CHAPTER 7: Funding of the South African Broadcasting Corporation         

Adequate funding is critical to innovative public broadcasting. However, sufficient funds alone do not ensure credible and distinctive programming that is responsive to the needs of all citizens, rather than the demands (or whims) of politicians, advertisers or managers of the broadcaster. Funding also needs to be secure to ensure the broadcaster is not influenced (even inadvertently) by market or political vagaries and is able to develop creative long-term strategies to meet defined public goals. 

The ideal funding model has been the subject of much debate in South Africa (as elsewhere in the world) since the early 1990s. The focus in the country, however, has been predominantly on the ratios of public to commercial funding rather than on the most appropriate mechanisms to secure adequate funding. These debates, moreover, have not had any effect on the dependence by the SABC on advertising and sponsorship revenue. 

In addition, new considerations, such as the introduction of digital broadcasting and possibilities arising from increased access and take-up of broadband, may require a review of both the needs and funding models for public broadcasting. Such new technologies have prompted evaluations of funding for broadcasters internationally.

In 2008, for example, the UK communications regulator, the Office of Communications (OFCOM), began a review of public service broadcasting by calling for comment on a paper outlining threats and opportunities to public service content on television. OFCOM states that it is critical in the process to evaluate the best funding mechanisms to meet audience needs in a new digital environment, given audience fragmentation across different platforms (including over the internet) and declining commercial revenue.

France has also recently announced a shake-up of public broadcasting funding. In January 2008, President Nicolas Sarkozy declared that advertising on public service television would be phased out completely by 2011. In June 2008 a parliamentary commission established to fine tune his proposals declared that advertising during prime time on public television would be phased out from January 2009. According to the plan, lost revenues will be replaced by taxes collected from internet, mobile phone and commercial broadcasting companies. 

1. Overview

When addressing questions around funding of public broadcasting in South Africa it is important to consider the broad history of funding of the SABC. Unfortunately the frequent changes in the leadership of the SABC described in the previous chapter, as well as changes in the management of the Department of Communications, have affected institutional memory, making it difficult in certain instances to obtain insights into decisions. 

The following are some of the key decisions/milestones affecting public broadcast funding:

• Pre 1994: The SABC is a state broadcaster focusing on the narrow interests of the apartheid government – despite the fact that it is funded primarily through advertising. According to a report by the Freedom of Expression Institute (FXI), the 1994 SABC annual report indicated that licence fees accounted for 20 per cent of all revenue, and advertising income made up 74 per cent of revenue. Advertising was allowed on television from 1978 (two years after its introduction in South Africa).

• 1995: The then regulator, the Independent Broadcasting Authority (IBA), issues the Triple Inquiry Report (see chapter three) and makes proposals on the viability of public broadcasting:

o The SABC should be funded through a mix of advertising and sponsorship, licence fees, government grants and “other income such as merchandising their products and leasing facilities”.  No recommendations are made on the ratio of the different revenue streams. 

o The funding mix and alternative options for collecting fees should be reviewed in 1998.

o Parliament should provide funding on a triennial basis for:

♣ The cost of provincial splits on radio and television services;

♣ The cost of increasing African language and local content television programming on the SABC;

♣ The cost of funding educational programming - including that of conducting a viability study into the desirability and viability of dedicated educational stations/channels. 

The proposal by the IBA was to streamline the SABC and sell off eight regional radio stations and one television channel. It was recommended that the SABC be allowed to keep national commercial stations Metro and 5FM as they provide “crucial revenue”. The revenue generated by the sale of stations would be invested in the SABC to assist in the restructuring of the broadcaster. 

• 1996: Parliament ratifies the Triple Inquiry Report. However, it decides in response to SABC lobbying that no television channels should be sold and only six of the regional commercial services be put up for sale. The sale of the stations is finalised later in the year. The IBA awards licences based on diversity of ownership and promises of performance rather than to the highest bidder. National Treasury keeps the funds raised (R510.1m) – leaving SABC without the revenue from the commercial services or the benefits of the sale. The SABC objects strongly to the claiming of the profits by government - to no avail.

• 1997: The SABC, according to its annual report, records a deficit of R64 million – attributed to the expanded mandate and a shift away from the broadcaster by advertisers.  The broadcaster warns Parliament that the deficit could grow to an estimated R650 million if the broadcaster is not restructured and streamlined. 

The then responsible Minister, Jay Naidoo, notes that government will, in the short term at least, fund certain public interest programmes at SABC, including regional radio splits, educational broadcasting, African language programming and South African content (in line with IBA recommendations) and introduce a three year funding model. He indicates however that it is important that the SABC moves towards self-sufficiency.

The SABC implements recommendations from international consultancy McKinsey to cut costs in light of government pressure to be self-sufficient:

o About 1 400 jobs are shed. 

o Certain public programming (including local content) is axed from prime time in favour of more commercially viable programmes (such as international sitcoms and less costly South African programmes including game shows). 

o SABC decides to outsource all production except news and current affairs.

Towards the end of the year, the Green Paper on Broadcasting is launched by government for public comment. The paper asks for submissions on the “realistic proportion of revenue from advertising, transactions and public funds” for the public broadcaster.

• 1998: 

o The Minister of Communications states that the SABC has to be self-sufficient due to “budget constraints of this government”. “This government,” he says, “is not going to give it more money”.  He announces that government funding for the SABC would be cut by 41 percent (from R235 million in the 1997/98 financial year to R141 million in the 1998/99 budget).

o The Broadcasting White Paper is published. A new funding model is mooted, dependent on the division of the SABC into public and commercial arms. The paper states:

Funding sources for the public broadcaster will consist of licence fees, grants, advertising and sponsorship. Advertising revenue of the public arm of the SABC will be less than that of the commercial arm. It is likely that cross-subsidisation of this arm from dividends paid by the commercial arm of the SABC will also be required, as may be some degree of budget supplementation from the general revenues of the Government. The public broadcasting arm of the SABC will also be allowed to sell advertising time, but such services cannot obtain their predominant form of revenue from advertising …

The paper also stipulates that the separation into public and public commercial divisions will be a “precursor” to possible “privatisation of, or the introduction of private equity to, the SABC’s commercial services”. It stipulates that the commercial arm will provide dividend payments to the Minister who will reallocate these as necessary to the public broadcasting arm. “Any surplus will be paid into the National Revenue Fund.” 

o Television fees paid to the SABC for possession of a television increase by 10 per cent (from R189 to R208 per annum).

• 1999: 

o The Broadcasting Act (No 4 of 1999) is promulgated and separates the SABC into public and a commercial wing.  Section (10)2 states the public wing is funded by “advertising and sponsorship, grants and donations, as well as licence fees … and may receive grants from the State”. Section 11(d) says the commercial wing must subsidise the public division “to the extent recommended by the Board in consultation with the Minister”. This division must be run efficiently so as to “maximise the revenue to be provided to its shareholder (the government)”. Section 18(7) states that any dividends to be paid to the shareholder must be paid into the National Revenue Fund.  

o In terms of the new legislation the SABC now has to abide by the Public Finance Management Act (PFMA) which, amongst other things, sets criteria for financial reporting in order to hold public bodies more accountable (including requiring bodies to report for example on senior executive salaries).

o Regional splits on SABC television are discontinued after funding from the government was stopped. 

• 2000: SABC records a deficit of R28.1 million for the 1999/2000 financial year. Government approves a new three-year funding plan for the SABC.

• 2001: SABC cuts in expenditure (including on public interest programming in prime time) bear dividends and the broadcaster posts a R5.3 million surplus for the 2000/2001 financial year. 

• 2002: 

o The Broadcasting Amendment Act is promulgated. Amongst other things, amendments are made to clauses outlining the process of corporatising the SABC. 

o The Act also stipulates that a further two public regional channels must be licensed which would cater for languages other than English and Afrikaans. Legislation states that these channels will be funded through money appropriated by Parliament and via grants, donations and sponsorships, and tasks the regulator with determining the “extent to which these services may draw revenue from advertising”. 

o The ruling party, the African National Congress (ANC), adopts a resolution at its national conference stipulating that government must “move towards establishing a publicly funded model of the public broadcaster“ and “increase its funding of the public broadcaster” in order to reduce dependence on advertising. 

o The SABC announces that it has stabilised its business and records a R7 million profit.

• 2003: 

o Television licence fees are increased again for the first time in five years, this time by eight per cent (from R208 to R225 per annum).

o New licence fee regulations strengthen the licence fee collection mechanisms by, for example, ensuring that no person can buy a television set without proof of a TV licence. 

o In a policy paper on the public regional channels, the regulator (now restructured and named the Independent Communications Authority of South Africa – ICASA) announces that these services will not be allowed advertising. The Position Paper also prohibits the use of English on the channels.

• 2004: The SABC corporatisation process is finalised. One of the financial implications is that the SABC is now liable to pay company tax. 

• 2005: 

o SABC announces an after-tax profit of R194 million for the 2004/2005 financial year.

o ICASA issues new licence conditions for SABC services, in line with the Broadcasting Act. For the first time, the SABC has to comply with limitations on advertising on television (bringing it in line with conditions for commercial broadcaster e.tv). The licence conditions state that television channels may not broadcast an average of more than 10 minutes per hour of advertising calculated annually, and that they may not air more than 12 minutes of advertising in any one hour. No distinction is made between public and public commercial channels – potentially negating the suggestion in the Broadcasting White Paper that there should be less advertising on public services. 

o ICASA also announces that it will not issue the licences awarded to the SABC’s two proposed regional television channels (SABC 4 and SABC 5) “pending the SABC securing appropriate and sufficient funding, to the satisfaction of the Authority”. It relaxes its earlier rule on no advertising on the two channels.

• 2006: The SABC announces an after-tax profit of over R382 million.

• 2007: The SABC announces an after-tax profit of R183million. - At the ANC National Conference in December 2007, another resolution demanding an increase in public funds for the SABC is passed. The resolution is more specific than the 2002 one – probably in reaction to the non-implementation of the previous decision. The resolution stipulates that government must increase funding for the SABC from “the current 2 (two) per cent (of revenue) to a minimum of 60 per cent by 2010”.

• 2008: The SABC announces an after-tax profit of R321 million.

• 2009:

o The SABC announces an after-tax loss of R790 million.

o The Department of Communications introduces the Public Service Broadcasting Bill, which proposes a radical change to the SABC’s funding model. It proposed that in future, funds for public broadcasting are to be paid into a Public Service Broadcasting Fund, to be administered by the Media Development and Diversity Agency (MDDA). All broadcasters would be allowed to apply for funding through this mechanism. Public broadcasting should be funded from personal income tax (not more than 1 percent), money appropriated from Parliament, contributions from broadcasting services licencees, contributions from business and money accruing to the Fund.

o The interim SABC board implements a stabilisation plan to address the myriad problems facing the broadcaster, including the resolution of a wage dispute with staff, a plan for payment of critical debt, cost reduction and increase of revenues. 

2. Sources of funding

The SABC is predominantly reliant on commercial income (advertising and sponsorship).   According to the most recent annual report (2008/2009), the funding mix for operations for that year (ending 31 March 2009) was:

Commercial funding 77% (R3.663bn)

Licence fee income 18% (R865m)

Government allocation 2% (R106m)

Other (including sale of merchandise,

rental of studios, etc.) 3% (865m)

This excludes the R150 million allocation from government for implementation of the technology plan. By the end of the financial year, R23m of this grant had been received. 

As indicated above, the dependence on commercial revenue pre-dates the advent of democracy and the transformation of public broadcasting in 1994. Whilst the increased mandate and alleged advertiser caution in light of changes at the SABC initially resulted in the corporation running at a loss, the broadcaster declared high profits from 2004 to 2007 – attributed by SABC’s executive to more effective management. For the 2007/2008 financial year the broadcaster reported that profit after tax grew by 75.8 per cent, but this could be attributed exclusively to a recognition of a Pension Fund surplus. If this profit were stripped out, the actual operating profit amounted to R43 million.

The high profits years coincided with an advertising boom, which slowed down due to the economic downturn starting in 2007. In 2006/2007, for example, the total media adspend grew by 16 per cent (or by R3 billion to about R23 billion) according to advertising research group Nielsen Media Research. Adspend in television over this period grew by 22 per cent and in radio by 12 per cent.  Yet in 2007/2008, the growth percentages of media adspend declined considerably. Television adspend in particular increased by a mere 6 per cent while radio remained almost steady with a 13 per cent growth rate. Given its dependence on advertising, SABC is very vulnerable to any reduction in advertising income, which is what took place in 2009 in the wake of the global recession when the broadcaster’s revenue from classic advertising came under pressure, leading to a 0.7 percent decrease in commercial revenue.

At the same time, licence fee income has gone up significantly as a result of the introduction of amendments to the Broadcasting Act and related regulations which increased the SABC’s capacity to enforce compliance with the law. The Minister of Communications promulgated the new regulations in 2004, and licence fee revenue jumped from a total of R395 million in that year to R568 million in 2005 when the regulations became effective (44 per cent). It increased again significantly in 2006 (to R739 million or by another 30 per cent from 2005), but dropped slightly in the following financial year. The SABC noted in its 2007/2008 annual report that television licence fee revenues came under pressure due to the absence of a rate increase, and the cost of collection increased as a greater portion of revenue came from collections from default licence holders. However, according to the broadcaster’s 2008/2009 annual report, licence fee revenue again increased slightly by 0.7 per cent.

There is broad agreement amongst a range of stakeholders that the over-reliance by the SABC on commercial funding is problematic. The ruling African National Congress has also added its voice to those calling for a publicly funded SABC – though government has not as yet implemented decisions by the party, nor given any indication of whether or how it will adhere to the call for public funding to increase to 60 per cent of total revenue by 2010/11.

According to the 2007/2008 budget of the Minister of Communications the SABC will continue to be profitable. The budget stated that SABC’s revenue rose to R5.1 billion in the financial year ending 31 March 2008, whilst expenses amounted to R4.7 billion. The budget vote noted that expenditure was expected to increase to R5.8 billion by 2010/11, but indicated that the SABC’s “long term sustainability remains positive as the corporation expects to grow its surplus by 45.7% (per cent) over the medium term.” 

The department’s 2009 budget was similarly upbeat about the SABC’s finances, stating that the SABC’s expenditure is expected to increase from R5.3 billion in 2008/2009 to R6.2 billion in 2011/2012 at an average annual rate of 5.1 per cent, while revenue is expected to grow from R5.8 billion in 2008/2009 to R7.3 billion in 2011/2012 at an average rate of 9.5 per cent. In the discussion of the department’s budget in the Portfolio Committee on Communications there was no indication of concern about the SABC’s financial state of health. 

Newspaper reports, however, said that the SABC has raised concerns about a possible R2 billion shortfall over the next three years. They cited a strategy document reportedly distributed in Parliament, highlighting shortfalls in funding for digitalisation and for SABC’s satellite international news channel (aimed predominantly at the rest of Africa but closed down by the corporation in mid-2008 due to lack of funds).

The matter did not come up in the committee’s meeting with the SABC, when the broadcaster was scheduled to present its strategic plan and budget, as the meeting focussed instead on a variety of issues the committee was unhappy about, leading to the ANC caucus recommending a vote of no-confidence in the board. These events prevented a proper consideration of the SABC’s budget. The full extent of the financial crisis emerged in the coming months, with the SABC reporting a financial loss of R839 million in the 2008/2009 financial year, leading to a request for a R2 billion bail-out from the government.

In response to the crisis, the government agreed to provide a financial guarantee of R1 473 billion, enabling the broadcaster to borrow money in the open market: However, the guarantee came with a number of obligations to be spelt out in a shareholder compact between the SABC Board and the Minister of Communications, including the development of a detailed project plan committing the broadcaster to explicit revenue targets and cost cutting measures to enable effective oversight by the government. While the granting of the guarantee is welcome, the terms of the shareholder compact raise questions for the SABC’s independence. 

2.1 Commercial revenue

In the 2007 Annual Report, former Group Chief Executive Officer, Dali Mpofu, singled out the predominance of commercial funding as “the single most important issue facing the corporation and all those who care for a true public service broadcaster which is accountable to the public and neither inherently susceptible to commercial nor state power”.  

Since 1994, a range of stakeholders including civil society organisations, media commentators, other broadcasters, and even the ruling party have echoed this sentiment. Some of the identified challenges associated with this dependence on commercial revenue include:

• The resultant over-emphasis on cheaper programmes (whether foreign programmes or less costly local formats) and/or genres which will attract more advertising (such as programmes targeting those with higher incomes) and audiences being regarded as consumers rather than citizens. As media commentator Anton Harber has highlighted, this plays out in a “daily tug of war between commercial and public service interests”. 

This tendency is in part countered by tight licence conditions (introduced by ICASA in 2005) and regulations such as those on South African content. These set out minimum percentages for local programming in different genres and stipulate the minimum number of hours each week that must be dedicated to particular types of programming (such as education, drama, children’s programmes and news and information). Licence conditions also set out specific requirements for prime time programming. 

However, as can be seen in ICASA’s reasons for decisions on a range of matters (including South African content quotas, sports rights and the SABC’s licence conditions), the effects any rules will have on the viability of the SABC are carefully considered before imposing requirements. The regulator cannot, given the current reality, ignore the impact any rulings could have on the SABC’s sustainability.

• The impact advertising has on the amount of actual time devoted to key programmes such as news and current affairs. Former Head of SABC news Snuki Zikalala has, for example, lamented that the actual amount of news aired in a half hour prime time bulletin is closer to 22 minutes than 30 – given the time taken up by advertising. This affects the number of stories which can be covered, and the depth of coverage of individual stories. SABC Chief Financial Officer Robin Nicholson, however, noted in an interview that this has been countered to some extent by an increase in the number of bulletins aired by the SABC. 

• The potential effect sponsorship can have on choice and content of programmes. Whilst ICASA regulations on advertising and sponsorship as well as SABC’s own editorial policies emphasise that the broadcaster must retain editorial control of sponsored programmes, there have been concerns raised regarding adherence to this.  The South African Communist Party (SACP), for example, in its submission on the draft editorial policies of the SABC in 2003, highlighted instances where it believed that the broadcaster’s editorial integrity had been compromised. One example given was a financial literacy programme sponsored by two financial institutions. The party complained that the programme did not deal broadly with financial issues facing the target audience but rather consisted of an “hour-long advertisement of a range of products and services” offered by the sponsors. More recently, media critic Brendan Seery has complained about a sponsor’s prominence in a television programme dealing with the environment. He wrote in an article in June 2008 that “Hybrid Living”, airing during prime time on one of the SABC channels and sponsored by Toyota, focused excessively on Toyota products and that “there is no distinction made between the genuine content and the ad plugs …”

• Given the SABC’s dominance in broadcasting, commercial operators have raised concerns that the emphasis on commercial income limits the number of other broadcasters that can be viable in South Africa, and therefore diversity. Broadcasting’s (radio and television) share of adspend according to AC Nielsen was 51 per cent of the total in 2009 SABC’s share of this is predictably high (accounting, for example, for roughly 75 per cent of all television adspend) given the number of channels and stations it airs compared to commercial and community operators who are bound by ownership restrictions. 

As media commentator and academic Anton Harber noted in a column: “If the SABC takes less of the advertising pot, this should provide new opportunities for other media and make the market more competitive”.

The head of commercial television channel e.tv, Marcel Golding, echoed the concerns raised by many private broadcasters when he spoke at a conference on fair competition:

The sheer size of the SABC provides it with a distinct uncompetitive advantage. With three (free-to-air) television channels and 21 radio stations, it is able to offer advertising packages which other broadcasters cannot match. It is also able to monopolise the audience by using its multiple channels to promote its services. It is the only broadcaster in the country which operates national commercial radio services which provides it with a sizeable advantage over its private sector competitors.

The contradictions resulting from the SABC’s legislative obligation to deliver on its public mandate whilst relying on commercial funding are further exacerbated by its licence conditions. As noted above, these do not distinguish between the number of minutes of advertising allowed on the public or commercial divisions (despite the White Paper on Broadcasting’s declaration that commercial funding for the public wing should not be the most dominant source of revenue). SABC’s public services are allowed the same amount of advertising as its commercial services – and the same number of minutes as private free–to-air channel e.tv.  

In fact, judging from SABC rate cards, advertising on public television service SABC 1 is substantially more expensive than on the commercial channel SABC 3 – reflecting the higher audience figures. The November 2009 rate cards for the channels show that a 30 second advertising slot during primetime news (7.30pm) on public channel SABC 1 would cost R71 000, whereas a slot during primetime news on commercial channel SABC 3 would cost R42 000. 

Whilst SABC does not provide a breakdown in its financial reports of the profitability of individual channels and stations, it would seem from the above that the public television channel SABC 1 is more profitable than the SABC’s commercial television channel. This further confuses the real distinction between the two divisions.

2.2 Licence fees

In terms of the Broadcasting Act (Section 27), all owners of a television set or any device capable of receiving a television signal (for example, an enabled mobile phone) have to have a television licence. No fee is payable for possession of a radio set. 

The licence is renewed annually in advance, and only one licence is needed per owner - regardless of the number of television sets they possess. Organisations and businesses, however, need to have a separate licence for each set. Dealers in television sets have to have a separate dealers’ licence. 

The fee is determined by the Minister of Communications in regulations – on application by the SABC (Section 40 of the Broadcasting Act). 

The SABC is responsible for collection of fees and ensuring compliance with the law. Sections 27(3) and (4) of the Act set out penalties the corporation can impose for failure to possess a valid television or dealer licence:

• If a person has owned the television for over three years without a television licence, they have to pay double the fee owed.

• If the transgression is for under three years, the person is liable for a fine of 10 per cent of the licence fee for every month of default.

• If a dealer sells a television set to a person who does not possess a television licence, the dealer has to pay a fine of between R3 000 to R10 000.

Section 27(8) of the Act stipulates that licence fees can only be used to subsidise the public wing of the SABC (both radio and television).

The regulations on television licence fees, promulgated by the Minister in 2004, empowered the SABC to more effectively collect licence fees by requiring that dealers cannot sell a television set without proof that the buyer has a valid licence. Dealers have to submit monthly and annual reports of television sets sold – including details of the names, addresses and ID numbers of purchasers. 

The regulations also set out the fees for different categories of user: 

• Domestic users, businesses and dealers have to pay R225 per annum.

• People who receive either a state pension or social grant for disability or as a war veteran and any person over the age of 70 have to pay R65 a year.

• Public schools are exempted from payment of the fee.

There is, however, no built-in inflation linked increase in these regulations or in the law, and since1994, the television licence fee has only been increased three times (in 1996, 1998 and 2004). The SABC regularly states in its annual reports that attempts to increase the licence fees have failed; however, no details are given of specific refusals by the Minister of any applications. In the 2007 Annual Report Chief Financial Officer Robin Nicholson states that should there not be regular increases of fees, “growth in net revenue will begin to decline and is likely even to decline as a percentage of revenue”, a prediction that was confirmed by the 2008 Annual Report.

The SABC has also complained about having to pay Value Added Tax (VAT) on television licence income and asked for this to be scrapped. CFO Robin Nicholson expanded on this in an interview for this research:

The VAT that is included in the licence fee amounts to roughly R110m. Should the licence fee be collected by a non profit entity (Section 21 company) established by the SABC, we would not have to pay the VAT and if licence fees remained the same this money would be added to the general SABC pot. 

Whilst the SABC has increased compliance with the legal requirement to possess a television licence, it has been a difficult and costly process. Under apartheid, in protest against state control of broadcasting, there was a mass boycott of paying licence fees to the SABC and it has been challenging to turn this culture of non-payment around. In addition, poverty (alongside other factors) results in defaults once people have bought the initial licence.

The SABC estimates that there are about 8.6 million television households in South Africa. According to the 2007 annual report, the number of licence holders stands at about 5.3 million (just under half of whom are fully compliant, with others only partially paid up or defaulting), and no figure are provided in the 2008 and 2009 annual reports. Whilst the SABC has not provided new estimates of piracy rates since its 2004 annual report (which stated that piracy stood at about 38 per cent), it seems from a rough calculation using the 2007 figures that about 33 per cent of television households do not possess a television licence at all (and are therefore not logged on SABC databases). Of the 62 per cent of households that are on the databases, just over 50 per cent are either defaulting or only partially paid up. 

Nicholson predicted that the percentage of defaulters will increase as South Africans face increasing financial challenges due to high inflation.  

Despite this, and even though increases in fees have not matched inflation, the SABC has, through ensuring compliance with the law, increased the contribution of licence fee revenue to overall revenue. Licence fee income accounted for 15 per cent of total revenue in 2004, 17 per cent in 2008 and 18 per cent in 2009.  The increase in television penetration due, among other things, to economic growth and the extension of electricity and television networks, has also contributed to this. 

This state of affairs will however be difficult to maintain as collection costs increase in line with inflation. In the 2008 annual report, Nicholson wrote that income from television licence fees for the period April 2007 - March 2008 dropped by one per cent, compared to an increase of one per cent in commercial revenue. Direct licence fee collection costs meanwhile grew, although the report did not say by how much.

In his interview for this research, Nicholson noted that, as of June 2008, it cost the SABC close to R110 out of the licence fee of R225 per year to collect the fee from defaulters. “This makes it still worthwhile for us as we get about R115 as well as the penalties applicable. If we do not receive an increase though in the licence fee, the costs of collection could outweigh the benefits.” 

The challenges related to collection of licence fees, among other things, have resulted in calls for a review of the licence fee as a mechanism for funding. 

• The IBA in its Triple Inquiry Report suggested that other mechanisms should also be looked at, such as a tax on purchase of cars with radios. It rejected the idea of a proposed tax on electricity because the number of different agencies responsible for collecting electricity fees (including the national electricity company Eskom and local municipalities) would make it difficult to manage and enforce. 

• The Freedom of Expression Institute (FXI) and Media Monitoring Africa (MMA, known as the Media Monitoring Project until 2008), among others, have proposed that a broadcasting tax should be considered which would be collected by the South African Revenue Service (SARS) together with income and company taxes. MMA suggested that the tax be set by SARS on recommendation by the broadcasting regulator.  It was argued that this would also ensure increased subsidisation by wealthier South Africans.

• The South African Communist Party (SACP) in its submission on the SABC’s editorial policy proposed that the fee be scrapped altogether:

Funding the SABC through the TV Licence Fees is inappropriate; the collection process is expensive, and is unlikely to improve given the rise in unemployment levels and low wages for the majority of employed workers. When the poor cannot afford to pay for these licences, they are criminalised. TV License Fees are also a form of regressive taxation which is not linked to employment status and income levels.

Chief Financial Officer Robin Nicholson says the SABC is well aware that there are people who cannot afford the fee.

We do not go after poor people given this but focus our efforts on those defaulters who are wealthy and can well afford the fee. As inflation is increasing in South Africa we know there will be more and more people who default on payment of their annual television licence due to poverty. In light of this, we are suggesting that government consider statistics on income and exempt people who cannot afford to pay the licence fee from payment. At the same time though, the government should pay over to the SABC a subsidy for low income earners so that we do not bear this cost. 

In August 2009, the Minister of Communications approved an 11 per cent television licence tariff increase from R225.00 to R250.00 annually as from 1 August 2009: only the third tariff increase in the past eleven years. According to the SABC, had it been allowed annual inflation-related tariff adjustments since 1998, the current R250.00 fee would now stand at R426.00.

2.3 Public funds

Direct allocations

Direct government allocations to the SABC account for an insignificant proportion of overall revenue (two per cent in the 2007/2008 financial year, excluding funding for the digital technology plan) – despite the broadcaster’s increased mandate due to transformation.

As US scholar Robert Horwitz notes in research on the SABC, a lack of funding from the fiscus has negatively affected the public broadcasting vision in South Africa since 1994:

… the dismal (SABC) budget situation inherited from the last white government doomed even the positive feature of this vision (of transformation).  With housing, education, and health care desperately in need of public monies, and with a sizeable portion of the budget precommitted to honoring state pensions as per the transition agreements, the government declined to allocate funds to an institution that had a proven source of funding.

Whilst government allocations are approved by Parliament as part of the Department of Communications allocation on a triannual (rather than annual) basis, as recommended by the then IBA in its Triple Inquiry Report, there appear to be no specific criteria for their determination. Thus, for example, it is difficult to analyse whether or not ongoing funds are allocated to specific projects (such as transmission costs and/or particular programme genres such as education) and on what basis levels of funding are decided upon. 

Government funding to the broadcaster has fluctuated. In her 1999/2000 budget the Minister of Communications noted that the subsidy of over R200 million would be reduced to just over R68 million in 2002/2003; however, since then the allocation has gone up again in recent years. 

A recommendation by the ANC in 2002, stipulating that the SABC must be predominantly funded by public revenue, also had no effect on the SABC’s budget. Joe Mjwara was the Deputy Director General responsible for broadcasting in the Department of Communications (DoC) at the time. He says the reluctance by Treasury to consider implementing the ANC resolution was due to a combination of factors:

Treasury was reluctant to provide a subsidy to an entity that they saw as self-sufficient. They would ask if there was a specific legal requirement to fund the SABC and did not understand the social needs that were being neglected due to the over-reliance on commercial funding. 

At the same time the SABC did not assist us, as their budget applications did not clearly define what aspects of their mandate public funds would contribute to, nor the implications on their mandate of limited public funding ... Despite suggestions made to, for example, restructure the programming line-up during prime time to ensure a better language reflection and include regional broadcasting splits, the SABC fought against these and advocated for the status quo …

It seemed that when the SABC spoke about public funding, it was just talking about an additional source of revenue to do the same commercialised broadcasting … It was difficult, given this, to argue with Treasury that the public broadcaster could not meet its legislative mandate without more funding. The SABC never, for example, showed how it would look and sound different with increased public funds … There has to be a public broadcasting model that is different to that expressed by how the SABC looks and sounds. 

Mjwara says that the White Paper on Broadcasting and the Broadcasting Act were aimed at addressing some of these issues, by ensuring that the SABC was given a clear legal mandate through its Charter and that compliance with this and licence conditions would be monitored by the broadcasting regulator. The Act was also aimed at involving the public both in drafting editorial policies and, via ICASA processes, in setting the licence conditions. The legislation, moreover, provided for greater financial accountability by requiring adherence to the Public Finance Management Act and company governance rules. “The legislation has gone some way towards ensuring this”, he says. “However it is time to review the policy and legislative framework alongside the funding model.”

At the ANC’s policy conference in December 2007, the party resolved that the percentage of public funding for the public broadcaster should be increased incrementally to a minimum of 60 per cent of revenue by 2010. Yet this resolution had little noticeable impact on the SABC’s budget. The 2009 budget of the Minister of Communications grants the SABC an additional R20 million in the 2009/2010 financial year (a 7 per cent increase). For the following years the vote envisages a further increase of R88m for the 2010/2011 financial year (29 per cent) and then a 35 percent drop in 2011/2012 (from R388 million to R252 million).

The budget vote estimated SABC’s expenditure for the 2010 financial year to be close to R5.66 billion and still predicts that the bulk of this will be covered by advertising revenue (R4.1 billion), with funding from the fiscus therefore only amounting to about 4.7 per cent of income. 

The current budget vote contains limited performance indicators for the SABC as required in terms of the Public Finance Management Act (PFMA) (see Table 7). The vote gives some detail on previous indicators, current indicators (2007/2008) and future aspirations. The focus though is on outputs in a limited number of areas rather than outcomes, and the measures chosen do not assist in assessing the impact of funding on fulfilment of the public mandate.

Table 7:  SABC performance indicators

Source: Department of Communications, Budget Vote 24

Other government funding

Government departments do fund the SABC outside of the public allocation through, for example, purchasing advertising and sponsoring programmes.

In terms of the Public Finance Management Act, the SABC has to report on income from related parties – including all national government departments and major public entities, but excluding provincial and local government. This income amounts to approximately R249 million for the 2008/2009 financial year (seven per cent of commercial revenue) – though it is not clear how much of this can be attributed to programme sponsorship and production and how much to advertising.   

Government is listed by Nielsen Media Research as one of the top ten advertisers in the media - ranking 5^th in 2008.. Whilst figures on how this is allocated differ, there are indications that radio stations broadcasting in official languages other than English are key beneficiaries of this spend. 

According to Nielsen (which measures total adspend) the print sector receives the largest proportion of these funds (47 per cent), presumably due to the large number of job vacancies advertised. Radio also attracts a significant portion (31 per cent) and 18 percent of the government advertising money is spent on television.

The Government Communication and Information System (GCIS), however, states that of the R206m of advertising that it bought on behalf of other government departments in the 2007/2008 financial year, 44.2 per cent accrued to radio, 22.8 per cent to print and 22.06 per cent to television. 

Individual government departments also sponsor specific programmes. GCIS has for example partnered with SABC to produce and air a 13-part television and radio series, Azishe Ke! Opportunity Knocks. According to the 2007 budget speech of the then Minister in the Presidency, Essop Pahad, the GCIS was responsible for the production of the programme which he said was aimed at expanding “access to information about economic opportunities provided by second economy initiatives and programmes”.

In addition, Ministers and top government officials apparently sponsor journalists to attend and cover international and national events that the SABC would otherwise not have the means to report on. Whilst this has not been officially confirmed, the researcher has been reliably informed of this practice – which potentially could skew news selection. 

2.4 Cross subsidisation

One of the key motives for the separation of the commercial and public channels and stations in the SABC, according to the White Paper, was to reduce the commercial influence on public programming. It was further envisaged that the commercial wing would cross-subsidise the public wing. 

This vision, however, does not seem to have worked in practice. 

It is not clear how the SABC decided which channels would be deemed commercial (though the radio stations selected were more obviously commercial, if not money making, even before the introduction of the Act) - those who were in decision-making positions in the SABC at the time have all left the broadcaster so there is limited institutional memory. As noted already, however, there is the curious fact that one of the two public channels, SABC 1, actually commands higher advertising rates than the commercial channel SABC 3, and it thus seems unlikely that there would have been any subsidisation by SABC 3 given this. 

Given the difficulties Good Hope FM faces, the SABC may be regretting their lobbying in 1996 in Parliament to keep the station – counter to the proposals by the then IBA.

Whilst SABC annual reports clearly state (as required by law) that the public funds have not been utilised to subsidise the commercial division, there is no indication in these documents if there has been any subsidisation by the commercial wing of the public services. 

Nicholson confirmed in an interview that there had not been a formal hand-over of funds from the commercial division to the public wing. He also pointed out that it is very difficult to separate the two units completely:

It is impractical. How for example do we allocate the shared overheads to the different divisions? If for example a commercial radio station is using the same transmitter in an area as some of the public service stations, how do we decide which of the stations pays what costs for that transmitter? In some ways it is just guess work.

According to statements by both the SABC and the Department of Communications during the process of developing the White Paper, an economic study had shown that the model of cross-subsidisation would reduce the public wing’s dependence on advertising revenue. However, this economic study was not made available to other stakeholders and it is therefore hard to assess the causes of the apparent failure of this model.

2.5 Other grant funding

SABC public programmes are funded by other organisations – including donor organisations and corporate social responsibility funds. Many of the programmes financed in this way have won international awards for excellence – providing evidence of the quality that could be aired with sufficient means.

Programmes which have been funded in this way over recent years include:

• Heartlines – This eight part television series focused on eight different generally shared moral/societal values through individual stories. It was produced in partnership with the SABC and primarily sponsored by First National Bank through its social investment fund. Additional funding was provided by the Nelson Mandela Foundation, the John Templeton Foundation, World Vision, the Open Society Foundation and the Tides Foundation. Episodes of the series have been selected to be screened at a range of international film festivals and have won both local and international awards.

• Soul City and Soul Buddyz – These radio and television edu-dramas focused on health and development and were produced by the Soul City Institute. The Institute is funded by a range of international and local donors including BP, the Department of Health, the European Union, Development Cooperation Ireland, Royal Netherlands Embassy, the United Kingdom’s Department for International Development, Pepfar, De Beers and the Department of Public Service and Administration.

• Tsha-Tsha – a drama focusing on HIV/AIDS produced for the SABC by the Centre for Aids, Development, Research and Evaluation. It was funded by USAID.

• Masupatsela Trailblazers – A documentary programme which focused on individuals and communities tackling HIV/AIDS creatively. The series, which was aired on radio and television, was sponsored by USAID, among others.

3. Expenditure

The table below highlights key expenditures (and percentage changes from previous years).

Table 8: Key expenditure budget lines

Source: SABC 2008, 2007 and 2006 Annual Reports

As can be seen from these figures, administrative costs (rather than programming costs) went up significantly in 2006/2007 – accounting for the overall increase of 19 per cent in expenditure against a revenue increase of only 8 per cent. The figure decreased by 2008, only to balloon again by 2009. The SABC has attributed the spending increases to investment in technology and increased marketing costs due to the repositioning of its channels in line with new licence conditions. Media analysts, however, have raised concerns that this might indicate a new general trend towards increased spending. It also needs to be pointed out that the general costs for the year 2006/2007 included a close to 200 per cent increase in expenditure on consulting (up from R44 million in 2005/2006 to R132 million), although this line item decreased by 2008. Expenditure on professional and consulting fees was included as a separate line item in the 2008/2009 Annual Report, which showed that the SABC had spent 38.2 per cent more on these services than in the previous year.

The SABC CFO Robin Nicholson concurred in an interview that the SABC needs to focus on increasing its efficiencies and that costs could be brought down and overheads reduced: “In addition we could for example much more effectively exploit those rights that we own and increase the contribution they make to the revenue.” 

It is important to emphasise, however, that the spending increases are not only on administration. The reported expenditure on South African content also went up – as  did expenditure on news. The 2007 Annual Report noted that spend on foreign content for that year accounted for 17 per cent of total content spend (compared to 20 per cent in 2006 and 30 per cent in 2005). According to the 2007/2008 Annual Report, the 22 per cent increase in amortisation and impairment of programming, film, sports rights and broadcast costs was driven by the extended mandate, in particular news and local programming. According to the 2008/2009 Annual Report, foreign programming accounted for as much as 46 per cent of total content expenditure, which means that the SABC spent considerably less on local content in that financial year.

Reporting

Whilst the financial statements meet financial reporting requirements, neither they nor the annual reports provide clear information on details of spending that would assist the public to understand exactly how public funds are used – and thus help to make the SABC more accountable to citizens. They do not, for example, outline the percentages spent on administration versus programmes, or comparative spending on programming in the different languages (a fair measure of equitable treatment). They further do not break down spending per station or channel – which would be important given perceptions expressed by amongst others the FXI that administration and head office are consuming a disproportionate percentage of funds.

In fact, the extent of analysis of the financial information provided in the CFO’s report has decreased markedly over the past few years. In 2004, for example, the annual report provided detailed segmental analysis indicating, among other things, the breakdown between revenue and expenditure between the public and commercial services and between television and radio.  Such information was not included in the 2008 report. The 2006 annual report indicated how licence fee revenue was allocated (including how much was expended to support overheads and the exact amounts allocated to the public radio stations and the two SABC public television channels). This breakdown too was not contained in the 2008 reports. However, the 2009 Annual Report does include revenue and expenditure breakdowns for the public services and public commercial services.

An analysis of the figures provided seems to indicate that administration costs are increasing as a percentage of total expenditure, whilst the percentage allocated to programming costs is decreasing.

Table 9: Percentage of expenditure per budget line

Source: Own calculation

Table 10 shows that the percentage of consolidated administration costs has grown by close to ten per cent from 2003, and that since the 2008/2009 financial year (2008 in the table) the percentage of spend on such operational costs has been exceeding that on programme costs by between 6-8 per cent.  In 2003, by contrast, the percentage spent on programme and broadcast costs exceeded that of administration. 

Table 10: Percentage of expenditure on consolidated administrative costs versus programme costs

Source: Own analysis

Since the Public Finance Management Act has been in force at the SABC, the broadcaster has been compelled to detail costs related to irregular, fruitless and wasteful expenditure. However, no information at all is given on the circumstances in which fruitless expenditure was incurred, and irregular expenditure and criminal cases are only briefly referred to. Overall, the losses accrued through such irregularities amounted to R65.1m in 2006/2007. Most of these were losses related to fruitless expenditure (defined as expenditure made in vain that could have been avoided had reasonable care been exercised) - a total of R54m. Although a significant amount, the only information provided is that disciplinary action is being taken in “cases 6 and 7” and the minutes of the Parliamentary Monitoring Group (PMG) give no indication that Parliament scrutinised these amounts or asked for further clarification. There is also no word about progress in cases covered in the 2006 annual report, which stated that outstanding recoveries amounted to about R6.2m. According to the 2008 annual report, the SABC ran up R40.6m in “fruitless and wasteful expenditure”. There is evidence in the 2009 Annual Report of some success in recovering such expenditure.

Given the absence of detailed information, it is impossible to analyse what is classified as fruitless expenditure. Robin Nicholson (SABC CFO) said that costs incurred, for example, in putting together a bid for a subscription licence which was withdrawn on the eve of the hearings into applications in 2007, would not be regarded as fruitless expenditure as they “were not wasteful”. 

This is debatable. The SABC, according to newspaper reports, stated that the reason for its withdrawal was that it wanted rather to be a content supplier to those awarded licences. Such a decision makes business and strategic sense for a public broadcaster and it seems that this conclusion could have been reached before submitting the application and incurring the costs of finalising the application. These costs, according to unconfirmed sources, included consulting fees which ran into millions.

Such apparent misjudgements are particularly concerning given recent expenditure hikes at the SABC as highlighted above. 

The previous board has also been accused of wasting money in its extended and unsuccessful legal battle against the former SABC CEO Dali Mpofu. The board lost with costs a court challenge against its suspension of the CEO in May 2008 after the judge found that there had been procedural irregularities. It also lost an application to challenge the decision. Newspapers have estimated the costs incurred in the process as R5m – not counting the payout that the interim board granted to Mpofu when he finally left the broadcaster in mid 2009.  

Joe Mjwara, previous head of broadcasting in the Department of Communications, said in an interview that one of the difficulties with the SABC is its sense of a lack of accountability on spending:

The SABC has tended to view the funds it collects through advertising and sponsorship as its money to do what it wants with. It does not recognise that it is accountable for the commercial revenue as this is collected through management of a public asset.

4. Conclusion and recommendations

The resolution of the public broadcasting funding conundrum is perhaps the core public broadcasting issue that needs to be resolved in South Africa. 

As reflected above, funding issues have been at the heart of tussles over the role the public broadcaster should play in the country since the process of transformation of the SABC commenced in 1993. Various attempts and proposals to resolve the funding dilemma (by the regulator, government and the ruling party, among others) have not been successful in ensuring that the SABC is appropriately and adequately funded to meet its legislative mandate “in a manner that protects (it) from arbitrary interference” as required by Article 6 of the Declaration of Principles on Freedom of Expression of the African Commission on Human and Peoples’ Rights. Instead the over-reliance on commercial income has meant that the broadcaster is forced to consider audience ratings over public need.

There are no quick fixes, however – and perhaps the failure of existing mechanisms can at least partly be ascribed to the apparent absence of a thorough and holistic economic  analysis of the SABC’s needs and an in-depth review of the impact of different funding models.

The issues surrounding funding and autonomy are complex. It would be simplistic, for example, to reduce them to the maxim “s/he who pays the piper calls the tune”.  The problems highlighted in this chapter cannot be solved just by insulating the SABC from its sources of funding. The SABC has often been seen to be ‘kow-towing’ to the ruling party (or particular cliques or individuals within the ANC) - despite government’s paltry contributions to the broadcaster.

Given all of this, it would be rash, based only on this research, to propose final solutions on the best funding mechanisms for public broadcasting in South Africa. Rather than recommend yet another set of seemingly ideal but untested models, it is recommended that an in-depth economic scoping exercise be conducted, including a review of the pros and cons of different models in the South African context. Such an evaluation should ensure the participation of all stakeholders in developing the best mechanisms for funding of public broadcasting in this country. 

It will also be critical during this exercise to determine the actual needs of the SABC in relation to its mandate – and to ensure transparent accounting in order to build the necessary trust amongst the public, government and advertisers essential to securing its income. The predicted reduction in available advertising spend and the potential increase in the number of television licence fee defaulters given an economic downturn in the country also need to be noted.  

Outlined below are some considerations that should guide this evaluation. 

• The development of any model should be underpinned by the following principles:

o The need to protect the SABC from either perceptions or the reality of political or commercial interference or manipulation through funding.

o The imperative of enabling the public broadcaster to plan with certainty, whilst moderating demand-driven pressures for funding by the SABC 

o The importance of establishing a durable and justifiable level of funding, taking into account new contexts such as the migration to digital broadcasting.

o The importance of maximising transparency – so that the SABC itself, other broadcasters and the public are aware of the motives for funding allocated by the state and through any fees/taxes paid by the public.

The research should be undertaken as part of a total review of all government and regulatory policies – including the Triple Inquiry Report, the White Paper on Broadcasting and the Broadcasting Act. The economic analysis of funding should be fed into any new policies and/or legislation to ensure that the mandate of the broadcaster is not only relevant but also viable both immediately and in a new digital environment. The overall review should include:

o Another look at proposals made in the Triple Inquiry Report to streamline the SABC and thus increase cost effectiveness. New opportunities arising from digital migration should be taken into account, such as the potential development of additional channels and mechanisms to assist the SABC to meet its mandate on, for example, delivery of programming in all official languages.

o A re-evaluation of the effectiveness of the separation of the SABC into public and public commercial arms. As noted above, a primary motivation for this division was to provide for cross-subsidisation of public broadcasting and thus reduce its reliance on commercial income. This, however, has not been effective. 

Such evaluation must also reconsider the legal status of the SABC as, again, the original motivation for corporatisation was based on commercialising certain aspects of the broadcaster.

o A review of all relevant licence conditions and regulations in light of any new policy and legislative requirements. This should include an evaluation of programming requirements and of advertising limitations.

• A thorough analysis needs to be done of the actual funding needs of the SABC – given its mandate. Financial costs must be linked to public interest value and traceable to enhanced delivery of services. This could include a study into how other countries benchmark public broadcasting funding, taking into consideration not only inflation, but also possible new imperatives.

• A workable mechanism for evaluating and determining ongoing levels of funding for the broadcaster (and, for example, appropriate licence fees or other levies) and for the distribution of such funds needs to be devised. This should include an analysis of the pros and cons of both existing and alternative mechanisms in relation to the principles outlined above. This review could consider a number of options:

o The strengths, weaknesses and appropriateness of the existing mechanism of determining funding levels via the Board, Minister, Treasury and finally Parliament. The different roles of each structure and their capacity to effectively evaluate proposed budgets and spending should be analysed. Note must be taken of the fact that concerns regarding the capacity of parliamentarians to properly scrutinise and consider funding needs of institutions were highlighted as one of the shortcomings of the parliamentary allocation system by the ad hoc committee established to review oversight by the legislature of constitutional bodies.

o The pros and cons of adapting the present Parliamentary allocation system in order to strengthen the legislature’s role in determining appropriate levels of funding. The SABC budget and proposed allocation from government could, for example, be considered separately from that of any particular government department , as recommended by the ad hoc committee, and be tabled as part of the Speaker’s budget. 

Parliament could also set funding levels for a set period (say five years) at the same time as determining a charter or remit for the broadcaster for that period. 

In any case the capacity of Parliament to adequately determine appropriate funding levels should be assessed – alongside the potential in South Africa for the ruling party to influence funding amounts given its majority in the legislature. 

o The advantages and disadvantages of establishing an independent public broadcasting agency/fund managed by an autonomous board responsible for assessing appropriate public funding (including government allocations and licence fees) for the SABC. The establishment of such an intermediary body has been proposed by the Southern African Broadcasting Association (SABA) in its policy document on public broadcasting in the region entitled On the move.  Such a body could either set or make binding recommendations on funding allocations for the SABC to Parliament – thus ensuring an arms length funding relationship between government and the broadcaster. However, possible limitations associated with establishing another bureaucracy and the potential difficulties in attracting sufficient independent expertise on funding for broadcasters to such an entity would have to be carefully considered. South Africa already has examples of funding structures (such as the Universal Service and Access Agency) whose effectiveness is viewed with scepticism due to such shortcomings.

o The strengths and weaknesses of giving the responsibility of setting public funding amounts (government allocations and licence fees) to an existing agency such as the Independent Communications Authority of South Africa (ICASA). It should be noted, however, that ICASA is viewed by some analysts as already overburdened and weak. The regulator could also be seen by the public broadcaster as competing with it for public funds, and questions about the appropriateness of regulating the SABC and the broadcasting sector as a whole whilst determining the funding levels of one licensee should be weighed up.

o The value/public benefit of supporting only the SABC through licence fee revenue over establishing a discretionary fund available on application to any broadcaster promoting public programming. Whilst this might not seem feasible, given the need to, for example, support the SABC’s drive for universal access, it is important to consider in order to again focus on why public funding is essential.  

o Combinations of the above (and other mechanisms) could also be considered. 

• Alongside discussion on mechanisms, it is also important to review the means of funding (i.e. licence fees, fiscal funding, commercial revenue, etc.) and the ratios of different revenue streams. Taking costs into account, a new funding model should be developed after thorough review of the effectiveness of existing and alternative sources of revenue:

o Ensuring inflation-linked increases of relevant revenue streams in line with purchasing power parity is critical. This should be built into any policy and law/regulation.

o The licence fee model should be evaluated and other possible options explored (in consideration of effectiveness and efficiency, collection costs and fairness). As noted above, other options include imposing a broadcasting tax collected as part of income tax, or via a tax on motor vehicles or as a levy on electricity. Another international model is a levy on audio-visual software and hardware which is distributed to the public broadcaster (Turkey). As all taxes are handed over to Treasury, a means of ring-fencing these funds would have to be developed should such options be viable. 

o Should the current licence fee model be considered the most appropriate means of funding, suggestions from the SABC about establishing a Section 21 company to remove obligatory VAT payments on licence fees should be considered. Proposals on broadening the scope of who qualifies for an exemption/concession of fees should also be examined – alongside the recommendations on a government subsidy to cover these shortfalls.

o The value and impact of a tax/levy on other broadcasters or on advertising income in the media should be considered. This would need to take into account the effect of such a levy on the viability of broadcasting/media industry as a whole.  

The SABC has reportedly included this as a possible new source of revenue in an as yet untabled proposal to Parliament. Such a tax, however, would only be viable if SABC’s dominance of adspend was reduced through strict limitations on advertising revenue at the Corporation. Other levies on broadcasters (including licence fees and contributions to the Universal Service Fund) would also have to be considered – and if necessary exemptions/reductions on these tariffs allowed. 

In informal discussions during this research, several commercial broadcasters indicated that such an option would be worth exploring, as limiting the SABC’s share of adspend would potentially benefit them. Note that in some countries (such as Canada) spectrum fees paid by other operators are used as a source of funding for the public broadcaster.

o The extent and nature of funding from the fiscus should be evaluated. This should not, however, be a simplistic review of ratios (as proposed by the ANC), but be linked, for example, to public value deliverables and/or shortfalls in revenue:

♣ The feasibility of earmarking specific budget lines for funding by the fiscus (such as signal distribution and infrastructure, including preparation for digitalisation) should be considered. This would remove any perceptions of manipulation of funds by government. Specific programming, such as educational content, might also be considered for support. 

♣ All existing funding and support from government (including advertising, sponsorship and in kind support) should be calculated so as to determine the precise current extent of the government subsidy. The possibility of including all such amounts in the fiscal allocation in order to promote transparency should be considered. This could reduce the potential for perceptions or accusations of interference in editorial independence by government.

♣ In her interview for this research, the then chairperson of the Board suggested that it might be worthwhile to explore spreading the fiscal allocation across the different government departments, rather than locating it in one unit. Thus, for example, each department could contribute a percentage of their budget towards realising the public mandate. Such options should be further explored.

o Concessions could also be considered such as an exemption from corporate tax or VAT (as proposed by the SABC).

• Finally, it is critical that mechanisms to ensure transparency are built in to any new model. Awareness of what criteria are used to determine funding levels and how the impact of this is measured, alongside specific mechanisms to promote accountability by the broadcaster, will ensure legitimacy of and support for any funding mechanisms. In line with this, specific proposals on how to ensure awareness of the funding process and on how the SABC should report on expenditure and progress against goals should be incorporated into any new policy/law. These could include the requirement, for example, to report on the percentages of funds allocated to programming for specific language groups – in order to enhance understanding of the value of public funding.