Should SA's commercials producers be protected against imported ads?

The latest such appeal comes by way of an email to Bizcommunity.com and argues the following point:

Assume that if I buy a Dodge, or any other imported car, luxury goody or even an Apple Mac, I'll pay a huge import duty. This was introduced to protect local industry, e.g., car manufacturers, and of course, employment. Don't know exactly how much it is these days, but at one stage it was 75% of the purchase price of the car. But, when the ad agency for Dodge in SA imported the tape with the Binky ad on it, did they pay import duty against the value of the production? Er, I don't think so. They probably paid VAT at customs against the value of the physical tape, R100 and that was that. But the true value of the production was, what, R1m? If so, the agency should have paid R750k in import duty, or alternatively used a local concept and production house to make the ad.

On the face of it, a perfectly reasonable argument one would think - why should the car industry get protection and the local TV commercials industry not?

Well, there are actually two sides to this story.

First of all, the current Motor Industry Development Programme (MIDP) was born out of an apartheid era (Local Content) programme by a government trying to develop a local industry simply by applying massive import duties on cars coming in and also giving local manufacturers huge financial incentives.

Unfair practice

Since this country became a democracy, import duties have fallen dramatically on cars and the entire MIDP is being overhauled following pressure from the World Trade Organisation among others on the basis that this is an unfair international trading practice.

Equally, the recent clothing industry quotas agreed to between SA and China were really a last ditch effort and are only going to last two years. After that, the local clothing manufacturing industry is on its own.

And in terms of the majority of other products, those "massive" import duties don't exist anymore.

So, first of all, the chances of Government agreeing to impose import duties on foreign TV commercials are absolutely zero. My advice is not to even bother going down that road because it will be time, money and effort completely wasted.

But, there is yet another side to this story.

For many years now, a section of the same TV commercials production industry that is lobbying for import duties, has been producing TV commercials for overseas clients. The annual turnover is estimated in billions of rands. These commercials are very rarely used in South Africa, being almost exclusively for use in overseas countries.

Now, in the unlikely event that Government agreed to impose import duties on foreign TV commercials coming in to this country, wouldn't it probably be fair for other countries to impose similar duties on SA -made commercials coming into their countries?

More lobbying

All of which would probably make South Africa a little less competitive, particularly when the rand starts strengthening as it did last year, almost killing off this business. And then all those local TV commercials production companies would start lobbying Government to have the import duties scrapped.

Researching the whole question of global trade and import restrictions, it becomes plain very quickly that any country imposing these is playing with fire. The current trend is away from import duties and now favours plain and simple competition.

The argument that South African advertisers should somehow be forced to have their TV commercials made in this country is unfortunately becoming more and more fatuous, given these trends.

The problem is that the whole business of marketing is becoming extremely expensive. Media inflation has been rampant and advertisers are not getting anywhere near the value out of their advertising rand today as they did a decade ago. Equally, TV production costs have also risen. Whether these have kept pace with inflation or not is beside the point - the perception is that they now cost a heck of a lot more than before.

All of this puts enormous pressure on brand managers who have to work miracles with budgets that have not increased at anything like the rate of media inflation. And if a brand manager can find a TV commercial from overseas that will do the job here, then he is going to leap at the chance of saving himself anything from R500 000 to several million by using it instead of commissioning something local.

While one can understand the frustration of local TV commercials producers trying to operate in an extremely competitive environment as it is and on top of all that seeing their clients opting for free or cut-priced imports, that, unfortunately, is what the free-market economy is all about.

No win, win

Quite simply, our TV commercials production industry cannot have its bread buttered on both sides. It cannot expect to export commercials with impunity and at the same time be protected from other countries doing what amounts to exactly the same thing.

My guess is if they want to blame someone for the situation they find themselves in, blame SA's mass media that, in terms of the product it is delivering, has inflated its prices higher than almost any other sector. This is what is making brand managers cut corners on commercials.