Thought Leadership

SABC restructuring a necessity, as with other SOEs

24/11/2020 | By Busiswe Mavuso

The developments at the SABC over the past week are further evidence of the devastating effect a culture that encourages lack of good governance, accountability and sustainability can have on stakeholders in a company. Today it’s the staff facing the consequences of years of maladministration and a collapse of governance at the state-owned enterprise (SOE).

In the case of some of the larger enterprises such as Eskom, they’ve done immense damage to the country’s economic growth and fiscal position, contributing to ratings downgrades that have seen debt servicing costs rise.

Over the next decade, if we are to rebuild the SA economy that may contract as much as 8% this year because of Covid-19 and the weak state in which we started the year, we are going to have to stop the bleeding. It can only begin if corporations such as the SABC are allowed the space and time to restructure into viable enterprises and aren’t delayed by over-riding political objectives to keep people employed no matter the cost to taxpayers.

For years the public broadcaster and its various boards have put forward restructuring plans to its shareholder representative in the department of communications that rejected them because of the implications on jobs. Instead of considering the plans, the reaction of old was to attempt to postpone economic reality by reshuffling the board and bringing in new executives, basically kicking the can down the road. The story of the broadcaster follows a similar script to Eskom’s, which at one stage was directed to keep the lights on at all costs despite the need for maintenance that came with load-shedding.

In the case of Eskom, the directives have changed considerably over the past two years as President Cyril Ramaphosa’s administration has left the leadership team under CEO André de Ruyter to run forward with restructuring plans. While this means that load-shedding will be a feature for some time as a result of past mistakes, it has provided certainty about Eskom’s direction that hasn’t existed in more than a decade.

It is the sort of stability that we call for across the vast swathe of SOEs that are in a state of unsustainable disrepair, including the SABC. While the broadcaster hasn’t received a bailout from the Treasury, its high cost base and shrinking revenues over the past five years mean that a case for a bailout will eventually lay before the state and therefore taxpayers. This needn’t be the path if the restructuring of the SABC by the board is backed by the shareholder.

The hallmark of the previous administration was incapacity and instability across various institutions of state. What it wrought within these institutions was a collapse of governance that would serve as the cornerstone not only of “state capture” but, in the case of SAA, as just one example, financial ruin.

One has to acknowledge the return of capacity and stability across the boards of various SOEs and enterprises under Ramaphosa. Stability eventuality feeds into certainty in policy, something that has been lacking in years past. The role of SOE boards is critical in achieving the stated goal of the president of reforming SOEs.

As such, it’s important that they are supported and left to battles that naturally come with unions whenever a company has to take on the difficult task of job cuts, an aspect of any restructuring in an environment when revenues are falling.

SABC board

Last week’s demand by unions to stop job cuts and for the board to be sacked come with the territory in such disputes. The SABC board has since suspended the retrenchment process for seven days. In a statement on Friday the board said that this would allow role players to explore further options to ensure the financial sustainability of the public broadcaster.

If the shareholder were to give into the union’s demands, this would interrupt a process of engagement that the board must go through with one of its main stakeholders, the workforce. A political settlement at this point would not resolve long-standing questions about the future of the broadcaster.

There’s a template in the manner in which the government has overseen Eskom this year that we hope is followed in the case of the SABC and other SOEs that will face their day of reckoning when they run out of money. Reform and restructuring was never going to be a walk in the park and the state’s commitment was always going to be tested. SABC is just that test.

The deeper the crisis grows at our SOEs, the greater the sovereign risk they pose as Treasury is under pressure to find a funding solution, which will burden generations of future taxpayers with debt repayments. The SABC board needs to move decisively especially in the Covid-19 world, where market conditions are in constant flux and will be for years.

This column was written by Busi Mavuso and was first published in Business Day

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