The South African Music Industry

5.8. Strengths, Weaknesses, Opportunities and Threats

STRENGTHS	WEAKNESSES	OPPORTUNITIES	THREATS
Deep and diverse musical heritage coupled with wide ranging music development programmes.	Limited resources to ensure the quality recording and promotion of artists.
Strong industrial base in recording; manufacture; retail and broadcast to ensure the sale of music.	Small market limiting resources available for investment.	Tourists from major music markets.	Piracy
Institutional density. Wide range of institutions representing most sectors.	Lack of coordination between different initiatives.	Industrial and Institutional density provide the foundations for coordinated industry growth.	Payola
Resumption of growth in unit sales and market value over the last four year period.	Lack of statistical data about potential markets.	Growth rate acting as an impetus for expansion.
Agglomeration facilitating easy industry interaction.	Artists are not always within the Gauteng complex.	Growth in developing markets predicted to accelerate.
Copyright collection agencies generating more revenue than any other African agencies.	Legal disputes over copyright payments and artists’ contracts.

5.9. Conclusion

The preceding sections have highlighted

• 
  The areas in which the South Africa music industry has the requisite structural conditions for growth;
  
• 
  Those factors which constitute impediments to the growth of the industry; and
  
• 
  The opportunities that exist should those impediments be overcome.
  

The South African industry is well set for growth. However there are a number of impediments to growth which need to be overcome in order for the industry to expand. The final chapter of this report will propose a number of mechanisms and projects to

• 
  Overcome these obstacles; and
  
• 
  Increase the aggregate strength of the music industry.
  

CHAPTER SIX: POLICY DEVELOPMENT

6.1. Introduction

The purpose of this chapter is to build on the preceding analysis to develop proposals that would aid in overcoming some of the impediments faced by the industry and strengthen the growth trends in the South African music industry.

This chapter is divided into five sections. The first section examines a variety of international initiatives that have been undertaken to assist domestic music industries to expand. The purpose of this section is to provide ideas on policies and programmes that could potentially be implemented in the South African industry. A number of the later proposals draw on this experience. The second section focuses on the few initiatives that are currently available to the South African music industry. The third section proposes broad initiatives necessary to address the obstacles to the growth of the South African music industry. The fourth section of this chapter elaborate upon those initiatives providing specific examples of the sorts of projects that might be undertaken by the public sector or in collaboration with private sector agents. The purpose of this section is to provide the basis for a dialogue over what the most appropriate targeted interventions, projects and programmes might be, given the broad policy direction established in the third section.

6.2. International Practice

Globally, government policy effecting the music industry can be divided into two broad categories - national level policies and policies designed specifically for the music industry.

Taxation⁷⁶

In Europe cultural goods receive a tax exemption or tax reduction, for example in Italy sales tax on books is 4%, whilst sales tax is generally 20%. However European governments and the EU have refused to classify music as a cultural product, thus the normal sales tax rate applies for music.

With the exception of a few outliers the world’s largest music markets have tax rates on musical product of between 10% and 20%. Thus, in global terms, South Africa’s tax level of 14% is not out of line with best practice.
Similarly with import tax levels, whilst there are a few outliers such as India and Egypt with exceptionally high levels of protection, South Africa falls well within global practice. The vast majority of countries impose an import tax of between 0% and 30%, South Africa’s import tax rate is 15%.
Thus South Africa’s tax regime is, in global terms, neutral towards the music industry neither being particularly positive nor negative.

Blank tape levies

A blank tape levy imposes a levy on blank cassettes which is intended to remunerate artists and producers for revenues that are lost due to home taping. Whilst 11 of the 15 EU countries impose a blank tape levy, the area is fraught with controversy.

The Canadian government introduced a blank tape levy in mid 1997 and incurred the anger the USA, who argued that US artists should also receive a share of the blank tape levy. As yet the issue is unresolved and the USA is threatening to take the issue to the World Trade Organisation.
Similarly the Australian government tried to introduce a blank tape levy but was forced to back down after the owners of blank cassette manufacturing plants threatened to disinvest⁷⁷.
In South Africa there are mixed sentiments regarding a blank tape royalty, whilst some respondents felt that it would be positive for the industry other felt that it would have little impact on piracy which is one of the key problems facing the SA music industry.