Presentation

1. Delivering Public ValuePresentation toParliamentary Portfolio CommitteeCape Town – 18 November, 2008

2. Presentation Delivering Public Value SABC Chairman: Kanyisiwe Mkonza SABC Operational Imperatives Acting Group CEO: Gab Mampone CFO: Robin Nicholson Financial Sustainability

3. Delivering Public Value SABC Chairman: Kanyisiwe Mkonza

4. A Shared Vision The last four years have been marked by: • Remarkable Growth • Restructuring & Repositioning SABC Platforms • A People-Centered Organisation • The Digital Revolution • Tighter Corporate Governance • The Establishment of the SABC Foundation • Effective Administrative Systems • A New Corporate Strategy to drive Organisational Performance • Re-aligning the Organisation to Respond to Changing Broadcasting Landscape • Digital Terrestrial Television • The Need to Close the Funding Gap • Focused and improved Stakeholder Engagement

5. Year Under Review • Report reflects transition between previous Board and the new Board announced end-2007 • Current Board inherited strategic framework from previous Board • Operational Performance • Financial Performance

6. SABC’s Mandate • The SABC’s Mandate is Public Service Broadcasting to: • Inform • Educate • Entertain • In delivering on its mandate the SABC has to ensure that it: • Contributes to evolving democracy • Contributes to socio-political and economic reconstruction • Contributes to Freedom of Speech • Provides Universal Access

7. TOTAL CITIZEN EMPOWERMENT People Operations Funding Technology Governance Corporate Goals and Values Regulatory Frame work Legislative Frame work CONSTITUTION

8. “From Mandate to Corporate Goals to Corporate Strategy” SABC Mandate Corporate Goals • Public service broadcaster contributing to evolving democracy • Contributing to socio-political and economic reconstruction • To translate public service mandate into reality Board formulated Corporate Goals • To translate Corporate Goals into service delivery model • Executive Management developed a Corporate Strategy • CONTENT • Democracy, non-racism, nation building • STAKEHOLDERS • Support and respect of shareholder and audience • FINANCIAL • Sustainability and empowerment • PEOPLE • Preferred employer • TECHNOLOGY • Innovative • GOVERNANCE • Compliance – legislative framework • PERFORMANCE MONITORING • Corporate Goals and SABC policies

9. Delivery of Mandate through Corporate Goals Key Performance Areas Objectives • CONTENT - Ensuring content that is informative, educational and entertaining; tells the South African and African stories accurately; and supports the African Renaissance and NEPAD • STAKEHOLDERS - Secure the support and respect of stakeholders • Aligned content to new audience segmentation and in line with platform positioning • Increased participation of content producers from HDIs, including the Regions • Engaged broader media fraternity through Media and Society Conference • Board continued engagements with Independent Producers to provide leadership on local content targets • Embarked on intellectual property research project with production industry to improve terms of trade between the SABC and the production industry Individual Value

10. …Delivery of Mandate through Corporate Goals (cont.) Objectives Key Performance Areas • FUNDING AND FINANCIAL HEALTH - Creating a financially sustainable and accountable organisation which also contributes to broad-based economic empowerment • TECHNOLOGY - Securing relevant technology, equipment and infrastructure to deliver on mandate • Developed strategies to grow market share in terms of both audiences and revenue • Introduced Cost Containment and Financial Turnaround • Completed pilot DTT Migration Plan and set up DTT Project Office • Planned for DTT Switch-On in November • Set up process for acquisition of HD Vans for Outside Broadcast • Rolled out Low-power analogue transmitters to under serviced areas • Digitisation of regional infrastructure • Implemented TV BMS for scheduling and archiving data in a multi-channel environment • Implementation of radio main control and layout Individual Value

11. …Delivery of Mandate through Corporate Goals (cont.) Objectives Key Performance Areas • Skills Audit and Development Plan in Key Areas • Achieved greater Employment Equity and Transformation of management • 74% black staff; 66% black managers • 45% female staff; 37% female managers • Implemented a Disability Policy and aligned to National and United Nations instruments • Introduced a comprehensive Delegation of Authority Framework • Established a Risk Committee to strengthen corporate governance • Established a Procurement Division to drive Policy, BBBEE and Strategic Sourcing • Established stringent PFMA Compliance and Reporting Framework • PEOPLE - Make the SABC a place of preferred employment by attracting, retaining and nurturing good talent • GOVERNANCE - Ensuring compliance with relevant legislation, policies, processes and procedures; and managing risk Individual Value

12. …Delivery of Mandate through Corporate Goals (cont.) Key Performance Areas Objectives • PERFORMANCE MONITORING – Ensuring organisational efficiency and delivery against Corporate Objectives • CORPORATE SOCIAL RESPONSIBILITY - To make the SABC a good corporate citizen and contribute to the nation’s social development • Performance measurement and deliverables against Corporate Plan and Objectives • New performance management and incentive systems implemented • Board launched the SABC Foundation • 20 Bursaries allocated Individual Value

13. Universal Access Increased local content for TV Content Delivery • SABC 1 by 15.94% to 91.2% • SABC 2 by 7.07% to 92.5% • SABC 3 by 2.29% to 82.1% • Between 60% and 70% of programming is in languages other than English during prime time • Up to 80% of local programmes now utilise languages other than English • Local content vs International Content at 23% and 77% respectively • Invested R924 million on Local Content Rolled out 5000 low powered transmitters to 300 sites to 1.5 million new citizens previously not receiving SABC signal

14. Board Priorities for 2008/09 • Digital Migration – Strategy in place; SABC supporting work of the Digital Dzonga • Stakeholder Engagement – have a comprehensive strategy to engage all stakeholders to proactively take their inputs to Board • 2010 FIFA World Cup and SABC Readiness – strategy in place; SABC working closely with FIFA and LOC and coordinating with the African Union of Broadcasters on Continental legacy projects and the broadcast of tournament beyond South Africa • Social Cohesion – programming across all platforms and programmes takes of this priority. Board has mechanisms through summits to oversee • Financial Sustainability – funding model and funding mix being developed; financial austerity measures, public value proposition meant to address challenges under the current funding model • Risk Management – policy and strategy in place; risk management unit established • Elections – strategy in place; working closely with IEC and other stakeholders

15. THANK YOU

16. SABC PERFOMANCE DELIVERABLES Acting Group CEO: Gab Mampone

17. STRATEGY BUILDING BLOCKS • B. Organisational Values • A. Corporate Goals: • Content – democracy non-racism, nation building • Stakeholders – support and respect of shareholder and audiences • Financial – sustainability and empowerment • People – preferred employer • Technology – innovative • Governance – compliance – legislative framework • Performance Monitoring – Corporate Goals and SABC policies • Conversations & Partnerships • Restoration of Human Dignity • Building a Common Future • C. Strategic Pillars • People • Operation • Funding • Technology • Governance Informs the Vision : Broadcasting for Total Citizen Empowerment Informs new performance management framework/group score card

18. Organisational Values • Conversations and Partnerships • Restoration of Human Dignity • Building a Common Future DELIVERING PUBLIC VALUE SABC Vision Broadcasting for Total Citizen Empowerment SABC Mission Objectives To be a: • People Centered • Content Driven • Technologically enabled • Strategically focused • Financially Sustainable Public Service Broadcaster • Ensuring that the SABC promotes democracy, non-racism, nation-building and empowerment through innovative programming that is informative, entertaining and educational, in all official languages • Creating an SABC that enjoys the support and respect of its shareholders, the citizens, viewers, listeners and other stakeholders • Putting in place innovative technology platforms and infrastructure that will enable the SABC to deliver on its mandate Individual Value

19. Maintaining relevance as a Public Service Broadcaster External Challenges SABC Ambitions Solutions • Proper audience segmentation • Clearly defined strategy options • Sustainable funding • Implementation roadmap • Understanding the changing tastes of audiences • Maintaining relevance in a TV and radio market that is becoming more competitive • Delivering Public Value • Leadership in digital distribution at home • Services for audiences abroad SustainableFuture? Increased Competition Funding Mix

20. SABC Response • Maintaining relevance in a TV, Radio and New Market • Technology Upgrade and Digitisation of Broadcasting Infrastructure • New Audience Segmentation and Platform positioning for a multi-media environment • Multi-channel offering in a new DTT environment for both TV and Radio • Striving for a Sustainable Funding Model to meet our Public Service ambitions SABC Strategic Focus during 2007/08 Financial Year SABC Business Challenges Business Factors in 2007/08 • The granting of new licenses leading to increased competition • The shifting of broadcast technology and new digital technologies • Possible fragmentation of audiences and revenues with the introduction of new players • The need for the SABC to implement a DTT Migration Programme • Need for a sustainable Funding Model and Funding Mix Creating an emotional bond with South African Citizens

21. SABC VALUE PROPOSITION Platform Offering 3-Year Strategy Roadmap Implementing the new SABC Value Proposition that: • Places audience understanding at the heart of the organisation • Defines and measures the public value created by the SABC’s service offering • Covers platforms, services and content • Provides a coherent approach to audiences across SABC’s TV, radio and new media services • Has a clearly defined public service mandate • Has a sustainable funding mechanism • Positions the SABC to meet the competitive challenges of a rapidly changing market • Has the relevant skills and competencies to deliver on the value proposition • Has a clearly defined Operating and Business Model that drives efficiencies and organisational effectiveness PlatformPositioning Content Alignment Audience Understanding SABC Branding& Image TradeMarketing Media Value & Buying Patterns

22. PEOPLE INTERNAL (FIRST CITIZENS) Key Performance Areas Objectives • SKILLS AUDIT - Ensuring the attraction, development and retention of Media and Broadcasting industry relevant skills • TALENT MANAGEMENT – Nurturing and developing key talent • LEADERSHIP DEVELOPMENT - Ensuring the existence of succession planning and management development programmes • Implemented a holistic recruitment strategy and skills pipeline for key talent • Identify critical skills requirement and establish the appropriate skills profile • Provide adequate learning and growth environment and infrastructure • Implement a Reward and Recognition Programme • Established the Senior Management Forum. • Developed a succession management framework • Achieved greater transformation of the management and staff profile: • 74% Black Staff • 66% Black Managers • 45% Female Staff • 37% Female Managers Individual Value

23. PEOPLE EXTERNAL (PUBLIC VALUE) Objectives Key Performance Areas • NATION BUILDING AND SOCIAL COHESION – Promote issue of national importance and nation building across portfolio of services including programming that promotes democracy and tolerance and reflects the aspirations of all South Africans • Invested in content themes that contributed to nation building and social cohesion • Each of the SABC business units, channels and radio stations identified and supported at least two events and programmes that promoted nation building and social cohesion • Supported sporting events of national importance, such as Rugby and the Cricket World Cups Individual Value

24. PEOPLE EXTERNAL (PUBLIC VALUE) Objectives Key Performance Areas • AFRICAN RENAISSANCE AND (NEPAD) – To support SABC’s Corporate Goal that is aimed at ensuring that the SABC plays a meaningful role in supporting the objectives of the African Renaissance and NEPAD • STAKEHOLDER MANAGEMENT – To ensure that the support and respect of stakeholders. • Concluded bilateral relations and agreements with a number of countries on the continent in support of national and continental initiatives and priorities in media and broadcasting. • Supported the African agenda in the broadcasting and media landscape through AUB initiatives. • Supported sporting events of national importance, such as Rugby and the Cricket World Cups • Visible and on-going engagement with SABC stakeholders on matters of common interests Individual Value

25. FUNDING AND FINANCIAL HEALTH Objectives Key Performance Areas • Revenue showed a 9.1% growth on the previous year • Profit before depreciation, amortisation and impairments grew by 14.8% • Commercial revenues continue to dominate the revenue sources at 81% and TV Licence at 17% • Absence of TV Licence rate increase in the last 8 years • TV license revenue grew by 8%. • Engaged government on • 50% funding of SABC News International • Funding during dual illumination for DTT migration • Removal of VAT on license revenues • Imposition of a broadcast levy • Introduce in increase on TV Licence Fee • Introduction of license fee subsidy • TV license from Pay TV operators • FINANCIAL SUSTAINABILITY – Ensure that the SABC attains financial sustainability in order to deliver on its public service mandate • PUBLIC SERVICE FUNDING – Reduce over reliance on commercial revenue through increased public funding Individual Value

26. Our Audiences

27. Citizen/Audience Centricity OBJECTIVES Key Performance Areas • Properly segmented SABC audiences for both DTT and Analogue Platforms • Audience segmented for SABC radio • Audience segmented for New Media • Increased the participation of content producers from HDI’s including regions in order to deliver content for specific audiences • Ensuring that the SABC places audiences at the centre of local content offering and takes cognizance of the diverse needs of the multiplicity of South African audiences

28. Content and Platforms Objectives Key Performance Areas • PLATFORM POSITIONING –Aligned to the new SABC Value Proposition and Audience Segmentation • MULTI-CHANNEL LINE-UP – Ensure DTT Switch-Over by November 2008 • AUDIENCE FOCUS – Ensuring that the SABC places audiences at the centre of Value Proposition • INCREASE IN LOCAL CONTENT – Ensuring that local content delivery takes cognisance of the diverse needs of the multiplicity of South African audiences and meets the requirements as stipulated by ICASA • Finalised and implemented DTT platform positioning for Television in line with the new audience segmentation • Developed a DTT Migration and Platform Management strategy for a multi-channel environment • Developed a strategy for Operationalising new audience segments • Increased local content on TV • - SABC 1 by 15.94% to 91.2% • - SABC 2 by 7.07% to 92.5% • - SABC 3 by 2.29% to 82.1% • Increased local music quota on Radio an average 60% on PBS radio • Achieved between 60% and 70% of programming in languages other than English • Up to 80% of local programmes now utilise languages other than English Individual Value

29. Technology Objectives Key Performance Areas • DTT READINESS AND MIGRATION – Ensuring that the SABC is ready for DTT Switch-Over by November 2008 • TECHNOLOGY UPGRADE AND DIGITISATION OF BROADCASTING INFRASTRUCTURE – To ensure that the SABC takes the lead in digital broadcasting infrastructure • DIGITISATION OF ARCHIVES – To migrate the risk of losing valuable archive material and transfer of current formats to a file-based format • Set up the DTT Migration Office and completed an implementation plan for • final multi-channel line-up • developed and finalised channels and programming positions • initiated dialogue with other DTT players. • Developed a strategy and plan for the following • acquisition of four DH TV OB Vans for Outside Broadcast • digitisation of regional infrastructure • implementation of TV BMS for scheduling and archiving data in a multi-channel environment • 10% of archive material will be digitized by 2009 Individual Value

30. Governance Objectives Key Performance Areas • RISK MANAGEMENT FRAMEWORK – Ensuring that the SABC is able to anticipate, detect, monitor, mitigate and control risk throughout the organisation • PFMA COMPLIANCE – Ensure full compliance with PFMA • POLICY AND REGULATION – Ensure compliance with ICASA licence conditions • PROCUREMENT – Ensure a procurement and contracting process that complies with BBBEE and contributes to capacity building • Aligned and consolidated various ERM processes • Completed training of Regional Risk Champions • Developed and implemented a Top 20 Risk Management Reporting Framework. • Established a monthly compliance checklist and reporting mechanism throughout the organisation • ICASA licence conditions fully integrated into the SABC business processes and operating environment • Developed a supplier database and BEE scorecard • Set up the Bids Adjudication Committee • Implemented a strategic sourcing plan • Implemented the ERP/SAP Procurement Module. Individual Value

31. 2010 FIFA WORLD CUP Key Performance Areas Objectives • Developed a mass media campaign that advertises relevant information on 2010 through Radio and TV • Developed a technology plan for all broadcast facilities for 2010 • Developed a technology plan for all broadcast facilities for 2010 • On-going mass mobilisation Siyanqoba Campaign • 2010 FIFA WORLD CUP – Ensure that every South African has access to the World Cup through the provision of broadcasting facilities in line with the FIFA requirements and nation priorities, i.e. legacy projects Individual Value

32. Measuring Public Value Individual Value PublicValue Citizen Value Economic Value 11 11

33. Educational programming Broad coverage High standards news and current affairs Mother tongue programming Information, nation building and democracy Issues important to South Africans National identity and pride Reflect diversity of South Africa Showcase South African talent National sports programming Entertainment programme Measuring Public Value Average Performance Ratings Importance of PBS Objectives Ranked importance of PBS objectives (Individual and Citizen respondents ) Performance ratings against PBS objectives (Individual and Citizen respondents) Importance of PBS Objective Importance of PBS Objective Rank Rank 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11

34. Delivering Public Service No. of households willing to pay various monthly prices

35. Delivering Public Service Net Citizen Surplus

36. FINANCIAL PERFORMANCE 2007/08 • Revenue grew by 9.1% in line with inflation to R4.7 billion • Profit before depreciation, amortisation and impairments grew by 14% • Over reliance on commercial revenue still a big feature at SABC with 81% revenue contribution • Absence of rate increase on TV Licence put pressure on TV Licence revenue growth • TV Licence declined by 1% from previous year to 17% (a 8.2% increase in 2008) • Sponsorships showed a 9% decline on 2007 revenue due to the decrease in aired sports events • Government transfer were 10% lower than 2007 • Significant pressures on the cost side • Programming rights impaired by R76 million due to programming not broadcast within licensed period

37. KEY FOCUS AREAS FOR 2008/09 • Immediate implementation of the austerity plan to secure financial stability and service delivery Focus on risk management and improving corporate governance • Convening a public debate on the funding of the SABC and the delivery of public value • Resolution of the audit qualifications • Delivery of DTT and 2010 • Appointments into key vacancies • Finalisation of the funding strategy including the funding mix • 2009 Elections coverage. • Implement new operating model

38. THANK YOU

39. Financial Sustainability CFO: Robin Nicholson

40. PERFORMANCE MANAGEMENT (ASSESMENTS) FINANCIAL PERFORMANCE

41. Table of Contents • Revenue and Expenses Overview • Revenue Government and Commercial • Revenue Growth year on year • Revenue 4.1 Revenue contribution 4.2 Public Funding Mix 4.3 Funding Mix 4.4 Commercial revenues excluding advertising 4.5 Analysis of advertising revenues 4.6 Government Income • Operating Expenses Review 5.1 Major expense contribution 5.2 Expenditure Analysis 5.3 Expenditure- Growth year on year • Balance Sheet 6.1 Balance Sheet Assets 6.2 Balance Sheet equity and Liabilities 6.3 Expenditure • Cash Flow Statement Summary • Matters of audit significance 8.1 Auditor’s Report

42. Net Financial Position - Summary • Overall revenue grew by 9%. This is in line with the inflation year on year. • Commercial revenue grew by 11%. • TV Licence revenue grew by 8% year on year.

43. Revenues Government and Commercial • Classical revenue grew by 14%. This is mainly due to the change in discount strategy. • Sponsorship revenue declined by 9% due to sport sponsorship that did not perform as planned.

44. Revenue Growth Year on Year - Past 3 Years

45. Funding Mix

46. Commercial Revenues Excluding Advertising

47. Analysis of Advertising Revenues

48. Government Income

49. Expenditure • Increased demand for content and mandate has resulted in increase in Amortization of Programme, Sports and Film Rights • Signal distribution costs also increased mainly with inflation and expansion to new areas where SABC did not have reach • The apportionment of the Pension Fund surplus under the provision of the Second Pension Fund Amendment Act was completed in the year under review

50. Expenditure - Growth Year on Year