Transformation of Advertising Industry: Progress Reports by MDDA, ASASA & Association for Communication & Advertising with Deputy Minister in Presidency in attendance

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Communications and Digital Technologies

21 February 2012
Chairperson: Mr E Kholwane (ANC)
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Meeting Summary

The Chief Executive Officer and Programme Director of the Media Development and Diversity Agency presented a briefing on the progress that had been made in the transformation of the advertising industry.  The briefing included an overview of the background to the issue, the outcomes of research commissioned by the Agency and the progress that had been made in implementing the recommendations that had arisen from Parliamentary oversight visits and public hearings.  The Agency had consulted with various network and industry organisations in the private sector as well as government entities and State-owned enterprises.  Government advertising would be centralised and a percentage of advertising expenditure would be channeled to community media.  The Agency was monitoring the effectiveness of the advertising commitments made by Brand SA and the community media campaign of the South African Post Office.  Concern over the practices of media brokers was expressed.  The Agency would continue to form partnerships with the private and public sectors and to encourage the implementation of the Marketing Advertising Communication South Africa Charter.

Members were concerned about the allegations of wrongdoing levelled at media brokers and wanted to know what action had been taken by the Agency.  It was established that the allegations referred to specific actions rather than the media broking industry in general.  The investigation by the Agency was initiated after complaints were made by community media organisations during oversight visits by the Committee.  Investigations into the alleged wrongdoing continued and sufficient evidence to support criminal prosecution had not yet been found.

Members queried the apparently close relationship between the entities involved in facilitating the transformation process.  Members were reassured that the entities concerned had developed a good working relationship to achieve the common transformation objectives but had retained their independence.

The Chairperson of the Board of the Association for Communication and Advertising briefed the Committee on the progress made in the implementation of the Charter, the training programme being piloted at the AAA School of Advertising and the progress that was being made in changing Marketing Advertising Communication South Africa from a Section 12 to a Section 9 entity in terms of the Broad-based Black Economic Empowerment Act.  Two liaison officials had been seconded by the Government Communication and Information System and the Department of Trade and Industry and the process was expected to be finalised during 2012.

Members asked questions about the availability of training opportunities at the AAA School and the involvement of the Sector Education and Training Authority in training programmes for the advertising sector.

The Chief Executive Officer of the Advertising Standards Authority of South Africa submitted a briefing on the complaints received from consumers and competitors during 2011 and January 2012.  A total of 2189 complaints were received during 2011, of which 2099 were from consumers.  1508 consumer complaints fell outside the jurisdiction of ASASA and were referred to the appropriate authorities for attention.  The number of valid complaints had increased by 55%.

Members felt that the information provided was sketchy and requested a more detailed submission in future.  Members asked if explanations for rejecting complaints were provided to complainants.


Meeting report

Progress Reports on the Transformation of the Advertising Industry
Mr Obed Bapela, Deputy Minister in the Presidency recalled that the issue of transformation of the advertising sector was previously discussed in the Committee meeting held on 14 June 2011.  He looked forward to hearing what progress had been made.

Briefing by the Media Development and Diversity Agency (MDDA)
Mr Lumko Mtimde, Chief Executive Officer and Mr Nkopane Maphiri, Programme Director, MDDA presented the briefing to the Committee (see attached document).

Concern over the slow pace of transformation in the advertising industry prompted the Committee to direct the Department of Communications (DoC) and the Government Communication and Information System (GCIS) to facilitate a consultative process with all stakeholders in 2002.  A value statement was adopted in April 2003.  Subsequently, extensive research, public dialogue and public hearings were undertaken.

The briefing document included an overview of the findings and conclusions from the research reports commissioned by the MDDA.  The report on “Trends of Ownership and Control of Media in South Africa” was issued in 2009.  It was found that many small local newspapers were owned by private companies, which did not fall within the definition of community media in the MDDA Act. A clear understanding of what was meant by ‘community media’ was necessary.

The Committee undertook oversight visits to the projects supported by the MDDA and held public hearings during June 2011. A summary of the recommendations and the progress that had been made in implementing the recommendations was included. Consultation with various stakeholders in network organisations, industry organisations, government entities and State-owned enterprises took place.

Government advertising would be centralised within GCIS and an increased proportion of government advertisements would be channelled to community media.  Brand South Africa had committed to allocating 25% of advertising expenditure to community media.  The South African Post Office (SAPO) had launched an advertising campaign involving community newspapers.  The MDDA was monitoring the efficacy of these campaigns and addressing the challenges that had arisen.  There were concerns over the operations of media brokers, which were not subject to regulation.

The implementation of the Marketing Advertising and Communication South Africa (MACSA) Charter and the establishment of partnerships with the public and private sectors were considered to be crucial to achieve the transformation of the sector.

Briefing by the Advertising Standards Authority of South Africa (ASASA)
Ms Thembi Msibi, Chief Executive Officer, ASASA presented a briefing on the complaints received by the Authority from consumers and competitors during 2011 and January 2012 (see attached document).

A total of 2189 complaints were received during 2011, of which 2099 (96%) were from consumers and 90 were from competitors.  1508 consumer complaints were rejected and 566 complaints were investigated further.  71 competitor complaints were investigated. The total number of complaints had increased by 6% over 2010.  During January 2012, 275 consumer complaints and 10 competitor complaints were dealt with.

ASASA noted a 55% increase in valid consumer complaints and a decrease of 13% in paid competitor complaints.  The introduction of consumer protection legislation had resulted in shifting the focus from disagreements between competitors to protecting the interests of consumers.

Briefing by the Association for Communication and Advertising (ACA)
Mr Nkwenkwe Nkomo, Chairperson of the ACA and the MACSA Boards briefed the Committee on the progress made in implementing the MACSA Charter (see attached document). 

The ACA had replaced the previous Association of Advertising Agencies (AAA).  However, the name of the AAA School of Advertising had not been changed.

MACSA was constituted in accordance with Section 12 of the Broad-based Black Economic Empowerment (BBBEE) Act.  The organisation had engaged with the Department of Trade and Industry (DTI) to change to a Section 9 organisation but the process had been stalled after the responsible official in the Department had left.  Subsequently, two officials were seconded by the DTI and GCIS to deal with MACSA matters and the change in the status of the organisation was imminent.

ACA acknowledged the role played by the Committee, the MDDA, GCIS and MACSA in facilitating the transformation of the industry and promoting the implementation of the Charter.  ACA had failed to attend the workshop on amendments to the BBBEE Act and codes of good practice arranged by GCIS on 7 December 2011 due to a misunderstanding about the date.

Ms Odette van der Haar, Chief Executive Officer, ACA advised that the ACA continued to engage with the MDDA.  A training course was currently being piloted at the AAA School of Advertising, which would assist in understanding community media.  Progress was being made in the implementation of the MACSA Charter.

Discussion
The Chairperson welcomed the recently-appointed MDDA Board members to the proceedings.  He explained that the Committee submitted the names of six Board members to the President.  The remaining three members of the Board were appointed by Government.  Mr Jimmy Manyi was a government appointee.

Ms J Killian (COPE) clarified that the appointment of Mr Manyi had not been clearly understood by all Members.  The report from the MDDA reflected the current status of the progress that had been made in addressing the transformation issue.

Ms M Shinn (DA) said that oversight visits to community media organisations revealed that many were struggling financially.  Many were published in indigenous languages.  She asked if the purpose of directing a portion of government advertising expenditure to community media was to allow the organisations in poorer communities to become financially viable.  She wanted to know if measures were in place to ensure that government advertising spending was effective.  She said that the Sector Education and Training Authorities (SETA’s) had been a failure.  The advertising schools had been dynamic and successful and she queried the continued involvement of the SETA.  She understood the need of the various stakeholders to work together but she found the relationship between the MDDA, ACA and ASA to be too “cosy”.

Ms W Newhoudt-Druchen (ANC) noted that the issue of the transformation of the industry was first addressed by the Committee in 2002.  She asked why it had taken so long before any progress had been made.  She asked for an explanation of how media brokers operated and why community media did not benefit from government advertising spending.  During oversight visits to community media entities, it was found that the MDDA provided funding for a period of three years.  She asked how the community media organisations were sustained after the initial three year period.  She asked how the activities reported on during the briefing would assist communities.  She noted that 25% of advertising spending had been committed to community media and she wanted to know how effective this had been and what benefit there had been to the community.  She asked for an electronic copy of the MACSA Charter to be e-mailed to Members.

Mr B Steyn (DA) asked for more clarity on unregulated players in the industry.  He understood that transformation of the industry was work in progress but target dates to achieve the objectives had not been included in the briefing.

Ms R Morutoa (ANC) observed that much had been achieved.  Previously there was little understanding between the MDDA, ACA and ASA and she was pleased to see that this matter had been resolved.  She asked if the MDDA was involved in an initiative in Namaqualand to promote the indigenous Nama language.

Mr Mtimde explained that the 25% advertising spending commitment to community media was made by BrandSA in particular.  The commitment from government was to increase the allocation of advertising spending to community media in order to increase the access of community media to advertising revenue, promote media diversity and to reach target audiences, particularly in remote rural and disadvantaged communities.  The annual report of the MDDA reflected the increase in government commitment.  The distinction between community media and privately-owned local community newspapers must be clarified.  Community media organisations were not regarded as charities but were considered to be essential communication tools that were owned and operated by the communities they served.  Financial support was aimed at promoting the communication agenda.  The MDDA recognised that certain community media organisations could not be sustained financially by the local community; others only required start-up funding and others requested funding for specific projects.  The varying financial realities were taken into account by the Agency when applications for funding were considered.  Communities benefited directly from increased revenue from government advertising as the community media entities became more financially viable and less dependent on MDDA grants.

Mr Mtimde disagreed that the SETA’s had been a failure.  The extent of the effectiveness of the SETA’s had not been established.  The SETA’s could add value to skills development and skills retention and contribute to the growth of the sector.  The MDDA continued to work with the SETA’s and a more detailed report on training outcomes could be provided.  The proposed online booking system would assist with monitoring the effectiveness and impact of advertising campaigns.  The system would generate reports from the data provided.

Mr Mtimde said that the parties involved in the transformation process were separate entities, each with its own mandate and areas of focus.  The parties needed to work together and share a common understanding in order to achieve the objectives.  A good working relationship had been developed, which was bearing fruit.  Significant progress had been made since the initial Parliamentary probe into the advertising industry in 2002.  The gazetting of the MACSA Charter in August 2008 was a milestone, although challenges with compliance and effectiveness remained.  It was necessary to strengthen the mechanisms for implementing the Charter.  The MDDA was an organ of State but worked closely with industry bodies.  The Agency was in a position to identify the players in the sector and to assess performance in the market.  The MDDA had engaged with individual media owners and other bodies in the print media sector to clarify the definition of community media in the MDDA Act, to assess the performance of the sector in achieving transformation and to ensure that accurate reports were submitted.  Definite target dates and timelines had been set for the various programmes of the MDDA.

Mr Mtimde advised that the MDDA was committed to the promotion of all indigenous languages.  The Agency required a commitment from project applicants to meet indigenous language promotion criteria.  The licenses issued to media entities included language criteria as well.  The MDDA encouraged organisations to exceed the targets for the use of indigenous languages in print publications, radio and television programmes.

Mr Mtimde said that the MDDA did not necessarily advocate that media brokers should be regulated but intervention was necessary to address the current challenges.

Mr Maphiri explained that media brokers had positioned themselves as a type of external sales arm of community radio stations and print media entities.  Many community media organisations found it difficult to directly access advertising opportunities.  Media brokers listed community media organisations where the advertisements would be placed when approaching sellers of advertising.  In certain instances, the promised advertisements were not placed with the community media concerned.  In other cases, the advertisements were published or flighted but the community media organisation was not paid the agreed amount by the broker.  The MDDA had requested annual reports from media brokers.  The information in the reports was verified with the community media organisations concerned.  At first, reports were received but few brokers continued to submit reports to the Agency in subsequent years.  It was necessary to investigate how media brokers conducted business as the industry was not being held accountable.  The proposed online booking system would allow community media organisations to gain direct access to government advertising campaigns.  The system would allow advertisers to track the advertisements and payment would be made directly to the media entity.  The MDDA had monitored the recent community radio campaign of a State-owned entity.  A list of radio stations was provided and payment for the advertisements was approved.  The MDDA had found that certain community radio stations listed by the media broker as stations where the advertisements were flighted knew nothing about it.

Mr Nkomo advised that the role of the SETA’s had been reviewed and that the MACSETA was in place.  Black students had benefited from the bursary scheme for five years.  The development of the community media sector was a national imperative and common understanding amongst all the stakeholders of the sector was essential.  The achievement of the national agenda required all stakeholders to work together and the ACA would continue to work together with government entities, such as GCIS.  During the development of the MACSA Charter, stakeholders were allowed to voice dissent but ultimately, unity was achieved and the Committee had approved the final document to be gazetted and presented to the DTI.  The process of achieving Section 9 status for MACSA was delayed for two years.  Since the appointment of two liaison officers, the process had been resumed and was expected to be finalised during 2012.

Mr Nkomo said that the Committee was responsible for conducting oversight and that it was essential that there was common understanding of community media.  The MDDA played an important role in promoting community media.  Initial criticism of the role played by the ACA had been resolved.  The stakeholders involved in the process remained independent but all parties were working together to achieve the common goals.

Ms Van der Haar reiterated that it was essential that all parties worked together.  The field of communication was broad and it would be necessary to extend the issue beyond the advertising sector.  Progress had been made in addressing the transformation issue and the ACA valued the relationships that had been developed with other stakeholders.  The ACA was committed to strengthening the advertising sector and to further the aims of the transformation agenda.

The Chairperson acknowledged that a printed copy of the MACSA Charter had been provided to Members of the Committee.  He asked that an electronic version was made available as well.

Ms Killian was gravely concerned over the issue of media brokers.  It was a clear case of fraud if the brokers had accepted payment for advertisements that were not placed.  She asked what action had been taken by the MDDA to report incidents of fraud to law enforcement agencies.  The MDDA was a government Agency, funded by taxpayers and must be seen to take the initiative to report any wrongdoing to the relevant authorities.

Ms Shinn said that the response provided to questions about media brokers implied that fraudulent activities were rife.  She asked if any charges had been laid by the MDDA if taxpayer’s funds were missspent.  She asked for clarity on the purpose of community media and if advertising revenue from government entities could be withheld if the community organisation expressed criticism of government or allowed space for opposing views.

Ms Stella Ndabeni, Deputy Minister of Communications reported complaints from constituents that the AAA School of Advertising was not accessible to all prospective students.  The Public Finance Management Act (PFMA) procurement process required suppliers to furnish tax clearance certificates.  She asked if the inability of community media organisations to provide tax clearance certificates was the reason why the services of media brokers were used.

The Chairperson explained that the Committee had requested the various entities in the advertising sector to work together in addressing the issue of the slow pace of transformation of the industry.  He wanted to know who operated as media brokers and where they were situated.  He recalled that community media organisations in the Free State had complained that most of the advertising revenue went to middlemen.  He was aware that the South African post Office (SAPO) had launched a campaign to the value of R5 million, which involved advertisements to be flighted on community radio stations.  The Committee conducted oversight over SAPO and would require a report on the effectiveness of the campaign from SAPO.  A resolution was taken by the Cabinet that all government advertising would be centralised.  The Committee had requested a commitment from all government entities to support community media and awaited confirmation from GCIS on the percentage of advertising expenditure that would be committed.

Mr Mtimde responded that the MDDA was engaged in creating an enabling environment for the effective channelling of government advertising spending to the community media sector.  Systems were being put in place to allow for accurate accounting.  The MDDA had requested media brokers to submit annual reports in 2006.  Reports from two or three brokers were received.  Subsequently, only one broker had submitted reports.  The MDDA would continue to request information that was required for analysis of the industry.  The SAPO campaign allowed the MDDA to undertake monitoring and evaluation of the effectiveness of the campaign.  Approximately 100 community radio stations were involved in the campaign and feedback from all the stations had to be manually gathered as no electronic system was currently in place.  Sufficient evidence of wrongdoing had to be gathered before charges could be laid.  The process was currently at the fact-finding stage.

Mr Mtimde said that there were no strings attached to the financial support provided by government and the MDDA to community media organisations.  There was no editorial interference.  The list of supported entities demonstrated the diversity of opinions expressed by the community media sector.  In certain cases, the content was extremely critical of government.  The purpose of community media was to inform and educate the local community and he was confident that these objectives were being achieved.  The question concerning tax clearance certificates was difficult to answer.  The MDDA encouraged community media organisations to submit tax clearance certificates before releasing funds.  The Agency had requested the South African Revenue Service (SARS) to assist by simplifying and clarifying the process that had to be followed.

Mr Nkomo advised that 400 students were enrolled at the AAA School for Advertising in 2012.  38% of students were black.  The training course was currently being piloted at the AAA School, before it was released to other institutions of learning.

The Chairperson asked if SAPO had required tax clearance certificates from the media brokers.  He asked if the brokers were bona fide businesses.  He asked if the ACA had a programme in place to promote the AAA School of Advertising in the rural areas of the country.

Mr Mtimde said that SAPO needed to respond to the question about tax clearance certificates from suppliers.  Community radio and print entities had to submit tax clearance certificates before direct payment from government authorities could be made.  He cited an example of a media broker listing a number of community media organisations that had run advertisements, which was subsequently denied by the organisations concerned when the MDDA investigated.

Mr Nkomo said that the AAA School of Advertising was promoted during visits to high schools throughout the country.  Training courses were also available at universities, in certain cases at a lower cost than the course offered by the School.  He agreed that more needed to be done and that more progress could be made in transforming the School.

Mr Steyn was not satisfied with the responses to the questions from Members concerning the media brokers.  The statement had been made that irregular activities had occurred but it was not clear what action had been taken.

Mr Bapela commented that the matter required further investigation.  It would appear that media brokers were taking advantage of the situation.  He was not sure that the MDDA had the necessary capacity to conduct a thorough investigation into the practices of media brokers.  He surmised that the MDDA did not yet have sufficient evidence of malfeasance to support a criminal investigation.  The proposed online booking system would help to remove the need for media brokers and to ensure that the community media organisations directly benefited from increased government advertising spending.

Ms Killian observed that media management and planning was complex and certain community media organisations lacked the necessary skills and capacity to effectively manage their advertising space.  Media brokers could provide a valuable service to community media, particularly in remote rural regions.  She asked if there was resistance to allowing commercial interests to operate in the community media sector or if the concern was limited to ensuring that public funds were not lost.  She asked if the introduction of the online booking system would replace media brokers.  It was preferable that the bad apples in the media broking industry were rooted out rather than government attempting to take over the role played by the brokers.  If the MDDA did not have the capacity to investigate possible fraudulent activities, the matter should be handed over to the law enforcement agencies.

Ms Shinn said that in her personal experience, the media brokering sector was highly specialised and credible and provided a valuable service to the sector.  It was not appropriate to level unsubstantiated allegations against media brokers in a public forum.  The lack of capacity in the community media sector to effectively manage advertising operations had been acknowledged and she asked if the validity of the accusations could be established.  A serious issue had been raised, requiring further investigation.  If government funds were misappropriated, the same could be true of funds from the private sector.  The allegations that had been made against the media broker sector were extremely serious and could result in repercussions.

Mr Mtimde said that the matter arose from complaints from community media organisations during the oversight visits of the Committee.  The MDDA had followed up on the complaints and had received some information concerning specific matters related to the SAPO campaign.  The accusations were not levied against the sector in general.  Part of the problem was the lack of information provided by the brokers.  He acknowledged that the MDDA did not have the capacity to undertake investigations into alleged fraudulent activities.  The mandate of the Agency included creating an enabling environment and problems reported were followed up.  The Agency had established that certain undesirable practices had occurred but sufficient evidence to support criminal charges had not been yet been found.  The matter was still under investigation and the proper procedures would be followed in pursuing the matter.  He denied that there was any resistance to allowing middlemen to operate in the sector - the problem was the practices followed by the middlemen.  Once the proposed systems were in place, the role that could be played by media brokers would be clarified.

The Chairperson remarked on the diverse nature of the industry.  There was little integration between the highly specialised, professional level and the level at which community media operated.  Further investigation into the allegations concerning media brokers was required.  He suggested that definitive statements were avoided until sufficient evidence to support the alleged corrupt activities was available.  The Committee would request a report from SAPO on the outcomes of its media campaign.  SAPO would be held accountable for the action taken against any fraudulent activity associated with the campaign.

Mr Steyn said that the statistics included in the ASASA briefing document did not add up to the total number of complaints dealt with.

Ms Newhoudt-Druchen asked for clarity on the increase in the number of complaints received by ASASA.  She noted that a relatively large percentage of complaints were rejected but no reasons for the rejections were provided.

Ms Morutoa said that the information provided in the briefing document did not assist Members to understand the statistics.

Ms Msibi explained that the ASASA Code of Practice limited investigations to certain categories of complaints.  Complaints falling outside the jurisdiction of ASASA were rejected.  The reason for the rejection was given to the complainant.  The information included in the briefing document was an overview and more detailed information was provided in the Authority’s annual report.  ASASA had observed a significant increase (55%) in valid complaints.  Total complaints had increased by only 6%.  In certain cases, the same complaint was made by both consumers and competitors.  She undertook to provide more detailed information at future briefings of the Committee.

Ms Ndabeni suggested that more detailed presentation documents were prepared as the documents were made available to the public.

Ms Newhoudt-Druchen asked if rejected complaints were referred to the correct entity for further action.

The Chairperson asked if ASASA was involved in complaints concerning inaccurate references to products included in the dialogue of programmes such as soap operas.

Ms Msibi confirmed that rejected complaints were referred to the appropriate organisation for further action.  Programme content was covered by Independent Communications Authority of South Africa (ICASA) licensing provisions.  References to products were also known as ‘placement’ and ASASA would assess the complaint to determine whether the placement was an advertisement (to be dealt with by ASASA) or content (to be dealt with by ICASA.

Mr Nkomo offered to present a more detailed briefing to the Committee on the operations of ASASA.

Mr Steyn asked for an explanation for ACA missing a workshop due to confusion about dates.

Mr Nkomo explained that the date of the workshop in the invitation was 7 December 2012.  The workshop was however held on 7 December 2011.

Ms Rene Smith, Member of the MDDA Board gave the assurance that the MDDA undertook rigorous assessments of projects, engaged with stakeholders and was aware of the challenges faced by the industry.  Compliance workshops were facilitated with the aim of improving professionalism in the industry.  The allegations made against media brokers were taken seriously and a more detailed response would be provided to the Committee in future.

Mr Nkomo assured the Committee that progress was being made in achieving the transformation of the advertising sector.  The ACA would continue to work closely with the other stakeholders.

Ms Van der Haar expressed appreciation for the positive engagement with the Committee, which was productive and helped to resolve the challenges faced by the industry.

The Chairperson said that the progress that had been made was acknowledged by the Committee.  Sufficient time for implementation would be allowed before the entities would be invited to submit the following progress report during July/August 2012.  The dates for the briefing on the print media indaba had not yet been finalised.  He thanked the representatives from MDDA, ASASA and ACA

Other Committee Matters
The Chairperson advised that the minutes of the recent Committee meetings would be tabled for adoption at the following meeting.  Ms Shinn had submitted a written request for the Committee to invite the Minister of Communications and the SAPO Board to present a briefing on the current state of affairs at SAPO.  A copy of the letter had been circulated to Members and the matter would be discussed at the following meeting of the Committee.

The meeting was adjourned.


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