Ownership. Control. Empowerment. Standing in isolation, outside the boundaries of the law, the terms are politically and economically loaded. Inside the law, as creatures of statute, they’re potentially explosive.
Where media is concerned, the terms have been on the books since 1993, when the IBA Act was passed. But while nine years is a long time for such volatile elements to be mixing it up together, as yet there have been no blasts. Maybe it’s because the bomb is a dud. Maybe it’s because, compared to larger sectors of the economy, like mining, the potential damage is seen as inconsequential and nobody takes any notice. Or maybe it’s because there are men like Mandla Langa doing their utmost to prevent all hell breaking loose.
As chairperson of ICASA (Independent Communications Authority of South Africa) since 2000, Mandla Langa has managed his share of hazardous situations. He was elected as head when the IBA (Independent Broadcasting Authority) and SATRA (South African Telecommunications Regulatory Authority) merged. That was around the time of the third cellular licence debacle, and Langa’s first task was to repair the ‘public image’ damage aggravated by the behaviour of Nape Maepa, his predecessor on the telecommunications side. Since then, Langa has consistently called Telkom who, by their own admission, are no friends of the regulator to account. He has made decisions that could euphemistically be called ‘unfavourable’ to the mammoth cellular network operators. He has presided over controversial merger applications in the media sector. He has also refused broadcast licences to a host of powerful media owners. Now he is dealing with the potentially farcical SNO (second network operator) issue.
In that time, zero blasts. Some threats, some unhappy stakeholders, but no over-the-top headlines.
Langa’s strategy on the upcoming review of ownership, control and empowerment in broadcasting should therefore come as no surprise. By all accounts, he’s defusing his next latent bomb by separating the elements before they’re thrown in the pot. The Discussion Paper on the Review of Ownership and Control of Broadcasting Services and Existing Commercial Sound Broadcasting Licences (sic) is quite clearly the consultative approach. Given what’s at stake, it may prove to be the correct one.
“When looking at the question and ethos of regulation, you find yourself having to balance a host of conflicting imperatives,” says Langa. “We want to see the industry thriving and being boosted. That imperative is enshrined in our underpinning legislation. But there is also the imperative of empowerment and of ensuring diversity of voice.
“The Discussion Paper would need to be framed in an environment that addresses all these issues.”
Langa, ever the wordsmith (he has published three novels and a collection of short stories), sees the conflict inherent in the paper as one of “consolidation versus constellation.” As an illustration of empowerment’s place in the dichotomy, he refers to last year’s blocked NAIL/ Kagiso merger, which, he says, “became quite a strong philosophical reference point for ICASA.” The issue, argues Langa, was that ICASA was faced with a scenario where a company with a five percent empowerment quotient was looking to buy a company with a 24 percent quotient. “If NAIL had wanted to go into a ‘greenfields’ operation, had wanted to get their hands dirty, that would have been different. NAIL wanted to acquire assets, and that does not imply going after growth.”
But when we’re talking about philosophical points, we’re also talking about interpretation of the law so the merger example raises the difficult question of ICASA’s role in policy-making. While the IBA Act empowers the regulator to make recommendations to parliament, as an independent body with the primary job of granting licences (and reviewing whether the conditions of those licences are being met) can it actually have a say in legislation? Can the police also be the lawmakers?
“We insist we are a Chapter 9 institution,” says Langa. “The only body we report to is parliament, where we are nominated and elected.” Nevertheless, Langa points out that when making a decision in the broadcasting sector, ICASA does not have to get ministerial approval (in telecommunications it’s the reverse).
Which leaves us where? The bomb squad is knocking at the doorthere’s that phrase again. “Policy is formulated and formed through a consultative approach,” says Langa. His suggestion is that ICASA will indeed have a voice in shaping the legislation to follow on from the Discussion Paper, although its unclear how loud the voice will be.
Whatever credence Ivy Matsepe-Cassaburri and the Department of Communications accord ICASA’s recommendations, the crucial piece of law is scheduled to be written and passed by June next year. This year, with the media owners involved in the process and the date for submissions looming (at the time of writing the initial deadline of December 6th had been pushed back three weeks), it looks like the concerns of some of the bigger groups will be heard.
The suggestion is that ICASA will indeed have a voice in shaping the legislation to follow on from the Discussion Paper, although its unclear how loud the voice will be.
The Media Owners Speak
Of the media owners approached for comment on their submissions, MIH, e.tv and United Stations were the most forthcoming. Roger Jardine of Kagiso felt he was not in a position to comment and Saki Macozoma of NAIL cancelled numerous interviews. William Kirsh of Primedia referred us to Dan Moyane, who said: “We’ve discussed your request and feel at this stage, when we are still busy formulating our position regarding the ICASA Discussion Paper, that it would be premature to engage in interviews on the issues. We are more than willing to talk later when we have a clearer and better picture of all our key inputs into this important discussion.”
And of those prepared to participate, Clarissa Mack, group executive for policy and regulatory affairs at MIH, was the most transparent.
“The broadcast media sector has ownership limitations set at 20 percent,” says Mack, emphasising that until now only e.tv has had a foreign investor who had a direct stake in a licence. “In contrast,” she says, “in the print media sector, we have wholly owned foreign titles re the Independent Group and we anticipate the introduction of a new Nigerian paper This Day.
“Foreign direct investment holds the promise of more competition, additional skills and the inflow of hard currency for capital investment,” Mack insists. “Partnerships between a local and foreign content owner could create synergies and efficiencies and the additional experience of the foreign player may place the local partner on a better and more stable financial footing to compete. Currently, the South African broadcasting market is characterised by a lack of funding and investment and has been described as fragile.”
In this vein Mack says: “The current 20 percent cap on a broadcast licensee makes the broadcast sector particularly unattractive.” She argues that while foreign investors are expected to invest large amounts of hard currency, the shareholding cap means that they can’t exercise the control over investments they would like.
Clarissa Mack (MIH): “The current 20 percent cap on a broadcast licensee makes the broadcast sector particularly unattractive.”
Mack suggests that any change upwards in the foreign ownership limitations would therefore be welcomed by MIH.
“In Africa,” she says, “South African companies like Multichoice, M-Net and others have invested considerable amounts of money in broadcasting. We took huge risks that would not have been justified if ownership caps sat at 20 percent.
“There is no reason why a Nigerian investor should be able to launch a newspaper and not also be able to take a considerable stake in a broadcasting licensee. In broadcasting, Africa has opened its markets to South Africans we have yet to return the favour.”
Mack highlights a similar principle that applies in non-African foreign markets. “Ownership rules in the home market influence our ability to impact debates on ownership limitations in the host country. It’s hard to argue for an increase in ownership caps in the home market where it is apparent that while the limitations are not ideal, they are still a vast improvement on the South African regulations.” [For more on MIH’s position, click here]
As mentioned above, e.tv is the only broadcasting entity that has had a foreign investor with a direct stake. (The stake belonged to the Virgin Group, and has subsequently been sold back). Marcel Golding, e.tv’s CEO, had the following to say on the ownership question: “I think ownership should be more flexible. But you don’t want to find yourself in a situation where your whole market is under foreign control. I think one has to keep some constraints or a limit on foreign ownership.”
Although Golding feels ICASA is acting in the industry’s best interests, he is concerned that the regulator is compromised by a lack of resources. “Government can do more by giving ICASA more resources. One can only affect one’s task if one is adequately resourced both financially and intellectually. Nevertheless, ICASA has done a good job at levelling the playing field. I’m satisfied that it has a role to play and has taken on key issues.”
On the issue of empowerment Golding says: “What is black empowerment? It is a whole majority of different definitions. It’s about trying to get equity in companies, acquiring skills, increased participation of people in media organisations. When people say you have to have a 30 to 40 percent ownership of a company, the difficulty arises when you are dealing with a public company.
“For empowerment to succeed doesn’t require handouts, but an appreciation of what people are trying to achieve. You need agencies and people saying: ‘Let’s give them a break.’ You can’t succeed without opportunity.”
Chairman of United Stations, Stan Katz, has a slightly different take to both Mack and Golding. “Investment in the industry foreign and local depends on the assets being freely tradable. If you invest in something, you want to know that you can sell it and at the right price.”
Katz insists that it isn’t necessarily the lack of foreign investment that has stifled industry growth. “What has hindered the growth of the industry is that TV and Radio stations are highly regulated assets that are not easily tradable.
Katz insists that it isn’t necessarily the lack of foreign investment that has stifled industry growth. “What has hindered the growth of the industry is that TV and Radio stations are highly regulated assets that are not easily tradable.”
“Ultimately, what will probably happen is consolidation, although it may be a bit early for that. There is still the issue of licences in the so-called ‘secondary’ towns, which would spur the process of consolidation. Consolidation also raises a number of related issues. Consolidation could impact the issue of diversity. You could land up, for example, with two players controlling the whole of broadcasting.
“Broadcasting is a business. What you need for a thriving business environment is light touch regulation.”
A Question of Capital?
Whatever the final responses of the media owners turn out to be, it’s a given that all submissions will reflect the interests of the groups concerned.
The Naspers/MIH consortium, having announced restructuring plans and intentions to buy out minority shareholders in overseas listed entities MIHH and MIHL, will probably submit a response that argues for a relaxation of cross-media ownership restrictions. After the restructuring, the group will once again become the richest media entity in terms of market capitalisation on the JSE (Max Koep of Deutsche Bank envisages a market cap of around R6 billion). The restructuring will also allow the group local access to all previously untouchable cash resources. Which begs the question: is the timing of the move a coincidence? After all, Clarissa Mack isn’t hiding the aspirations of Naspers/MIH [see sidebar].
Marcel Golding’s interests don’t seem as straightforward. At the moment, his main agenda is ensuring that e.tv has enough cash to keep operating into next year. This means ensuring that the sale of the 5 percent stake in Vodacom goes through (the sale is being made through HCI, e.tv’s holding company). Which in turn may mean appeasing ICASA, who, as witnessed during the proposed NAIL/Kagiso merger, have proved they will block any deal that involves a dilution of empowerment shareholding.
As for the rest, the writing is on the wall. Primedia are perpetually on the hunt for more radio licences. NAIL are cash rich and must surely be looking to ICASA to allow it to spend some money. United Stations, as implied by Katz’s statement above, may be looking for a good trade. And Kagiso still looks ripe for a merger, as does AME.
Then there’s Mandla Langa, who’ll have to sort it all out without exploding any bombs.
Reporting assistance by Janine Lazarus.