Issued by: Independent Broadcasting Authority
REASONS FOR THE DECISION
in relation to
APPLICATION FOR
PRIVATE SOUND BROADCASTING LICENCE FOR
RADIO JACARANDA/RMFM
BY
NEWSHELF 71 (PTY) LTD
AND
NALEDI MEDIA INVESTMENTS
1. BACKGROUND
The Independent Broadcasting Authority Act (the Act), requires the Authority to conduct an inquiry into the protection and viability of public broadcasting services, cross media control and South African content.
In its report to Parliament following this inquiry, the Authority recommended, inter alia, that Radio Jacaranda be sold. Parliament approved this recommendation in March 1996.
As a result of this decision, the South African Broadcasting Corporation (the SABC) advertised the sale of Radio Jacaranda and a select process was used to obtain three bidders where practicable. In this case two bidders were shortlisted.
2. THE SALE AND THE LICENSING PROCESS
The procedure approved by the Authority was as follows:
2.1 The determination of the price and the sale process was conducted by the SABC through its merchant bank, Investec.
2.3. After completion of the bid process the SABC presented the Authority with two bidders.
2.3 Both applied to the Authority through the normal licensing process as prescribed by the Act.
2.4 The SABC will, at the end of the licensing process be a willing seller to the successful applicant as decided by the Authority.
3. THE DETERMINATION OF THE LICENCE APPLICATION ACCORDING TO THE ACT.
Section 42(1)(c) of the Act provides the guidance on how the licence application is to be considered. This section provides as follows:
"The Authority, after having duly considered the application, the representations (if any), made in accordance with the provisions of that subsection, the applicant's written response thereto (if any), any further information furnished in terms of section 41 and any other evidence tendered to the Authority, shall grant or refuse the application and provide written reasons for its ruling."
Section 41(6) of the Act provides:
"Within 14 days of receipt of any application in terms of this section, the authority shall cause to be published in the Gazette a notice containing all the material particulars of the application and inviting interested persons to lodge their written representations in relation to the application in the manner specified in such notice within one month as from the date of such notice."
Representations were received from three entities.
Section 42(6) sets out how the Authority's decision is to be communicated. This section provides as follows:
"Upon having reached a decision on any application, the Authority shall by notice in the Gazette and by written notice addressed to the applicant make known the outcome thereof."
4. THE OBJECTS AND PRINCIPLES OF THE ACT
The primary object of the Act is to provide for the regulation of broadcasting activities in the Republic in the public interest. The concept of the public interest is dynamic and varies in accordance with factors such as the stages of scoio-economic development.
Section 2 of the Act provides a broad policy framework for the interpretation of the public interest in the context of South Africa today.
In deciding whether to grant a licence, or who the successful applicant is amongst competing entities, the Authority is guided by the policy framework and often has to weigh competing public interest considerations.
The application of these principles and objects differs according to circumstances. In arriving at its decision, the Authority considers the particular needs of the coverage area and the history of the applicant to determine how it would contribute to the particular broadcasting service. The Authority is required to view a range of criteria collectively the most relevant of which are as stated hereunder.
5. THE APPLICANTS 5.1 LEGAL STATUS 5.1.1 NEWSHELF 71 (PTY) LTD
The applicant is a registered company with limited liability.
5.1.2 ONSHELF TRADING NINE (PTY) LTD TRADING AS NALEDI MEDIA INVESTMENTS
The applicant is a registered company with limited liability.
5.2 REPRESENTATIONS
Representations were received from the Stigting vir Afrikaans and Newshelf 71 in respect of Naledi. Briefly stated, the basis for Stigting vir Afrikaans' representations was a desire by Afrikaans speakers to have a shareholders' stake in the company and to participate in the affairs of the radio station and to protect the Afrikaans language.
Newshelf 71 made representations challenging arrangements like shareholders' agreement, the budgeted figure of R750 000 for the news, etc.
Advocate Van Wyk appeared wanting to make representations on behalf of staff and management. However, his intended representations could not be entertained by reason of the fact that their representations were not in compliance with the rovisions of section 41(7) of the Act as they were submitted to the Authority very late.
Representations were also received from Naledi in respect of the application by Newshelf 71 and the said representations inter alia, revolved around the question of cross media control and ownership.
5.3 OWNERSHIP AND CONTROL
5.3.1 By historically disadvantaged:
NEWSHELF 71: Sixty five comma one percent (65,1%) of Newshelf 71 normal shareholding is in the hands of the historically disadvantaged persons.
NALEDI: Forty five percent (45%) of the shareholding in Naledi is in the hands of historically disadvantaged persons.
The Authority considered both applicants to have satisfied this objective.
5.3.2 Funding and funding structure
NEWSHELF 71: Funding in Neshelf 71 is in the form of owners equity.
NALEDI: Members funds will be raised from share capital and bank loans.
The Authority is satisfied with the funding arrangements of both applicants.
5.3.3 By people from the province of the coverage area
The Authority is satisfied that each applicant has meaningful representation of persons from the provinces of the coverage area.
5.3.4 By persons from diverse groupings
In terms of section 2(1) of the Act, the Authority is required to "ensure that private, community, broadcasting licences, viewed collectively, are controlled by persons or groups of persons from a diverse range of communities in the Republic." The Authority is encouraged by the fact that each applicant included ownership from diverse groupings.
5.4 HUMAN RESOURCES DEVELOPMENT:
NEWSHELF 71: This applicant has a strategy for training including R5m in this respect. It will draw considerably from overseas expertise.
NALEDI: This applicant has a strategy for training.
5.5DIVERSITY, SHARE OF VOICE AND CROSS MEDIA CONTROL
5.5.1 DIVERSITY
NEWSHELF 71: Despite the interest of the majority shareholder in other media forms, this applicant will add some diversity in the coverage area as it is a new entity with new partners.
NALEDI: Applicant would add considerably to diversity in the coverage area as it would be a completely new player.
5.5.2 SHARE OF VOICE
NEWSHELF 71: There is a fair amount of media diversity in the coverage area including:
(a) The Citizen which is owned by the Perskor/Kagiso Group, (b) The Star and the Pretoria News owned by the Independent Group, (c) Radio 702, (d) Highveld Stereo and (e) SABC stations.
NALEDI: Applicant would be a new voice.
5.5.3 CROSS MEDIA CONTROL
NEWSHELF 71: The dominant shareholder in NEWSHELF 71 is NAIL. NAIL has just participate in a take over of Johnnic which controls M-NET through OMNI. Taking into account the shareholding, ross directorships and influence that Nail would have in Johnnic, this for all practical purposes gives Nail control of M-NET.
Given that Nail already has controlling interests in newspapers, the granting of a radio licence would give them control of newspapers, a television and a radio licence.
This same transaction would give Nail control of a number of newspapers. This control would have the effect that Nail's control of the newspapers would likely exceed the average issue readership of 15% of the total newspaper readership in the coverage area.
NALEDI: The issue of cross media control does not arise here.
5.6 PROGRAMMING
5.6.1 News and Information
NEWSHELF 71: The applicant proposes to spend R1m per annum on news, develop a local news department and make use of its international network of correspondents.
NALEDI: The applicant proposes to commit R750 000 per annum on news, develop a news department and employ stringers in the coverage area.
5.6.2 Language
Both applicants satisfied the Authority that they would cater for, and be sensitive to, the language needs of the area.
Newshelf 71 undertook to contribute naught coma five percent (0,5%) of their turnover to the Language Development Fund as proposed by the Authority.
5.6.3 Local Content
Both applicants said they would achieve the twenty percent (20%) minimum of South African music, Newshelf committed itself to develop South African local music taking into account the international experience and networks at their disposal.
5.7 OTHER FACTORS RELATED TO THE PUBLIC INTEREST
5.7.1 Meeting the needs of the Community
NALEDI: Naledi has a balanced and diverse shareholder base with significant participation by members of the historically disadvantaged persons. Through SAPEF, Naledi supports transactions which have the objective of empowering the historically disadvantaged groups.
NEWSHELF 71: Newshelf 71 will assist with economic empowerment. With the assistance of European Development International EDI, they will be able to provide quality programmes. 5.7.2 Commitment and contribution to the industry.
NALEDI: Applicant would make a positive contribution to the industry.
NEWSHELF 71: Applicant has a vision and a plan to invest in the industry. It will introduce a wide range of expertise including technology, research and programming. The applicant also brings significant foreign investment into the country.
5.7.3 Contributing to competition in the industry:
NALEDI: Thi applicant would be a new player and stimulate competition.
NEWSHELF 71: Because of the highly competitive environment in parts of the coverage area, there is a need for strong players. Given the potential synergies with the applicant's newspaper interests, this applicant is likely to be such a player. Those same synergies however, could have the potential to stifle competition. Given the diverse and competitive media environment the Authority believes that there would be no danger to fair competition.
5.7.4 History of the applicants:
Both applicants have a history of involvement in the upliftment of previousy disadvantaged persons and in the development of black business.
5.8 THE BID PRICE
The Authority does consider price an important factor in determining the public interest, but not an overriding one. The bids are as follows:
NALEDI: R90m
NEWSHELF 71: R70m
In considering the difference in the bid price between applicants, the Authority weighs the monetary value against the value of the contribution the applicant with the lower bid would make to the industry.
6. THE DECISION
Taking into account the provisions of section 46(1) of the Act, the bid price as well as the representations made, the Authority took a unanimous decision to grant the licence to Newshelf 71.
The Authority found in the applicant a financially strong and highly experienced business team with the capacity to make a major contribution to the modernising and advancement of the South African broadcasting industry in a highly competitive market.
7. LICENCE CONDITIONS AND PROMISE OF PERFORMANCE
It remains for the Authority to specify the licence conditions under which the licensee will operate. The promise of performance by the licensee will become part of the licence conditions. However, the Authority will ensure that ownership and control by persons from historically disadvantaged groups will endure. In this regard, the Authority intends to specify the licence conditions in a manner which will guarantee that such ownership and control is neither watered down nor reduced in any manner without the prior approval of the Authority.
All the criteria which the Authority has considered in granting this licence will be added to the licence conditions of the lisensee.
18 September 1996