Parliament's demands impact on media inflation

By logical deduction, in order for the SABC to achieve the aspirations of Parliament, it is having to spend a mountain of money. A small proportion of its revenue comes from TV licences but more than 70% comes from advertising and sponsorship revenue. Now, given that by law no local TV station can have more than 12 minutes of advertising per hour, it stands to reason that when higher operating budgets are approved, the only possible way to meet them is to jack up the price of advertising.

Which is why the SABC has been forced recently to increase its advertising rates by 25% and why it is desperately having to consider increasing them another 30% plus.

Benchmark

The consequence of SABC rate increases is that other media can follow suit. Think about it. SABC has become an unwitting benchmark for media inflation, with the result that other media feel that if they increase their rates by half or a quarter of the SABC hikes, they will create the perception that their increases are modest by comparison. But, in fact, they're still sky high.

All of which has resulted in the media sector being guilty of the highest inflation in the entire South African public and public sector environments.

Now, while statistics are showing that some advertisers are responding to this runaway inflation by simply advertising less – an extremely dangerous practice in itself – others, mostly in the FMCG sector, don't even think about doing that because they know full well that any reduction of advertising frequency will result in a sales slowdown. So, they have to bite the bullet and continue paying through the nose for what must surely be the world's most expensive advertising space.

Raise prices

But of course, they're not digging into profits to pay for it. They are having to increase the advertising costs component in their product and service pricing. Which in turn is giving impetus to one of the country's main inflation culprits – food.

It would be interesting to see either the Reserve Bank or the Departments of Finance or Trade and Industry working out just how much of a contribution to overall inflation is directly the result of the media sector and specifically the ripple effect of the SABC's massive rate hikes. The result, I reckon , would be a huge eye-opener.

Reconsider objectives

It is time, surely, for Parliament to reconsider its demands on the SABC. Certainly the objectives are noble – a high proportion of local content, education programmes in all 11 languages and other socially responsible and noble things. But, it is equally important that Parliament understands the financial implication of its idealistic expectations.

Parliament cannot continue to have its cake and eat it while the bulk of the nation slowly starves in front of their TV sets.

Because what is happening right now is that the very people they are trying to help through the SABC are being pushed further into poverty by the rapidly rising prices of food and other essentials.

Take the pressure off the SABC, let it lower its rates to at least national inflation levels and the effect will ripple right through the media industry and help a lot toward reducing inflation overall.