Call for SABC to be placed under business rescue

2018-01-08 14:43 - Carin Smith
Post a comment 0


Cape Town - It is questionable why the board of the SABC has not placed the state-owned broadcaster under voluntary business rescue yet, Advocate Paul Hoffman SC, director of Accountability Now, said on Monday.

The Companies Act permits a board to do this if it has reasonable grounds to believe a company is "financially distressed".

The aim of Accountability Now - a non-profit organisation with emeritus archbishop Desmond Tutu as patron -  is to ensure that the rule of law is enforced by holding governments, parastatals and the private sector to account.

Fin24 reported last year that the SABC posted a R977m loss after tax for the 2016/17 financial year.

In an open letter addressed to SABC chair Bongumusa Makhathini, Hoffman refers to a report on the SABC delivered by the auditor general to Parliament last year. In the report, the auditor general states that the SABC's latest annual financial statements show it was already commercially insolvent at the end of March 2017, as it was not able to pay its debts when they were due. This was despite assets exceeding liabilities.

For this reason, Accountability Now concludes that the SABC's March 2017 annual financial statements show it is "financially distressed" in terms of the Companies Act.

The organisation also sent copies of its open letter to Treasury, the minister of finance and the minister of communications.

The auditor general's report points out that, after the year end, the SABC asked National Treasury for a government guarantee to enable it to borrow money to settle outstanding obligations. This process had not yet been finalised at the time of the report.

The auditor general could not find audit evidence of the SABC’s viability in the foreseeable future. The SABC's directors, in turn, were of the opinion that internal accounting controls were inadequate and the annual financial statements, therefore, materially misstated its position.

Accountability Now wants the SABC board to provide a detailed written reply on whether it believes the state-owned broadcaster could be saved by business rescue. In its view, the SABC cannot "on any reasonable or rational basis" be regarded as being "too big to fail".

Therefore, the organisation wants any further state support to be based only on business principles and in compliance with the rule of law.

It believes using funds from taxpayers to help the SABC will ultimately pay some, but not necessarily all, of its creditors, while placing additional pressure on scarce national financial resources.

Hoffman claims if the SABC continues to trade (provide its services) under the present circumstances, it would be contrary to the Companies Act as it would be trading either recklessly or in a grossly negligent manner.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER