Presidential Creative Industries Task Team: Deputy Minister in Presidency briefing; Enyokeni Cultural Precinct Project forensic investigation

Arts and Culture

01 November 2016
Chairperson: Ms X Tom (ANC)
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Meeting Summary

The Presidential Task Team briefed the Committee on the creative industries, saying that the immediate challenges facing artists included coordinating government’s response to concerns of the the creative industry, catalysing and accelerating the creation of a conducive environment for artists to contribute to the economy, job creation and general transformation of the country. The industries should work together to intervene against piracy, intellectual property and copyright infringement, The agreement was also that the Department of Arts and Culture (DAC) should also take active steps to increase local content and enable the media to foster values and drive social cohesion and nation building, while also extending social welfare and social insurance coverage. The Task Team comprised of seven departments, each being represented by their respective Deputy Ministers.

Due to the on-going challenges in the industry, several recommendations were made. Firstly, it was recommended that the Copyright Act be amended to allow for one collecting society per set of rights, for all music governed by the Copyright Act of 1978. The Department of Trade and Industry should  develop a standardised template of terms and conditions for contracts in the music sector and that government should administer all collecting societies. Artists not signed to any agency are being encouraged to make use of existing legal protection The Department of Trade and industry had  has organised workshops where artists are taught how to register formal businesses and how to order their intellectual property. The Directorate for Priority Crimes Investigations (DPCI or the Hawks) had dedicated capacity, at a national and provincial level, to prevent, combat and investigate offences relating to intellectual property rights. Another change was the decision, by SABC on 12 May 2016, to implement 90% local music across all 18 radio stations. Royalty payments for music, raising this from 3% to 4% on radio stations, were made and would be paid out to registered musicians through their collection societies. The Industrial Development Cooperation and National Film and Video Foundation has provided production supervision and mentoring for film makers, and a little background to the NFVF was provided.

Members generally felt that not enough insight was given to development funding, but noted that an organisation that funds culturally significant films may not have a large commercial return. However, several expressed the view that the report did not contain enough information on the challenges faced by artists, nor on strategies and plans which the task team would implement. They asked about royalties for artists and noted how the White Paper Review might impact on the process, although the slow pace of that could cause challenges. They also wanted to know more about the practicalities of the 90% content requirement. It was recommended that the Committee should meet with with the Portfolio Committee on Trade and Industry to discuss amendments to the Copyright Act.

DAC then reported back on the forensic investigation into the Enyokeni Cultural Precinct, which had been a joint project between DAC and the Independent Development Trust (IDT). Gobodo Forensic and Investigating Accounting had conducted a forensic investigation after State Law Advisers had raised several concerns around policy frameworks, project planning, acceptances, processes followed and supply chain considerations, in the 2012/13 year. The final report was given to the DAC in January 2016. The DAC had originally received a request for capital funding and financial support to extend the Isibhubhu Cultural Arena to accommodate up to 50 000 attendees.  However, there was no formal process either to initiate the project or approve the funding and in fact there was nothing that expressly authorised the DAC to attend to cultural precincts, unless the place could be declared a national heritage site, so the project had to be classified as rendering financial support. Even then, nothing was incorporated into the Annual Performance Plan, there was no proper planning, legal frameworks and principles around land ownership and contracts were never taken into account, nor was the final use to be gained from the Precinct. A budget of R129 million had been approved by the former Director General and it was managed by an official who then appointed in several consultants, costing over R20 million. There were numerous irregularities about the construction process and over R11 million was paid to the IDT contractor for items that did not contribute to value overall and were classed as fruitless and wasteful, whilst the Administrator then charged R3 million more than the statutory fee. Large amounts were shifted from project to pay for VIP and Royal Square sections. Overall in addition to the fruitless expenditure, the primary objective was not achieved, nor was there any value-add from the “plethora” of consultants, who were essentially doing the work that IDT were paid to do. It was recommended that in future DAC must have clearly documented criteria and processes in place, adjudication committees appointed, roles set and that a task team must reconcile amounts still owing to IDT. Members felt that they could not do justice to the report now, but would discuss it the following week. They did feel that more detail was needed, particularly on criminal charges, corrective actions, and officials being named.  

Meeting report

Presidential Creative Industries Task Team: Presidency, Presidential Task Team and Department briefings
Mr Buti Manamela, Deputy Minister in the Presidency, said the first Presidential Creative Task Team was established by the President in 2009, and was chaired by the Deputy Minister of Arts and Culture. He had chaired the current task team from 17 June 2015, and the team was to continue with the work that was done by the previous task team. The current task team was tasked with championing support to performing artists and musicians on matters including, piracy, copyright protection and infringement, local content and airplay in broadcast media, social welfare and security, and income tax awareness.

Ms Josephine Hlope, Outcome Facilitator: Department of Planning, Monitoring and Evaluation said the terms of reference for the task team included:

- coordinating government’s response to concerns of the creative industry
- catalysing and accelerating the creation of a conducive environment for artists to contribute to the economy
- job creation
- general transformation of the country
- allowing interaction between the President, Deputy Ministers and performing artists and industry participants.

The team has also been tasked with providing strategic platform for decision making in government, civil society and the private sector to discuss collective action that will accelerate transformation.
The team’s immediate tasks have been identified. It is mandated to effectively intervene against piracy and intellectual property and copyright infringement, increase local content, enable the media to foster values and drive social cohesion and nation building, and extend social welfare and social insurance coverage and income smoothing to artists and skills development. The team has embarked on various interventions and consultations to unlock and optimise the performance industry throughout the value chain, including meeting with the entire industry representatives. Each department that contributes on the task team is assigned with key deliverables, to deal with specific areas affecting the creative industry.

The same key deliverables are also assigned to state agencies, who are responsible for specific sectors, such as the National Arts Council and Media and Motion Picture Division. Several Deputy Minsters were involved; namely Mr Buti Manamela from the Presidency, Ms Rejoice Mabudafhasi from Department of Arts and Culture (DAC), Ms Stella Ndabeni-Abrahams from Department of Communications, Ms Henrietta Bogopane-Zulu from Department of Social Development, Mr Mcebisi Jonas from Department of Finance, Ms Maggie Sotyu from the Department of Police, Mr Mduduzi Manana from the Department of Higher Education and Training, and a Deputy Minister of the Department of Trade and Industry.

Ms Hlope noted that the creative arts sectors have formed the Cultural and Creative Industries Federation of South Africa in order to enable artists to speak with the same voice. The main objective of this structure is to organise, unite and develop and grow the creative industry. There are still many challenges being faced by artists in the creative industry, and hence the task team began endorsing the implementation of the recommendations of the Copyright Review Commission (CRC). The CRC recommended that the legislation be amended to allow for one collecting society, per set of rights, in respect of all music governed by the Copyright Act of 1978. Furthermore, it had recommended that the Department of Trade and Industry (dti) should develop a standardised template of terms and conditions for contracts for the music sector and that government should, through the Act, administer all collecting societies. Collecting societies must collect only for their registered members . It was recognised that education and awareness on intellectual property (IP) is paramount, and a critical success factor.

The Copyright Amendment Bill and the Performers Protection Bill were introduced to Parliament in July 2016. These Bills allow for one collecting society per set of rights, cover all music governed by the Copyright Act of 1978, allow fair compensation for the commercial re-use of works, such as the rebroadcasting of films in the area of copyright across the value chain, and for an artist to be entitled to a royalty when their work is resold. Meanwhile, private persons are being encouraged to make use of existing legal protection. The dti had organised workshops where artists are taught how to register formal businesses and how to order their intellectual property (IP). They are also encouraged to register a company in order to benefit/access government assistance and incentives.

The Directorate for Priority Crime Investigation (DPCI) has dedicated capacity at a national and provincial level to prevent, combat and investigate offences relating to intellectual property rights. The difficulty in implementing the Copyright Act 98 of 1978 and the Films and Publications Act is that the IP holder must raise a complaint and the police must ascertain from the IP owner whether or not the suspect had the requisite authority to trade. The police must then prove that the suspect had prior knowledge that the item in question is counterfeit goods. The situation was not made any easier by operating within an environment of old legislation but advanced technology, but in spite of these difficulties 42 arrests were made in 2015/16 and R2.3 million worth of goods were seized.

On 12 May 2016 the South African Broadcasting Corporation (SABC) took the decision to implement 90% local music content across all 18 radio stations. The music to be played cuts across all genres. This guarantees that 90% of a wide range of music royalties will remain in South Africa. The SABC also increased royalty payments for music, from 3% to 4%, on radio for all collecting societies. These royalties are to be paid out to registered musicians through their collection societies. The work of the task team continues as more work needs to be done on local content on radio and television, needle-time payment for musicians, commercial exploitation fees for television actors and updated industry agreements for freelance performers.

The Industrial Development Cooperation (IDC) has provided production supervision and mentoring for film makers if needed and it also assists with distribution and marketing of the films. For the 2016 year the IDC funded films in which the youth had a shareholding of over 25%, amounting to R275 039 970. The National Film and Video Foundation (NFVF) was given the mandate to develop and promote SA film and to provide opportunities to from disadvantaged communities to get involved in the industry. The NFVF is the only institution that provides development funding and the only organisation that funds cultural significant films that have limited commercial return. This year alone, the NFVF has funded 66 projects, while 38 of these are in the development phase. The task team has identified weaknesses within the Black Emerging Film-makers Transformation Fund. The IDC and NFVF have been tasked to come up with a plan to render this fund more accessible in areas where it is needed the most.

Ms Hlope concluded that a sub-committee comprising of all the departments that deal with social welfare and social insurance has been convened. In the interim it is proposed that a desk is set up in the DAC to provide financial advisory and planning services to artists. The DAC must also improve awareness around the existing products in the market. The Department of Labour should conduct an investigation into how artists could be included in the UIF. The White Paper on Arts, Culture and Heritage (1996) is currently being reviewed taking into consideration what had worked in the past, and what has not worked, towards achieving radical economic transformation.

The Chairperson said that artists are job creators and the public needs must support them as they do with any other business. The presentation did not contain much detail on what the challenges and weaknesses are that are currently being faced by artists in the industry, nor on those identified by the task team. The Committee's task is to provide support to the creative industry, and so the Committee had to be given clear explanations on what steps the task team planned to take to ensure that the creative industry is managed effectively. This information is important for the monitoring process, to assess whether the task team has achieved its planned goals. The police are not working hard enough to try to stop the piracy of intellectual property. This then forces artists to take matters into their own hands. There should be proper co-ordination between all the departments represented on the task team to ensure the strengthening of the industry. She also alluded to the importance of setting timeframes for each project, otherwise plans and projects will always be referred to as being ‘on-going’ processes.

Mr T Makondo (ANC) said the presentation lacked details and he was also unable to understand what the artists' main challenges are, because of the minimal information that had been provided to the Committee. He asked what the task team was doing to ensure that there was proper co-ordination between the departments, and also asked how artists did receive royalties from companies such as MTN and Vodacom and from advertising companies who sell their songs as ringtones or use them as jingles. A lot of piracy happened over the internet and this required a different kind of approach. He asked what the Directorate for Priority Crime Investigation (DPCI) was  doing to ensure that it had enough capacity to deal with the piracy taking place on the internet.

Mr G Grootboom (DA) asked how royalties are being paid to artists, whether quarterly or monthly. He wondered how the requirement for 90% local content would advantage the artists. He said the bursaries for film-makers had to increase.

Ms S Tsoleli (ANC) said she agreed with colleagues that the presentation lacked detail and information. It was difficult for Members to engage on a presentation that does not give much information to discuss.

Mr M Rabotapi (DA) said the review of the White Paper process is moving slowly, and asked what the task team had done to get it moving along more smoothly.

Ms N Bilankulu (ANC) asked if the task team was operating at a national or provincial level.

Mr J Mahlangu (ANC) said the Committee was happy with the decision to play 90% local music. He urged this decision should not be reversed, regardless of the internal politics in the SABC. He had an issue with the Copyright Bill and asked how does the task team or Hawks intended to prove that an infringer knew that he was violating a law when he sold pirated goods. He said that this would be difficult to prove in court, and he recommended that an amendment to the Copyright Bill be considered.

Mr Mahlangu added that some of the SABC radio stations may not be happy with the 90% local music – for instance Lotus FM, had complained that the 90% local music requirement disadvantaged it because there was not enough local Indian music that could be played in order to reach the 90% local music target. He asked how the task team will deal with this matter Lotus FM may not be the only radio station that is dealing with this matter and facing these problems.

Mr Mahlangu fully understood that there is a problem with filling the critical vacant positions in the state agencies but urged that the Presidency must ensure that financial positions are filled with competent employees.

Mr Manamela responded that the task team is working with all provincial departments, and it has succeeded in co-ordinating all the departments to form good working relationships between themselves. He added that this was previously not the case. The Committee is an important part of the of the task team and he believes that they have done a lot of good work and done more than enough to try and help to capacitate the task team. The challenges faced by artists have been listed under the “Background” and “Introduction” sections of the report. He reminded the Committee that when people refer to artists, they are not only referring to musicians and actors, but to poets and sculptors as well. The intention of the review of the White Paper is to co-ordinate and add different categories of artists, like poets and sculptors so that they can also receive royalties for their work. There are a number of collecting societies in the creative industry, but the problem with many was that they struggled with providing the SABC with verified names of the artists for which they are collecting royalties for. SABC has thus not been engaging or working with these societies until they were able to provide verified names of the artists. It is imperative that the SABC verifies these names so that that the collecting societies rightfully pay royalties to artists.

The 90% local music decision was taken after the former Chief Operating Officer had consulted with all the 18 radio stations that fall under the SABC. Those that expressed concerns over the decision were told to at least try to play 70% local music. Nonetheless, the challenge here is ensuring that royalties reach the artists and does not stay with the collecting societies, music companies or producers. As such, a sub-task team has been created to try and deal with these challenges. The Committee can expect to receive a report in March 2017 on the progress which has been made by the sub-task team.  

Major-General Alfred Khana, Head of Commercial Crime; DPCI / Hawks, said the Copyright Bill is a complex issue because the Bill is hybrid, involving both civil and criminal charges. The Bill envisages that the IP owner must firstly lay a complaint of theft against the person whom they believe has been selling pirated copies of the artist's work. The Hawks must then to follow up on the charge which has been laid. The reason why SA Police Services) (SAPS) and Hawks cannot lay the charge is due to the processes that must be followed. For example, if the seller of the pirated copies has received authorisation from the IP owner to sell their music/movies then the person can lay a charge of negligence against the police, especially if the goods were damaged during seizure.

Ms Mashendri Padayachy, Deputy Director, Department of Trade and Industry, said the DTI has developed a tribunal system for artists to log complaints. The administration costs must not exceed 20%, and the collecting societies can only collect for one creative industry. The Bill is currently being reviewed, and in the future will include poets and crafters as well so that they can get royalties for their art.

Mr Visuthemba Ndima, Acting Director-General; DAC, told the Committee that there will be an Indaba to address the issues in the White Paper and to consult with stakeholders regarding on amendments. He added that the department is working hard to ensure that critical vacant positions are filled to increase capacities.

Ms Tsoleli said the review of the White Paper must be fast tracked, because artists are complaining that there is no legislation that protects their IP. She said that it seems the Department currently focuses more on getting the easier tasks done, than the important tasks. She questioned the legitimacy of the 90% local music decision, and asked whether this decision has been added somewhere into legislation, for she pointed out that if it had not, the radio stations could ignore it. The 90% local music decision is good for the artists and the creative industry. However, there seems to be a tendency for some vernacular radio stations to play only music that is sung in their vernacular language, and not play other songs that are sung in any other languages.

Mr Grootboom asked if the Department of Labour had considered establishing a pension fund for artists, and which entity would be responsible for ensuring that painters get the correct royalties when their art is sold at a gallery.

Ms X Tom (ANC) wanted to know who the task team had consulted as stakeholders, and said that the answer this was very important. Sometimes, the Committee had found consultation minimal and the task team was not consulted. She said that this question is important because at times the Committee has found that there consultation was minimal and there was not a variety of stakeholders at the consultation table. She asked about the tagging of the Bill as a section 75 of 76 Bill; she tended to think that many stakeholders and agencies would be involved with the implementation of the Bill.

Mr Manamela recommended that this Committee should meet with its counterparts in the Portfolio Committee on Trade and Industry in order to communicate and to makes inputs as to how the Copyright Bill should be amended.

He said that 80% local music is the minimum which radio stations can play and the issue of “balkanising” music to play only one genre of music will be dealt with in the task team. He concluded that playing local music was very important, especially for young people. Through local music, young people can learn about cultural values, norms and languages.

He also mentioned that the SABC currently has a channel called “Encore” that plays films and television shows from the past. The artists on those shows should also be receiving royalties but the task team is still waiting on the SABC to hear how they are going to tackle this matter.

Enyokeni Cultural Precinct Forensic Investigation:  Department of Arts and Culture briefing
Ms Hope Matolo, Director, DAC, explained the background to this matter. The Minister of Arts and Culture had requested the Office of the Chief State Law Adviser to provide a legal opinion on the audit outcomes for the 2013/2014 financial year, which had included the Enyokeni Cultural Precinct project, where the DAC had committed itself to some developments of a precinct with the beneficiaries. The State Law Adviser recommended that a forensic investigation be conducted to answer some of the questions raised about the cultural precinct. The DAC had appointed Gobodo Forensic and Investigating Accounting (Pty) Ltd (GFIA) to conduct an investigation into allegations of impropriety in respect of the development of the Precinct. 

The State Law Adviser had raised a lot of questions regarding the cultural precinct, which included questions around the policy framework that governed the development and maintenance of a cultural precinct, the project planning and acceptance considerations, what processes were followed, what budget considerations were applied, and what were the supply chain processes followed, as well as calling for the relevant documentation. The investigation was finalised in November 2015 and a final report was issued to the department on 18 January 2016.

The facts were summarised. The DAC had received a request for capital funding and financial support to extend the Isibhubhu Cultural Arena, and the provision of concrete platforms for the erection of sleeping marquees, for approximately 35 000 to 50 000 attendees.

It was found that no formal process was followed to initiate the Cultural Precinct, and therefore there was no actual approval of the requests for funding. Apart from the National Heritage Resources Act 1999 (NHRA) and the Culture Promotion Act of 1983, there was no specific legislation dealing with cultural precincts. The closest applicable section was section 27(5) of the NHRA, which allows the South African Heritage Resource Agency (SAHRA) may declare a place to be “a national heritage site”. There was also no specific policy framework that governs cultural precincts. For that reason, the project had to be classified as one that merely gave financial support to an entity or an organisation. Furthermore, the DAC did not have any criteria or processes for evaluating requests for funding. Finally, the projects were never incorporated as part of the  Annual Performance Plan (APP), not having gone through the planning process of the Department.

The conclusion was thus that there had not been proper planning for the Enyokeni Cultural Precinct within the DAC or in the Independent Development Trust (IDT). The applicable legal framework was not considered. Critical issues such as land ownership considerations, budget arrangements and the necessary contractual arrangements were also not considered or provided for.

As at 11 February 2014 the cost of the project was estimated to be R25 million. On 7 March 2014 the former Director General of DAC had approved a budget of R129 854 000 for Enyokeni, from an under spending of the 2013/2014 Capital Works Budget.

As the project could only be described as a legacy project, it should have been managed by Heritage Institutional Development, within the DAC's branch dealing with Promotion and Preservation. However, a senior official was tasked with managing the Enyokeni project, along with additional consultants. Two of the consultants were appointed as single source appointments on 22 August 2013 by the former Director General, in the Project Support Office (PSO), which was at the time due to be established shortly. Two consultants were paid R1 776 280 for the period August 2013 to December 2014, and R2 406 059for the period of August 2013 to September 2014.

The former Director General had also appointed the IDT on 8 November 2013, for the implementation of the Heritage and Library projects of the Department. He had specifically requested the establishment of a Project Management Office (PMO). The Department reached an agreement with the IDT in a form of a Memorandum of Agreement (MoA) on 16 January 2014. On 12 March 2014 the Director General sent a letter of instruction to the IDT to proceed with the implementation of the Enyokeni Cultural Precinct, as a matter of urgency. IDT appointed a service provider for professional services on 27 February 2014, later specifically appointing it  as Principal Agent (PA) for the Enyokeni Project on 14 March 2014.

The investigators found that no proper consideration was given to the question of the ownership and maintenance of the site after completion of the Project. No proper legal agreements were concluded between all stakeholders. There was no survey of the site with a view to subdividing the land, to ensure that the rights over the sites were property secured and related to the site only. No proper consideration was given to what would really be needed for the reed dance event that only lasted a few days each year.

In relation to the actual construction process, it was again found that there was a lot that was not properly completed, including a proper scope of work, a defined budget, a detailed Bill of quantities and geotechnical surveys before the Project was embarked on.

The contractor who was appointed by IDT was paid R11 075 503 for items which did not contribute to the value of the infrastructure – such as the cost of an excavator for the sod turning ceremony, the cost of removing litter after the reed dance festival, water carts, a grader, staff to assist during the reed dance festival, security guards at the Shembe festival and for work that was to be done on a french drain in the existing palace. Such expenditure was likely to be fruitless and wasteful expenditure.

The Project Administrator appointed by IDT probably misrepresented the statutory fees that are usually charged, claiming 4% instead of the usual 1% statutory rate, or R3 000 000 more than the statutory fee.

The maidens’ pods were not constructed and the budget saved by not constructing them was instead shifted across and spent on the VIP section and the Royal Square. Geo-technical reports were used as a reason for not building the pods.

GFIA concluded that the primary objective of the project was not achieved. Quite apart from the DAC not deriving value for the spend for itself, there was fruitless expenditure of R40 496 904.15. No value had been received from the plethora of consultants hired  at a combined cost of R20 266 770.48 – broken down into R4 182 339.80 for the two consultants appointed by the Department, and R16 084 430.68 for the consultants appointed by the IDT. Quite apart from this cost, there was the principle that the IDT, together with the PA, who together charged R28 528 338.48 should have been adequately equipped to do what the consultants did.

Recommendations for the future were that the DAC should have approved and clearly documented criteria and processes in place to address all the stages and requirements for funding of cultural villages and museums. The accounting officer should consider appointing an adjudication committee to adjudicate any  request for funding from different institutions or individuals. The Department, with other key role players, should decide on the roles and responsibilities of every party involved. In addition, the DAC should appoint a task team to reconcile the amounts that the Department might still owe to the IDT for this project, and to calculate any overpayments.

Mr Mahlangu said that whilst it was very important that the Committee must deal with this report thoroughly and diligently, there was no time to do this now. The Committee must demonstrate that it was not prepared to take corruption lightly.

Ms Tsoleli agreed that that ideally the Report should be discussed next week.

Mr Grootboom agreed that this report, an important forensic report, could not be discussed in the 30 minutes remaining.

Ms Tom said she would have liked to see the report contain more details, such as an explanation of what the R28 million was used for. The DAC does not seem to have taken this report seriously, because it proposed only very light corrective actions. She asked why the project managers were charged with criminal charges first, when it was the accounting officers who had signed off on the project. Ms Tsoleli added that the accounting officer who was responsible for signing off the project must be named in the report, and so must the contractors.

The Acting Chairperson asked that the full report from GFIA be sent to the Committee as soon as possible; the Department's version did not contain enough detail. He also asked that the names of the former Director-Generals responsible for authorising the project must be included in the report.

Mr Ndima responded that the Department was hesitant about adding names of officials into the report because there were cases still being dealt with by the courts. He said that the Department will consult with its legal team, as to what names can be disclosed in the report.

The Acting Chairperson said the Committee has the authority and right to know who the accounting officers responsible for authorising the projects are. The Constitution of South Africa gives the Committee the powers to request any information which the Committee deems as relevant. He added that he found it strange that the Director-General and Chief Financial Officers’ names have been left out of the report, but the name of the project manager has been added. He cautioned that no one should withhold information from the Committee.

The meeting was adjourned.  

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