Exhorbitant Taxes,Low Circulation Lead To Newspaper Closures

A raft of taxes and fees imposed on the media industry by government have militated against recovery efforts in the troubled sector , a 666-page report released by the Information and Media Panel of Inquiry (IMPI) last week noted. 
It warned of difficult times ahead for the media industry, which has in recent years been grappling with falling revenues, massive losses and retrenchments.
The exorbitant taxes and fees have eroded profitability at a time when advertising revenues have been plummeting due to the harsh economic environment and the emergence of digital platforms.
The report said the taxes, combined with draconian media laws, will repel potential investment inflows into the sector.
Industry players are levied a fee of 0,5 percent on gross annual turnover by the Zimbabwe Media Commission.
Apart from the above levy, the electronic media are also charged transmission fees on a monthly basis by Transmedia Corporation of Zimbabwe.
IMPI said given that the media industry, like all companies, is subjected to other statutory payments such as Value Added Tax (VAT), corporate tax, and Pay As You Earn (PAYE) and income tax, the media levy and the other levies could be seen as double taxation.
“In view of the fact that the media levy is charged on gross turnover and not net profit, it pushes up the overall cost of producing newspapers and operating the electronic media, and exerts an unbearable burden on cash flows at a time when VAT and PAYE payments to the Zimbabwe Revenue Authority are supposed to be made by the 25th of every month,” said IMPI.
“Yet there may be timing differences so the amounts owed are due before the advertisers have paid,” it added.
IMPI also observed that media organisations have adopted inefficient business models, partly due to polarisation, in which they have seen the need to procure and install printing machines and operate distribution systems whose capacity utilisation levels are well below 50 percent.
It said this has led to high cost structures because of the inefficient models adopted.
“An example of better models are those employed by newspapers in South Africa where independent operators print all newspapers and independent distributors transport and distribute newspapers for all media organisations throughout the country,” said IMPI.
“Through such economies of scale and sourcing of spares of printing machines from the same supplier, the operators in South Africa benefit from group discounts…Newsprint, that constitutes the biggest expenditure item…is not available locally since the closure of the Mutare Board and Paper Mills, but is imported…”
“The effect is that given the long lead times that invariably apply to importation of newsprint, print media companies tie up too much money in stocks at a time when cash flow is very tight and this contributes to the expensive cost structure in terms of newspaper production,” IMPI said.
The report also cast doubts over the ability of the sector to successfully confront the hurdles facing the print and broadcasting industry.
Instead of exploiting opportunities presented by the advent of the digital media, the report said the offline media has been found wanting.
IMPI warned that the plunge in circulation volumes for newspapers would drive advertisers to online platforms.
However, these platforms charge low rates for advertising space and take long to generate incomes that can drive operations.
As a result, while newspapers are still trying to build their online versions, retrenchments are looming as institutions respond.
“They (online publications) also produce better quality graphics and colours compared to the print media products,” said the report.
“However, initially, the revenue generated from online platforms will not be able to support existing structures in the media organisations. Retrenchments seem inevitable, especially due to changes in the skills required. Just as other businesses have been paralysed by lack of affordable finance from banks for recapitalisation and working capital, the same factors have had a devastating impact on the media industry.
“While the emergence of online platforms can be viewed as an opportunity for the media industry in Zimbabwe, the revenues generated have not been sufficient to offset the high costs that are required to fund the platforms, especially the cost of skills required and the necessary equipment to make the online platforms effective.”
Industry players are finding the going tough.
There has been massive restructuring of operations, including retrenchments, to reduce excess fat.
One publication has so far gone under this year.
The Zimbabwe Mail, owned by Transport Minister, Obert Mpofu, announced its closure this month.
Alpha Media Holdings also issued an announcement to the effect that it will soon close its loss-making daily, Southern Eye, from April 1.
Among some of the major issues highlighted by the report is the fall in standards of journalism, caused in part by the exodus of skills to greener pastures.
Another contributor to the falling standards has been poor training.


Financial Gazette