R 120734Z MAR 09
FM AMEMBASSY PRETORIA
TO SECSTATE WASHDC 7660
INFO AMCONSUL JOHANNESBURG 
AMCONSUL DURBAN 
AMCONSUL CAPE TOWN

UNCLAS PRETORIA 000475 
 
 
DEPT FOR PA/PRS, AF/S, AF/PDPA, NSC 
 
E.O. 12958:  N/A 
TAGS: PREL KPAO PGOV ECPS EINT SF
SUBJECT: STATE MEDIA GIANT SINKS INTO FINANCIAL QUAGMIRE 
 
REF: PRETORIA 1165 
 
¶1. (U) SUMMARY: South Africa's state broadcaster, the South African 
Broadcasting Corporation, recently admitted serious financial 
difficulties and is applying to the Treasury for immediate help. 
This follows on a year of political infighting between the Thabo 
Mbeki-appointed Board and the Jacob Zuma-supporting executive 
managers and Parliamentary committee.  The SABC has become a very 
obvious symbol of the divisions in the ANC that led to the formation 
of the break-away political party COPE and which are the central 
focus of the current campaigns for the April 22 national elections. 
END SUMMARY 
 
¶2. (U) The South African Broadcasting Corporation (SABC) dominates 
broadcast media in South Africa, reaching 78% of radio listeners and 
74% of TV viewers daily.  It has been engulfed in a battle for 
political control between the supporters of the former South African 
President Thabo Mbeki and the new ANC leadership loyal to party 
president Jacob Zuma.  The SABC has a long history as a government 
mouthpiece, dating back to the apartheid era. Despite efforts to 
recreate itself as a true "public" broadcaster after 1994, it 
gradually fell back into its previous role of state broadcaster and 
regime supporter. The internal infighting and political manipulation 
taking place currently are playing out very publicly in non-state 
print and broadcast media. 
 
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Drowning in the Red 
-------------------- 
 
¶3. (U) On March 6, SABC's Acting CEO Gab Mampone revealed that the 
state media giant has a deficit of R784 million for FY 2008. 
According to Mampone, the Corporation has been hard hit by a sharp 
downturn in the TV advertising market, attributing R400 million of 
the current deficit figure to this.  (Advertising comprises 86% of 
the corporation's revenue.  Only 2% of its funding comes from state 
coffers.)  At present, suppliers are also demanding 50% payment 
prior to delivery; creditors have shortened payment terms; and 
debtors have had their terms extended.  Expenses within the 
organization have grown substantially: from R4.4 billion last year 
to R6 billion this year. 
 
¶4. (U) At the same time, the corporation also announced that it will 
continue to fund its ambitious 24-hour news venture, SABC 
International, but reduce the number of its foreign bureaus.  No 
permanent staff will lose their jobs; however, projected cuts will 
affect freelancers and contractors, who make up half of the 4,000 
strong workforce.  SABC executives claim they are confident of 
turning the deficit into a R55 million profit next financial year. 
 
¶5. (U) The CEO also announced that the Corporation will be meeting 
with various government departments, starting with the Treasury, to 
discuss guarantees as some banks have withdrawn overdraft 
facilities.   The corporation is also planning to ask the government 
for aid of between R2 billion and R4.5 billion, although details 
have yet to be worked out. 
 
¶6. (U) "The days of the SABC funding itself are gone," Mampone said. 
 The model could not hold up against its "onerous" public service 
mandate.   Some experts agree with this statement, noting that the 
"news operation is unnecessarily bloated as it has to send news 
bulletins in all 11 official languages."  Other broadcasters in 
Africa carry news bulletins in only one language. 
 
¶7. (U) The SABC's financial crisis is exacerbated by a new lawsuit 
by a creditor seeking payment for past services.  On March 4, a 
Johannesburg legal firm, Barry Aaron and Associates, filed a civil 
QJohannesburg legal firm, Barry Aaron and Associates, filed a civil 
action suit against the corporation for failing to pay a debt of 
R450,000 (USD 45,000) in outstanding fees due for representing the 
SABC in a legal battle that ran from November 2008-January 2009. 
This suit sparked fears that other, larger creditors will also file 
for payment and force the cash-strapped corporation into 
liquidation. 
 
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Culture of infighting 
---------------------- 
 
¶8. (U) Communication Minister Ivy Catsepe-Casaburri commissioned 
auditing firm Deloitte & Touche (D&T) to prepare a report on the 
state of the SABC's  management accountability and the effectiveness 
and viability of the Corporation itself.  The report, presented to 
the Minister and dated January 19, 2009, states that "antagonism 
between SABC board members and the broadcaster's executive 
management has undermined the overall effectiveness of the 
institution's governance."  According to D&T, there is an "air and 
culture of infighting and discontent, a sense of checking up on 
others, a culture of mistrust of others' actions."  Interviews with 
SABC managers and board members turned into "gripe sessions" about 
the actions, conduct, and behavior of other people; their disregard 
for controls and authority; and "numerous references" to unnecessary 
overspending.  According to D&T, if these allegations are true, 
"they indicate a breakdown in authorization, review and 
accountability structures and processes." 
 
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Culprits? 
--------- 
 
¶9. (U) The audit makes a number of allegations of mismanagement of 
funds against the Chief Financial Officer, Robin Nicholson, 
particularly for "flouting regulations in the Public Finance 
Management Act while awarding a tender."  Despite this, three months 
later, his contract was extended by the Chairman of the Board, (Ms) 
Kanyisiwe Mkonza. 
 
¶10. (U) The Communications Workers' Union claims that irregular 
financial activities in the office of the general manager of sales 
for radio and television, Strini Naicker, are largely to blame for 
the problems.  Naicker has been accused by the Union of selling 
advertising at heavily discounted rates, publishing inconsistent 
tariff rate cards that resulted in lost advertising, and nepotism. 
Naicker denies this and instead blames the loss in advertising 
revenue on a small clique of intransigent employees, who want to 
remain in their "comfort zone" rather than implement new sales 
strategies.  The Acting CEO has appointed a four-member committee to 
investigate these allegations. 
 
¶11. (SBU) COMMENT:  Post contacts and media reports speculate that 
the South African Parliament will take action to dismiss the current 
Mbeki-appointed SABC Board before the elections in April.  The SABC 
in any event is a critical player in the elections, and its news 
coverage and airtime for the different parties is closely monitored 
(and constantly criticized) by all sides.  Without significant 
private sector competition, this news giant is critical in its role 
as the main communication medium for most South African citizens. 
How the SABC political and financial drama plays out over the next 
two months is an indicator of national politics in general and will 
likely result in a clean sweep for a pro-Zuma board and new 
executive management. END COMMENT. 
 
LALIME