SABC running out of cash, says report

• • December reserves down to R174m About R650m needed every month

The SABC’s treasury has warned its management that the broadcaster would soon run out of cash unless it raised new funding urgently.

A confidential treasury risk committee report up to January 31 2017 paints a disastrous picture. Cash reserves plummeted to R174m in December — drastically down from more than R1bn in 2015. This is not enough to keep the broadcaster going.

It is understood that the report was presented to SABC executives in February. Despite this, acting CEO James Aguma told Parliament on February 28 that the SABC’s financial performance was “satisfactory”.

“Note: the liquidity requirement of SABC is R650m a month on average,” the report warns.

Dealing with the SABC’s financial crisis is probably the most pressing task facing the interim board expected to be appointed by President Jacob Zuma this week.

Parliament’s inquiry into the SABC blamed the board and executive, especially former chief operating officer Hlaudi Motsoeneng and Aguma, for the crisis. Witnesses told the committee that the two had abused their power to commit the broadcaster to a slew of dubious deals; spent tens of millions of rand on external consultants to duplicate work done by SABC staff and, implemented a 90% local content policy without considering effect on revenue.

Motsoeneng and Aguma were implicated in questionable contracts that were red-flagged by the committee and its witnesses, including audit services provided by PwC and SekelaXabiso, a debt-collection deal with LornaVision and the SABC’s controversial contract with MultiChoice.

The report says the SABC’s cash balance increased slightly to R330m in January. This was mostly due to delayed payments to suppliers. However, it stresses this is short of its operational requirements.

“The long-term forecasts for cash [for the full years 2017 to 2019] are not favourable, as the SABC must have a cash balance of [more than] R650m at all times in order to continue its operations,” the report states. “The impact of various strategic projects will have a negative impact on cash holdings unless these initiatives are funded by government or alternative funding streams are explored.”

The report also shows that at the end of January the SABC faced a net cash deficit of R1bn. If it continues at the same rate, the deficit will grow to R1.2bn at the end of this financial year.

During former CEO Lulama Mokhobo’s tenure three years ago, cash inflows almost matched outflows.

The SABC faces three choices: it could ask for a full government bail-out, ask for Treasury guarantees to raise funding or sell off its assets. None of these is palatable.

It is unlikely to get a cash injection, but even a guarantee will be seen in a negative light by ratings agencies.

“[Finance Minister] Pravin Gordhan is not in a good mood to listen to such a request,” said a source with knowledge of the SABC’s financial predicament. “And selling your operational assets is not a solution. That’s what you do if you’re closing down.

“For the SABC to turn its fortunes around the investment in operational assets and compelling content is of utmost importance,” the source said.

The SABC did not respond to repeated requests for comment.