/ 21 October 2011

The writing is on the wall

The Writing Is On The Wall

The boardroom battles and ownership of news media are in the political spotlight again. It is not so much their exposés of government officials that are making headlines in parliamentary circles — they are in the news for their lack of transformation and black economic empowerment (BEE) ownership.

Print Media South Africa, which represents a large section of the industry, puts the “consolidated” black ownership for the big four publishers — Avusa, Independent Newspapers, Media24 and Caxton — at 14% .

So it is lucky for the print industry that the paused private equity buyout of media group Avusa – which owns titles such as Sunday Times, The Times, Sowetan and 50% of Business Day and Financial Mail — will probably not change its black economic empowerment ownership levels. As Print Media South Africa president Hoosain Karjieker pointed out, Avusa’s BEE levels “help everyone else look good”.

At a parliamentary portfolio committee media diversity and transformation indaba last month, Print Media South Africa was frank about the level of transformation, though they did not highlight the lack of BEE ownership.

Jane Duncan, Highway Africa chair of media and information society at Rhodes University, obtained the scorecards of all the groups for a soon-to-be-published chapter in the New South Africa Review. She worked out the BEE ownership of the big four publishers at about 16% on average.

Of the big four, only Avusa and Media24 have any BEE shareholding at all. Avusa is sitting on 51% and Media24 14.5%. Caxton has no BEE shareholding, nor does Independent Newspapers, which is entirely foreign-owned, being a subsidiary of Independent News and Media plc, based in Ireland.

The Mail & Guardian is, in BEE terms, foreign-owned, as is The New Age, owned by the Gupta family.

According to Print Media South Africa, the print media industry is scored as a “Level 5” on the department of trade and industry’s BEE scorecard, with a score of about 63 points. That is not too bad, as there are eight levels, although Duncan noted Level 3 was probably considered acceptable by government. But if the scorecard is strictly applied, a company must score in every one of the seven sections. The best performer is again Avusa.

Direct government leverage
Compared with the retail sector, direct government leverage through licensing and procurement, the key tools to encourage BEE, is not great. Consumers do not buy groceries on the basis of BEE scores and neither do readers of newspapers. Should the government try to direct adspend away from the big newspaper groups this would be construed as inimical to freedom of speech.

But that does not mean that the government cannot apply pressure, especially through parliamentary hearings. It was exactly such pressure, Professor Guy Berger of Rhodes University noted, that led to the creation of the Media Development and Diversity Agency (MDDA) in 2002 as a kind of “compromise”.

However, recently “the mainstream media have reduced their involvement in the MDDA for economic reasons”, he said. At the same time, the ANC is dissatisfied with the level of diversity in the news media, unravelling the compromise that kept pressure off the print media for years.

The result is the new pressure to relook at ownership structures and BEE in the news media.

Despite the arguable lack of urgency, print media has gone some way, as their scorecards show, towards taking on transformation, subscribing to the department of trade and industry’s broad-based BEE codes of good practice. A recent study by the JSE indicated that overall black ownership of the JSE could be around 17%, so the industry average is not far off.

The most visible change has been at the top of the editorial side of the business, with 65% of editors now black, according to Print Media South Africa, as opposed to only 7% in 1994.

However, Print Media South Africa was frank in admitting that the employment equity score was low compared with its high BEE code management score, largely, it said, “due to a lack of gender diversity and a lack of disabled employees”, and it needed to spend more on skills development.

Karjieker said: “We will have to embrace the whole issue of transformation. We have set ourselves some tight deadlines to report back to Parliament with serious targets. We have to go back with something tangible. It has to be meaningful.”

‘Print charter’
One option, not on the table before, is to look at a charter for print media. The movement towards charters has stalled in other industries, such as telecommunications, and the financial sector charter looks dead in the water, but a print charter has definite advantages.

“Quite frankly, we should engage more about the charter route rather than simply applying the codes. We need to flesh it out,” Karjieker said.

A charter might give the industry more flexibility and allow it to go beyond questions of ownership. He said that the ­industry, by shaping the charter, could make empowerment work better for the industry.

If this route is taken, it is less likely to fall prey to the quarrels over ownership targets that appear to have wrecked some other charter initiatives, such as the financial sector charter.

What has impeded BEE in the print industry is the low profit margins, according to Berger.

The idea of black ownership of newspapers for political influence that ruled transformation drives in the days of the sale of Johnnic — which, stripped down, became Avusa — by Anglo American has taken a backseat.

It could also be argued that the influence that newspaper ownership brings has been found to be limited. New Africa Investment Limited’s ownership of the Sowetan did not help that ill-fated early BEE group to fend off news media criticism.

The issue of market dominance and diversity has also resurfaced after a long absence but the print media is far more diverse than it was pre-1994 and, according to one study, we have just the right number of big media houses.

As Media Monitoring Africa noted at the indaba, there has been significant change in media diversity, ownership and content. It noted the new audiences targeted by the Daily Sun and Daily Voice and small commercial African language media, such as Isolezwe and the Sunday Times isiZulu edition, were brand new. There were efforts by the government and the MDDA to support small media.

Discussions of media ownership at the indaba were characterised, as they often are, by a static view of the industry. But Print Media South Africa also brought up the important issue of the profit challenges newspapers face. These included moving to online and digital platforms, which required intensive capital investment, and high printing, distribution and marketing costs. It pointed to a decline in readership, circulation and advertising spend.

In this environment, though some of the ideas about intervention in the industry for diversity are worth debating, being too ambitious could have the opposite effect.