The stand-off between the South African Broadcasting Corporation and film and TV producers has taken a new turn, with an open letter about the issue being sent to the Department of Communications.

Producers have complained that the SABC owes them as much as R40 million for work commissioned by the broadcaster. The SABC has acknowledged that it owes producers money, but has disputed the amount claimed.

The letter to the department is from the Television Industry Emergency Coalition (TVIEC), which comprises representatives from across the film industry.

The TVIEC met with top management at the SABC earlier this week, and also held meetings with the department.

The letter was released after those meetings.

Full text of the letter

Open Letter to DOC

20 May 2009

Att: Harry Mathabathe

Deputy Director General

Finance, SOE's and SMME's

Department of Communication

Dear Harry

Thank you for meeting yesterday morning. It is good to have made contact and we are encouraged to hear that the SABC crisis is the number one priority for the DoC and that you share our sense of urgency regards the challenges facing the Independent Television industry in this regard

To Summarize Our Discussion

The TVIEC (Television Industry Emergency Coalition) is driven by the IPO (Independent Producers Organization), SASFED (South African Screen Federation), BFN (Black Filmmakers Network), TPA (The Producers Alliance), non-aligned producers and includes equipment suppliers and facilities representing 90% of the local content on air as well as the CWU (Creative Workers Union).

We have approached the DoC to intervene in the unfolding crisis at the SABC.

Essentially there are 2 areas of crisis:

1) The immediate financial crisis which has seen numerous suppliers unpaid for months on end with vague promises of “we are working on it” yet no payments or at best unpredictable incomplete payments. This has led to companies retrenching and many teetering on closing down.

2) The ongoing management crisis which has led to a breakdown in relationship between the Independent Production sector and the SABC across all areas - The Content Hub, Legal and Finance. (Increased bureaucracy and the centralization of power and heavy handed management at the content hub have resulted in distrust and deep frustration for all the content providers delivering programming to the SABC).

A brief history of events in the past 8 weeks

On 26 March 2009, concerned by SABC payments slowing down and increasing rumours of SABC financial problems, our industry formed the TVIEC coalition and requested a meeting with the SABC exec to understand the scale of the problem, offer assistance and most importantly risk manage as we employ thousands of freelance people who inadvertently work for the SABC.

On the 12th April the SABC Exec (The Acting CEO, the COO, the Head of Content Hub, the Chairperson of the board and many others excluding the CFO) met with the TVIEC to respond to our requests for urgent clarification on their ability to meet contractual financial commitments to our industry who are in daily production to keep content on air. We clearly articulated it preferential to know immediately of any payment defaults so we could risk manage and try and weather the ‘storm”. The SABC Exec (with a PowerPoint) assured us they could and would meet their current financial obligations as well as for all the tenders that were already publicized. The also committed to work with us as partners on resolving the payments that were already outstanding- both parties agreed to work swiftly to ascertain what monies were indeed owed and to whom.

On the 17th of April a joint Ops Committee, comprising SABC and the TVIEC met to consolidate the findings. At this meeting the TVIEC, shared with the SABC a list (compiled in 4 days and thus not encompassing the entire industry as yet.) detailing initial findings on historical debt owed to the independent producing community. The SABC failed to produce their own list at this meeting despite their assurances in the meeting of 12 April, that they had this information on hand.

In the meeting of the 17th, the following timelines were agreed:

1. SABC Content Hub Finance would take one week to consolidate and verify amounts contained in the TVIEC's list i.e. week starting 20 April 2009 with a view to completing by 24 April 2009.

2. SABC Content Hub Finance would then present to SABC treasury (week starting 27 April 2009). In our discussion we agreed that, including revert from SABC treasury, it was reasonable to assume that this part of the process would be concluded by 01 May 2009.

3. The joint Ops Committee aimed to roll out the payment plan in the week starting 04 May 2009

4. The joint Ops Committee aimed to have all payments contained in the TVIEC's list settled by Friday the 19th of June 2009.

Points 1,2 and 3 have not been met by the SABC and this leaves us with little faith that point 4 will be met. Despite numerous requests from the TVIEC for an update or feedback, the SABC has not provided any clarity and has reneged on the plan agreed by the joint Ops committee. The problem instead escalated as on the 30th April with no warning numerous service providers found themselves again unpaid (some carrying production costs of millions) and thus increasing the debt originally estimated.

This non payment and lack of timely communication has led to extreme uncertainty and resulted in companies retrenching staff and teetering on the edge of closing down.

Since then we have tried to obtain feedback from the COO, CFO and the Content Hub as to when these defaulted payments will be met - again with no success.

This week on the 18th of May we again requested an urgent meeting to try and repair the breakdown of trust and seek a constructive way forward to resolve the issue. Every day is critical to a small company carrying anything between R 100 000 and R3 million debt, not to mention the complete paralyses for small and medium sized enterprises to plan. Many companies are contracted for large projects that they cannot simply abandon without incurring substantial costs and thus debt. A production company's main costs are the human capital required to create content - actors, writers, technicians, directors, etc.

We realize that these are hard economic times and that SABC are facing a “leadership predicament” and so we sought to collaborate with the SABC to avoid unnecessary insolvencies, job-losses and to avert any compromise in terms of local programming. However they have time and again proved to say one thing and do another. We can no longer place any trust in the current administration, nor can we accept that the current crisis is a result of the global economic crisis. In fact, recent reports in the media indicate that ad spend has increased over the past few months and thus we can only deduce that the current cashflow crisis is self inflicted.

Our Request

In light of the lack of response from the SABC Executive, the Coalition is requesting that the DoC intervene. First to alleviate the immediate crisis and second to resolve the leadership crisis and deep rooted problems that beset the SABC.

To alleviate the immediate crisis we ask for DoC to by facilitate an urgent meeting between the SABC Executive - including the acting CEO, COO and CFO, the DoC and the TVIEC (Television Industry Emergency Coalition).

The outcomes of this meeting we hope are as follows:

1. A mutually agreed payment schedule which sees all outstanding debt resolved no later than 30 June 2009, with a commitment that there will be no further/new contractually legitimate invoices being defaulted on and new debt incurred.

2. The on-going monitoring of this process to ensure that the schedule is adhered to.

We wish to stress that behind each scene we see on air, there is a string of people and salaries/costs that need to be paid. Thus any costs related to the product (what is on air) need to be prioritised over administrative costs. Revenue is derived from what is on air.

TVIEC Input and Active Engagement in the SABC Turn-Around Strategy (including Cost-Cutting Recommendations)

It is the TVIEC's view that urgent interim leadership needs to be brought in to the SABC to manage the SABC through this crisis and ensure that there is a moratorium on unnecessary spending. This interim management should remain until the new CEO and executive are in place. The financial crisis thrust upon the independent content providers is the visible crack in what is a much deeper and severe crisis within the SABC. We do not believe the SABC turn around strategy can be driven by the current “acting” management despite their willingness to do so and thus either a turn around team needs to be deployed or an interim management team appointed.

Further to our discussion this morning we would like again to state that it is vital that the independent content suppliers and producing community make input with regard to the SABC turnaround strategy, if we are to work within the proposed solutions we need to agree that they are possible and do not further thrust our industry into turmoil. Already our industry finds itself extremely vulnerable due to enforced price fixing at the SABC and ever increasing reductions in budgets which has left the industry with budgets lower than they were 6/7 years ago. The important matter of content creators not owning their rights to intellectual property which we feel strongly is in contradiction to the spirit of our constitution and prevents our sector from growth as well as heavy handed editorial policies and oppressive management must be changed to support the growth and sustainability of both the SABC and production sector. In the past, broadcast policy and management decisions have been made largely without meaningful industry consultation; this has brought our sector to its knees and cannot be allowed to continue.

The survival of our companies, our artists, creators and industry is at stake.

The TVIEC will caucus with our members to come up with a list of candidates we believe may bring the expertise and energy needed to drive an interim leadership position towards a turn around strategy. We will make such recommendation to the DoC directly.

Considerations regarding cost cutting within the SABC.

We urge caution in allowing the SABC to present savings/cost cutting in places that seem easy in a spread-sheet but may have severe consequences. Recently the Content Hub indicated to individuals in the industry that it would be seeking to make substantial cost cuts in already meager production budgets. This would be disastrous for our sector as already companies are struggling to work within the confines that have not taken real inflation into account for years and have been subject to harsh cuts year on year.

When small companies are on the verge of bankruptcy they are extremely vulnerable to further exploitation and this can only lead to long term collapse. (By way of example: a daily soap has an approx annual production cost of R 50 million with a fixed (and in our view unsustainable) SABC allocation of 6% - R 3 million - for the production fee. This production fee needs to cover the company's entire infrastructural costs for 12 months including paying its management. This fee is less than the CFO of the SABC takes as a bonus in a year as one individual, yet a company that produces major revenue driving content is expected to runs its infrastructure and management for the same amount. Now apply this thinking to smaller productions such as educational programming, documentary, seasonal drama, etc where the budgets are a fraction of a ‘soapie' and it is easy to see that this is exploitative and unsustainable)

Our industry cannot be expected to further bear the costs of the poor and excessive management decisions of the SABC Executive.

Areas we propose be considered for the SABC to make immediate or short term cost savings:

It is difficult for the TVIEC or any other outside organisations to be able to identify how costs could be cut without being privy to any recent financial statements (which the DoC receives at least quarterly from the SABC). However we have endeavoured to highlight some areas we believe can be easily examined and implemented.

• A moratorium on all non essential consultancies, especially management consultancies - excluding as required directly for the turn around strategy

• Stop all SABC parties and functions that are not essential

• A moratorium on all travel that is not critical - travel economy class, accommodation limited to four star hotels - no suites. This includes groups of people traveling where only one or two are needed and then only for essential business.

• Pause any new imaging or new advertising spend on SABC or Channel branding

• Halt all renovation work on offices or of studios and internal facilities that are not core to 2010 preparations..

• Close down all international bureaus and SABC international

• Close down asset warehouses - scrap asset registry system which is cumbersome, costly and preventing productions from being wrapped up.

• Simplify final cost reporting to make processes swifter and not waste unnecessary manpower and expenses on unnecessary auditing (creating distorted view of debt)

• Pay acute attention to scheduling - advertise correct and detailed schedules to the public and advertisers to prevent audience ratings decline and having to re pay tens of millions to advertisers.

• Freeze bonuses and perks.

• Freeze any new deals with international programming that are non essential

• Review the amount of managers and bloated staff and infrastructure.

• Review the Content Hub

• Freeze all irregular expenditure.

Any changes proposed at SABC needs to ensure it meets its mandate rather than further contributes towards ongoing apparently excessive management and administration costs.

SABC needs to address weaknesses that itself has previously identified, in for example its advertising and sponsorship units (not only in recent statements on its "cash flow crisis" but also noted in most recent annual reports as under performing units).

It appears from the outside (but again this is based on media reports as little other real information is forthcoming from the broadcaster itself) that they have been unable to produce a revised budget showing how they are addressing what they have termed a reduction in predicted income. This points to a severe lack of capacity in leadership and management - and therefore it is critical to bring in an interim leadership to sort it out. Such interim leadership does not need to start from scratch in identifying how to turn the organisation around - there have been endless suggestions made in a range of different consultancy reports commissioned by both the SABC itself and the DoC.

It is critical that there is extremely good financial capacity in such interim leadership to both identify wasteful and fraudulent expenditure. This must be linked to broadcasting skills so that essential broadcasting costs can be identified - and must include a person/people with a passion for public broadcasting and understanding of what this will require. If necessary SABC needs to draw on expertise from international broadcasters to assist in quickly developing a viable plan for the SABC for at least the interim rather than getting in "management consultants" who do not really understand public broadcasting.

In Closing

The president has called for a new dawn, we hope this applies to the SABC.

Broadcasting and content creation is a sector of the economy that has great potential to grow, the Dept of Trade and Industry has recognised this. We need a proper development strategy for this industry; this is a huge job creation sector. We are ready to work with the Department of Communications and Government to make this a reality,

We respectfully seek your continued support to our sector and in escalating this matter with the relevant stakeholders.

We thank you for your commitment to revert back to us this week and look forward to hearing from you.

Sincerely

The TVIEC

The TVIEC - Television Industry Emergency Coalition

(Producers of content such as: Nomzamo, Isidingo, Zone 14, A Place Called Home, Strictly come Dancing, Tsha Tsha, Khululeka, Relate, Tshisa, Mtunzini, Erfsonders, The Lab, Generations, Home Affairs, 7de Laan, Yizo Yizo, Unsung Heroes, Hopeville, Moferefere Lenyalong, Drawing the Line, Late Night with Kgomotso, uGugu no Andile, Takalani Sesame, Askies, Redemption and Stokvel, to name but a few).

Steering committee for the TVIEC: Rehad Desai, Desiree Markgraaff, Kgomotso Matsunyane, Levern Engel, Makhaolo Ndebele, Harriet Gavshon, Robbie Thorpe, Sechaba Morejele, Dumi Gumba.