HOW THE SABC GOT wrecked
AS BUSINESS RESCUE WARNING IS SERVED, STARTLING DOCUMENTS CLAIM HUNDREDS OF MILLIONS IN IRREGULAR SPEND
The financially decimated public broadcaster, SABC, has 20 business days to respond to a notice from the Companies and Intellectual Property Commission (CIPC), asking it to explain why it believes it is not trading recklessly under insolvent circumstances. The SABC’s liabilities exceed its assets by R1.8 billion, according to the notice, which was served last Thursday, “and as a result, the SABC is not able to settle its short-term obligations”.
TV production houses estimate that only half of them were paid for December, and the SA Screen Federation says producers and their teams are facing a bleak new year as they are increasingly being expected to deliver shows that have not been paid for.
Even worse, say insiders, the SABC – which has had to write to Joburg mayor Herman Mashaba to help it keep the lights on – cannot afford new shows, and its advertising revenue will continue to slide.
The broadcaster is said to require R600 million a month to operate, but is apparently generating about R380 million in income.
However, there is some light at the end of the tunnel. Yesterday a spokesperson for Communications Minister Stella Ndabeni-Abrahams told City Press help is on its way: “The department of communications is currently working with National Treasury in an effort to resolve this matter through a government guarantee. The department intends to submit the government guarantee application before the end of January 2019.”
For now, though, under chief executive Madoda Mxakwe, the SABC is also wading through a relentless and expensive course of litigation and labour action as a result of the executive’s resolve to clean up the country’s furthest-reaching media operation ahead of next year’s elections.
Mxakwe and the SABC board, reduced to an inquorate four members following a spate of resignations – some of them believed to be politically motivated – have been working through an ongoing stream of internal investigation reports all year. This, in an attempt to reclaim funds and measure the effect of the five-year reign – ending in 2017 – of former chief operating officer Hlaudi Motsoeneng and former chief financial officer James Aguma.
City Press has obtained thousands of pages of internal audit reports, minutes, contracts and emails that begin to reveal the scale and extent of the damage.
The documents informed the work of the Special Investigating Unit (SIU), which is in its first phase of taking civil claims to court involving hundreds of millions of rands in irregular contracts, promotions and salary increases.
Motsoeneng, who has had his pension withheld and face civil action, this week flatly denied that the SIU claims had any truth to them, adding that that if he won his case, he would sue the SABC. Aguma, who’s pension was also frozen, justified the decisions he made which form the basis of the SIU claims.
The documents reveal startling details of contracts not put out to tender, Gupta-linked activity, the dishing out of SABC databases and strategy documents to hand-picked contractors, and flagrant spending on vanity projects.
But the CIPC has the power to shut down the SABC, or creditors could go to court to force it into business rescue, with the board stripped of its powers.
SABC spokesperson Neo Momodu said: “The SABC is currently preparing a response, as requested. The corporation has kept the minister of communications informed and will be cooperating fully with the CIPC during this process.”
The broadcaster will be relying heavily on the minister’s latest statement. It is believed to be unable to pay salaries come March and is likely to tell the CIPC that it is trading with the understanding that Treasury will provide a bank guarantee for a loan to finance its turnaround strategy.
The board has had a rocky relationship with the minister. In a recent letter to Ndabeni-Abrahams, its members refer to two earlier letters – written in September and October – requesting “urgent intervention with respect to the government guarantee application” and highlighting “the risks facing the corporation and its directors … including the SABC’s insolvency, compliance with the Companies Act by directors and the potential liquidation of the SABC – and no formal response has yet been received”.
This week, CIPC spokesperson Tshiamo Zebediela told City Press that the commission was not acting on a complaint, but that the notice was “a proactive inquiry, which was triggered by our exercise of the oversight and monitoring functions as a commission”.
She added: “Some form of a turnaround strategy – in the form of an action plan – which can include a government guarantee may be sufficient for the notice to be withdrawn.”
The R366m worth of civil claims from the Hlaudi era include R27m spent on a vanity concert, Gupta links in a TV licence deal, contracts awarded without tender, irregular appointments, bonuses, salary increases and R5m paid for work on the SABC lifts that was apparently not done. And that’s just phase one, report Charl Blignaut, Dewald van Rensburg and Abram Mashego
City Press has obtained a trove of documents detailing the evidence gathered during the SABC’s internal audit investigations – initiated by the 2017 interim and permanent boards – that are now finding their way into the courts.
The internal investigations fed into the work of the Special Investigating Unit (SIU), which has been acting on a 2017 presidential proclamation to uncover the rot at the broadcaster since 2011, under the watch of former chief operating officer Hlaudi Motsoeneng and his right-hand man, former chief financial officer James Aguma.
Motsoeneng has vehemently denied the claims, calling them “politically motivated nonsense”, and has dismissed the SIU’s actions as lacking in depth and integrity. Aguma has responded to detailed claims, justifying his actions and denying wrongdoing.
SIU and ‘the ghost of Hlaudi’
The SIU has so far investigated 18 historical matters. Some, like the case against Motsoeneng, have been in court since February but have been repeatedly delayed by technical challenges.
Next year will be a busy one for those accused of contract and payment irregularities, which the SIU has so far identified in the cases of: Lornavision (Pty) Ltd and Lezaf Consulting CC, Gekkonomix (Pty) Ltd (trading as Infonomix), Sekela Xabiso CA Incorporated, Asante Sana (Pty) Ltd, Mott MacDonald (Pty) Ltd, Vision View Productions CC and Foxton Communicating (Pty) Ltd.
There have so far been eight civil litigations, six criminal referrals and 23 disciplinary referrals emanating from the SIU, including Motsoeneng’s R11.5 million “success fee” for the controversial MultiChoice/SABC deal and further claims originally raised by then public protector Thuli Madonsela.
But this is nowhere near the full picture. Impeccable sources at the embattled public broadcaster have confirmed that there have been over 100 disciplinary hearings and that 30 so-called “Hlaudi enforcers” have left the organisation – of these, 20 were fired and there were 10 whose contracts came to an end or who resigned.
As more internal reports continue to reach the desks of the executive, the full extent of the rot at the SABC’s radio stations and provincial operations is only now beginning to become clear.
It is believed that there are still at least 30 irregular appointments to be dealt with, some of them among very senior news staff after Motsoeneng took charge of the SABC’s editorial line, when he introduced his 70% “good news” policy.
“The ghost of Hlaudi still haunts the corridors,” said an SABC source this week. “There are a lot of staff that still support him and many turned up at the launch of his political party [the African Content Movement] last week.”
But sources say chief executive Madoda Mxakwe is increasingly taking a harder line on errant and corrupt staff – just one of a mountain of problems he and his now-inquorate board are facing.
Critics such as the Broadcasting, Electronic Media and Allied Workers’ Union are, however, accusing the new SABC bosses of squandering money on hiring top consultants to implement the clean-up.
Gupta links in TV licence scandal
Although The New Age breakfasts and the Gupta-owned newspaper’s links to the SABC are part of the SIU’s second phase of investigation, new evidence obtained by City Press suggests the Gupta family had a substantial interest in the controversial multimillion-rand Lornavision contract, awarded by the SABC without a tender in 2015.
At the very least, the family’s foremost dealmaker, Salim Essa, was being kept in the loop as the deal was prepared, documents obtained by City Press show. The deal was for the creation of a new payment system for licences on a commission basis – potentially worth hundreds of millions of rands.
The SIU is currently trying to recover R62 million in relation to the deal, which is what Lornavision actually got paid from July 2015 up to early 2017. The SABC then repudiated another R19 million it owed Lornavision by getting the Johannesburg High Court to set aside the irregularly awarded contract last year.
Lornavision has now threatened to launch a counterclaim of R500 million for lost income, defamation and theft of its intellectual property, according to its chief executive officer, Frans Basson.
Basson denies any links to Essa and claims that the SABC would be in far better shape today if it had embraced Lornavision’s work.
The new evidence of Gupta involvement consists of emails attached to an internal SABC forensic report on a related deal with Lezaf Consulting, which the SIU has also investigated. The emails show that members of the Lornavision consortium were in constant contact with the SABC’s Aguma leading up to the signing of the deal on July 10 2015.
Copied into some of their emails was none other than Essa, who was sent a copy of the Lornavision proposal shortly before it was sent to Aguma.
Futhermore, an employee of another company belonging to Basson that did work for Lornavision at the time, Andre du Plessis, said that Essa was presented as the “chair” of Lornavision and the representative of its majority shareholder, Kimomode. Kimomode, which owned 60% of Lornavision, belongs to Kuben Moodley.
Du Plessis said he “sat in” on two meetings between Basson, Moodley and Essa early in 2015.
Basson denies ever meeting Essa and told City Press he cannot explain why Essa was cc’d into emails. He speculated that it was possible that Kimomode had some or other dealing with Essa, but that he was not privy to it.
Like many other SABC deals investigated by the SIU, Lornavision’s contract was awarded through a deviation instead of a competitive bidding process. This is only meant to happen in emergencies or if the supplier is the only possible supplier.
Last year’s court ruling lambasted the use of a deviation for the Lornavision deal, calling Aguma’s actions “inexplicable”.
Basson said there was “nothing funny” about getting appointed on a deviation and that the only problem with Lornavision’s work at the SABC was that it required SABC staff “to actually do some work”.
“I have done work for the SABC since 1992 and got a lot of work on deviation,” he said.
Basson has a law firm that has done work for the SABC for years, sending letters of demand to people who have not paid for their TV licences. According to Basson, the attempt to recover R62 million from Lornavision is ridiculous because it is based on his being responsible for how the SABC procures. “Nowhere in any court document or on this summons is there any suggestion of wrongdoing on our part.”
This week, Aguma said: “I hired Lornavision because they offered a unique service which was not available on the market, and therefore I did not have to go through the tendering system.”
A database of 100 000 licence holders was provided to Lornavision by Aguma to analyse in order to determine the scope of the project, says the forensic report.
Hlaudi’s R30 million ‘vanity project’
According to an SABC forensic report, titled Legends and SABC Heritage Concert, R27.7 million was, in fact, spent by the SABC on the 2016 Thank You SABC concert that the broadcaster had insisted it was not paying for, but was a gift from musicians to thank Motsoeneng for introducing a disastrous 90% local music quota at SABC radio and to promote the payment of licences.
The bulk of the R27 million was the value of radio and TV adverts on blanket rotation to try to drum up attendance at the concert at the last minute. Another R10.7 million was earmarked to pay “musical legends” R50 000 each, even though only R2.45 million appears to have been paid in the end.
When it comes to the concert, the forensic report details an astonishing timeline in which the idea for the bash was pitched by musician Mzwakhe Mbuli just 10 days before the event was staged.
It was, by all accounts, a flop, with top musicians pulling out and only about 1 000 people arriving at the 40 000-capacity Orlando Stadium in Soweto.
According to transaction records, the SABC diverted a potential R5.3 million from various divisions to help pay for the concert.
It paid at least R2 million to sponsor the concert, later buying another R600 000 in tickets, paying R800 000 in artists’ fees, and helping to stock up the VIP bar with R11 000 worth of booze.
Motsoeneng continues to insist that he did nothing wrong and is proud of his 90% achievements, including the concert, which he has always hailed as a success.
This week, Mbuli told of how the bash had resulted in his Phumelela Entertainment being liquidated in court by debtors – notably, the stadium’s management – who were never paid for their work. One of the concert producers told City Press this week that the production team was still appealing to the SABC for payment that never happened.
Mbuli said: “The planning period was too short.”
He added that when a major potential sponsor fell through, “I proposed postponement”. But SABC minutes show that Motsoeneng was determined to proceed and upped the SABC advertising for the ill-fated bash. The audit report notes that a TV licence drive was not included, as proposed, in the concert’s promos. Mbuli said he raised it in interviews promoting the bash.
An insider this week described the concert as “a vanity project” conducted against the odds “to make Hlaudi feel loved”.
Aguma and Motsoeneng this week said that both the concert and the legends payments were approved by the SABC’s operations committee, which they supported. Motsoeneng chaired the committee, according to records.
The curious case of the missing websites
In another case pursued by the SIU, a company trading as Infonomix was paid, according to SABC transaction records, R4.55 million for seven new websites for SABC radio and TV stations, deliverable by May 2017.
Only one – for Metro FM – was ever delivered.
The Infonomix deal was also awarded by deviation instead of tender. Aguma told staff that this was done to stop competitors finding out what the SABC was doing, according to an SABC audit report.
There was a simultaneous request for another Infonomix deal for R9 million, related to “digital sports rights”, which was never signed or paid, the report said.
The managers of the stations for which Infonomix was to produce websites were told to immediately stop any internal work on digital strategies and hand over their digital strategy papers to Infonomix instead.
The sole director of Infonomix, Mutheiwana Rambuwani, who used an email address belonging to a driving school in Midrand called Lpasso, said Infonomix presented a concept to the SABC which was adjudicated by the SABC’s strategic and commercial team. It was then shared and presented to the executive committee and board. “After these extensive engagements, a letter of award was granted.”
Rambuwani said Infonomix issued a notice of breach of contract to the SABC in July 2017 because the broadcaster had rendered it impossible for Infonomix to carry out its contractual obligations.
“All documentation to support the abovementioned facts were provided to the SIU,” said Rambuwani.
Said Aguma: “Infonomix came with a sound proposal and they provided a website, and while they were busy working on others, they were chased away.”
Other deals under the spotlight
Aguma was allegedly also responsible for irregularly appointing accounting and auditing firm Sekela Xabiso CA Incorporated, ironically hired to prevent and detect irregular, fruitless and wasteful expenditure in line with applicable legislation, policies and procedures for the SABC.
The claims are outlined in affidavits made to the SIU.
“No open bidding supply chain management process was followed for the appointment of Sekela Xabiso, and the service provider was provided on a deviation,” said the SABC’s then head of supply chain management, Simon Molaudzi, in his affidavit.
The SIU is looking to recover R9.8 million paid to the firm. Molaudzi, the subject of an irregular appointment investigation, has since been fired, claiming he was a victim of unfair dismissal for blowing the whistle on another investigation – into the awarding of a security tender that implicates the interim board.
Sikela Xabiso executive chairman Abel Dlamini said the SABC was seeking to avoid its payment obligations because it didn’t follow its own procurement rules and his firm was defending the application to review and set aside the award of the contract. “Sekela Xabiso has instructed its legal team to demand that the SIU forthwith retracts the above statements, issues an apology and a statement clarifying that there is no pending claim against Sekela Xabiso,” he said.
Another suspect contract involves nearly R20 million having been paid to accounting and consulting firm Asante Sana.
This started out as a relatively small R1.7 million contract for three months in 2013 – by way of a deviation request made by Motsoeneng.
Then five separate addendums to the contract, and another deviation, ballooned the deal into R19.9 million worth of work up to 2015. Motsoeneng signed off on R4.4 million of that and Aguma on R15.5 million. Like all the other contracts entered into by deviation, the reports find it irregular.
Asante Sana director Mandla Musundwa told City Press that the SABC was alleging impropriety on the part of its own officials, not Asante. “We are very proud of what we have achieved at the SABC,” he said. The SABC has not paid all the firm’s outstanding invoices and Asante is claiming R350 000 from the broadcaster.
Another potential shocker has come to light pertaining to the maintenance and repair of the lifts at the SABC. The firm Mott MacDonald was approached by Aguma, according to an SABC forensic report, and paid R4.92 million for work on the lifts. “There is no proof of deliverables linked to payments to Mott MacDonald,” reads the report, adding that the firm’s appointment was irregular.
“The firm provided a consultancy on the lifts and made a report on whether we needed new ones or should repair existing ones,” said Aguma.
Said Mott MacDonald’s Tom Smith: “The legal proceedings following the conclusion of the SABC investigation are ongoing and it would be inappropriate for us to comment at this stage.”
One of the bigger matters still to come to light relates to Vision View, a company contracted to provide a multipurpose studio for the SABC. The SIU has had the R52 million contract set aside in court and further legal action will follow.
This week, the SABC’s Neo Momodu said: “Most of the matters referred to are currently under investigation by the SIU and there is also litigation, which renders the matters sub judice. The SABC can therefore not comment on the specific details of the cases/matters.
“We would, however, like to state that the current SABC management inherited over R5.5 billion in irregular expenditure from the previous executive management, and the cases are currently under investigation by the SIU. The SABC has approached the Labour Court to overturn irregular appointments made during the previous management’s tenure which have cost the SABC a minimum of R60 million.”
Both Motsoeneng and Aguma said they had never been interviewed by the SABC or the SIU.
Motsoeneng said the cases against him were intended to tarnish his name and repeatedly called them “nonsense”, adding that the SIU was being paid by the SABC and was therefore not impartial.
Momodu responded: “Mr Motsoeneng’s view is indicative of his failure to appreciate the massive damage he has caused. The SABC would like to make it clear that Mr Motsoeneng was the central figure in the complete financial and governance collapse of the corporation which the current executive management is redressing.”
AT CLOSE QUARTERS Hlaudi Motsoeneng and James Aguma