SABC Financial Crisis: Can it avoid Nokia's fate?

THE SA Broadcasting Corporation (SABC) is teetering on the brink of financial collapse, crippled by a 50-year-old funding model that is no longer fit for purpose.

This stark revelation emerged during a recent briefing to the Select Committee on Economic Development and Trade, where the public broadcaster laid bare its operational challenges and the uphill battle to implement its turnaround strategy.

The broadcaster’s struggle drew comparisons to the downfall of Nokia, the once-dominant cellphone giant that failed to adapt to a rapidly changing technological landscape. Nokia’s inability to innovate resulted in its decline and eventual acquisition by Microsoft in 2014.

The ANC’s Mpho Modise warned that without intervention, the SABC could face the same fate as Nokia, which failed to adapt to a changing world. “If nothing is done, the SABC will fold,” Modise said. “We need a dedicated budget and monthly oversight to ensure its survival.”

The SABC, which self-funds nearly 50% of its public mandate costs, is struggling to invest in critical areas such as content acquisition, infrastructure maintenance, and digital transformation. The national broadcaster’s reliance on an ancient funding model, designed in 1975, has rendered it unable to compete in a fast-evolving media landscape dominated by streaming giants such as Netflix and YouTube, among others.

“The funding model was designed for a world that no longer exists,” SABC deputy chairperson Nomvuyiso Batyi said during the briefing. “It is no longer relevant in the current context, but it cannot be changed without legislative amendments.”

The SABC’s financial troubles are compounded by the analogue switch-off, which has led to a significant loss of audiences and advertising revenue. With compliance levels for TV licence fees plummeting to a dismal 14%, the broadcaster is caught in a vicious cycle of underfunding and declining competitiveness.

“We are not seeking a bailout,” SABC group chief executive officer Nomsa Chabeli said. “We are seeking regulatory and legislative changes, loan guarantees, and increased government support to ensure our sustainability.”

Despite these challenges, the SABC has managed to achieve some milestones, including an unqualified audit opinion for 2024 and the filling of critical executive vacancies. However, these achievements are overshadowed by the broadcaster’s inability to attract advertisers, its ageing infrastructure, and its crawling pace of digital transformation. “The SABC is being held back by a lack of compelling content, slow progress on monetising SABC Plus, and the inability to borrow funds for capital expenditure,” Chabeli admitted.

The committee expressed serious concerns about the state-owned broadcaster’s relationship with the National Treasury, which has been reluctant to provide financial guarantees. The MK Party’s Seeng Mokoena questioned why the funding model had remained unchanged for five decades, despite repeated attempts to reform it. “There seems to be a lack of cohesion between the SABC and National Treasury,” she said. “Why has the funding model stayed the same for 50 years? What has been done to address this?”

The DA’s Nicolaas Pienaar raised concerns about the broadcaster’s ability to compete in a free market economy. “The SABC will always struggle to compete within the media industry,” he said. “But it plays a crucial role in providing access to information and entertainment for millions of South Africans who cannot afford subscriptions.”

The SABC’s reliance on advertising revenue, which accounts for more than 80% of its income, has also come under scrutiny. With only 4% of advertising revenue coming from the public sector, the broadcaster is heavily dependent on private advertisers, who are steadily shifting their budgets to digital platforms. “The SABC is competing with global players who do not have a public interest mandate or the associated cost structure,” Chabeli said. “We need a level playing field to survive.”

The analogue switch-off, set for March 30, has added to the broadcaster’s woes. The loss of more than 1.4 million viewers due to the switch-off is expected to further erode advertising revenue, worsening the dire financial situation. “The analogue switch-off has created uncertainty, resulting in the loss of audiences and advertisers,” Chabeli said. “We urgently need investment to mitigate this impact.”

The SABC’s plea for regulatory and legislative changes was met with mixed reactions from the committee. While some members acknowledged the broadcaster’s efforts to stabilise its operations, others criticised its failure to meet local content targets and its over-reliance on partnerships with international broadcasters such as the BBC. “Why is the SABC limiting itself by working mainly with the BBC?” the ANC’s Solomon Patrick Mabilo asked. “There are global issues, like the crisis in the Middle East, that are not being covered adequately.”

The SABC’s struggle to collect TV licence fees has also been a point of contention. With compliance levels at an all-time low, the broadcaster is exploring innovative ways to boost collections, including partnering with collection agencies and limiting the number of TV sets an individual can own. “The culture of non-payment for TV licences is a major challenge,” Chabeli said. “We need to think differently about the licensing regime and find new ways to enforce compliance.”

The ball is now in the court of legislators and the government to decide whether the SABC, a cornerstone of South Africa’s media landscape, will be allowed to crumble or given the support it needs to thrive in the digital age.