisable value. Net realisable value is the estimated term, b) on initial recognition it is part of a portfolio of identified selling price in the ordinary course of business less the financial instruments that the Group manages together and estimated costs of completion and selling expenses. Cost is has a recent actual pattern of short term profit-taking, or c) it is determined on a weighted average basis and includes other
Annual Financial Statements Annual Financial Statements costs incurred in bringing the consumables to their present (U) Provisions location and condition. Any write-down and impairment of A provision is recognised in the statement of financial position obsolete inventory to net realisable value are recognised as when the Group has a present legal or constructive obligation an expense in the period in which the write-down occurs. Any as a result of a past event, and it is probable that an outflow reversals are recognised in profit and loss in the period in of economic benefits will be required to settle the obligation which the reversal occurs. and a reliable estimate can be made. Provisions are reviewed (R) Trade receivables at each reporting date and adjusted to reflect the current best Trade receivables comprise receivables in respect of estimates. If the effect is material, provisions are determined advertising, sponsorships and facilities and are recognised by discounting the expected future cash flows at a pre-tax rate initially at fair value and subsequently measured at amortised that reflects current market assessments of the time value of cost using the effective interest method, less impairment money and, where appropriate, the risks specific to the liability. losses. The fair value of trade receivables is net of agency (V) Trade and other payables commissions, and where applicable net of trade discounts, Trade and other payables are initially recognised at fair value which are granted when payment is made in accordance with less any directly attributable transaction costs. Trade and agreed payment terms. other payables are subsequently measured at amortised cost, (S) Share capital using the effective interest method. Ordinary shares are classified as equity. Incremental costs (W) Cash and cash equivalents directly attributable to the issue of new shares are shown in Cash and cash equivalents includes cash on hand, deposits equity as a deduction from the proceeds, net of tax. held on call with banks, other short-term highly liquid (T) Employee benefit obligations investments with original maturities of three months or less, (i) Defined benefit pension plans and bank overdrafts shown within the loans and receivables category of financial instruments. Bank overdrafts are shown The net obligation in respect of defined benefit pension within borrowings in current liabilities in the statement of plans is the present value of the defined benefit obligation financial position. Bank overdrafts that are repayable on (calculated by estimating the amount of future benefits that demand and form an integral part of the Group’s cash employees have earned in return for their service in the current management are included as a component of cash and cash and prior periods) at the end of the reporting period less the equivalents for the purpose of the statement of cash flows. fair value on plan assets. The present value of the defined benefit obligation is determined by discounting the estimated Restricted cash future cash flows using an appropriate discount rate. The Cash which is subject to restrictions on its use is stated discount rates used are the following:- yield on Government separately at carrying value in the statement of financial Stock, the zero-coupon yield curve provided by the South position. Government grants received for capital expenditure African Bond Exchange (member of the Johannesburg Stock are restricted to capital projects relating to the migration of of Exchange) that have maturity dates approximating the terms analogue infrastructure to digital. Given that the cash has of the Company’s obligations. The defined benefit obligation is specific conditions of use it has been separately disclosed in calculated annually by independent actuaries. Refer to Note 8 note 15. on the defined benefit pension plan. (X) Revenue Past service costs are recognised immediately in profit and (i) Advertising revenue loss. Advertising revenue is recognised at the time the related (ii) Other post-employment benefit obligations advertisement or commercial appears before the public. The Group provides a subsidy for medical aid contributions The amount recognised is net of Value-Added Tax and trade payable by those employees who elect to remain on the discounts. medical aid scheme after retirement. The entitlement to these (ii) Trade exchanges (non-monetary exchanges) benefits is usually conditional on the employee remaining in When broadcasting airtime is exchanged for dissimilar goods service up to normal retirement age or the completion of a or services, the exchange is regarded as a transaction which minimum service period in the event of early retirement. The generates revenue. The revenue is measured at the fair value expected costs of these benefits are accrued over the period of the goods or services received, adjusted by the amount of employment using an accounting methodology similar to of any cash or cash equivalents transferred. When the fair that used for the defined benefit pension plan. This liability value of the goods or services received cannot be measured relating to post-employment medical benefits is valued reliably, the revenue is measured at the fair value of the goods annually by independent qualified actuaries. This practice of or services given up, adjusted by the amount of any cash or post-retirement medical aid contributions was discontinued cash equivalents transferred. for all new employees after 1 July 2002. Actuarial gains and losses arising from experience adjustments, and changes in (iii) Sponsorship revenue actuarial assumptions, are recognised in other comprehensive Sponsorship revenue is recognised at the time sponsored income. programmes are aired, net of Value-Added Tax and trade (iii) Short-term benefits discounts. The consideration in sponsorship agreements containing more than one identifiable component, such as Short-term employee benefit obligations relating to leave pay promotional advertising time and sponsorships, is allocated are measured on an undiscounted basis and are expensed as to underlying components based on their relative fair value the related service is provided. 107 and accounted for in accordance with the substance of the A liability is recognised for the amount expected to be paid underlying component. under short-term cash bonus or profit-sharing plans if the (iv) Licence fee revenue Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee Licence fee revenue is recognised only when it is probable that and the obligation can be estimated reliably. the economic benefits associated with the transaction will flow to the Group. (iv) Long-term benefits (v) Government grants The Group’s net obligation in respect of long-term employee benefits relating to old leave pay and bonuses other than Government grants are recognised in the statement of financial pension plans is the amount of future benefits that employees position initially as deferred income (deferred government have earned in return for their service in the current and prior grant) when there is reasonable assurance that they will be periods; that benefit is discounted to determine its present received and that the Group will comply with the conditions value. attached to them. Grants that compensate the Group for
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) expenses incurred are recognised as revenue in profit or differences between the carrying amounts of assets and loss on a systematic basis in the same periods in which the liabilities for financial reporting purposes and the amounts expenses are incurred. Grants that compensate the Group for used for taxation purposes. Deferred tax is not recognised the cost of an asset are recognised in profit or loss as revenue for the following differences: the initial recognition of on a systematic basis over the useful life of the asset. assets or liabilities in a transaction that is not a business (vi) Other revenue combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in Other revenue associated with the sale of goods such as subsidiaries to the extent that it is probable that they will not programme rights exploitation revenue and mobile revenue reverse in the foreseeable future. In addition, deferred tax is is recognised in profit or loss when the significant risks and not recognised for taxable temporary differences arising on rewards of ownership have been transferred to the buyer. the initial recognition of goodwill. Other revenue associated with the provision of services is recognised in profit or loss in proportion to the services Deferred tax is measured at the tax rates that are expected to performed to date as a percentage of total services to be be applied to temporary differences when they reverse, based performed. Other revenue/income also includes rental income, on the laws that have been enacted or substantively enacted which is recognised in profit or loss on a straight-line basis over by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current the term of the lease. Lease incentives granted are tax liabilities and assets, and they relate to income taxes recognised as an integral part of the total rental income, over levied by the same tax authority on the same taxable entity, the term of the lease. or on different tax entities, but they intend to settle current (vii) Other income tax liabilities and assets on the net basis or their tax assets Other income includes rental income, which is recognised and liabilities will be realised simultaneously. in profit or loss on a straight-line basis over the term of the A deferred tax asset is recognised only to the extent that it 108 lease. Lease incentives granted are recognised as an integral is probable that future taxable profits or reversing temporary part of the total rental income, over the term of the lease. differences will be available against which the asset can be (Y) Lease payments utilised. (i) Operating lease payments Additional income taxes that arise from the distribution of Payments made under operating leases are recognised in dividends are recognised at the same time as the liability to profit or loss on a straight-line basis over the term of the pay the related dividend is recognised. lease. Lease incentives are recognised in profit or loss as an (BB) Related parties integral part of the total lease expense, over the term of the The Group operates in an environment currently dominated lease. The difference between the amounts recognised as an by entities directly or indirectly owned by the South African expense and the contractual payments (due to straight-lining government. As a result of the constitutional independence of lease payments), is recognised as an operating lease of all the three spheres of government in South Africa, only asset or liability. parties within the national sphere of government will be (ii) Finance lease payments considered to be related parties. Minimum lease payments are apportioned between the Key management is defined as individuals with the authority finance charge and the reduction of the outstanding liability. and responsibility for planning, directing and controlling The finance charge is also allocated to each period during the activities of the Company. All individuals from the level the lease term so as to produce a constant periodic rate of of Executive Management up to the Board of Directors are interest on the remaining balance of the liability. The capital regarded as key management per the definition of IFRS. portion of future obligations under the leases is included as Close family members of key management personnel a liability in the statement of financial position. are considered to be those family members who may be Initial direct costs incurred in negotiating and securing lease expected to influence, or be influenced by key management arrangements are added to the amount recognised as an individuals in their dealings with the Group. asset. Other related party transactions are also disclosed in terms (Z) Net financing income of the requirements of IFRS. The objective of IFRS and the Financing income includes interest receivable on funds annual financial statements is to provide relevant and reliable invested, dividend income and foreign exchange gains and information and therefore materiality is considered in the losses. disclosure of these transactions. Interest payable on borrowings is calculated using the (CC) Borrowing costs effective interest method. Interest income is recognised General and specific borrowing costs directly attributable in profit or loss as it accrues, using the effective interest to the acquisition, construction or production of qualifying method. assets that necessarily take a substantial period of time to Dividend income is recognised in profit or loss on the date get ready for their intended use or sale, are added to the cost that the Group’s right to receive payment is established, of those assets, until such time as the assets are substantially which in the case of quoted securities is usually the ex- ready for their intended use or sale. dividend date. Investment income earned on the temporary investment of The interest expense component of finance lease payments specific borrowings pending their expenditure on qualifying is recognised in profit or loss using the effective interest assets is deducted from the borrowing costs eligible for method. capitalisation. (AA) Income tax All other borrowing costs are recognised in profit and loss in the period in which they are incurred. Income tax expense comprises current and deferred tax. Income tax is recognised in profit or loss, except to the (DD) Irregular, Fruitless and Wasteful Expenditure extent that it relates to items recognised directly in equity or Irregular Expenditure other comprehensive income, in which case it is recognised Irregular expenditure: means expenditure, incurred in contra- there. vention of or that is not in accordance with the requirement of Current tax is the expected tax payable on the taxable any applicable legislation. Such expenditure is recorded in income for the year, using tax rates enacted or substantively the notes to the annual financial statements. It is recorded enacted at the reporting date, and any adjustment to tax at the value of the irregular expenditure incurred unless it payable in respect of previous years. is impracticable to determine the value thereof. Where such Deferred tax is recognised in respect of temporary
Annual Financial Statements Annual Financial Statements impracticality exists, the reasons therefore are provided in component identified based on their past experiences and the notes. Irregular expenditure is removed from the notes knowledge. when it is either (a) condoned by the National Treasury or In determining the expected useful lives of the assets, the the relevant authority; (b) it is transferred to receivables current asset register was analysed to determine the average for recovery; or (c) it is not condoned and is irrecoverable. age of the assets per component where applicable. A receivable related to irregular expenditure is measured The remaining useful life of assets is informed by two at the amount that is expected to be recovered and is de- parameters, age based remaining useful life and condition recognised when the receivable is settled or subsequently based remaining useful life. The final remaining useful life is written off as irrecoverable. determined with reference to an algorithm, which takes into Fruitless and Wasteful Expenditure account both parameters. Fruitless and wasteful expenditure means expenditure Residual Values which was made in vain and would have been avoided had The residual value has in most cases been taken as zero, reasonable care been exercised. When confirmed, fruitless as the SABC has adopted the approach of sweating their and wasteful expenditure is recorded in the notes to the assets beyond their economical useful live, considering financial statements. This includes particulars of fruitless the environment in which the SABC functions where and wasteful expenditure that occurred during the financial technological advancements can render certain assets year and any disciplinary steps taken as a consequence of obsolete and also on the assertion that none of the assets such fruitless and wasteful expenditure. have material residual values at the end of the expected (EE) Contingent liabilities useful life. A contingent liability is a possible obligation that arises from (ii) Amortisation and impairment of computer software past events and whose existence will be confirmed only by The Group believes that the accounting estimates relating the occurrence or non-occurrence of one or more uncertain to the amortisation and impairment of computer software future events not wholly within the control of the entity, or are significant accounting estimates because they require a present obligation that arises from past events but is not management to make assumptions about the useful life of recognised because it is not probable that an outflow of an asset. The useful life of an asset is determined on existing resources embodying economic benefits will be required to economic and technical ageing, legal or other limitations settle the obligation; or the amount of the obligation cannot on the use of the asset and obsolescence. If some of these be measured with sufficient reliability. factors were to deteriorate materially, impairing the ability If the likelihood of an outflow of resources is remote, the of the asset to generate future cash flows, the Group may possible obligation is neither a provision nor a contingent accelerate the amortisation charge to reflect the remaining liability and no disclosure is made. useful life of the asset or record an impairment loss. See (FF) Expenses accounting policy 1(G) and note 7. Expenses are decreases in economic benefits during (iii) Amortisation and impairment of programme, film and sports the financial year in the form of outflows or depletions of rights assets or incurrences of liabilities that result in decreases The Group believes that the accounting estimates relating in equity, other than those relating to distributions to equity to the amortisation and impairment of programme, film and participants. sports rights are significant accounting estimates because they require management to make assumptions about 2 Accounting Estimates and Judgements future audiences and revenues, and a change in the pattern Management discusses with the Audit Committee the of amortisation or potential impairment in programme, film development, selection and disclosure of the Group’s critical and sports rights may have a material impact on the value accounting policies and estimates and the application of of these assets reported in the Company’s statement of these policies and estimates. financial position. See accounting policies 1(G) and note 7. The (A) Critical accounting estimates and assumptions recoverable amount of the rights is considered zero once the The preparation of the annual financial statements licence period is expired. requires management to make judgements, estimates and (iv) Pension assumptions assumptions that affect the reported amounts of revenues, The Group’s pension fund is a funded defined benefit pension expenses, assets and liabilities, and the disclosure of fund that provides pension fund benefits for all of the Group’s contingent liabilities at the reporting date. However, permanent employees. The latest statutory valuation of uncertainty about these assumptions and estimates could the fund was performed at 31 December 2013, in which result in significant adjustments as accounting estimates will, the valuator reported that the fund was in a sound financial by definition, seldom equal the actual results. The estimates position subject to the continuation of the current contribution and assumptions that have a significant risk of causing a rates, and its assets exceed its liabilities. material adjustment to the carrying amounts of assets and Annually the defined benefit pension plan is valued on 31 liabilities within the next financial year are discussed below. March using the Projected Unit Credit Method for the financial (i) Useful lives and residual values of property, plant and statements certified by the Actuaries. The cost of the defined equipment benefit pension plan as well as the present value of the Useful lives pension obligation is determined using actuarial valuations. The Group calculates depreciation of property, plant and The actuarial valuations involve making assumptions about equipment on a straight-line basis so as to write off the cost discount rates, expected rates of return of assets, future salary 109 of the assets over their expected useful lives. The useful increases, mortality rates of in-service members and pensioner life of an asset is determined on existing physical wear and mortality rates and future pension increases, withdrawal of tear, economic and technical ageing, legal or other limits members in the service and family statistics. All assumptions on the use of the asset and obsolescence. If some of these are reviewed at each reporting date. In determining the factors were to deteriorate materially, impairing the ability appropriate discount rate, management considers the interest of the asset to generate future cash flows, the Group may rates of quality corporate bonds in the respective country, (i.e. accelerate depreciation charges to reflect the remaining yield on South African Government Bonds). The mortality rate useful life of the asset or record an impairment loss. is based on public available mortality tables for the specific country (i.e. PA (90) mortality table). Future salary increases The expected useful lives of assets is determined by and pension increases are based on expected future inflation considering the components identified in the asset rates. Further details about the assumptions used are given hierarchy and by considering the inputs from knowledgeable in note 8. representatives within the departments within the SABC per
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) (v) Post-employment medical aid assumptions 3 New and revised IFRS’s in issue but not The Group provides a subsidy of medical aid contributions payable by those employees who elect to remain on the yet effective medical aid scheme after retirement. The Group provides At the date of authorisation of the financial statements of for these post-employment medical aid benefits using the the Group for the year ended 31 March 2014, the following Projected Unit Credit method prescribed by IAS 19 - Employee standards and interpretations were in issue but not yet Benefits. Future benefits valued are projected using specific effective. The Group has therefore not yet applied them. actuarial assumptions and the liability for in-service members Effective is accrued over their expected working lifetime. The liability date of is calculated by considering some key actuarial assumptions Standard such as the rate of healthcare cost inflation, discount rate, percentage members continuing after retirement and average (i) IFRS 9 - Financial Instruments 01-Jan-18 retirement age of members. The key actuarial assumptions (ii) Amendments to IFRS 9 and IFRS 7 - 01-Jan-18 made are disclosed in note 8. Mandatory effective date of IFRS 9 and Any change in these assumptions could result in a material Transition Disclosure adjustment to the post-employment medical liability stated (iii) Amendments to IFRS 10, IFRS 12, and IAS 01-Jan-14 on the Group’s statement of financial position as well as a 27 - Investment Entities material impact on the Group’s profit. A one percentage point (iv) Amendments to IAS 32 - Offsetting Financial 01-Jan-14 change in the rate of health care cost inflation would have the Assets and Financial Liabilities following effects. IFRS 9 Financial Instruments One IFRS 9, issued in November 2009, introduced new requirements 110 percentage for the classification and measurement of financial assets. One percentage point IFRS 9 was amended in October 2010 to include requirements point increase decrease for the classification and measurement of financial liabilities Effect on the post-employment and for derecognition. It replaces the parts of IAS39 that relate medical aid liability: R1 078m R800m to the classification and measurement of financial instruments. (vi) Legal matters IFRS 9 requires financial assets to be classified into two The Group is involved in legal disputes through its normal measurement categories: those measured at fair value and course of business. The outcome of these legal claims may those measured at amortised cost. The determination is made have a material impact on the Group’s financial position and at initial recognition. The classification depends on the entities results of operations. Management estimates the potential business model for managing its financial instruments and outcome of these legal claims based on the most objective the contractual cash flow characteristics of the instrument. evidence on hand from internal and external legal advisors For financial liabilities, the standard retains most of the IAS39 until such time that ultimate legal resolution has been finalised. requirements. The main change is that, in cases where the fair Due to the uncertain nature of these issues, any changes in value option is taken for financial liabilities, the part of the fair these estimates based on additional information as it becomes value change due to an entity’s own credit risk is recorded available could result in material changes to the financial in other comprehensive income rather than the income statements in subsequent periods. See note 25 and 40. statement, unless this creates an accounting mismatch. The (vii) Determining the fair value of financial instruments Group is yet to assess IFRS 9’s full impact. The Group will also Where the fair value of the financial assets and liabilities consider the impact of the remaining phases of IFRS 9 when recorded in the statement of financial position cannot be completed by the IASB. derived from the active markets, they are determined using Amendments to IFRS 10, IFRS 12 and IAS 27 Investment valuation techniques including the discounted cash flow entities model (Level 2). The inputs of these models are taken from The amendments to IFRS 10 define an investment entity observable markets where possible, but where this is not and require a reporting entity that meets the definition of possible, a degree of judgment is required in establishing an investment entity not to consolidate its subsidiaries but fair values. The judgements include consideration of inputs instead to measure its subsidiaries at fair value through profit such as liquidity risk, credit risk, and volatility. Changes in or loss in its consolidated and separate financial statements. assumptions about the facts could affect the reported fair To qualify as an investment, a reporting entity is required to value of the affected financial instrument. a) obtain funds from one or more investors for the purpose The different valuation levels are identified as follows by IFRS of providing them with professional investment management 13: services, b) commit to investor(s) that its business purpose Level 1 - Quoted prices (unadjusted) in active markets for is to invest funds solely for returns from capital appreciation, identical assets or liabilities. investment income, or both and c) measure and evaluate Level 2 - Inputs other than quoted prices included within level 1 performance of substantially all of its investments on a fair that are observable for the asset or liability, either directly (that value basis. Consequential amendments have been made to is, as prices) or indirectly (that is, derived from prices) IFRS 12 and IAS27 to introduce new disclosure requirements for investment entities. The Group does not anticipate that the Level 3 - Inputs for the asset or liability that are not based on investment entities amendments will have any effect on the observable market data (that is, unobservable inputs). Group’s consolidated financial statements as the company is (viii) Impairment of trade and other receivables and credit notes not an investment entity. Doubtful accounts are reported at the amount likely to be Amendments to IAS 32 Offsetting Financial Assets and recoverable based on the historical experience of customer Financial Liabilities default. As soon as it is learned that a particular account is The amendments to IAS32 clarify the requirements relating subject to a risk over and above the normal credit risk (e.g. to the offset of financial assets and financial liabilities. lower creditworthiness of customer, dispute as to the existence Specifically, the amendments clarify the meaning of the of the amount of the claim, no enforceability of the claim for ‘currently has a legally enforceable right of set-off’ and legal reasons etc.), the account is analysed and written down ‘simultaneous realisation and settlement’. The Group does not if circumstances indicate the receivable is uncollectable. anticipate that the application of the amendments to IAS32 will Accumulated write-downs of receivables and provisions for have a significant impact on the Group’s consolidated financial credit notes amounted to R118 million (2013: R205 million) as statement as the Group does not have any financial assets and of 31 March 2014. financial liabilities that qualify for offset.
Annual Financial Statements Annual Financial Statements 2013 2012 Previously Adjust- Previously Adjust- Restated Restated 4 Restatements in respect of Errors Reported ments Reported ments and Changes in Accounting Policy R’000 R’000 R’000 R’000 R’000 R’000 GROUP ASSETS Property, plant and equipment (i), (xii) 1 205 095 406 839 1 611 934 1 323 272 492 459 1 815 731 Investment property (i) - 17 978 17 978 - 18 195 18 195 Computer software (i) 132 447 31 044 163 491 172 709 34 016 206 725 Prepayments (ii) 143 941 24 141 168 082 83 049 16 493 99 542 Total non-current assets 480 002 561 163
Programme, film and sports rights (ii) 689 636 (32 277) 657 359 862 467 (152 410) 710 057 Inventory (xii) 2 536 2 2 538 4 339 - 4 339 Trade and other receivables (iii), (xiii) 859 162 (7 571) 851 591 883 391 (5 846) 877 545 Prepayments (ii) 63 902 (6 689) 57 213 151 495 (3 359) 148 136 Cash and cash equivalents 1 072 476 4 675 1 077 151 1 229 728 4 446 1 234 174 Total current assets (41 860) (157 169) LIABILITIES Trade and other payables (ii), (xiii) (700 849) 30 184 (670 665) (932 770) 212 701 (720 069) Employee benefits obligation (viii) (854 650) (9 700) (864 350) (650 417) - (650 417) Current portion of deferred government grant (vi) (76 410) (17 215) (93 625) (71 432) (16 647) (88 079) Deferred income (vi) (103 243) 17 215 (86 028) (122 828) 16 647 (106 181) Impact on Deferred Tax Liability (vii) - (278 426) (278 426) - - - Impact on liabilities (257 942) 212 701 Impact on assets and Liabilities 180 200 616 695 INCOME STATEMENT Revenue (ix), (xiii) 6 665 812 (15 423) 6 650 389 Other income (ix) 97 987 (37 910) 60 077 Amortisation of programme, film and sports (ii) (1 516 341) 97 397 (1 418 944) rights Net impairment (raised)/reversed of (ii) (12 230) 4 043 (8 187) programme, film and sports rights Amortisation of computer software (i), (ii) (43 643) (2 748) (46 391) Impairment of trade and other receivables (iii) (789) (1 400) (2 189) Broadcast costs (ii), (iv), (xii) (408 390) (124 455) (532 845) Signal distribution and linking costs (ii) (514 792) (622) (515 414) Employee compensation and benefit (ii), (v), (viii) (2 076 957) (75 635) (2 152 592) expenses Depreciation of property, plant and (i), (ii) (239 008) (56 448) (295 456) equipment Marketing costs (xii) (123 307) 46 (123 261) Professional and consulting fees (xii) (63 161) 1 381 (61 780) Other Expenses- operational (i), (ii) (403 299) (43 275) (446 574) Other Expenses- personnel (ii) (79 245) 900 (78 345) Finance income (xiii) 100 727 53 236 153 963 Impact on Operating profit/(loss) before (200 913) finance costs and tax Impact on Income tax (vii) (23 142) (267 425) (290 567) Impact on Income tax (267 425) Impact on Profit/(loss) for the year (468 338) OTHER COMPREHENSIVE INCOME Pension fund Actuarial loss (v) (640 402) (662 748) (1 303 150) Expected return on plan assets (v) 655 449 655 449 Change in para 58 limit (v) 664 847 59 836 724 683 Post retirement medical aid Actuarial loss (viii) (158 305) (9 700) (168 005) 111 Impact on other comprehensive income 42 837 Income tax related to available for sale finan- (v), (xi) (375) 1 000 625 cial assets Income tax relating to gain/loss on PRMA (v), (viii) (6 845) (14 710) (21 555) Income tax relating to gain/loss on pension (v), (viii) 44 325 2 716 47 041 (10 994) Impact on Total comprehensive income (436 495) (loss) for the year EQUITY Cumulative impact on opening retained 616 695 earnings Total Impact on Equity 1 353 687 180 200 1 533 887 1 118 923 616 695 1 735 618 Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 4 Restatements in respect of Errors and 2013 2012 Previously Adjust- Previously Adjust- Changes in Accounting Policy (continued) Restated Restated Reported ments Reported ments R’000 R’000 R’000 R’000 R’000 R’000 COMPANY ASSETS Property, plant and equipment (i), (xii) 1 205 095 406 839 1 611 934 1 323 272 492 459 1 815 731 Investment Property (i) - 17 978 17 978 - 18 195 18 195 Computer software (i) 132 447 31 044 163 491 172 709 34 016 206 725 Prepayments (ii) 143 941 24 141 168 082 83 049 16 493 99 542 Impact on non-current assets 480 002 561 163 Programme, film and sports rights (ii) 689 636 (32 277) 657 359 862 467 (152 410) 710 057 Inventory (xii) 2 536 2 2 538 4 339 - 4 339 Trade and other receivables (iii), (xiii) 859 768 (7 571) 852 197 883 192 (5 846) 877 346 Prepayments (ii) 63 857 (6 689) 57 168 151 459 (3 359) 148 100 Cash and cash equivalents 1 058 429 4 675 1 063 104 1 220 292 4 446 1 224 738 Impact on current assets (41 860) (157 169) LIABILITIES Non current portion of loans and borrowings (x) 359 660 (16 602) 343 058 800 927 (12 537) 788 390 Current portion of loans and borrowings (x) 56 978 16 602 73 580 387 894 12 537 400 431 Trade and other payables (ii)(xii) (684 957) 30 184 (654 773) (919 559) 212 701 (706 858) 112 Employee benefits obligation (viii) (854 650) (9 700) (864 350) (650 417) - (650 417) Current portion of deferred government grant (vi) (76 410) (17 215) (93 625) (71 432) (16 647) (88 079) Deferred income (vi) (103 243) 17 215 (86 028) (122 828) 16 647 (106 181) Impact on Deferred Tax Liability (vii) - (278 426) (278 426) - - - Impact on liabilities (257 942) 212 701 Impact on assets and Liabilities 180 200 616 695 INCOME STATEMENT Revenue (ix), (xiii) 6 665 812 (15 423) 6 650 389 Other income (ix) 101 120 (37 910) 63 210 Amortisation of programme, film and sports (ii) (1 516 341) 97 397 (1 418 944) rights Net impairment (raised)/reversed of programme, (ii) (12 230) 4 043 (8 187) film and sports rights Amortisation of computer software (i), (ii) (43 643) (2 748) (46 391) Impairment of trade and other receivables (iii) (789) (1 400) (2 189) Broadcast costs (iv), (xii) (408 390) (124 570) (532 960) Signal distribution and linking costs (ii), (xii) (514 792) (622) (515 414) Employee compensation and benefit expenses (ii), (v), (viii) (2 077 130) (75 635) (2 152 765) Depreciation of property, plant and equipment (i), (ii) (239 008) (56 448) (295 456) Marketing costs (xii) (123 307) 46 (123 261) Professional and consulting fees (xii) (63 763) 1 381 (62 382) Other Expenses- operational (i), (ii), (xii) (405 632) (41 724) (447 356) Other Expenses- personnel (ii), (xii) (79 237) (528) (79 765) Finance Income (xiii) 99 453 53 236 152 689 Impact on Operating (loss)/profit before (200 905) finance costs and tax Income Tax (vii) (23 012) (267 433) (290 445) Impact on Income tax (267 433) Impact on (loss)/profit for the year (468 338)
OTHER COMPREHENSIVE INCOME Pension fund Actuarial (loss)/gain (v) (640 402) (662 748) (1 303 150) Expected return on plan assets (v) - 655 449 655 449 Change in para 58 limit (v) 664 847 59 836 724 683 Post retirement medical aid Actuarial loss (viii) (158 305) (9 700) (168 005) Impact on other comprehensive income 42 837 Income tax related to available for sale financial (375) 1 000 625 assets Income tax relating to gain/loss on pension (v) (6 845) (14 710) (21 555) Income tax relating to gain/loss on PRMA (viii) 44 325 2 716 47 041 (10 994) Impact on Total comprehensive (loss)/income (436 495) for the year EQUITY Cumulative impact on opening retained earnings 616 695 Total Impact on Equity 1 339 694 180 200 1 519 894 1 109 795 616 695 1 726 490
Annual Financial Statements Annual Financial Statements 4 Restatements in respect of Errors and GROUP AND COMPANY Changes in Accounting Policy (continued) 2013 2012 Adjustments R’000 R’000 (i) Restatements in respect of Property, plant and equipment; computer software and investment property Prior Period Error Restatement: In the current year, a project was undertaken to conduct a count of Property, plant and equipment; Computer software and Investment property as well as to re-assess residual values and useful lives of the related assets. The project also cleared old reconciling items between the general ledger and fixed asset register and enhanced the asset hierarchy which affected classifications within Property, plant and equipment. Investment properties that had been incorrectly included in Property, plant and equipment were corrected to reflect as Investment property. The period specific effects of the historic errors has been disclosed above, comprising mainly of a reversal of Depreciation of Property, plant and equipment and Amortisation of Computer software to reflect a more accurate assessment of estimated useful lives of individual assets. The project is ongoing and the below reflect the adjustments for the portion concluded.
ASSETS Cost- Property, plant and equipment (Decrease)/Increase in cost of Land and buildings N1 (22 192) (22 191) (Decrease)/Increase in cost of Broadcasting equipment N1 (314 055) (302 706) (Decrease)/Increase in cost of Other equipment N1 263 924 252 678 (Decrease)/Increase in cost of Vehicles N1 15 712 15 670 (Decrease)/Increase in Assets Under Construction (618) (393) Cost- Investment property (Decrease)/Increase in cost of Investment property N1 27 368 27 368 Cost- Computer software (Decrease)/Increase in cost of Computer software N1 2 015 2 015 Accumulated depreciation- Property, plant and equipment Decrease in accumulated amortisation of Land and buildings N2 113 846 91 040 Decrease in accumulated amortisation of Broadcasting equipment N2 324 914 318 369 Decrease in accumulated amortisation of Other equipment N2 18 406 122 927 Vehicles N2 6 902 17 065 Accumulated depreciation- Investment Property Increase in accumulated depreciation of Investment property N2 (9 390) (9 173) Accumulated depreciation- Computer software Increase in accumulated depreciation of Computer software N2 29 029 32 001 Increase in Property, plant and equipment; Investment property and Computer software 455 861 544 670 Increase in Deferred Tax (Financial Position) * (24 867) (152 508) Deferred Tax asset not recognised * 152 508 Increase in Total Assets 430 994 544 670 EQUITY AND RESERVES (Increase)/Decrease in Equity and reserves 430 994 544 670 N1- Prior Period Error Restatement: Cost of Property, Plant Equipment; Computer Software and Investment Property was adjusted to reflect corrections to the classification of assets across asset classes as well as the clearance of old reconciling differences between the fixed asset register and general ledger. N2- Prior Period Error Restatement: Accumulated depreciation for Property, Plant Equipment; Computer Software and Investment Property was adjusted to reflect corrections to the estimated useful lives of assets, corrections to the classification of assets across asset classes as well as clearance of old reconciling differences between the fixed asset register and general ledger. * Impact of deferred tax asset not recognised (in 2012 and prior periods) will net off the deferred tax impact on group figures to zero for 2012
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Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 4 Restatements in respect of Errors and GROUP AND COMPANY Changes in Accounting Policy (continued) 2013 2012 Adjustments R’000 R’000 (ii) Restatements in respect of Programme, Film and Sports Rights Prior Period Error Restatement: In the current year, asset registers for Programme, film and sports rights were corrected retrospectively by ensuring all initial costs and subsequent costs (e.g. amortisation and impairment) of programme, film and sports rights were captured on the asset register. The related amortisation, impairment, prepayments and related accruals were recalculated. Invalid asset and accrual balances were written off. ASSETS TOTAL NON-CURRENT ASSETS Increase/(decrease) in Prepayments (non-current) 24 141 16 493
TOTAL CURRENT ASSETS Cost- Programme, film and sports rights Increase/(Decrease) in Cost of programme, film and sports rights (7 470 208) (6 222 788) Accumulated Amortisation- Programme, film and sports rights (Increase)/Decrease in Accumulated Amortisation of programme, film and sports rights 7 426 981 6 054 567 Provision for programme, film and sports rights impairment losses 114 (Increase)/Decrease in Provision for programme, film and sports rights impairment losses 10 950 15 811
Increase/(Decrease) in Prepayments (current) (6 689) (3 359) Increase/(Decrease) in Deferred Tax (Financial Position) * (17 692) (19 652) Deferred Tax asset not recognised * 19 652 (32 517) (139 276) LIABILITIES Increase/(decrease) in Trade and other payables 24 551 212 701 EQUITY AND RESERVES (Increase)/Decrease in Equity and reserves (7 966) 73 425 * Impact of deferred tax asset not recognised (in 2012 and prior periods) will net off the deferred tax impact on group figures to zero for 2012 (iii) Prior Period Error: In the prior period, the allowance for doubtful debtors was incorrectly stated. This was corrected retrospectively and the impact of the error is disclosed above in the affected line items. (iv) Prior Period Error: In the prior period, Trade exchanges related to sports contracts were incorrectly classified as Amortisation of programme, film and sports rights. These have been reclassified as Broadcast costs. (v) Change in Accounting Policy: IAS 19, Employee benefits was revised in June 2011. The changes to the group’s accounting policies have been as follows: to immediately recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability/(asset). (vi) Prior Period Reclassification: In the prior period, the entity disclosed government grants related to educational programming as deferred income. They have been reclassified into deferred government grants retrospectively. (vii) Prior Period Error: The income tax and deferred tax has been re-calculated retrospectively. The tax corrections are however a work in progress and the re-statements in respect of tax are not complete. * The impact of deferred tax asset not recognised (in 2012 and prior periods) will net off the deferred tax impact on group figures to zero for 2012 (viii) Prior Period Error: In the prior period the entity omitted certain employees from the calculation of the post-retirement medical benefit obligation. This has been corrected retrospectively (ix) Prior Period Error: In the prior period the entity incorrectly classified management fees in other income instead of in revenue. This has been corrected retrospectively. (x) Prior Period Error: In the prior period the entity reclassified the amount recognised as loans to subsidiary from non-current liabilities to current liabilities as the loans are repayable on demand. (xi) Prior Period Error: In the prior period, the change in tax rate related to available for sale financial assets was incorrectly attributed to other operating expenses (xii) Prior Period Error: In the prior period, there were goods and services received by SABC that had not been accrued for at year end. This has been corrected retrospectively. (xiii) Prior Period Error: In the prior period, the reclassification of revenue to interest received relates to the interest that had to be recognised as a result of discounting of the year end trade receivables. This has been retropectively corrected. (xiv) Prior Period Error: In the prior period, interest receivable related to the organisations held to maturity investments was disclosed under trade and other receivables, this was reclassified to cash equivalents. (xv) Prior Period Error: In prior periods, the donations expense relating to the SABC Foundation had not been recognised at all, this was corrected retrospectively.
Annual Financial Statements Annual Financial Statements Broad- Other Capital- 5 Property, plant and equipment Land and casting equip- Vehicles work-in- Total buildings equipment ment* progress** R’000 R’000 R’000 R’000 R’000 R’000 GROUP At 31 March 2014 Cost 871 789 1 335 082 641 415 97 703 21 849 2 967 838 Accumulated depreciation and impairment losses (331 002) (821 019) (382 870) (47 931) - (1 582 822) Carrying amount 540 787 514 063 258 545 49 772 21 849 1 385 016 At 31 March 2013 Cost 864 146 1 394 727 649 590 96 592 36 505 3 041 560 Accumulated depreciation and impairment losses (306 632) (791 878) (291 139) (39 977) - (1 429 626) Carrying amount 557 514 602 849 358 451 56 615 36 505 1 611 934
For the year ended 31 March 2014 Carrying amount at 1 April 2013 557 514 602 849 358 451 56 615 36 505 1 611 934 Additions 1 061 38 654 24 982 5 776 30 788 101 261 Disposals - (829) (1 277) (142) - (2 248) Cost (512) (124 559) (43 501) (6 146) - (174 718) Accumulated depreciation and impairment losses 512 123 730 42 224 6 004 - 172 470 Transfers from/(to) computer software and other 7 094 26 260 10 344 1 481 (45 444) (265) categories Cost 7 094 26 260 10 344 1 481 (45 444) (265) Accumulated depreciation and impairment losses ------Depreciation charge for the year (21 322) (152 871) (133 955) (13 958) - (322 106) Impairment loss for the year (3 560) - - - (3 560) Carrying amount at 31 March 2014 540 787 514 063 258 545 49 772 21 849 1 385 016 For the year ended 31 March 2013 Carrying amount at 1 April 2012 574 353 671 915 447 511 71 480 50 472 1 815 731 Additions 1 058 41 635 36 219 7 42 479 121 398 Disposals - (478) (23) (21) - (522) Cost - (17 383) (5 696) (130) - (23 209) Accumulated depreciation and impairment losses - 16 905 5 673 109 - 22 687 Transfers from/(to) computer software and other 2 315 46 052 7 809 - (56 446) (270) categories Cost 2 111 46 015 7 851 - (56 446) (469) Accumulated depreciation and impairment losses 204 37 (42) - - 199 Depreciation charge for the year (20 212) (156 275) (133 065) (14 851) (324 403) Carrying amount at 31 March 2013 557 514 602 849 358 451 56 615 36 505 1 611 934 * Other equipment comprises computer, office, musical and security equipment. ** Capital work-in-progress consists of property, plant and equipment that has been received or constructed, but is not yet available for use. Information on land and buildings Information in respect of land and buildings is contained in the fixed property register, which is available for inspection at the registered office of the company. GROUP 2014 2013 Depreciation reconciliation to profit and loss R'000 R'000 Depreciation and impairment charge for the year as stated in the Note (above) (325 666) (324 403) Depreciation capitalised as Programme, film and sports rights 16 777 28 947 Amounts recognised in profit and loss (308 889) (295 456)
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Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) Broad- Other Capital- 5 Property, plant and equipment (continued) Land and casting equip- Vehicles work-in- Total buildings equipment ment* progress** R’000 R’000 R’000 R’000 R’000 R’000 COMPANY At 31 March 2014 Cost 871 789 1 335 082 641 415 97 703 21 849 2 967 838 Accumulated depreciation and impairment losses (331 002) (821 019) (382 870) (47 931) - (1 582 822) Carrying amount 540 787 514 063 258 545 49 772 21 849 1 385 016 At 31 March 2013 Cost 864 146 1 394 727 649 346 96 592 36 505 3 041 316 Accumulated depreciation and impairment losses (306 632) (791 878) (290 895) (39 977) - (1 429 382) Carrying amount 557 514 602 849 358 451 56 615 36 505 1 611 934 For the year ended 31 March 2014 Carrying amount at 1 April 2013 557 514 602 849 358 451 56 615 36 505 1 611 934 Additions 1 061 38 654 24 982 5 776 30 788 101 261 Disposals - (829) (1 277) (142) - (2 248) Cost (512) (124 559) (43 257) (6 146) - (174 474) Accumulated depreciation and impairment losses 512 123 730 41 980 6 004 - 172 226 Transfers from/(to) computer software and other 7 094 26 260 10 344 1 481 (45 444) (265) categories 116 Cost 7 094 26 260 10 344 1 481 (45 444) (265) Accumulated depreciation and impairment losses ------Depreciation charge for the year (21 322) (152 871) (133 955) (13 958) - (322 106) Impairment loss for the year (3 560) - - - (3 560) Carrying amount at 31 March 2014 540 787 514 063 258 545 49 772 21 849 1 385 016 For the year ended 31 March 2013 Carrying amount at 1 April 2012 574 353 671 915 447 511 71 480 50 472 1 815 731 Additions 1 058 41 635 36 219 7 47 479 121 398 Disposals - (478) (23) (21) - (522) Cost - (17 383) (5 634) (130) - (23 147) Accumulated depreciation and impairment losses - 16 905 5 611 109 - 22 625 Transfers from/(to) computer software and other 2 315 46 052 7 809 - (56 446) (270) categories Cost 2 111 46 015 7 851 - (56 446) (469) Accumulated depreciation and impairment losses 204 37 (42) - - 199 Depreciation charge for the year (20 212) (156 275) (133 065) (14 851) (324 403) Carrying amount at 31 March 2013 557 514 602 849 358 451 56 615 36 505 1 611 934
* Other equipment comprises computer, office, musical and security equipment. ** Capital work-in-progress consists of property, plant and equipment that has been received or constructed, but is not yet available for use. Information on land and buildings Information in respect of land and buildings is contained in the fixed property register, which is available for inspection at the registered office of the company. COMPANY 2014 2013 Depreciation reconciliation to profit and loss R’000 R’000 Depreciation and impairment charge for the year as stated in the Note (above) (325 666) (324 403) Depreciation capitalised as Programme, film and sports rights 16 777 28 947 Amounts recognised in profit and loss (308 889) (295 456)
Annual Financial Statements Annual Financial Statements 5 Property, plant and equipment (continued) GROUP AND COMPANY 2014 2013 R’000 R’000 Carrying amount of Property, plant and equipment ceded as security (see also note 19) Broadcasting Equipment High Definition TV outside broadcast units to secure Wesbank and Rand Merchant Bank lease 89 021 218 958 facility Motor Vehicle Motor vehicles to secure Nedbank instalment sale 2 193 2 915 91 214 221 873 Included in capital work-in-progress are the following major projects: Henley sport play out centre 4 848 - Election results system 2 446 - Mafikeng access control system 1 927 1 860 Western Cape passenger lifts upgrade 1 224 1 091 Asset management system 1 209 - Henley fire detection system replacement 1 141 - Radiopark and Henley uninterrupted power system upgrades 852 - Kwa-Zulu Natal CCTV recording system upgrade 841 774 Radiopark and TV Block chillers replacements 702 - Polokwane studio and news booth upgrade 660 650 Mpumalanga studio facilities upgrade 377 - SAFM studio equipment replacement 357 - Western Cape foyer upgrade 318 - News weather system replacement - 8 977 Henley final control centre expansion for DTT - 6 490 Radio minor capital - 2 413 Expansion of DTT headend equipment - 2 305 Henley line record facility upgrade - 2 019 Radiopark lift rope replacement - 1 471 News minor capital - 1 015 News craft and playout server system - 917 TVOB radio communication equipment - 620 TVOB minor capital - 607 Radiopark UPS system - 579 Group Sales office refurbishment - 527 News production and computer systems - - Henley final control centres 1 to 4 equipment replacement - - News studio 9 digitisation - - Radiopark studios S3 and S4 upgrade - - Port Elizabeth chiller replacement - - Western Cape chiller replacement - - Richards Bay News bureau - - Polokwane temporary News facilities - - Group Services minor capital - - Other 4 947 4 190 Total 21 849 36 505
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Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 6 Investment properties GROUP AND COMPANY Total R’000 At 31 March 2014 Cost 18 827 Accumulated depreciation (9 607) Carrying amount 9 220 At 31 March 2013 Cost 27 368 Accumulated depreciation (9 390) Carrying amount 17 978 For the year ended 31 March 2014 Carrying amount at 1 April 2013 17 978 Additions Transfer to asset held for sale (8 541) Cost (8 541) Accumulated depreciation - Depreciation charge for the year (217) 118 Carrying amount at 31 March 2014 9 220 For the year ended 31 March 2013 Carrying amount at 1 April 2012 18 195 Additions - Depreciation charge for the year (217) Carrying amount at 31 March 2013 17 978
Fair value of investment properties The fair values of investment properties are determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same location as the Group’s investment properties. The fair values were determined by a Professional Valuer, Grant McIntosh on 10 June 2014. Details of the Group’s investment properties and information about the hierarchy as at 31 March 2014 are as follows: Level 1 Level 2 Level 3 Fair value at 31 March 2014 Fair value of investment properties 61 190 - - 61 190
There were no transfers between level 1 and 2 during the year. (The fair value is based on observable quoted prices in an active market) Information on investment properties Investment properties comprise a commercial property leased to a third party, vacant buildings and vacant land. The commercial property lease is for a non-cancellable period of 5 years. Subsequent renewals are negotiated with the lessee. Information in respect of investment properties is contained in the register of fixed property which is available for inspection at the registered office of the Group. Rental income earned on investment property and direct operating expenses such as maintenance and repairs relating investment properties are disclosed under operating leases Note 38.
Annual Financial Statements Annual Financial Statements 7 Intangible assets GROUP AND COMPANY Total R’000 (i) Computer software At 31 March 2014 Cost 387 728 Accumulated amortisation (297 625) Carrying amount 90 103 At 31 March 2013 Cost 392 605 Accumulated amortisation (229 114) Carrying amount 163 491 For the year ended 31 March 2014 Carrying amount at 1 April 2013 163 491 Additions 3 194 Transfers from PPE 265 Cost 265 Accumulated amortisation - Retirements - Cost (8 336) Accumulated amortisation 8 336 Amortisation charge for the year (76 847) Carrying amount at 31 March 2014 90 103
For the year ended 31 March 2013 Carrying amount at 1 April 2012 206 725 Additions 3 111 Transfers 270 Cost 2 543 Accumulated amortisation (2 273) Retirements - Cost (923) Accumulated amortisation 923 Amortisation charge for the year (46 615)
Carrying amount at 31 March 2013 163 491
GROUP AND COMPANY 2014 2013 Amortisation reconciliation to profit and loss R'000 R'000 Amortisation charge for the year as stated in the Note (above) (76 847) (46 615) Capitalised to Programme, film and sports rights 134 224 Amounts recognised in profit and loss (76 713) (46 391)
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Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued)
7 Intangible assets (continued) GROUP AND COMPANY Acquired Originated programme programme film and film and Work-in- sports rights sports rights progress Total (ii) Programme film and sports rights R’000 R’000 R’000 R’000 At 31 March 2014 Cost 531 119 1 393 129 284 374 2 208 622 Accumulated amortisation and impairment losses (274 417) (1 183 956) - (1 458 373) Provision for programme, film and sports rights impairment (23 516) - - (23 516) losses* Carrying amount 233 186 209 173 284 374 726 733 At 31 March 2013 Cost 496 546 1 026 457 259 089 1 782 092 Accumulated amortisation and impairment losses (258 171) (847 623) - (1 105 794) Provision for programme, film and sports rights impairment (18 939) - - (18 939) losses* Carrying amount 219 436 178 834 259 089 657 359
For the year ended 31 March 2014 120 Carrying amount at 1 April 2013 219 436 178 834 259 089 657 359 Additions 562 034 44 243 803 464 1 409 741 Transfers - 778 179 (778 179) - Amortisation charge for the year (538 886) (791 503) - (1 330 389) Impairment charge for the year (4 820) (580) - (5 400) Reversal/(raising) provision for write- off * (4 578) - - (4 578) Derecognition - - - - Cost (527 461) (457 933) - (985 393) Accumulated amortisation 527 461 457 933 - 985 393 Carrying amount at 31 March 2014 233 186 209 173 284 374 726 733 For the year ended 31 March 2013 Carrying amount at 1 April 2012 248 111 179 613 282 333 710 057 Additions 659 552 43 868 675 987 1 379 407 Transfers - 699 231 (699 231) - Amortisation charge for the year (680 040) (743 878) - (1 423 918) Impairment charge for the year (6 064) - - (6 064) Reversal/(raising) provision for write- off * (2 123) - - (2 123) Derecognition - - - - Cost (609 687) (285 966) - (895 653) Accumulated amortisation 609 687 285 966 - 895 653 Carrying amount at 31 March 2013 219 436 178 834 259 089 657 359
*Excess capacity film rights for which the licence period has not yet expired. (iii) Programme film and sports rights GROUP AND COMPANY 2014 2013 Amortisation reconciliation to profit and loss R’000 R’000 Amortisation for the year as stated in the Note (1 330 389) (1 423 918) Prior period amortisation correction for previously de-recognised fully broadcast programmes 2 320 4 974 Amounts recognised in profit and loss (1 328 069) (1 418 944)
Annual Financial Statements Annual Financial Statements 8 Defined benefit asset The Group’s Pension Fund is a funded defined benefit pension fund, that is registered and governed in terms of the Pension Funds Act, No. 24 of 1956 and Pension Funds Second Amendment Act, No. 39 of 2001. It provides pension fund benefits for all its members in the form of a guaranteed level of pension payable for life. The financial position of the fund is examined and reported upon by the Fund’s valuator at intervals not exceeding three years. The last statutory valuation of the Fund was performed at 31 December 2011, in which the valuator reported that the Fund was in a sound financial position subject to the continuation of the current contribution rates, and that its assets exceeded its liabilities. The results of the valuation undertaken in 31 December 2003 and approved in 2007 have been used to determine the extent of the surplus for the purpose of a surplus apportionment in terms of the Pension Fund Second Amendment Act, No. 39 of 2001. The level of benefits provided depends on members’ length of service and their final salary in the final years leading up to retirement. Pension increases are defined in the rules of the fund where increases will be the lesser of 100% of Headline inflation to the preceding 31 March; or the percentage increase that can be afforded out of investment earnings. The Trustees may grant increases in excess of the abovementioned provided that the funding level in the Pensions Account does not reduce to below 114%. The governance of the Fund is a joint responsibility of the Board of Trustees and the Group, the Board of Trustees must be composed of representatives of the Group and Fund members in accordance with regulations and the rules of the Fund. The defined benefit pension plan is valued annually at year end using the ojectedPr Unit Credit Method for the financial statements. These valuations are performed by actuaries and the results are as follows: GROUP AND COMPANY 2014 2013 R’000 R’000 Opening balance 69 202 155 277 Actuarial loss recognised in other comprehensive income 293 540 76 982 Amounts recognised in profit or loss (333 745) (236 801) Employer contributions 126 660 73 744 Closing balance 155 657 69 202 The amounts recognised in the statement of financial position are determined as follows: Present value of funded obligations (9 881 401) (8 428 328) Fair value of plan assets 10 037 058 8 497 530 Funded status of the plan 155 657 69 202 Unrecognised due to paragraph 58 limit of IAS 19 - Employee benefits - - Asset recognised in the statement of financial position 155 657 69 202 Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation 8 428 328 6 592 079 Current service cost 295 016 213 319 Interest cost 750 889 602 572 Actuarial loss/(gain) 667 195 1 303 150 Benefits paid (337 478) (346 340) Employee contributions 77 451 63 548 Closing defined benefit obligation 9 881 401 8 428 328 Changes in the fair value of plan assets are as follows: Fair value of plan assets at the beginning of the year 8 497 530 7 412 203 Employee contributions 77 451 63 548 Employer contributions 126 660 73 744 Benefit payments (357 913) (364 297) Expected return on plan assets 960 735 655 449 Actuarial gain - Interest income 732 595 656 883 Fair value of plan assets at the end of the year 10 037 058 8 497 530 The amounts recognised in profit or loss are determined as follows: (333 745) (236 801) Current service cost (295 016) (213 319) Expenses (20 435) (17 957) Interest cost (18 294) (5 525) Expected return on plan assets Items recognised in a statement of other comprehensive income are determined as follows: 293 540 76 982 Actuarial (loss) (667 195) (1 303 150) Change in paragraph 58 limitation - 724 683 121 Expected return on plan assets 960 735 655 449 Net periodic pension charge (40 205) (159 819)
The principal actuarial assumptions at the reporting date (expressed as weighted averages) are as 2014 2013 follows: % % Discount rate at 31 March 9,1 8,7 Expected return on plan assets at 31 March 0,0 0,0 Inflation 6,5 6,2 Future salary increases 8,0 7,7 Future pension increases 6,5 6,2
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued)
8 Defined benefit asset (continued) GROUP AND COMPANY 2014 2013 Plan assets comprise: R’000 % R’000 %
Domestic equity 6 072 420 60.5 5 166 498 60.8 Bonds 1 515 596 15.1 1 427 585 16.8 Cash 421 556 4.2 407 882 4.8 Foreign assets 2 027 486 20.2 1 495 565 17.6 Hedged assets - - - - 10 037 058 100.0 8 497 530 100.0 GROUP AND COMPANY 2014 2013 2012 2011 2010 R’000 R’000 R’000 R’000 R’000 Defined benefit obligation (9 881 401) (8 428 328) (6 592 079) (5 932 902) (5 718 895) Plan assets 10 037 058 8 497 530 7 412 203 6 937 326 6 476 210 Surplus 155 657 69 202 820 124 1 004 424 757 315 The plan typically exposes the group to actuarial risks such as: Interest rate risk The risk that future interest rates are lower than assumed and that the liability has 122 been undervalued. Inflation risk The risk that future CPI inflation is higher than assumed and that it is sporadic and uncontrolled. Longevity risk The risk that continuation members live longer than expected and that the company needs to pay their healthcare benefits for longer than initially anticipated, thus generating a higher cost for the company. Risk on non-enforcement of eligibility criteria The risk that the eligibility criteria and benefit rules set out by the company are not and rules strictly adhered to. Risk of future changes in legislation and The risk that changes in legislation and regulation (specifically IAS19R) and the regulation methodology used in valuing the benefit may increase the liability. Risk of dissatisfied non-eligible employees The risk that employees not eligible for post-retirement pension benefits perceive themselves to be treated unequally and are dissatisfied as a result. Mismatch risk The risk that the plan assets do not match the nature and term of the liabilities and hence that the company will be required to fund the balance. Currency risk The risk of currency movements, due to a proportion of the fund’s assets being held in foreign investments, and hence that the assets are not adequate to fund the liability. Sensitivity Analysis Reasonable possible changes in one of the significant actuarial assumptions at the end of the reporting period, keeping all other as- sumptions constant, would have the following effect on the defined benefit obligation as displayed below:
1% decrease Base (6.5%) 1% increase Inflation (pension and salary increase rates) (9 019 912) (9 881 401) (11 005 541) 1% decrease Base (9.1%) 1% increase Discount rate (11 027 293) (9 881 401) (9 011 555) 0.0% Base (0.5% 1.0% Post-retirement mortality improvements improvement improvement) improvement (9 791 232) (9 881 401) (9 967 863) Percentage married 80% 100% (9 623 762) (9 881 401) Although the plan does not take into account the distribution of the cash flows expected under the plan, it does provide an approxi- mation of the sensitivity of the assumptions shown. The SABC has assumed that all the active members will have eligible spouses at retirement. This assumption was set in line with the last statutory valuation of the fund. The sensitivity analysis is shown above.
Annual Financial Statements Annual Financial Statements 9 Investments in subsidiaries COMPANY Issued 2014 2013 share Nature of capital Shares at cost business (number) % Held R’000 R’000 SABC Airwave Travel (Proprietary) Limited Travel agency 2 100 - * - * Astrasat (Proprietary) Limited Dormant 1 100 - * - * Auckland Programme Trade B.V. (incorporated in the Trading in TV 40 100 71 71 Netherlands) programmes Rugby Broadcasting (Proprietary) Limited Dormant 1 100 - * - * Skenia Telematics (Proprietary) Limited Dormant 1 100 - * - * SABC Foundation (NPC) Corporate Social - - * - * Investment Shares at cost 71 71 *Shares at cost of R1. 10 Available-for-sale financial assets GROUP AND COMPANY 2014 2013 Fair value hierarchy R’000 R’000 The available for sale assets listed below are analysed by hierarchy levels defined as follows: Level 1: Quoted prices in active markets for identical assets Level 1 Sanlam shares Listed - 143 257 (2013 : 143 257) Sanlam Limited Balance on 1 April 6 761 4 755 Fair value adjustment recognised in the statement of other comprehensive income 1 484 2 006 8 245 6 761 GROUP COMPANY 2014 2013 2014 2013 11 Prepayments R’000 R’000 R’000 R’000 Programme, film and sports rights 307 361 207 238 307 361 207 238 Other 21 275 18 057 21 218 18 012 328 636 225 295 328 579 225 250 Less: Current portion (195 363) (57 213) (195 306) (57 168) Non-current portion 133 273 168 082 133 273 168 082
12 Property held for sale GROUP AND COMPANY 2014 2013 R’000 R’000 For the year ended 31 March 2014 Carrying amount at 1 April 2013 - - Transfer from investment property 8 541 - Impairment charge for the year - - Carrying amount at 31 March 2014 8 541 - The Minister of Communication approved the disposal of the house situated in New Malden, London in the United Kingdom, on 26 November 2013. The sale of the property is expected to be concluded during the year ending 31 March 2015.
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Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 13 Inventories GROUP AND COMPANY 2014 2013 R’000 R’000 Merchandise and consumables 3 370 3 240 Provision for obsolescence (469) (702) 2 901 2 538 14 Trade and other receivables GROUP COMPANY 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Trade receivables - gross 1 182 577 1 042 027 1 182 577 1 042 027 Less: allowance for doubtful debts (117 792) (204 778) (117 792) (204 778) Impairment of trade receivables (99 795) (137 075) (99 795) (137 075) Allowance for credit notes (17 997) (67 703) (17 997) (67 703) Trade receivables - net 1 064 785 837 249 1 064 785 837 249 Other receivables 476 14 342 5 875 14 948 1 065 261 851 591 1 070 660 852 197 124 15 Cash and cash equivalents Bank balances 23 960 105 119 22 454 95 113 Held-to-maturity investments (i) 1 189 717 857 075 1 189 717 857 075 Government Grant restricted cash (ii) 170 005 74 598 170 005 74 598 SABC Foundation Bursary Scheme restricted cash (iii) - 1 431 - 1 431 SABC Sport clubs bank balances (iv) - 782 - 782 SABC Community Radio bank balances (v) 11 096 12 105 11 096 12 105 Short term deposits 26 500 22 000 26 500 22 000 Cash held in foreign bank accounts 3 565 4 041 - - 1 424 843 1 077 151 1 419 772 1 063 104 (i) During the financial year under review, held-to-maturity investments were made with approved financial institutions. The periods of investing range from 33 to 210 days. The average interest rate is 5.15% (2013: 5.76%). (ii) The Government Grant is related to the technology plan for the migration of the SABC from analogue to digital technology (refer to note 20). (iii) The SABC Foundation Bursary Scheme is to be transferred to the SABC Foundation NPC (a subsidiary) in the new financial year. (iv) The SABC Sport clubs bank account relates to employees contribution to social sporting clubs managed and run by the employees. (v) The SABC Community Radio bank account relates to funds received from the Department of Communications for Community Radio stations. 16 Share capital GROUP AND COMPANY 2014 2013 Share capital - Authorised and issued R’000 R’000 1 000 ordinary shares of R 1 each 1 1 17 Fair value adjustment reserve Opening balance at 1 April 5 772 3 141 Adjustment to revaluation reserve - 996 Gain on revaluation of available-for-sale financial asset 1 210 1 635 Closing balance at 31 March 6 982 5 772 The fair value adjustment reserve relates to fair value adjustments of available-for-sale financial assets. 18 Perpetual debt instrument Permanent capital non-redeemable debt 27 390 27 390 On 1 February 1972, the Company’s shareholder converted a long-term loan into non redeemable capital. The permanent capital is not repayable. In terms of the Exchequer Act, No. 66 of 1975, as amended, interest is payable, in perpetuity, at a rate of 6.5% per annum on the capital amount. The instrument represents a financial liability (in the form of perpetual debt) under IAS 32 - Financial Instruments: Presentation, because of the underlying obligation to deliver cash in the form of future interest payments to the Company’s shareholder.
Annual Financial Statements Annual Financial Statements 19 Loans and borrowings GROUP COMPANY 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Unsecured Loan from Auckland Programme Trade B.V. used to buy sports rights bearing interest at 5% per annum. The loan has no fixed terms of repayment. - - 21 105 16 602 Long term loan obtained from Nedbank repayable over five years with a moratorium on the capital repayment for the first two years from December 2009 to December 2011. Interest is linked to the monthly Johannesburg Interbank rate (JIBAR) currently 6.84% (2013: 6.79%) per annum at 31 March 2014. - 166 667 - 166 667 Secured* Wesbank finance lease facility for a high definition outside broadcast vehicle payable over five years bearing interest at 5.65% (2013: 5.15%) per annum. The lease is repayable in monthly payments of R0,97 million with a final balloon payment of R28,1 million due in September 2014. 32 010 41 832 32 010 41 832 Rand Merchant Bank finance lease facility for a high definition television outside broadcast vehicle payable over five years bearing interest at 0.0% (2013: 10.73%) per annum. The lease is repayable in monthly payments of R1,2 million with a final balloon payment of R27,2 million due in August 2014.The lease was settled early, in March 2014. - 41 175 - 41 175 Nedbank instalment sale facilities for desktop computer equipment payable over four years bearing interest at 0.0% (2013: 6.5%) per annum. The borrowing is repayable in monthly payments of R0,06 million with the last payment due in May 2013. - 80 - 80 Nedbank instalment sale facility for PABX equipment payable over five years bearing interest at 0.0% (2013: 5.75%) per annum. The borrowing is repayable in monthly payments of R0,003 million with the last payment made in December 2013. - 26 - 26 Wesbank finance lease facility for a high definition television outside broadcast vehicle payable over five years bearing interest at 5.65% (2013: 5.15%) per annum. The lease is repayable in monthly payments of R1,6 million with a final balloon payment of R44,1 million due in February 2015. 58 909 74 645 58 909 74 645 Rand Merchant Bank finance lease facility for a high definition television outside broadcast vehicle payable over five years bearing interest at 0% (2013: 9.81%) per annum. The lease is repayable in monthly payments of R2,0 million with a final balloon payment of R41.3 million due in January 2015. The lease was settled early, in March 2014. - 72 846 - 72 846 Nedbank instalment sale facility for vehicles payable over five years bearing interest at 7.5% (2013: 7.0%) per annum. The borrowing is repayable in monthly payments of R0,12 million with the last payment due in May 2015. 1 550 2 765 1 550 2 765 Total 92 469 400 036 113 574 416 638 Current portion (92 239) (56 978) (113 344) (73 580) Non-current portion 230 343 058 230 343 058 * secured assets are reflected on note 5 At the end of the leases the SABC has an option to purchase the HD OB units at market value. Alternatively, the SABC can retain the units for its own use, subject to a new lease with the lessor.
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Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 19 Loans and borrowings (continued) 2014 2013 Minimum Minimum lease lease payments Interest Principal payments Interest Principal R’000 R’000 R’000 R’000 R’000 R’000 Finance lease liabilities: GROUP Less than one year 94 120 (3 201) 90 919 71 310 (15 662) 55 648 Later than one year but not later than five years - - - 182 997 (8 146) 174 851 94 120 (3 201) 90 919 254 307 (23 808) 230 499 Instalment sale liabilities: Less than one year 1 383 (63) 1 320 1 487 (157) 1 330 Later than one year but not later than five years 231 (1) 230 1 609 (69) 1 540 1 614 (64) 1 550 3 096 (226) 2 870 Total 95 734 (3 265) 92 469 257 403 (24 034) 233 369 Finance lease liabilities: COMPANY Less than one year 94 120 (3 201) 90 919 71 310 (15 662) 55 648 Later than one year but not later than five years - - - 182 997 (8 146) 174 851 126 94 120 (3 201) 90 919 254 307 (23 808) 230 499 Instalment sale liabilities: Less than one year 1 383 (63) 1 320 1 487 (157) 1 330 Later than one year but not later than five years 231 (1) 230 1 609 (69) 1 540 1 614 (64) 1 550 3 096 (226) 2 870 Loan from subsidiary: 21 105 - 21 105 16 602 - 16 602 Total 116 839 (3 265) 113 574 274 005 (24 034) 249 971
20 Deferred government grant GROUP AND COMPANY 2014 2013 R’000 R’000 Balance on 1 April 385 767 452 357 Amounts received during the year Amount received during the year for technology funding 66 667 - Amount received during the year for Community Radio funding 8 842 12 105 Amount paid during the year for Community Radio projects (9 851) - Amounts received during the year for Education projects 78 118 88 730 Amounts received during the year for Channel Africa projects 44 673 37 910 Amounts received during the year for News Projects 39 474 - Amounts received during the year for Sports projects 57 017 Amount recognised in profit or loss (including amortisation and depreciation of assets acquired with the grant) (see note 26) (196 278) (262 352) Balance on 31 March 417 412 385 767 Less: Current portion (120 924) (93 625) Non-current portion 296 488 292 142 In February 2005, the Department of Communications and National Treasury committed an amount of R700 million including VAT to the Company over a period of five years, in order to facilitate key improvements to infrastructure within the Company. The money is intended to fund the Company’s detailed modernisation and information technology plan, which includes the migration from analogue to digital technology. During the year 2010/2011 an additional amount of R150 million including VAT was contributed by the Department of Communication, with the total received amounting to R850 million.
Annual Financial Statements Annual Financial Statements GROUP COMPANY 21 Deferred tax 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Deferred tax is attributable to the following: Deferred tax liabilities Property, plant and equipment (153 489) (211 806) (153 489) (211 806) Property held for sale (2 391) - (2 391) - Investment properties (2 582) - (2 582) - Finance lease asset - - - - Defined benefit asset (43 584) (34 087) (43 584) (34 087) Programme, film and sports rights (13 936) (184 060) (13 936) (184 060) Computer software (16 249) (33 138) (16 249) (33 138) Available-for-sale financial assets (1 213) (936) (1 213) (936) Doubtful debt allowance (1 292 965) (399 439) (1 292 965) (399 439) Derivative financial instruments - - - Prepayments (32 014) - (32 014) - Total liabilities (1 558 423) (863 466) (1 558 423) (863 466) Deferred tax assets Finance leases 25 457 64 540 25 457 64 540 Inventory 17 - 17 - Investment properties - 4 911 - 4 911 Straight-lining of operating leases 137 79 137 79 Employee benefits 321 139 289 833 321 139 289 833 Deferred income 1 300 467 28 908 1 300 467 28 908 Other payables and provisions 105 383 85 504 105 383 85 504 Tax Loss - 111 265 - 111 265 Set off of tax asset - - - - Total assets 1 752 600 585 040 1 752 600 585 040 Total deferred tax 194 177 (278 426) 194 177 (278 426) All movements in the temporary differences described above, have been recognised in profit or loss and other comprehensive income, as follows: Deferred tax liability on 1 April (278 426) - (278 426) - Deferred tax recognised in profit and loss 439 110 (380 343) 439 110 (380 343) Deferred Tax loss utilised 111 265 73 173 111 265 73 173 Prior year end adjustment 2 633 2 633 Deferred tax recognised in the statement of other comprehensive income (77 772) 26 111 (77 772) 26 111 Deferred tax on 31 March 194 177 (278 426) 194 177 (278 426) Opening tax loss 397 375 668 108 397 375 668 108 Utilised against deferred tax (397 375) (261 331) (397 375) (261 331) Prior period adjustments - (9 402) - (9 402) Un-utilised from prior periods - - Available for utilisation in future years - 397 375 - 397 375 22 Employee benefits obligation Non-current statement of financial position obligations for: Post-employment medical benefits* 927 451 852 140 927 451 852 140 Leave pay 10 487 12 210 10 487 12 210 937 938 864 350 937 938 864 350 Current statement of financial position obligations for: Employee incentive 2 306 (1 687) 2 306 (1 687) Leave pay 158 315 154 400 158 315 154 400 160 621 152 713 160 621 152 713 Total statement of financial position obligations for employee benefits 1 098 559 1 017 063 1 098 559 1 017 063 Income Statement (See also note 28): Post-employment medical benefits 91 316 74 562 91 316 74 562 Employee incentive 7 772 41 870 7 772 41 870 Leave pay 35 008 30 291 35 008 30 291 134 096 146 723 134 096 146 723 127 Post-employment medical benefits * This balance includes an amount of R2.9m, which arose as a result of an ex employee instituting a claim against the SABC for post employment medical benefits. The Group provides a varying subsidy towards medical aid contributions payable by employees who elect to remain on the medical aid scheme after retirement. This subsidy is unfunded and is provided for based on actuarial valuations performed annually. The valuation assumes a varying subsidy of 60%; 75% and 100% consistent with the 2013 valuation scenario. The plan is only open to employees who joined SABC before 1 June 2002. There are different levels of post-employment subsidy namely; staff whom retired between 1979 and 31 March 1990 with past service greater than 5 years, receives a 100% medical aid subsidy from SABC; staff whom retired between 1979 and 31 March 1990 with past service of less than 5 years receives a 75% medical aid subsidy from SABC; staff whom retired from 1 April 1990 and thereafter receives a 60% subsidy. Not all in receipt of a post-employment subsidy are retired on SABC Pension Fund; there are a select group of Non-Pensioner Retirees whom qualified for post-employment subsidies. The method of accounting, significant assumptions and the frequency of the valuation are similar to those used for the defined benefit pension scheme as set out with the addition of the Healthcare cost inflation of 8%.
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 22 Employee benefits obligation (continued) The amount recognised in the statement of financial position is determined as follows: GROUP AND COMPANY 2014 2013 R’000 R’000 Present value of unfunded obligations Post-employment medical benefits 927 451 852 140 Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation 852 140 638 893 Current service cost 18 051 13 961 Interest cost 73 265 60 601 Subsidy payments (32 764) (29 320) Actuarial loss 16 759 168 005 Closing defined benefit obligation 927 451 852 140 The amount recognised in profit or loss is determined as follows: 91 316 74 562 Current service cost 18 051 13 961 Interest cost 73 265 60 601 The amount recognised in other comprehensive income is determined as follows: Actuarial loss 16 759 168 005 Total, included in employee compensation and benefit expenses, including items recognised in other 128 comprehensive income 108 075 242 567 The principal actuarial assumptions at the reporting date (expressed as weighted averages) are as follows: % % Discount rate at 31 March 9% 9% Medical inflation rate per annum 8% 8% Take-up rate by retired employees 80% 80% GROUP AND COMPANY 2014 2013 2012 2011 2010 R’000 R’000 R’000 R’000 R’000 Post employment medical benefits obligation (927 451) (852 140) (552 969) (638 893) (478 942) Sensitivity Analysis 1% decrease Base (CPI + 1.5%) 1% increase Healthcare cost inflation (800 250) (924 524) (1 078 492) 1% decrease Base (CPI + 1.5%) 1% increase Discount rate (1 078 333) (924 524) (802 387) 0.0% 1.0% Base (0.5% improvement) Post-retirement mortality improvements improvement improvement (924 524) (881 869) (969 874) The above sensitivity analysis are based on a change in one of the significant actuarial assumptions at the end of the reporting date, keeping all other assumptions constant. When calculating the sensitivity of the employee benefits obligation to the significant actuarial assumptions the projected unit credit method has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period. Employee incentive and long-term leave pay Certain of the Group’s employee incentive programmes and employee leave arrangements provide for benefits not payable wholly within twelve months after the reporting date. These arrangements are therefore classified as ‘’other long-term employee benefits” and the liabilities in respect thereof are measured on the same basis as the Group’s obligations in respect of its post-employment benefit plans, with certain simplified assumptions. The liability in respect of employee incentives also requires certain assumptions regarding the Group’s future performance. The principal actuarial assumptions in respect of long-term leave pay at the reporting date (expressed as GROUP AND COMPANY weighted averages) are as follows: 2014 2013 % % Discount rate at 31 March 8,4% 8,7% Rate of salary increase 8,5% 9,5% Employee turnover rate 18,3% 16,9% 23 Trade and other payables GROUP COMPANY 2014 2013 2014 2013 Trade payables R’000 R’000 R’000 R’000 - local 6 597 24 968 6 597 21 758 - foreign 25 846 6 659 25 846 6 659 Other payables* 98 132 123 918 93 501 111 614 Accruals 352 272 300 049 351 785 299 671 Programme, film and sports rights related trade and other payables 198 460 215 071 198 460 215 071 681 307 670 665 676 189 654 773 *included in other payables are VAT amounts owing to SARS and payroll related payables. 24 Deferred income GROUP AND COMPANY 2014 2013 R’000 R’000 TV Licence fees received in advance 46 095 39 087 Income and sponsorships received in advance 155 414 46 941 201 509 86 028
Annual Financial Statements Annual Financial Statements GROUP AND COMPANY 25 Provisions 2014 2013 Legal claims* R’000 R’000 Balance at 1 April 228 874 195 264 Provisions reversed during the year (104 937) - Provisions raised during the year - 33 610
Balance at 31 March 123 937 228 874 *Legal claims against the SABC were instituted by various individuals/institutions and a provision has been raised in that regard. Certain of these matters are before the courts and others the Group is attempting to settle out of court. Management estimates the potential outcome of these legal claims based on the most objective evidence on hand from internal and external legal advisors until such time that ultimate legal resolution has been finalised. Refer to note 2(A) for basis of estimates and assumptions in determining any provision raised. GROUP COMPANY 26 Revenue 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Total advertising revenue 5 295 418 4 941 242 5 295 418 4 941 242 Advertising 5 184 618 4 802 548 5 184 618 4 802 548 Trade exchanges (non-monetary exchanges) 110 800 138 694 110 800 138 694 Business enterprise and facilities revenue 41 884 35 041 41 884 35 041 Sponsorships 498 842 410 470 498 842 410 470 Licence fees 927 882 913 838 927 882 913 838 Government grants 196 278 262 351 196 278 262 351 - for Educational programmes 69 577 88 161 69 577 88 161 - for Technology assets 79 939 79 263 79 939 79 263 - for Sport - 57 017 - 57 017 - Other 46 762 37 910 46 762 37 910 ** Mobile revenue 34 425 10 433 34 425 10 433 * Other revenue 74 712 77 014 74 712 77 014 7 069 441 6 650 389 7 069 441 6 650 389 * Included in other revenue is facilities revenue, programme rights exploitation revenue and mobile revenue. **Mobile revenue and the related Mobile revenue collection costs of R22 519 for the current period are disclosed seperately in the current year however comparative figures are disclosed as a net figure above. 27 Other income Rental income 11 382 31 804 11 382 31 804 Management fees 923 285 7 455 6 039 Travel commission 4 096 3 672 1 083 1 051 Other sundry income 155 390 24 316 155 390 24 316 171 791 60 077 175 310 63 210 28 Employee compensation and benefit expense Cost of Employment 2 713 367 2 242 670 2 713 367 2 242 843 Defined benefit pension fund recognised in profit or loss (333 745) (236 801) (333 745) (236 801) Post-employment medical benefits 91 316 74 562 91 316 74 562 Employee incentive 7 772 41 870 7 772 41 870 Leave pay 35 008 30 291 35 008 30 291 Total amounts recognised in profit or loss 2 513 718 2 152 592 2 513 718 2 152 765 Items recognised in other comprehensive income: 276 781 (91 023) 276 781 (91 023)
Actuarial loss- Post-retirement medical aid liability (16 759) (168 005) (16 759) (168 005) Actuarial loss/(gain) - Pension fund defined benefit (667 195) (1 303 150) (667 195) (1 303 150) Change in paragraph 58 limit of IAS 19 - employee benefits 655 449 655 449 Expected return on plan assets 960 735 724 683 960 735 724 683 2 790 499 2 061 569 2 790 499 2 061 742 Included in these amounts are directors’ emoluments which are disclosed in 129 more detail in note 41. 29 Professional and consulting fees Audit fees 23 782 13 116 23 782 13 116 - current year 23 782 13 116 23 782 13 116 - prior years - - - - Consulting fees 44 749 48 664 45 376 49 266 Managerial 25 211 19 486 25 838 20 088 Projects 1 482 1 011 1 482 1 011 Technical 18 056 28 167 18 056 28 167 68 531 61 780 69 158 62 382
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 30 Other expenses GROUP COMPANY 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Other expenses include the following charges: Operating lease charges 17 947 26 919 17 947 26 919 Buildings 11 074 11 278 11 074 11 278 Equipment 869 2 450 869 2 450 Vehicles 6 004 13 191 6 004 13 191 Legal claim provision raised/(reversed) (104 937) 33 610 (104 937) 33 610 Consumables - (reversal)/write down to net realisable value (233) (30) (233) (30) 31 Other losses Profit/(Loss) on sale of property, plant and equipment 302 (482) 302 (482) 32 Net financing costs Interest received 123 029 125 733 122 107 124 765 Banking institutions 123 029 124 055 122 107 123 087 South African Revenue Services - 1 678 - 1 678 Dividend received 289 - 289 - 130 Net foreign exchange gain on monetary items 1 382 1 631 1 382 1 631 Foreign exchange gain 1 259 26 599 1 259 26 293 Finance income 125 959 153 963 125 037 152 689 Interest paid (34 210) (73 929) (34 201) (73 929) Independent third parties (15 835) (51 943) (15 827) (51 943) Shareholder - permanent capital (1 780) (1 780) (1 780) (1 780) Finance leases (16 595) (20 206) (16 594) (20 206) Foreign exchange loss (13 359) (43 098) (17 877) (46 852) Finance expenses (47 569) (117 027) (52 078) (120 781) Net financing costs 78 390 36 936 72 959 31 908 33 Income tax expense Income tax recognised in profit or loss Current tax expense (370 092) - (370 092) - Current tax expense - prior year adjustment - 13 970 - 14 092 Deferred tax- utilisation of assessed loss 111 265 73 173 111 265 73 173 Deferred tax Prior year adjustment 2 357 2 633 2 594 2 633 Deferred tax expense relating to temporary differences 439 111 (380 343) 439 111 (380 343) 182 640 (290 567) 182 877 (290 445) Reconciliation of effective tax expense: Profit/(loss) before income tax 469 291 151 742 467 747 146 755 Income tax using the company tax rate (131 401) (42 488) (130 969) (41 091) Non-taxable income (393 496) (30 689) (393 496) (30 689) Non-deductible expenses 75 761 41 387 75 761 41 387 Prior year adjustment - (13 971) - (14 093) Prior year deferred tax adjustment 639 260 (243 983) 638 640 (245 135) Effective tax expense 190 124 (289 744) 189 936 (289 621) Income tax recognised in other comprehensive income: Pension fund (82 191) (21 555) (82 191) (21 555) Post-employment medical benefits 4 693 47 041 4 693 47 041 Available-for-sale financial assets (274) 625 (274) 625 (77 772) 26 111 (77 772) 26 111 Reconciliation of effective tax expense: Comprehensive income/(loss) before income tax 278 265 (89 017) 278 265 (89 017) Income tax using the company tax rate (77 914) 24 925 (77 914) 24 925 Change in Tax rate (CGT-rate) from 50% to 66% relating to prior periods - 996 - 996 Rate differences on available for sale assets 142 190 142 190 Effective tax expense (77 772) 26 111 (77 772) 26 111
Annual Financial Statements Annual Financial Statements GROUP COMPANY 34 Cash generated by/from operations 2014 2013 2014 2013 Reconciliation of profit/(loss) for the year to cash generated from/ (utilised by) operations: Note R’000 R’000 R’000 R’000 Profit/(Loss) for the year 651 931 (138 825) 650 624 (143 690) Adjustments for: Amortisation and impairment of programme, film and sports rights 7 1 330 389 1 423 918 1 330 389 1 423 918 Impairment/Reversal of impairment of programme, film and sports 7 9 978 8 187 9 978 8 187 rights Amortisation of computer software 7 76 847 46 615 76 847 46 615 Amount recognised in profit or loss in line with amortisation and 20 (196 278) (262 352) (196 278) (262 352) depreciation of assets acquired with the grant. Depreciation and impairment of property, plant and equipment 5 325 666 324 403 325 666 324 403 Depreciation of Investment Property 6 217 217 217 217 (Reversal)/provision for consumables obsolescence 30 (233) (30) (233) (30) Impairment of trade receivables 14 (30 479) 2 189 (30 479) 2 189 (Profit)/Loss on disposal of property, plant and equipment 31 (302) 482 (302) 482 Interest received 32 (123 029) (125 733) (122 107) (124 765) Dividends received 32 (289) - (289) - Interest paid 32 34 210 73 929 34 201 73 929 Provisions raised 25 - 33 610 - 33 610 Income tax expense 33 (180 287) 290 567 (180 287) 290 445 Withholding taxes accrued - 7 773 - 7 773 Operating profit before payment for acquisition of programme, film and sports rights 1 898 341 1 684 950 1 897 947 1 680 931 Net acquisitions of programme, film and sports rights 7 (1 409 741) (1 379 407) (1 409 741) (1 379 407) Operating profit before changes in working capital, employee benefits 488 600 305 543 488 206 301 524 Provisions paid 25 (104 937) - (104 937) - (Increase)decrease in prepayments 11 (103 341) 22 383 (103 328) 22 392 (Increase)/decrease in inventories 13 (130) 1 831 (130) 1 831 (Increase)decrease in trade and other receivables 14 (183 191) 23 765 (187 984) 22 960 Decrease in defined benefit asset 207 086 163 060 207 085 163 060 Increase in employee benefits obligation 64 737 51 356 64 737 51 487 Decrease/ (Increase) in trade and other payables 23 10 642 (49 404) 21 416 (52 085) Increase/(Decrease) in deferred income 24 115 481 (20 153) 115 481 (20 153) (Increase) in other non-current assets and liabilities (223) (403) (223) (916) Cash generated from operations 494 724 497 978 500 323 490 100 35 Income taxes refunded Balance at 1 April 69 034 62 988 68 902 62 808 Current taxation 370 089 (13 970) 370 089 (14 092) Taxation refund (14 093) 14 093 (14 093) 14 093 Withholding taxes - 7 773 - 7 773 Balance at 31 March (370 439) (69 034) (370 094) (68 902) Taxation paid 54 591 1 850 54 804 1 680 36 Proceeds from disposal of property, plant and equipment Net book value of disposals 2 248 522 2 248 522 Profit/(loss) on sale of property, plant and equipment 302 (482) 302 (482) Proceeds 2 550 40 2 550 40 37 Financial instruments Overview The Group has exposure to credit risk, liquidity risk and market risk, that consists of interest rate risk and currency risk that arise out of the normal course of business. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. 131 The Group Audit Committee is tasked with overseeing how management monitors compliance with the Group’s policies and procedures and the reviews of the adequacy of the internal audit monitoring of these risks. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group Audit Committee. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. Trade and other receivables The Group has established a credit policy under which each new significant customer is analysed individually for creditworthiness before credit is extended.
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 37 Financial instruments (continued) Credit risk (continued) Allowance for impairment Trade receivables are impaired when there is objective evidence that the debt is irrecoverable. Trade receivables that are past due but relate to Government clients or of which the Group hold security, insurance or any other types of collateral is held are also not considered to be impaired. The majority of the Group’s trade receivables are due for maturity within 45 days and largely comprise of amounts receivable from advertising agencies. Cash and cash equivalents Investments are acquired only in liquid securities and only with counterparties that have credit ratings equal to or better than the Group. Transactions involving derivative financial instruments are with counterparties with sound credit ratings. Guarantees The Group’s policy is to provide financial guarantees on behalf of its wholly owned subsidiaries. The Company has issued a guarantee of R0.320 million on behalf of Airwave Travel (Pty) Ltd for the IATA travel agency licence. Other guarantees issued by the Company were amounts of R0.400 million outstanding relating to the employee housing scheme. The Group considers its maximum exposure to credit risk to be as follows: GROUP COMPANY 2014 2013 2014 2013 R’000 R’000 R’000 R’000 132 Available-for-sale financial assets (note 10) 8 245 6 761 8 245 6 761 Trade and other receivables 1 065 261 851 591 1 070 660 852 197 Cash and cash equivalents 1 424 843 1 077 151 1 419 772 1 063 104 2 498 349 1 935 503 2 498 677 1 922 062 2014 2013 R’000 R’000 Fully Past due Impaired Fully Past due Impaired Performing but not Performing but not impaired impaired Trade receivables: GROUP Government 18 841 6 985 5 017 20 156 1 611 46 169 Agencies 851 149 9 745 53 651 772 281 15 837 89 799 Direct clients 10 618 167 447 59 124 33 600 (6 236) 68 810 880 608 184 177 117 792 826 037 11 212 204 778 Trade receivables: COMPANY Government 18 841 6 985 5 017 20 156 1 611 46 169 Agencies 851 149 9 745 53 651 772 281 15 837 89 799 Direct clients 10 618 167 447 59 124 33 600 (6 236) 68 810 880 608 184 177 117 792 826 037 11 212 204 778 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Age analysis of past due but not impaired is the following: GROUP COMPANY Past due 0 to 30 days 179 295 20 323 179 295 20 323 Past due 31 to 90 days (2 988) 304 (2 988) 304 91 to 120 days (344) 1 782 (344) 1 782 121 days to 1 year 8 214 (11 197) 8 214 (11 197) 184 177 11 212 184 177 11 212 Age analysis of the impaired trade receivables is the following: Past due 0 to 30 days (709) 5 252 (709) 5 252 Past due 31 to 90 days 2 685 997 2 685 997 91 to 120 days 4 344 198 529 4 344 198 529 121 days and older 10 567 - 10 567 - Over 1 year 100 905 - 100 905 - 117 792 204 778 117 792 204 778 Movements on the impairment of trade receivables are as follows: Opening balance - 1 April 204 779 245 495 204 779 245 495 Prior Period Adjustment 1 400 1 400 Restated Opening Balance 204 778 246 895 204 779 246 895 Amounts written off against provision for credit notes (32 198) - (32 198) - Amounts written off against provision for bad debts (24 039) (34 950) (24 039) (34 950) Movement in impairment - disclosed in profit and loss (30 749) (7 167) (30 749) (7 167) 117 792 204 778 117 792 204 778 The Group does hold collateral as security. The nature and fair value of the collateral are as follows: Insurance Cover 483 610 455 000 483 610 455 000 MCC Security 1 072 800 956 420 1 072 800 956 420 1 556 410 1 411 420 1 556 410 1 411 420
Annual Financial Statements Annual Financial Statements 37 Financial instruments (continued) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to man- aging liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages its cash flow requirements with a three month forecast. The Group has borrowing facilities amounting to R822 million (2013: R754 million) which include short-term banking facilities as well as asset-based finance facilities. Carrying Contractual Up to 6 6 months to 1 year to 3 Thereafter amount cash flow months 1 year years R’000 R’000 R’000 R’000 R’000 R’000 GROUP Non-derivative financial liabilities 2014 Trade payables - Local 6 597 6 597 6 597 - - - Trade payables - Foreign 25 846 25 846 25 846 - - - Other payables* 46 584 46 584 46 584 - - - Accruals 352 272 352 272 352 272 - - - Programme, film and sports rights related trade and 198 460 198 460 198 460 - - - other payables Loans and borrowings 92 469 95 734 47 752 47 752 231 Perpetual debt instrument 27 390 27 390 890 890 3 560 22 050 749 618 752 883 678 401 48 642 3 791 22 050 Non-derivative financial liabilities 2013 Trade payables - Local 24 968 24 968 24 968 - - - Trade payables - Foreign 6 659 6 659 6 659 - - - Other payables* 81 406 81 406 81 406 - - - Accruals 300 049 300 049 300 049 - - - Programme, film and sports rights related trade and 215 071 215 071 215 071 - - - other payables Loan obtained with government guarantee 166 667 170 069 170 069 - - - Loans and borrowings 233 369 247 617 35 438 35 438 176 741 - Perpetual debt instrument 27 390 27 390 890 890 3 560 22 050 1 055 579 1 073 229 834 550 36 328 180 301 22 050 Maturity analysis, due in: COMPANY Non-derivative financial liabilities 2014 Trade payables - Local 6 597 6 597 6 597 - - - Trade payables - Foreign 25 846 25 846 25 846 - - - Other payables* 41 589 41 589 41 589 - - - Accruals 351 785 351 785 351 785 - - - Programme, film and sports rights related to trade 198 460 198 460 198 460 - - - and other payables Loans and borrowings 113 574 116 839 47 752 47 752 21 336 Perpetual debt instrument 27 390 27 390 890 890 3 560 22 050 Loans from subsidiaries 21 105 21 105 - 21 105 - -
786 346 789 611 672 918 69 747 24 896 22 050 Non-derivative financial liabilities 2013 Trade payables - Local 21 758 21 758 21 758 - - - Trade payables - Foreign 6 659 6 659 6 659 - - - Other payables* 61 502 61 502 61 502 - - - Accruals 299 671 299 671 299 671 - - - Programme, film and sports rights related to trade 215 071 215 071 215 071 - - - 133 and other payables Loan obtained with government guarantee 166 667 170 069 170 069 - - - Loans and borrowings 233 369 247 617 35 438 35 438 176 741 - Perpetual debt instrument 27 390 27 390 890 890 3 560 22 050 Loans from subsidiaries 16 602 16 602 - 16 602 - - 1 048 689 1 066 339 811 058 52 930 180 301 22 050 * excludes statutory accruals and payables Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, that will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 37 Financial instruments (continued) Market risk (continued) Currency risk Foreign currency risk arises primarily from international programming rights that are procured in foreign currency and the procurement, implementation and maintenance of the broadcasting infrastructure. Foreign currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Group uses forward contracts to manage foreign currency risk arising from future commercial transactions and recognised assets and liabilities and is responsible for managing the net position in each foreign currency. The Group’s risk management policy is to economically hedge between 35% to 75% of firm commitments for the rolling 12 months. The Group has not applied hedge accounting for these forward currency contracts. The Group only covers known commitments and does not speculate in foreign currency. The percentage cover for less than one year is 35%. The Group’s exposure to foreign currency risk was as follows based on notional amounts: US Dollar Euro Rand ‘000 ‘000 ‘000 GROUP 2014 Foreign cash and cash equivalents 246 3 565 Trade payables 2 459 (25 846) Gross financial position exposure 2 459 246 (22 281) 134 Net financial position exposure 2 459 246 (22 281) 2013 Foreign cash and cash equivalents - 342 4 041 Trade payables (721) - (6 659) Gross financial position exposure (721) 342 (2 618) Net financial position exposure (721) 342 (2 618) COMPANY 2014 Loans and bearing borrowings (1 455) (21 105) Trade payables 2 459 (25 846) Gross financial position exposure 2 459 (1 455) (46 951) Net financial position exposure 2 459 (1 455) (46 951) 2013 Loans and bearing borrowings - (1 407) (16 602) Trade payables (721) - (6 659) Gross financial position exposure (721) (1 407) (23 261) Net financial position exposure (721) (1 407) (23 261) The following significant exchange rates applied during the year: GROUP COMPANY Average Rate Reporting date spot rate 2014 2013 2014 2013 USD 1 10,08 8,49 10,51 9,23 EUR 1 13,5 10,94 14,51 11,8 Sensitivity analysis A 10% strengthening of the Rand against the following currency at 31 March would have increased profit/decreased loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. This analysis is performed on the same basis for 2013. Due to the nature of the transactions, there is no effect on equity. Profit or (loss) GROUP COMPANY 2014 2013 2014 2013 R'000 R'000 R'000 R'000 USD 2 228 262 4 695 2 326
A 10% weakening of the Rand against the above currency at 31 March would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk The Group’s income and operating cash flows are substantially dependent on changes in market interest rates. The interest rates of finance leases to which the Group is a lessee are fixed at inception of the lease or variable over the term of the lease, and therefore expose the Group to fair value interest rate risk.
Annual Financial Statements Annual Financial Statements 37 Financial instruments (continued) Market risk (continued)
At reporting date the interest rate profile of the Group’s interest bearing financial instruments was:
GROUP COMPANY Carrying amount 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Fixed rate instruments Finance lease liabilities - (114 021) - (114 021) Perpetual debt instrument (27 390) (27 390) (27 390) (27 390) (27 390) (141 411) (27 390) (141 411) Variable rate instruments Long term loan obtained with government guarantee - (166 667) - (166 667) Finance lease liabilities (90 919) (116 477) (90 919) (116 477) Instalment sale liabilities (1 550) (2 871) (1 550) (2 871) Cash and cash equivalents 1 424 843 1 077 151 1 419 772 1 063 104 1 332 374 791 136 1 327 303 777 089 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rates financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments An increase of 100 basis points in interest rates at the reporting date would have increased profit or decreased loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis was performed on the same basis for 2013. Due to the nature of the transactions, there is no effect on equity. Profit/loss 100 bp increase GROUP COMPANY 2014 2013 2014 2013 R’000 R’000 R’000 R’000 Variable rate instruments 10 618 4 920 10 522 4 802 A decrease of 100 basis points in interest rates at the reporting date would have had the equal but opposite effect on the above amounts, on the basis that all other variables remain constant. Fair value of financial instruments
The table below analyses financial instruments carried at fair value, by valuation method. The different valuation levels are identified as follows by IFRS 13: Level 1 - Quoted prices (unadjusted) in active ,markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within level 1 that observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal market at the measurement date under current market conditions. The following methods and assumptions are used to estimate the fair value of each class of financial instruments: (i) Loans and receivables, perpetual debt instrument and loans and borrowings The fair value of these financial instruments is determined by eferencer to market-related interest rates for financial instruments with similar maturities, and without deducting any transaction costs. (Level 2)
(ii) Trade and other receivables, cash and cash equivalents and trade and other payables The carrying amount of these financial assets and liabilities approximates fair value due to the relative short term maturity of these financial instruments. (Level 2)
135
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued)
37 Financial instruments (continued) 2014 2013
Carrying Fair value Carrying Fair value amount Level 1 Level 2 Level 3 amount R’000 R’000 R’000 R’000 R’000 R’000 GROUP Financial assets Available-for-sale Available-for-sale financial assets 8 245 8 245 - - 6 761 6 761 Loans and receivables Trade and other receivables 1 065 261 - 1 065 261 - 851 591 851 591 Cash and cash equivalents 1 424 843 1 424 843 - - 1 077 151 1 077 151 Total financial assets 2 498 349 1 433 088 1 065 261 - 1 935 503 1 935 503 Financial liabilities Financial liabilities measured at amortised costs Perpetual debt instrument (27 390) - (19 782) - (27 390) (19 782) Loans and borrowings (92 469) - (92 469) - (400 036) (400 036) 136 Trade and other payables* (629 759) - (629 759) - (670 665) (670 665) Total financial liabilities (749 618) - (742 010) - (1 098 091) (1 090 483) Net financial liabilities 1 748 731 1 433 088 323 252 - 837 412 845 020 COMPANY Financial assets Available-for-sale Available-for-sale financial assets 8 245 8 245 - - 6 761 6 761 Loans and receivables Trade and other receivables 1 070 660 - 1 070 660 - 852 197 852 197 Cash and cash equivalents 1 419 772 1 419 772 - - 1 063 104 1 063 104 Total financial assets 2 498 677 1 428 017 1 070 660 - 1 922 062 1 922 062 Financial liabilities Financial liabilities measured at amortised costs Perpetual instrument (27 390) - (19 782) - (27 390) (19 782) Loans and borrowings (113 574) - (113 574) - (416 638) (416 638) Trade and other payables* (624 277) - (624 277) - (654 773) (654 773) Total financial liabilities (765 241) - (757 633) - (1 098 801) (1 091 193) Net financial liabilities 1 733 436 1 428 017 313 027 - 823 261 830 869 The fair value of trade and other payables is determined with reference to their carrying amounts as the impact of discounting is not significant. * excludes statutory accruals and payables Capital management The Group’s share capital is 100% owned by the Government. The Group does not hold any other form of share capital. There are no changes expected in the Group’s approach to capital management during the year. The Group is not subject to any externally imposed capital requirements. The Group manages its Capital to ensure that the entity is able to continue as a going concern by maintaining a minimum liquidity reserve. The minimum liquidity reserve is the specified minimum acceptable surplus of uncommitted facilities or cash holdings over projected net debt levels for the next 12 months. This level is currently set at R500 million. Borrowing facilities The unutilised borrowing facilities include general short-term banking facilities, asset-based finance facilities as well as guarantee facilities. Included in normal guarantees, the Group has guarantees against the employee housing scheme to the value of R0.400 million, and a guarantee for the Airwave Travel’s IATA travel agency licence to the value of R0.320 million.
Annual Financial Statements Annual Financial Statements 37 Financial instruments (continued) GROUP AND COMPANY 2014 2013 R’000 R’000 General short-term banking facilities Rand Merchant Bank 96 500 90 000 Nedbank 152 000 80 000 Absa Corporate and Merchant Bank 135 000 183 600 Total 383 500 353 600 Unutilised 383 500 353 600 Asset finance Provided 438 000 399 971 Utilised (92 464) (233 369) Unutilised 345 536 166 602 Guarantees Provided 52 000 50 360 Utilised (720) (160) Unutilised 51 280 50 200 38 Operating leases Leases as lessee Non-cancellable operating lease rentals are payable as follows: Less than one year 1 810 892 Between one and five years 4 538 939 6 348 1 831 The Group has various lease agreements for equipment and premises. Some of these lease agreements contain renewal and/or purchase options. None of the lease agreements include contingent rentals. During the year ended 31 March 2014, R18 million was recognised as an expense in the statement of financial performance in respect of operating leases (2013: R67 million). Leases as lessor The Group leases out certain of its property under operating leases. The future minimum lease receipts under non-cancellable leases are as follows: Less than one year 4 436 4 813 Between one and five years 2 257 9 364 6 693 14 177 During the year ended 31 March 2014, R10.5 million was recognised as rental income in the statement of financial performance (2013: R6 million) and R0.4 million in espectr of repairs and maintenance was recognised as an expense in the statement of financial performance (2013: R1.1 million). 39 Commitments Capital commitments Contracted for 101 210 48 038 Programme, film and sports rights 1 121 683 1 130 295 Foreign exchange contracts - 54 806 Total purchase commitments 1 222 893 1 233 139 The capital commitment is to be financed as follows: Internally generated funds 100 637 35 368 Government funding 573 12 670 101 210 48 038
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Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 39 Commitments (continued)
Commitments for programme, film and sports rights will be funded internally. The local commitments and the currency exposure on foreign programme, film and sports rights at 31 March 2014 is as follows: Local Commitments Foreign commitments Total R’000 Forex ‘000 R’000 R’000 Year ending 31 March 2015 419 905 10 156 125 500 545 405 Local 419 905 - - 419 905 Foreign - US Dollar - 5 521 58 204 58 204 Foreign - Euro - 4 635 67 296 67 296 Year ending 31 March 2016 288 923 3 404 35 882 324 805 Local 288 923 - - 288 923 Foreign - US Dollar - 3 404 35 882 35 882 Foreign - Euro - - - - Year ending 31 March 2017 184 569 2 520 26 567 211 136 Local 184 569 - - 184 569 Foreign - US Dollar 2 520 26 567 26 567 Foreign - Euro - - - - 138 Year ending 31 March 2018 - - - - 40 337 - - 40 337 Local 40 337 - - 40 337 Foreign - US Dollar - - - - Foreign - Euro - - - - Year ending 31 March 2019 - - - - Total commitments 933 734 16 080 187 949 1 121 683 The Group has committed R10 million to the SABC Foundation for educating future generations. 40 Contingencies Contingent liabilities comprise claims lodged by third parties against the Group and Company which, in some cases, may be reduced by a counter-claim for insurance. The claims details are as follows: Possible Losses for the Group 2014 2013 R’000 R’000 (i) The Government Employee Pension Fund (‘GEPF’) represented by the Public Investment Corporation 337 000 337 000 (‘PIC’) instituted a claim of approximately R337 million plus interest against the SABC. The claim arose from the cancellation of a purported lease agreement for certain assets previously leased by Bophuthatswana Broadcasting Corporation. There have been various interlocutory applications and rulings, none of which has been lost by the SABC. The SABC has, in the course of proceedings, joined certain third parties as respondents, i.e. Minister of Finance, Minister of Communications, Minister of Arts and Culture and North West Provincial Government. The matter was set down for hearing from 15 to 26 July 2013 but had to be removed from the roll as some of the parties did not receive the notice of set down timeously. The matter has not been set down again and this will give parties an opportunity to explore other mechanisms of resolving this matter. (ii) Digital Horizons is suing the SABC for awarding a tender to a party allegedly in breach of its tender 150 000 120 000 processes. The value of the tender was in excess of R400 million. Digital Horizons lodged several interlocutory applications including an interdict which was dismissed and a review which it has abandoned and instead issued a new claim for damages against the SABC for an amount of R140 million. The matter was postponed sine die at the instance of Digital Horizons after having proceeded in court for approximately 7 days during August 2012. In April 2013, the SABC received a without prejudice settlement proposal from Digital Horizons proposing that the SABC pays an amount of R150 million including interest and costs. This proposal was rejected by the SABC. Digital Horizons has to date failed to set the matter down and the SABC has decided to file an application for security for costs and tax the bill of costs awarded to the SABC in the interdict application. (iii) A third party entered into an independent contractor’s agreement with the SABC for Takalane Sesame. 76 76 The production team was not happy with his performance and after giving several opportunities to prove himself, his contract was terminated. He is claiming R76 thousand for the termination of contract. The matter has been postponed several times and the last postponement was in 2013 without a date.
(iv) A third party has issued summons against the SABC for alleged non-payment of repeat fees. The SABC Royalties and is defending the matter. The internal client has advised that the Plaintiff was paid. The SABC cannot serve repeat fees any paper on the Plaintiff as he is currently in prison. (v) Red Cherry Media is demanding commission payment of R1.3 million from the SABC allegedly for securing 1 300 1 300 sponsorship from the Tshwane Metropolitan Municipality as a host city for the staging of the Metro FM awards in 2008. The SABC is of the view that this sponsorship was secured by its employees. Counsel is on brief to apply for a dismissal of this claim.
Annual Financial Statements Annual Financial Statements 40 Contingecies (continued) Possible Losses for the Group 2014 2013 R’000 R’000 (vi) A third party is suing the SABC for damages of R447 thousand as a result of an alleged breach of 447 447 his contract which was terminated for misconduct in that he did not adhere to the program plan and did things without following proper channels. We have instructed our attorney to force the plaintiff to set the matter down failing which, we will set the matter down ourselves. (vii) SABC Education commissioned a certain producer to produce a program called Matric’s Reloaded. 57 000 57 000 After broadcasting the program we received summons for R57 million from a certain third party who claims to own the concept of the program. (viii) A third party is suing the SABC for R1.2 million for the termination of his independent contract 1 200 1 200 wherein he was to render services as a presenter for Munghana Lonene FM. The contract was terminated due to his transgression which was viewed in a serious light by the station. (ix) BCG Productions is claiming a sum of R228 thousand for breach of contract arising from an 228 228 alleged failure by the SABC to flight BGC’s advertisement and consequently suffering a loss of income in the form of advertising revenue. It later unfolded that the SABC did actually flight those advertisements. The matter is yet to be set down by the Plaintiff. (x) A former SABC (METRO FM) presenter is claiming damages of R230 thousand from the SABC for 230 230 an alleged breach of contract. The contract was terminated on 5 March 2010 before its expiry date due to a decline in audience rating and the station’s decision to terminate the programme. (xi) Branco Sports Production (Branco) made an application to court for an order interdicting the SABC 38 000 38 000 and BSA from signing an agreement to regulate broadcast dates. Branco also issued summons against the SABC claiming R38 million for alleged short payments. Matter was set down for hearing on 16 May 2014 but had to be removed from the roll as Branco served the SABC with a supplementary discovery affidavit. (xii) A third party is suing the SABC for royalties in connection with the theme song for SABC1 ‘Simunye We are One’. The SABC raised an exception to plaintiff’s claim on the basis that he did not have Exception dismissed Locus Standi to sue. However the exception has been dismissed with costs. We await a new court with costs date. (xiii) Since 2011 the SABC and South African Recording Rights Association (SARRAL) liquidators have 5 000 5 000 been in discussions in an effort to resolve this matter as the SABC is currently not paying SARRAL and/or its liquidators any licence fees. In July 2011 the SABC entered into a tripartite agreement with South African Music Rights Organisation (SAMRO) and National Organisation for Reproduction Rights in Music (NORM) in terms of which the two collecting societies licenced the same right that SARRAL was licensing and further indemnified the SABC against any claims by third parties. This means that the SABC is indemnified against a claim of R5m that SARRAL is making. (xiv) The South African Music Performance Rights Association (SAMPRA) which is a collecting society 4% of net - established to collect needle time royalties, referred a dispute to the Copyright Tribunal for the revenue determination of the royalties payable by the broadcasters. The broadcasters were represented by the National Association of Broadcasters (NAB). On 30 May 2012 the Copyright Tribunal heard the matter and set the royalty at 7% of the net revenue instead of the 10% that SAMPRA was claiming. The broadcasters appealed the above decision in the Supreme Court of Appeal and the SCA reduced the percentage to 3%. SAMPRA has now approached the Constitutional Court to have the SCA judgment reviewed. (xv) On 12 December 2012 the Legal Department received summons from Fluxmans Attorneys acting 61 - on behalf of a third party. The plaintiff is claiming a payment for the sum of R1.4 million being the amount for alleged unpaid remuneration. The plaintiff was appointed as the General Manager of the Business Information Technology division on 10 December 2008. He later resigned from this position and employment on 9 December 2012 and was paid all the monies that were due to him on his last day of work. An exception was set down for hearing on 19 February 2013. However, pursuant to further consultations with our counsel, he advised an exception be withdrawn, and further advised the plaintiff to file a declaration within two weeks as this would likely bethe outcome of the exception. The matter was then withdrawn from the court roll on 19 March 2013. A filed declaration was received on 21 May 2013 from the attorneys representing the plaintiff and the amount of R61 thousand claimed in the declaration differs drastically from the amount claimed in the summons. Our attorneys suggested that we meet with the plaintiff’s attorneys to determine what their claim is based on. We still await their confirmation with regard to the suggested meeting. 139 (xvi) SABC entered into a guarentee agreement with ABSA (surety) and Rand Merchant Bank (co- 320 - principal debtor). Guarentee is for the amount which may become payable to International Air Transport Association (IATA) members participating in IATA billing settlement plan. In terms of the guarentee the banks shall act as a surety and co-pricipal debtor with the SABC acting as the agent. Per the agreement, the SABC irrevocably undertakes to pay to the banks on demand all amounts paid by the banks under the guarentee. (xvii) SABC has a case with the CCMA relating to an alleged unfair labour practice for a non-payment of 358 - an acting allowance. The CCMA ruled on 30 October 2013 that the late referral of the dispute is not condoned and that the CCMA lacks jurisdiction to entertain the matter. (xviii) SABC has entered into a subordination agreement with its subsidiary, SABC Airwave Travel (Pty) 5 214 - Ltd, in order to guarentee all their debts as and when they become due and payble should they not be in a position to repay the debts. Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 41 Related parties The Group is 100% controlled by its Shareholder, the Government, represented by the Department of Communications. The Group is a Schedule 2 public entity in terms of the Public Finance Management Act, no 1 of 1999 as amended. The related parties of the Group consist mainly of government departments, State-Owned Companies (SOC), other public entities in the national sphere of government and key management personnel of the Company or its shareholder and close family members of these related parties. The related parties of the Company also include its subsidiaries (see note 9). The list of public entities in the national sphere of government was provided by National Treasury on their website www.treasury.gov.za. The Group with regards to government related entities is required to disclose the nature and amount of each individually significant transaction and for other transactions that are collectively but not individually significant, a quantitative or qualitative indication of their extent. (i) Transactions with subsidiaries COMPANY 2014 2013 Amount of Amounts Amount of Amounts transactions owed (to)/by transactions owed (to)/by subsidiary subsidiary R’000 R’000 R’000 R’000 Rugby Broadcasting (Pty) Ltd - - - - Skenia Telematics (Pty) Ltd - - - - AstraSat (Pty) Ltd - - - - SABC Airwave Travel (Proprietary) Limited trading as Airwave Travel 7 566 (588) 140 7 447 - Auckland Programme Trade B.V. (incorporated in the Netherlands) - (21 105) - (16 602) SABC Foundation NPC 2 209 2 209 - - 9 656 (18 896) 7 566 (17 190) Related party relationships exists between the Company and its wholly-owned subsidiaries, Airwave Travel, Auckland Programme Trade B.V. and SABC Foundation NPC. The Company has entered into a number of transactions with Airwave Travel for bookings and accommodation for business trips. Transactions entered into are in the normal course of business and on an arm’s length basis. Amounts due and owing are settled accordingly. Auckland Programme Trade B.V. is managed by Orange Field Trust, Netherlands and transactions within this subsidiary are limited to administration costs and exchange differences arising from the translation of items into Rand (its functional currency under IAS 21 - The Effects of Changes in Foreign Exchange Rates). Transactions entered with SABC Foundation NPC are donations received by SABC SOC on behalf of SABC Foundation and management fees charged by SABC SOC for operating costs incurred. These transactions are at arm’s length and entered into in the normal course of business. (ii) Significant transactions with government related entities GROUP AND COMPANY 2014 2013 Included in Revenue are the following: R’000 R’000 Aggregate of all transactions that are collectively significant Independent Electoral Commission 14 059 - Parliament of the Republic of South Africa 14 536 10 751 Government Communication and Information Services 140 440 70 635 Department of Transport - 11 641 Department of Health - 110 213 Department of Social Development 14 996 16 540 Department of Agriculture 12 872 11 236 South African Social Security Agency - 45 297 Eskom 53 082 - Telkom 17 047 - Department of Science and Technology 12 380 - Aggregate Sales to other government related entities not listed above 44 606 57 713 324 018 334 026 Goods and services are sold to related parties on an arm’s length basis at market related prices. GROUP COMPANY 2014 2013 2014 2013 Purchases of goods and services R’000 R’000 R’000 R’000 Aggregate of all transactions that are collectively significant City of Johannesburg 78 664 - 78 664 - South African Post Office (SOC) Limited 34 367 19 709 34 367 28 032 Telkom South Africa (SOC) Limited 23 024 22 488 23 024 31 256 Sentech (SOC) Limited 608 385 574 058 608 385 535 837 Aggregate Purchases from other government related entities 11 401 7 561 11 401 55 755 841 623 816 755 841 595 180 GROUP AND COMPANY (iii) Grants and sponsorships 2014 2013 Amount of Outstanding Amount of Outstanding transactions balance transactions balance R’000 R’000 R’000 R’000 Government grants recognised in revenue 196 278 - 262 352 - Deferred government grant - 417 412 - 385 767 196 278 417 412 262 352 385 767
Annual Financial Statements Annual Financial Statements 41 Related parties (continued) Goods and services are purchased from related parties on an arms length basis at market related prices. GROUP AND COMPANY 2014 2013 Amount of Outstanding Amount of Outstanding transactions balance transactions balance (iv) Interest payments R’000 R’000 R’000 R’000 Shareholder - permanent capital 1 780 27 390 1 780 27 390 (v) Employee benefit payments SABC Pension fund (40 205) 155 657 (159 819) 69 202 SABC Medical aid scheme (108 075) - (242 567) - (148 280) 155 657 (402 386) 69 202 (vi) Administered projects The Group has been delegated with the responsibility by the Department of Communications to administer Channel Africa and the Community Radio Project, which are sub-divisions of the Department of Communications. The net amount of administered projects of R11 million (2013: R4 million) is included in trade and other payables and/or trade and other receivables. GROUP AND COMPANY Opening Funds Applied to Applied to Interest Closing balance received expenditure net assets accrued balance R’000 R’000 R’000 R’000 R’000 R’000 For the year ended 31 March 2014 Channel Africa (4 229) 44 673 (52 196) - - (11 752) Community Radio Project (7 737) 8 842 (9 961) (4) 114 (8 746) (11 966) 53 515 (62 157) (4) 114 (20 498) For the year ended 31 March 2013 Channel Africa (884) 43 292 (46 637) - - (4 229) Community Radio Project 29 799 10 000 (48 285) (4) 753 (7 737) 28 915 53 292 (94 922) (4) 753 (11 966) 2014 2013 R’000 R’000 (vii) Administered funds Bank balances of Community Radio Project 11 096 12 105 (viii) Service contracts for permanent executive C Olivier G H J R Aguma L P Mokhobo G P Duda directors Motsoeneng Service contract - start date 18 March 2014 28 November 18 March 2014 01 February 01 March 2012 2011 2012 - end date 17 June 2014 30 November 17 June 2014 28 February 19 March 2014 2015 2014 Service period 2 weeks * 2 years and 4 2 weeks * 2 years and 1 2 years and 2 months month weeks Remaining 2 months and 1 year and 8 2 months and Nil Nil 2 weeks * months 2 weeks *
*service period in acting position as at balance sheet date, and is in the process of being extended for a further three months.
141
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 41 Related parties (continued)
(xi) Directors’ and key management personnel compensation
Remuneration paid to the person in any capacity Employer’s contribution to pension Year ended 31 March 2014 Service Expenses fund, medical period Basic Bonuses and and other aid and other in salary commissions allowances ~ Total Service as months R’000 R’000 R’000 R’000 R’000 Members of the Accounting Authority Non-executive directors Ms Z E Tshabalala Board Chairperson 12 - - 936 - 936 Ms N P Gosa Deputy Board Chairperson 9 - - 399 - 399 Prof M O Maguvhe Deputy Board Chairperson 6 - - 344 - 344 Mr M S Mazwi Board Member 4 - - 25 - 25 Mr M R Lubisi Board Member 12 - - 606 - 606 142 Mr V G M Mavuso Board Member 12 - - 651 - 651 Mr K T Bonakele Board Member 6 - - 216 - 216 Ms R Kalidass Board Member 6 - - 227 - 227 Prof B A Khumalo Board Member 6 - - 218 - 218 Ms N M Mhlakaza Board Member 6 - - 205 205 Mr K Naidoo Board Member 6 - - 321 - 321 Dr N A Tshidzumba Board Member 6 - - 222 222 Ms H Zinde Board Member 6 - - 222 - 222 Executive directors Ms L P Mokhobo* Group Chief Executive 11 5 369 - 2 289 436 8 094 Officer Ms G P Duda Chief Financial Officer 12 1 999 - 642 348 2 989 Mr G H Motsoeneng Acting Chief Operating 12 1 676 - 897 299 2 872 Officer Mr C Olivier Acting Group Chief 12 1 162 371 225 1 758 Executive Officer/ (Acting Chief Financial Officer until 17 March 2014) Mr J R Aguma Acting Chief Financial Officer 1 82 26 14 122 Senior Management Ms T Geldenhuys Company Secretary 12 1 139 - 436 299 1 874 Mr S M Masinga Group Executive 12 1 328 - 542 236 2 106 Ms V Duwarkah Group Executive 12 1 322 - 689 238 2 249 Mr K Kganyago Group Executive 12 906 - 327 165 1 398 Ms L Z Francois Group Executive 12 1 253 - 378 244 1 875 Ms M Nepfumbada Group Executive 12 993 - 356 186 1 535 Mr L Ntloko Group Executive 12 1 321 - 601 258 2 180 Mr A Heunis Group Executive 12 1 688 1 493 602 312 4 095 Mr M J Shushu Group Executive 12 1 078 - 348 220 1 646 Mr S E Nzimande Group Executive 8 1 305 - 77 1 382 Mr T P Molefe* Group Executive 2 3 530 - 733 622 4 885 Mr I Tseisi Group Executive 10 995 - 454 181 1 630 Mr J Mabaso Group Executive 10 1 105 - 388 218 1 711 Mr V Tsoenyane Acting Group Executive 12 818 - 403 171 1 392 Mr J Matthews Acting Group Executive 12 1 024 - 518 21 1 563 Mr M P Moilwa Acting Group Executive 6 420 - 520 81 1 021 Ms B L Tugwana Acting Group Executive 3 266 - 89 46 401 Ms S M Motsweni Acting Group Executive 2 172 - 58 31 261 Mr R Naiker Acting Group Executive 2 150 - 55 27 232 Mr K Mosweu Acting Group Executive 2 150 - 92 242 Ms Y B Kgame Acting Group Executive 2 176 - 48 33 257 Mr N J Bonthuys Acting Group Executive 1 64 - 24 13 101 Total remuneration 31 491 1 493 16 555 4 924 54 463 ~ - including contributions on employer variable pension contribution * - included in basic salary and expenses and other allowances is compensation paid in respect of loss of office.
Annual Financial Statements Annual Financial Statements 41 Related parties (continued)
(xi) Directors’ and key management personnel compensation
Remuneration paid to the person in any capacity Employer’s contribution to pension Year ended 31 March 2013 Service Expenses fund, medical period Basic Bonuses and and other aid and other in salary commissions allowances ~ Total Service as months R’000 R’000 R’000 R’000 R’000 Members of the Accounting Authority Non-executive directors Dr B B Ngubane Board Chairperson 12 - - 521 - 521 Mr T Ka Plaatjie Deputy Board Chairperson 12 - - 562 - 562 Mr C S Gina Board Member 12 - - 451 - 451 Ms C F O'Neil Board Member 12 - - 347 - 347 Mr P M Green Board Member 12 - - 385 - 385 Mr D K Golding Board Member 12 - - 177 - 177 Ms S Vos Board Member 12 - - 403 - 403 Mr J S Danana Board Member 12 - - 405 - 405 Adv C B Mahlati Board Member 12 - - 335 - 335 Dr S P Makhesha Board Member 12 - - 233 - 233 Mr L C Mtinde Board Member 12 - - 410 - 410 Ms N Gosa Board Member 8 - - 78 - 78 Executive directors Ms L P Mokhobo Group Chief Executive 12 2 618 - 960 430 4 008 Officer Ms G P Duda Chief Financial Officer 12 1 860 - 642 303 2 805 Mr G H Motsoeneng Acting Chief Operating 12 1 566 - 650 266 2 482 Officer Mr C Olivier Acting Chief Financial Officer 7 625 130 116 871 Senior Management Ms T Geldenhuys Company Secretary 11 975 - 400 179 1 554 Mr T P Molefe Group Executive 12 1 629 - 359 290 2 278 Mr V Tsoenyane Acting Group Executive 8 506 - 256 102 864 Mr S M Masinga Acting Group Executive 12 748 - 373 136 1 257 Ms S M Motsweni Acting Group Executive 9 790 - 324 142 1 256 Mr R Naiker Acting Group Executive 5 358 - 143 64 565 Ms V Duwarkah Group Executive 10 842 - 387 147 1 376 Mr K Kganyago Group Executive 12 823 - 329 123 1 275 Ms L Z Francois Group Executive 12 1 171 - 392 218 1 781 Ms B L Tugwana Acting Group Executive 3 231 338 116 34 719 Ms M Nepfumbada Acting Group Executive 5 284 - 129 54 467 Mr L Ntloko Group Executive 12 1 191 332 472 130 2 125 Mr S E Nzimande Group Executive 12 1 957 - 4 - 1 961 Ms P D Mwelase Acting Group Executive 5 320 - 230 54 604 Mr N G Dlamini Acting Group Executive 5 238 - 48 44 330 Mr P T Lesala Group Executive 7 723 - 2 461 130 3 314 Mr A Heunis Group Executive 12 1 577 1 749 536 279 4 141 Ms I Marutla Acting Group Executive 7 329 - 163 77 569 Mr J Mathews Acting Group Executive 12 943 - 475 20 1 438 143 Mr K Mosweu Acting Group Executive 5 345 - 238 - 583 Ms Y B Kgame Acting Group Executive 6 528 - 87 99 714 Mr T S Mathibe Acting Group Executive 1 80 - 31 12 123 Ms J Mbatia Acting Group Executive 2 82 - 41 19 142 Total remuneration 23 339 2 419 14 683 3 468 43 909 ~ - including contributions obtained from pension fund holiday
Annual Financial Statements Annual Financial Statements Financials | South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Notes to the annual Financial Statements for the Year Ended 31 March 2014 (continued) 42 Licence agreements The Group was granted the following Public Television Broadcasting Licences by the Independent Communications Authority of South Africa (“ICASA”) for the period 18 December 2008 to 18 December 2023: SABC 1 and SABC 2. The Group was granted the following Commercial Television Broadcasting Licences by ICASA for the period 18 December 2008 to 18 December 2023: SABC 3. The Group was granted the following Public Sound Broadcasting Licences by ICASA for the period 18 December 2008 to 18 December 2018: SA FM, RSG, UMHLOBO WENENE FM, UKHOZI FM, LESEDI FM, MOTSWEDING FM, THOBELA FM, LIGWALAGWALA FM, IKWEKWEZI FM, MUNGHANA LONENE FM, PHALAPHALA FM, LOTUS FM, RADIO 2000, X-K FM and TRU FM. The Group was granted the following Commercial Sound Broadcasting Licences by ICASA for the period 23 March 2008 to 22 March 2014: 5FM, METRO FM and GOOD HOPE FM. The licence area for all of the licences above is the Republic of South Africa. The Licences were granted at no consideration and the Group is required to comply with the applicable regulations as amended from time to time. No subsequent expenditure has been incurred on these licences. 43 E xpenditure and losses through criminal conduct, irregular, fruitless and wasteful expenditures (i) All losses through any irregular expenditure Section 1 of the Public Finance Management Act, No. 1 of 1999, as amended, defines irregular expenditure as expenditure, other 144 than unauthorised expenditure, incurred in contravention of or that is not incurred in accordance with a requirement of any applicable legislation. The following amounts have been determined as being irregular expenditure, in terms of section 55(2)(b)(i) of the Public Finance Management Act, No. 1 of 1999, as amended: GROUP AND COMPANY 2014 2013 2012 R’000 R’000 R’000 Opening Balance 1 231 - - Add: Irregular expenditure - current year 990 694 100 322 114 416 Add: Irregular expenditure identified in the current year relating to the prior years 2 399 775 Financial Year 2013 1 033 800 Financial Year 2012 1 365 975 Less: Amounts condoned (14 891) (97 218) (112 081) Irregular expenditure not condoned 3 376 809 3 104 2 335 Less: Amounts recoverable - - (771) Less: Amounts recovered - - (3) Less: Amounts not recoverable - (1 873) (1 561) Irregular expenditure awaiting condonation 3 376 809 1 231 - Analysis of expenditure awaiting condonation per age classification Current year 975 803 1 231 Prior year 2 401 006 - - 3 376 809 1 231 - Details of irregular expenditure Incident Disciplinary steps taken/(criminal proceedings) Payments without contracts None 14 891 97 218 112 081 Procurement process not followed None 3 375 578 1 873 1 561 Financial Year 2014 975 803 - - Financial Year 2013 1 033 800 - - Financial Year 2012 1 365 975 - - Delegation of authority contravened Investigations underway - 325 298 Misappropriation of resources Disciplinary action initiated against the - 906 476 responsible person 3 390 469 100 322 114 416
Annual Financial Statements Annual Financial Statements 43 Expenditure and losses through criminal conduct, irregular, fruitless and wasteful expenditures (continued) (ii) Material losses through fruitless and wasteful expenditures Section 1 of the Public Finance Management Act, No. 1 of 1999, as amended, defines fruitless and wasteful expenditure as expenditure which was made in vain and would have been avoided had reasonable care been exercised. The following material losses, through fruitless and wasteful expenditure have been identified as being reportable in terms of the materiality framework approved by the Minister of Communications for the year under review: GROUP AND COMPANY 2014 2013 2012 R’000 R’000 R’000 Add: Fruitless and wasteful expenditure - current year 54 600 15 662 104 615 Less: Amounts condoned - (15 612) (103 098) Fruitless and wasteful expenditure not condoned 54 600 50 1 517 Less: Amounts recoverable (12 600) (50) (1 512) Less: Amounts recovered - - ( 5) Less: Amounts not recoverable (not condoned) Fruitless and wasteful expenditure awaiting condonation 42 000 - - Details of fruitless and wasteful expenditure Incident Disciplinary steps taken/(criminal proceedings) Impairment of foreign content Content should be broadcast in full 4 820 6 064 22 120 before the licence expired Withholding tax penalties and interest Process payment when due timeously 29 372 - - Contractual disputes with third parties Contract disputes for vehicles rented but - 6 743 2 372 not utilised Travel cancellation fees and penalties Investigations underway 404 442 124 Interest, penalties and fines on late payments Timeous payments 3 615 - - Staff advances long outstanding and written Timeous reconciliation of advances and 266 - - off recoveries Impairment of Sport productions - not Reconciliation of broadcast schedule 2 396 - - broadcasted Impairment provision raised - not all content Negotiations with service provider 13 027 - - provided Overcharge by vendor for services rendered In negotiations to recover value 600 - - Court dismissed CCMA reward review CCMA reward adhered to 100 - - Legal claims 72 060
Payment for services not provided Disciplinary action initiated against the - 2 413 7 939 responsible person 54 600 15 662 104 615 * Adjustment to Prior year 2013 Previously Adjustment New value reported R’000 R’000 R’000 Impairment of foreign content 12 518 (6 454) 6 064 - - - 12 518 (6 454) 6 064 44 Subsequent Events As at balance sheet date of 31 March 2014, no subsequent events have taken place.
145
Annual Financial Statements Annual Financial Statements Remembering South African Broadcasting Corporation [SOC] Ltd | SABC Annual Report 2013|14
Honouring Men and Women who Contributed to the SABC During the year under review.
Sipho Ndlela - 7 April 2013 Stakeholder Relations
Victor Ravhuanzwo - 7 April 2013 Provincial Operations
Jafta Nyathi - 31 May 2013 Technology
146 Ambani Makuya - 13 June 2013 Radio
Kaizer Ngoveni - 5 July 2013 Technology
Mokgethinyana Motseko - 7 July 2013 News
Grace Mothiba - 7 August 2013 Radio
Paulus Mashinini - 8 September 2013 News
Johan Neethling - 14 September 2013 Television
Shadi Moalusi - 2 October 2013 Commercial Enterprises
Dougie Connell - 7 December 2013 Technology
Abel Nzabonimpa - 3 January 2014 Radio
Mpepa Khumalo - 5 January 2014 Television
Jeanne Van Der Ryst - 27 February 2014 Commercial Enterprises
Honouring all our fallen heroes who have contributed immensely to the SABC TV Channels and Radio Stations with deep gratitude. Publication Detail
This publication is available from SABC Corporate Publications Private Bag X1, Auckland Park 2006 Tel: +27 11 714 4117 Fax: +27 11 714 3514 Visit the SABC: www.sabc.co.za
Compiled and Edited by: Iris Cupido, Thokozani Zitha, Errol Motsoene, Lorraine Francois and the Group Internal Audit Team, Petra Campher and the Finance Team. Concept, Design and DTP: Alicia Coutinho and Johanna Nieuwenhuys. Photography: Nolwazi Shange, Lungelo Mbulwana, SABC divisional submissions, Gallo Images and Clips from historical events broadcast on Television.