Issued by: Independent Broadcasting Authority
REASONS FOR THE DECISION
in relation to the
APPLICATION FOR PRIVATE SOUND BROADCASTING LICENCE FOR EAST COAST RADIO
by
DYNAMO CONSORTIUM
and
NEW RADIO CONSORTIUM
and
MORIBO CONSORTIUM
1. BACKGROUND
The Independent Broadcasting Authority Act No 153 of 1993 requires the Authority to conduct an enquiry into the protection and viability of public broadcasting services, cross media control and South African content.
In its report to parliament the Authority recommended that East Coast Radio be sold. Parliament approved this recommendation in March 1996.
As a result of this decision the South African Broadcasting Corporation (SABC) advertised the sale of East Coast Radio and a select tender process was used to obtain three bidders where practicable. In this case three bidders were short-listed.
2. THE SALE AND LICENSING PROCESS
The procedure approved by the Authority was as follows:
2.1 The determination of the price and the sale process was spearheaded by the SABC through its merchant bank, Investec.
2.2 After the completion of the bid process the SABC presented the Authority with three bidders.
2.3 The three bidders 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 LICENSE APPLICATIONS ACCORDING TO THE ACT
Section 42(1)(c) of the Act provides guidance on how the license 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 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 applicant and provide written reasons or its ruling."
Section 41(6) of the Act provides:
"Within 14 days of receipt of any application in terms of this action, 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".
Section 42(6) sets out how the Authority's decision is to be communicated. The 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 socio-economic development.
Section 2 of the Act provides a broad policy framework for the interpretation of the public interest inn the context of South Africa today.
In deciding whether to grant a licence or who the successful applicant is, amongst the competing entities, the Authority is guided by that policy framework and often has to weigh competing public interest considerations.
The application of these principles and objects differs according to the 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, stated hereunder.
5. THE APPLICANT.
5.1 Legal Status
MORIBO CONSORTIUM. The applicant is a joint venture partnership
NEW RADIO CONSORTIUM The applicant is a partnership
DYNAMO CONSORTIUM The Dynamo Consortium made their application in the name of a wholly owned subsidiary of Dynamo Investments Ltd., namely Dynamo Diversified Investments (Pty) Ltd.
5.2 REPRESENTATIONS.
No representations were received in respect of the applicants.
5.3 Ownership and control
5.3.1 By the historically disadvantaged persons
The Authority is satisfied that a substantial number of shareholders in all the applicants are historically disadvantaged persons.
5.3.2 Funding and funding arrangements
MORIBO CONSORTIUM wuld receive loan funding from Anglovaal and Natal Newspapers and Thebe Investments would provide funding to KZN Women, Chatsworth and MUSA.
NEW RADIO CONSORTIUM shareholders will fund their own investments.
DYNAMO would fund itself and raise further capital from investors.
5.3.3 By persons from the province of the coverage area.
The Authority is satisfied that each applicant had meaningful representation of members from 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 and 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 Resource Development
The Authority is satisfied that all three applicants are committed to the development of human resources.
The Authority noted the possibilities open to the Moribo and New Radio Consortia for training opportunities by international expects.
5.5. Diversity, share of voice and cross media control
5.5.1 Diversity
Moribo Consortium
The contribution of the applicant to diversity of voice in the coverage area would be somewhat limited given the involvement of one of its shareholders in the print media.
The Dynamo and New Radio Consortia
Both applicants would be new voices in the area and therefore contribute significantly to the diversity of voice in the coverage area.
5.5.2 Share voice
The Moribo Consortium includes Natal Newspapers, which controls all the major English language daily and weekly newspapers in KwaZulu-Natal. This gives it an effective monopoly of news and information coverage in the English language newspapers of the province.
East Coast Radio will be the first private radio station in the province, with what is likely to be a dominant radio voice for some time to come, even after the licensing of new radio stations in the province.
The Moribo Consortium has undertaken to run a separate news organisation that is unrelated to the Natal Newspaper operation already in existence. Natal Newspapers shareholding is 14,9%.
By combining some elements of sales, marketing and advertising for the newspapers and East Coast Radio together, the combined power would have a dampening effect on the development of alternative media voices, which is a particular concern for the Authority in this province.
The Dynamo and the New Radio Consortia will both be new voices in the area and would therefore contribute to diversity.
5.5.3 Cross Media Control
None of the applicants were in violation of the cross-media control limitations.
5.6 Programming
5.6.1 News and Information
The Dynamo Consortium has the objective to convey comprehensive credible unbiased, and impartial community, regional and international news relevant to residents of KwaZulu-Natal. Their aim is to consolidate a new-look news team, and its personalities. The station would enjoy editorial independence which would be entrenched with an editorial charter.
The New Radio Consortium budgeted R1 million for the provision of news. Its intention is to provide an independent source of news. The expertise of the BBC would be used to assist in the training of staff. Publico would add to this with experience and skills in specialist information gathering, marketing and publishing.
The Moribo Consortium plan to adopt an objective perspective in so far as national and international news are concerned. The Consortium intends to develop and implement an editorial charter.
The Authority was satisfied with the plans of all three applicants, for news and information.
5.6.2 Language
The applicants satisfied the Authority that they would cater for a language need of the area.
5.6.3 Local Content
The Authority is satisfied that all the applicants would meet the local content requirements of the IBA.
The presence of Musicians Union of South Africa (MUSA) in the Moribo Consortium and Mr. Clegg in the New Radio Consortium and their contribution to the local content policies of the country were of particular significance to the Authority.
5.7 Other factors related to the public interest
5.7.1 Meeting the Needs of the Community
The Authority is satisfied that all the applicants would meet the needs of the community and make meaningful contributions to the development of the province.
5.7.2 Commitment and Contribution to the Industry
The Authority is satisfied that all three applicants would contribute to the development of the industry.
5.7.3 Contributing to Competition in the Industry
The Moribo Consortium includes Natal Newspapers, which controls all the major daily and weekly newspapers published in English in KwaZulu-Natal. For all practical purposes, this gives Natal Newspapers a monopoly of the English language print media adspend in this province.
East Coast Radio will be the first private radio station in the province. Given its size, the fact that it is an established radio station, and the potential synergies with the newspapers, the consortium would have a considerable advantage in attracting adspend, which would stifle competition.
New Radio Consortium is a new voice which would therefore contribute to competition in the industry.
Dynamo Consortium is a new voice which would therefore contribute to competition in the industry.
5.7.4 History of Applicants
All applicants have a history of commitment to the welfare of their communities.
The Moribo and New Radio Consortia have members with a history of promoting South African music internationally.
5.8 Bid Price
The Authority does consider price an important factor in determining the public interest, but not an overriding one. 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 towards the total industry.
The bids were as follows:
DYNAMO CONSORTIUM: R65 000 000
NEW RADIO CONSORTIUM: R40 000 000
MORIBO/EAST COAST CONSORTIUM: R33 000 000
6. THE DECISION
The Authority found in the New Radio Consortium a creative team whose dynamic plans for the entertainment industry the province of KwaZulu-Natal and the country should not be deprived of.
Taking into account Section 46(1) of the Act and the bid price, the Authority decided unanimously to grant the licence to the New Radio Consortium.
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 license 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 license conditions in a manner which will guarantee that such ownership and control is neither watered down nor reduced in any manner without prior approval of the Authority. All the criteria which the Authority has considered in granting this license will be added to the licence conditions of the licensee.