Transformation in the Advertising Industry: public hearings

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Communications and Digital Technologies

12 November 2002
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Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
12 November 2002
TRANSFORMATION IN THE ADVERTISING INDUSTRY: PUBLIC HEARINGS

Chairperson: Mr. N Kekana

Documents handed out:
 

 

Introduction by Yacoob Abba Omar
Advertising Standards Authority (ASA) submission
Consumer Affairs Committee (CAFCOM) submission
MFSA submission
SAARF submission
Advertising Media Forum (AMF) submission
Survey: Representivity & ownership in advertising & marketing Industry
Link to GCIS website with all related hearings documents

SUMMARY
Hearings held in 2001 revealed that the advertising and marketing industry had not transformed in terms of ownership and in the way it marketed products in advertisements. Following these hearings, the industry was tasked with transforming the industry.

In this 2002 hearing, various stakeholders in the industry reported on progress made in the industry and problems which it still faced. The hearing follows a succession of 8 plenary meetings that have been held since the first hearings in October 2001, in which industry representatives have deliberated on the following issues: vision for the industry, the regulatory debate surrounding the industry, representativity in and ownership of the industry, and advertising spend.

MINUTES
Introduction by Committee Chairperson
The Chair commented that in the eight years of democracy, much had been achieved in South Africa; in some cases, even more than expected. There had been many debates about racism and South Africa had been very patient. He felt though that there needed to be an acceleration of change and that the country needed to move beyond racism. Racism was a sickness of the mind and it can be cured. The Committee had tracked and monitored the transformation debate in the advertising industry. It made business sense for the industry to understand the daily life of South Africans. It was not easy to transform, but that it was important to remain focused. He called the industry to point the way forward and that he hoped they would not return to the status quo after the hearings. He felt that the Committee had to facilitate dialogue so that positive results could be achieved.

Introduction by Hearings Facilitator
Mr. Y A Omar, facilitator of the plenary sessions, outlined the process that had been followed after the last hearings in 2001. He explained that various stakeholders in the industry had got together and had studied the industry and its progress in transformation. The results were to be presented to the Committee over the next two days. He pointed out that the hearings were not to expose racists, but rather to explain what is happening in the industry at the moment and what is being done to transform (see document for full text of his introduction).

DiscussionMs M Smuts (DP) welcomed the fact that the hearings were not to be a racist witch-hunt. She felt that that the real problem lies with market mechanisms. It was the way products were marketed which was the real cause of concern.

Advertising Standards Authority (ASA) submission
Ms. D Beukes explained that the ASA was an industry body and it was a self regulatory body. The ASA followed the international code of practice in regulating how advertisements were produced. She cited examples of advertisements that had caused problems, e.g. Landrover, and how it had been dealt with. She added that following the ASA's television campaign, complaints had increased by 53%. They had also produced a booklet explaining to the public how to complain (see submission).

Consumer Affairs Committee (CAFCOM) submission
Ms. A Lotheringen explained that CAFCOM was a statutory body which was part of the Department of Trade and Industry and was governed by the Consumer Act. She explained the Act and the functions of the committee. CAFCOM deals not only with unfair business practices, but also with businesses practice in general. She pointed out that CAFCOM was the "big stick" of the ASA. When the ASA was unable to act against one of its members or a non-member, CAFCOM would act (see submission).

Discussion
Mr. Maziya (ANC) commented that last year's hearings had been dominated by males and he had observed the same this year. He asked what was meant by fair competition. He also inquired about the ASA's make up which was 50% public and 50% independent. He asked what public meant.

On the point of fair competition, Ms. Beukes remarked that the ASA had resolved 147 cases between competitors. These cases had involved disparagement, use of intellectual capital, stealing of ideas and unfair claims. Mr. Nkomo, also a member of ASA, explained that the public meant anybody outside of the industry. Ms Beukes added that public interest bodies that were represented included the Gender Commission, the SABS and the Housewives League.

Ms. Smuts asked when advertising agencies had to substantiate their claims in their advertisements and also suggested that all advertisers should be members of the ASA.

Mr. Nkomo explained that there was no pre-censorship. He pointed out that only once a complaint had been lodged with the ASA, would they act. He explained that even if one person complained, they would act. Ms. Lotheringen added that CAFCOM does not wait for a complaint before it investigates. They could act should the Minister, Reserve Bank or a member ask them to.

Mr. F Masermule (ANC) asked what below and above the line meant in the industry and who decides what is newsworthy.

Ms. Beukes explained that above the line would refer to media that could be controlled such as television, radio and print.

Ms. S Vos (IFP) asked what capacity the ASA had to deal with complaints.

Ms. Beukes pointed out that the ASA has dealt with 1 500 complaints this year. Eighty percent of these involved the public interest and 20% were independent. Members of the industry could appeal any decisions made. Ms. Lotheringen added that as far as CAFCOM was concerned, the DTI was busy restructuring and the capacity of CAFCOM was being investigated.

Ms. Morutua (ANC) asked what recourse consumers had if they felt they were not being targeted.


There is some progress that has been made towards transformation, but that progress is very slow. There is good emphasis on training, but not enough for black people in the industry.

Due to time constraints, the meeting adjourned without discussion of this final presentation.

 


Ms. Lotheringen replied that there was a problem in that consumers did not know where to complain. Less than 2% knew about the committee. She added that there is protection and that consumers could remain anonymous.

Mr. Maziya (ANC) wanted to know how the ASA could ensure that standards are in place - if it acts even when one person complains. He also asked how the ASA determines fair competition if channels are used which have a small following.
 

Ms. Beukes replied that the ASA was seeking legal underpinning and that at the moment it did not have enough teeth to cover all areas. As far as standards were concerned, the code was being renewed annually and that the public was involved. She also pointed out that there was a committee in the ASA which set standards. It was also not possible for the ASA to determine what channels were being used by advertisers.

Mr. Omar added that the debate between self regulation and legislative regulation would continue to be around for some time. What was needed was a regulating framework to support self regulation. It was found that internationally this was happening.

Mr. Nkomo suggested as well that a forum needs be set up which would address issues and which would have some power. Addressing the issue of racial stereotyping in advertisements, he said that once it had been raised as a complaint, the ASA can act against it. He added though that the thinking behind such advertisements had to be tackled.

Mr. Kekana, the Chair, added that consumers needed to be aware of their rights. There needed to be a usable policy so that certain advertisements could not fall through the cracks.

Marketing Federation of South Africa (MFSA) submission
Talking on a new creative value system, Mr. T Ikalafeng noted that South African advertising was world class and had won numerous international awards. He did however add that there were still some problems in the industry involving the number of black people in the industry - and especially on the creative side. He asked whether the industry had embraced the South African culture or whether it was embracing some other culture (see submission).

DiscussionRev. M Chabaku (ANC, NCOP) commended the fact that young people were being targeted in advertisements, but she was concerned that old people were being excluded. She was also concerned about the ethics and words used in advertisements which were not sound.

Mr. Masermule asked whether self regulation was the ideal situation. He also pointed out that the good advertisements were exceptions. Many advertisements still depicted black people as servants. here were many BMWs in Soweto yet one seldom saw a black person driving one in advertisements.

Mr. Ikafeleng explained that self regulation was governed by society and that the community sets the tone and that it could be done by the community.

Ms. Magazi (ANC) referred to a Joshua Doore advertisement which gave only the installment price and not the full price. She questioned this deceptive message to the public and felt that it was targeting below the line.

 


Mr. Ikafaleng responded by saying that consumers need to be empowered so that they could complain to the ASA or CAFCOM.

Ms. Morutua (ANC) asked how many black women were in the industry and whether there were any bursaries given to young blacks to qualify themselves in the industry.
 

Mr. Ikalafeng replied that statistics would be given in a later presentation and that bursaries are given. He also pointed out that advertisers or agencies are really only the executors in a process, yet they were seen or acted as leaders. He felt that this had to change.

The Chair once again urged the ASA and CAFCOM to set up call centres so that the public could submit complaints more easily.

South African Advertising Research Board (SAARB) on Segmentation Processes
Ms. M Tshwaedi explained that advertising agencies were the last in the marketing process. She explained how markets are segmented and why it is done. The hypothesis done in the research was that discrimination determines spending. She explained that the Living Standard Measures (LSM) were not racist, but that the way it was used could be racist

Advertising Media Forum (AMF) submission on Advertising Spend Transformation Index
Ms. B Wortley presented research done around amounts spent on advertising in different media and related this to the audience in those media. There was a great variation in advertising costs on radio stations. Even though some radio stations cost more to advertise, they had more advertisements because of the market that the advertiser wants to reach. She pointed out certain disparities, for example, 5FM which had an audience of 680 000 had more advertising than Radio Ukhosa which had an audience of 4 million (see submission)

Discussion
Ms. Smuts commented that she was glad that advertising on YFM and Radio Khaya had increased significantly in 2001.

Mr. Maziya remarked that advertisers were targeting the wrong sectors. The lower LSMs were spending more money yet there was not much advertising in that part of the market.

Ms. Wortley confirmed this. She explained that 83% of blacks were in LSMs 1 to 5 (earn less than R3500 per month) yet there was less advertising targeting this market. LSMs 6 to 10 contained 98% whites and 12% of blacks - yet this is where most of the advertising is targeted at. She pointed out that lots of advertising took place in below the line media and that was not measurable. There were certain media which were aimed at niche markets but had more advertising spent on them because they targeted a high income audience.

In response to a question by Mr. Maziya about government spending on advertising, Mr. T Trew, Deputy CEO of the GCIS, said that government acknowledges that there is problem and is particularly concerned about the rural areas.

The Chairperson urged the industry to stop spin doctoring and face the fact that 75% of the population is black and it therefore makes no sense to target only white audiences because they had more money. The sheer volume of people meant that black people would consume more of a particular product.

Representivity and Ownership of the Industry
Mr Joe Mjwara (Dept of Communications) noted that the Department had commissioned a survey to gauge representivity and ownership in the industry. Mr Varish Ganpath (Prodigy Business Services) had compiled the survey in conjunction with the Advertising and Communication Association (ACA), Advertising Media Forum (AMF) and Association of Marketers (AoM).

Mr Ganpath's presentation on the survey results covered: employee demographics, shareholders and ownership profile, enabling and constraining factors, and recommendations. Slide profiles relating to demographics showed an under-representation of Blacks (20%), and an overrepresentation of Whites in the industry. There was a 16% representation of blacks in senior management, with 84% of senior management being non-black. The numbers skewed very high in favour of white female representation. Representation swung from one extreme to the other, when elementary job categories were considered. The lower levels of management, such as clerks, were starting to balance out along the racial spectrum. These more elementary positions could pave the way forward for transformation within the industry. Some companies had levied senior staff members with the responsibility for overseeing the transformation process within their department or company.

Training and Recruitment:
There was no indication of a trend towards recruitment in favour of bringing numbers to the correct representation. Recruitment for white females was at 40%, and 51% for non-blacks.

Training for blacks in the industry was not what it should be. Very little training was made available to blacks in senior or middle management positions.

On the matter of promotions, there was again an improper balance.

All the indicators point to the lack of an active drive to transform the industry.

Targets for BEE in the industry:
A company must have 26% black ownership to qualify for government tenders, and many of the big companies have now aligned themselves to this requirement.

Conclusion

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