The announcement of the radio licence winners was the end of a 20-month long road for applicants. Since August 2005, 10 prospective new radio station owners had been drawing up business plans, lodging applications and sourcing funding and black empowered partners. But now that the three winners have been named, an even longer road lies ahead in their battle to make inroads into an SABC-dominated market and a sceptical advertising community.
“They are the pioneers. Everybody is going to learn from them to see if a commercial radio station can exist outside the primary areas of Gauteng, Cape Town and Durban,” says Gilbert Mokwatedi, radio lecturer at the Tshwane University of Technology in Pretoria.
In an attempt to end the monopoly enjoyed by the SABC in the secondary radio market, the Independent Communications Authority of South Africa (Icasa) invited parties to apply for commercial broadcasting licences in the North West, Mpumalanga, Limpopo and Northern Cape. Until now, listeners in these areas have had limited choice by way of community radio, SABC stations and campus radio stations.
Icasa received 10 applications in total and announced the winners earlier this year: adult contemporary station Capricorn FM in Limpopo, adult contemporary station M-Power Radio in Mpumalanga and SeTswana gospel station Radio North West.
Amongst these three, M-Power’s owners are probably the best-known in the South African radio landscape. Its shareholders are JSE-listed African Media Entertainment Ltd, which owns Algoa FM, OFM and radio sales house United Stations.
Algoa FM programme manager Alfie Jay says the other shareholders are black business group Direng Investment Holdings Pty Ltd and Mbombela Business Joint Venture, the local and major shareholder.
“M-Power Radio will target upwardly mobile Mpumalanga residents aged 16 plus in the LSM 6-10 lifestyle measures,” says Jay who was involved in the M-Power application.
M-Power seems to have an advantage over the other two stations because it is backed by players with solid credentials in the commercial radio industry.
Capricorn FM’s owners produce the Harmony Mines in-house radio on behalf of the mining company. Its biggest shareholder is MSG, an entertainment and communications company established by former radio personality Given Mkhari and communications professional Simphiwe Mdlalose. Its other key shareholder is Safika which recently sold all its radio assets gained in the takeover of New Africa Investments Limited (Nail).
Mkhari has said Capricorn FM hopes to show a profit within three years. “Limpopo is a lucrative business— Capricorn has been given something close to a monopoly as the first commercial licence holder in the province,” he said in Business Report after the three winners were announced.
“The three new stations will really need financial muscle,” says Mokwatedi. “I don’t think the SABC is just going to sit back and watch. They will certainly make it difficult for the competition to tap into the market.”
“It’s not easy to say it will be viable. There are a lot of issues involved here. The stations will not break even in the first two years or so. Yes, everybody can get excited and say we have a new station and listeners, but in terms of advertising revenue, potential investors would wait for the station to prove itself first,” adds Mokwatedi.
Radio North West might have the toughest road ahead. Not only is it trying to penetrate a new market, but it is also venturing into relatively untested waters by launching a gospel radio station.
It is planning to target North West listeners aged between 25 and 49 in the LSM4-8 income groups. It is also owned by Direng, as well as the investment company of the South African Democratic Teachers’ Union, a group of black women entrepreneurs from North West province and a foreign partner called 21st Venture, a Norwegian company including individuals who helped establish P4 in Durban and Cape Town. Kagiso Media has since then bought shares in the P4 stations and renamed them to iGagasi and Heart FM.
“Everybody is waiting to see whether they would really make it,” says Mokwatedi. “Gospel music is popular, yes, but in terms of the money, do these listeners have buying power? Would they be able to get income from this type of product? I’m waiting with interest to see what will happen. They should be given a chance.”
Radio North West has reportedly applied for funding from the Industrial Development Corporation.
For now, only these three provinces will enjoy the advantages of new players. Although Icasa would have wanted to see another newcomer in the Northern Cape, the province received no applications.
Icasa councilor Zolisa Masiza described this is a “major cause for concern.”
“All the relevant questions have been asked, what is the situation in the Northern Cape, what has happened— The reasons for looking into these issues are to get more clarity on the state of play in the Northern Cape,” Masiza said.
According to the RAMS wave of May 2007, residents in the Northern Cape spend the least time listening to radio in the country – 3h55 per day. On the other hand, Limpopo, North West and Mpumalanga were all above the national average of 4h32.
That is at least some good news for the new players. But there is no doubt that a rocky road lies ahead.
Why did Icasa invite new radio players?
Icasa chairman Paris Mashile says the regulatory body published a Position Paper in January 2004 on the Review of Ownership and Control of Broadcasting Services and Existing Commercial Sound Broadcasting Licenses.
“In terms of this Position Paper, the authority made a commitment that it would licence commercial sound broadcasters in the Secondary Markets. The Secondary Markets were defined in the Position Paper as being geographical markets, including mainly metropolitan areas, outside the primary markets.”
This was to:
- Promote the provision of a diverse range of sound and television broadcasting services on national, regional and local level which, when viewed collectively, cater for all language and cultural groups and provide entertainment, education and information.
- Promote the development of public, private and community broadcasting services, which are responsive to the needs of the public.
- Encourage ownership and control of broadcasting services by persons from historically disadvantaged groups.
- Ensure that private and community broadcasting services, viewed collectively, are controlled by persons or groups of persons from a diverse range of communities in the Republic.
- Ensure fair competition between broadcasting licensees.