Downtown Studios: Department of Arts & Culture update; Fana Mokoena briefing

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the Department of Arts and Culture representatives, and noted the presence of  Mr Fana Mokoena, a popular actor on South African television. She noted that he had been invited because he had issues to discuss with the Department of Arts and Culture (DAC) and National Arts Council (NAC). She noted that the issue of Downtown Studios had outstanding for two years, with little apparent progress, and for this reason the Department had been asked to give an update.

Downtown Music Hub Progress Report briefing by Department of Arts and Culture
Mr Sibusiso Xaba, Director General, Department of Arts and Culture, explained that Downtown Music Hub was developed to support music development in South Africa,  create high quality local content, and help to transform the music industry in South Africa. Not only musicians would benefit from this, but also the long line of people who gained employment throughout the music industry and who supported the musicians’ work. DAC wanted to improve South African music and make it globally competitive.

He reported that Downtown Music Hub had taken over the old Gallo studios but still needed to get state of the art equipment to help with the development of intellectual property holding for content creators and performers. The National Arts Council (NAC) had become involved when it acted as a conduit for the purchase of the studios, on behalf of the DAC. There had been, and still was, slow progress on the issue, as there were a number of legal complexities. If those were not addressed, the whole deal could fall apart for the NAC, and Downtown.  Therefore Downtown studios was still being subsidised by the DAC until it could hand it over to the music sector.

Mr Xaba noted that the current asset value of Downtown Studios was about R7 million, but it had not been fully developed. The Studios needed a lot of work and an injection of capital to get them globally competitive.  Ultimately Downtown Studios was to be transferred to the music sector, but this could not happen until the compliance issues outlined in the presentation (see attached document) were sorted out.

Discussion
The Chairperson thanked Mr Xaba and asked for clarity as to whether the Studios had not, at first, been in compliance with the law. She wondered if that had been the reason for the delays. She noted that the same questions had been asked of the DAC for the last two years, and asked why there had not been compliance with clear rules.

The Chairperson also was disappointed in the presentation, which she did not believe provided enough detail about some of the issues. She repeated that this was a longstanding matter, that the issues had affected the industry and were burdensome for the NAC. She wanted to know if there had been any developments. She enquired if the Studios were intended only for elite performers, and what exactly was going on.

Mr P Ntshiqela (COPE) thanked the presenters, and said he had a better idea of what was going on, but suggested that in future perhaps DAC should think of renaming this “Uptown Studios”. He was pleased to hear of the intention to transfer the Studios to the music industry but asked about the Board, whether there was a voice for musicians and artists on that board, and if it was comprised of trusted members. He wondered what the role of the Department would be after the handover.

Ms H Van Schalkwyk (DA) asked exactly how many music hubs there were, and whether it was intended to have one or several music studios. She wondered if a business plan would be presented to the Portfolio Committee. She noted the statement that at some stage the music industry would be taking over the Studios and enquired if the DAC would keep on subsidising them, or whether it was intended that they be fully independent.

Mr N Van Den Berg (DA) agreed that young artists needed a platform, and noted that the music industry was very competitive. He asked what the budget was for the Hub. He also asked where exactly the Studios were, and whether they were occupying the old Gallo building, and, if so, how much of this was standing. He thought that the idea of enhanced competitiveness should extend also to the building and studios. He pointed out that the Gallo Studios had been old studios, with old equipment. He thought it would cost millions to update that, and feared that there was not sufficient budget. He pointed out that a good-quality mixing desk alone would cost millions, and the studio layout needed work. Many South African artists probably preferred to go overseas to record, where the equipment was of a high standard.

Mr Van Den Berg pointed out that it would cost a lot even to compete with the South African Broadcasting Corporation (SABC), even in terms of the facility alone. He added that the facility should not simply stand idle, but had to be run so that people would get something out of it. He asked how it was going to be handled. He believed that people would be queuing to get the chance to record if it was properly advertised. He noted, as a follow up, that many people wanted to be artists, but wondered if there would be a selection process, because not everyone could be recorded. After recording, it was still necessary to market the individual, and there was no guarantee that the radio stations would play their music, especially if it was not within their requirements.

Mr Van Den Berg wanted to make it clear that whilst he supported the idea full-heartedly, he thought that it should be started in a way that made it successful. The private sector would possibly see this as government competing with them. He repeated that the issues that needed to be dealt with included how it was to be managed, how much money would need to be paid, and by whom, for upgrading equipment, and whether there had been any quotations received for new equipment.

Ms T Nwamitwa-Shilubana (ANC) said that one of her greatest concerns was how the DAC would empower musicians; with so many people their careers was not sustainable and they would die in poverty, having put nothing aside for themselves during their recording years. She suggested that perhaps a body or association should act in consultation with the music sector and Department to attend to this. She also questioned the R7 million allocated to the music sector, and asked how this calculation was made. She also commented that her impression was that only the elite could use the facilities, yet there were many talented people outside of Johannesburg, and she wondered how the DAC would reach out to them.

Ms L Moss (ANC) said that the presentation seemed exactly the same as that given the previous year, and this looked like a “cut and paste” effort. She thought that whoever was appointed to head up the organisation should have been presenting a turnaround plan, and although Mr Xaba had previously spoken of a commitment to the project, there was nothing in the presentation that supported this. No proper progress could be seen over the last two years. Like the Chairperson, she was also concerned that the DAC had not complied with the Public Finance Management Act (PFMA) requirements and pointed out that no department or entity was above the law.

Ms Moss agreed with Ms Nwamitwa-Shilubana that other provinces also had talented people, and she wondered how the DAC would assist in empowering them, and funding those with talent to develop their potential. She asked what partnerships might be envisaged in other provinces.

Mr L Khoarai (ANC) agreed that it was important for the Committee to see the business plan. He noted that page 7 of the presentation spoke about administrative issues to be addressed. The presentation should have stated clearly what these issues were so that Members knew what was outstanding. He also pointed to the last paragraph, which spoke of outstanding debts and asked what those debts were and who was responsible for them. He wanted to know whether the Department could afford the new equipment, and what guarantees there were. He pointed out that page 8 referred to “other issues”, including accounting, that had to be further explained. He insisted that the Committee should receive a full report explaining the issues in depth.

The Chairperson said that Members were clearly disappointed at the lack of information and suggested that the Chief Executive Officer of Downtown Studios could contribute, to give Members a better idea of what was happening.

The Chairperson indicated that job creation was mentioned on page 3 of the presentation, and asked exactly what job creation was done, what additional funding was provided for operations, and where the evidence was of these operations. She reiterated that the Committee had been given only a sketchy understanding.

The Chairperson asked where the Board members of Downtown studios were, saying that she felt that there was little point in continuing the meeting if no proper information was given, and the Board was not present.

Mr Xaba noted that the DAC had the impression that he was merely supposed to be updating the Committee on Downtown Studios’ issues, and the main “make or break” point for the Studios was whether the legal challenges would be resolved; if not, then the whole operation would fall apart for the NAC and Downtown Studios. In order to move forward, condonation was needed of the past failure to comply. There was not a problem with the business plan, which was in existence, and he would gladly show it to the Committee. He also invited Committee Members to pay a visit to and view Downtown Studios. Over the past year, DAC had provided money to refurbish the building, including the lifts and carpeting for rehearsal venues.  Downtown had three studios, and two were operational. Most of the spending was on infrastructure. He agreed that the equipment was costly, and although Downtown already had good basic equipment, an upgrade would be very costly. The Studios used to have state-of-the-art equipment but this had now become obsolete. The need to re-equip raised the issue of whether Downtown wanted to be seen as a competitive recording companies, and he responded that this was not in fact the aim. Instead, government wanted to ensure that the music industry received what it needed to become globally competitive.

Mr Xaba explained that Downtown Studios offered rehearsal facilities, of which there were very few. Nobody wanted to pay a lot for rehearsing, as it did not bring in money, but it was necessary for musicians. Downtown should be used to make music more competitive and more accessible to musicians.

Mr Xaba answered questions about the selection process for recording by saying it was based on taking a risk. Not everyone could record but it was an upfront risk that companies had to make, and the Board of Downtown and management would make those kinds of calls.

Mr Xaba noted the questions about the budget, and said that currently there was not sufficient budget for Downtown but there was funding to start the process. A three to five year investment was needed, but it must be recognised that a start had to be made somewhere.

Mr Xaba said that currently there was a Special Purpose Vehicle to run Downtown Studios, and there was a Board, chaired by Don Laka, and including other musicians and business people.  A Board was not just about music, but about governance and commercial viability, and it was recognised that there had to be skills and special capabilities to help the Board to operate.

The DAC envisaged itself as playing a stewardship role. When Downtown Studios was transferred to the industry, the DAC would ensure that it had representation on the board, purely to secure the interests of the public and ensure the rights and benefits of Downtown to the music industry. However, government did not want to be involved in the operational issues of Downtown. The DAC was prepared to continue subsidising Downtown Studios until all legal matters were resolved, as Downtown could not be regarded as fully operational until that time. In future, it was envisaged that Downtown Studios would not need a government subsidy, once it was operating alone. The Department would just take oversight responsibility. 

Mr Xaba said that musicians needed to be empowered through education. They must be seen as entrepreneurs as they had the skills and intellectual property to make money, but he agreed that they had to be educated in how to be sustainable where their careers were in flux, but he also did not believe that this was the responsibility of government in the long term. He noted that piracy was a major contributor to difficulties of musicians, as this resulted in their music being played without them seeing any benefit, which would kill the industry. South African music and art needed to be promoted, to making sure that people bought South African art, and this would sustain its livelihood as a sector.

Mr Xaba then explained how Downtown Studios contributed to job creation. Although Downtown Studios would employ very few people itself, there was room for a long value chain in music, if musicians became sustainable, including composers, publishers, retailers, logistics workers, and a host of others. The main point was certainty; as people would not be employed if there was no certainty of a budget to sustain them. Downtown Studios would not primarily be a large employer, but would produce an environment conducive for job creation.

Mr Mohau Mphomela, Deputy Chairperson, National Arts Council, spoke to some issues that had been raised at the last meeting, pertaining to NAC. Some of its challenges had been that key posts were not filled, with acting posts of Chief Executive Officer and Chief Financial Officer. The NAC had promised the Portfolio Committee that these positions would be filled by January 31 and this was done. The NAC’s other main outstanding issue was Downtown Studios.  The new Board appointed a committee, headed by Mr Mphomela, other musicians and key members. He reminded the Committee that NAC only came on board as a conduit to acquire Downtown Studios for the DAC, and was thus holding the facility of behalf of the DAC, but when this led to qualified audit, the NAC reviewed the situation, and decided against keeping it on, because NAC had neither the mandate to run property, nor was this part of its business. The Board therefore passed a resolution to relieve the NAC of Downtown Studios. He said that the NAC had taken on the task in the first place to correct the institution, as a national duty, understood the essence of Downtown Studios, but essentially had its hands tied. Lack of compliance was an issue. Downtown Studios was seen as an NAC institution, yet was not accounting to it, because the Special Purpose Vehicle (SPV) had its own board that was not obliged to account to the NAC board. He said that the SPV had to account properly before it could be transferred, so that it was known how much money was spent, if there had been any mismanagement, and so that people were held accountable and liable.

The Chairperson noted that the issue was complex, but processes had to be followed. She asked how long it was likely to take to sort out the legal issues, pointing out that this had been dragging on for some time. Downtown Studios was a heritage project for the arts sector, but must be run properly and with due regard to the law. The Committee would support an entity that had a credible and understandable business plan. However, she thought that government must continue to support Downtown Studios as long as it was still in the developmental stages.

Ms Monica Newton, Chief Executive Officer, NAC, said that there were some quite technical issues. There were two corporate and legal governance factors to be taken into consideration. In regard to corporate governance issues, she pointed out that the entity Downtown Studios consisted of the physical property at Fox Street, then the business of Downtown Studios, which had been de-registered, and thirdly the SPV or Downtown music hub. In order for there to be a transfer, there were various compliance issues. Firstly, there had been non-compliance with the PFMA, which had to be disclosed, and the Auditor-General felt that this was not appropriate to its circumstances. A more serious matter was the extent to which it was possible to account fully for the activities at Downtown Studios. There had to be credible financial records for all three of the entities outlined earlier. Until there was condonation of the non-compliance, it was not possible to transfer, despite the fact that NAC had, in other ways, been preparing for transfer of Downtown Studios.

Ms Chola Makgamathe, Chief Executive Officer, SPV spoke about the day to day operations of Downtown Studios, as well as the issues pertaining to the transfer.  She reiterated that Downtown Studios consisted of the physical property at Fox Street (Foxstreet Properties), but the Downtown Music Hub and SPV was a section 21 entity. The operations provided three sources of income. Downtown Studios and Foxstreet Properties were originally owned by Gallo Studios. They sold the business, but they did not sell the company Downtown Studios. She noted that the studios themselves got limited revenue because of the old technology being used, and repeated Mr Xaba’s point that a large injection of capital would be needed to get the studios to the standard where they could attract investors and a new client base. The building was almost 60 years old, so it too needed upgrading.  There were health and safety issues that need to be dealt with. Ultimately, she suggested that it could be a “black hole” of expenditure. Currently, the building generated income from hiring out rehearsal space, and from other tenants.  The little money received was used to make rehearsal rooms more comfortable, by providing for carpeting and air conditioners.  Downtown Studios provided those musicians with little income as another option.

Ms Moss said that she wished this background information could have been provided to the Committee sooner.

The Chairperson said that a new picture was now emerging, at a late stage, and she asked that Ms Makgamathe not continue. She asked Mr Xaba to provide all reports in advance, in future, commenting that this was the first time that the Committee had been told that Downtown Studios essentially comprised three entities. The Committee could not support what it was not given to understand.

Mr Van Den Berg agreed with the Chairperson, commenting that the further the Committee probed, the “deeper the hole”, and he was uncomfortable with the fact that more kept coming to light. The state of the building was shocking, and he was worried if matters were not operating properly, and felt that this situation was unacceptable.

Mr D Mavunda (ANC) asked exactly what was included in the properties, the buildings and what they contained. He noted that the NAC saw itself as a conduit, and DAC had given funds, but the Committee should have been advised of this latest information beforehand, so that the Committee could have asked relevant questions.

Ms Moss commented that a plan was needed to help the entity move forward, and if necessary this should start from very basic issues. She understood that there were legal issues, but noted that these had been ongoing for some time. She pointed out that if the building was 60 years old, there must surely have been plans to maintain it, and pointed out that upgrades and maintenance went hand in hand. She thought it would have been more useful to hear the presentation from Downtown Studios officials first.

The Chairperson said that she would close the meeting at this point, saying that the meeting had not been particularly fruitful. In the next meeting, the Committee would expect more explanation on the SPV and the roles of the various stakeholders. She asked the DAC to return with a detailed report in two weeks time, and reiterated that the Committee was not happy with today’s presentation.

Mr Van Den Berg asked that the DAC should not use so many acronyms as Members were not aware of what they meant.

Ms M Morutoa (ANC) said she had not been to Downtown Studios, but realised there was a lot that needed to be attended to. She noted that the DAC had a large responsibility, and these Studios had been neglected for many years. The Committee would have to spend some time on the issues and decide what had to be done.

Mr Fana Mokoena briefing
Mr Fana Mokoena introduced himself as an artist, working specifically in film, television and theatre. He said that he wanted to make some input that should be seen as a seed, on behalf of artists in these categories. He suggested the need to regulate and professionalise the space for performers so they could do their work, and thought that the best way to do this would be to set up a body or association, with whom artists should registered, similar to professional bodies for doctors, engineers and accountants.  Such an association could also build up a database for the artists, specifying who they were, who was working, and how they were working, to provide statistics.

Mr Mokoena pointed out the desperate situation of there being nine provinces in South Africa, yet only three were involved with television, film and theatre. He said the lack of unity amongst artists was partially the fault of the artists themselves, and if there was a body supported by Government it would force everybody to come together, creating a unit.  He also stated it would help with issues of exploitation, for at the moment young women were being asked to do favours for work, and start-up agencies were taking money from people. Such an organisation would need to have a financial wing or department to help artists with their financial issues. Finally, he reiterated that there was a great deal of talent in all the provinces, but most were left out of the mainstream, and therefore he believed that this body should be set up in every province in the country.

Discussion
The Chairperson said that many young artists tended to earn something, and then run through that money very quickly, so that education was important. She asked how a young person whose art was identified would be nurtured, and if it was envisaged that this person would get a pension. She raised her concerns about the number of international actors in South-African films, even when the producers were South African, and urged that local actors should be given these roles. She thanked Mr Mokoena for his input.

Mr Van Den Berg thought Mr Mokoena had raised some important points worthy of discussion.

Ms Moss suggested it would be useful to have a workshop to brainstorm the ideas, and come up with a proposal on this matter, to protect South African artists.

Mr Xaba said the DAC would be keen to engage with Mr Mokoena.

Mr Mohau noted that this was a huge industry, and one that needed to be consolidated.  He challenged the institution of arts to tap into the Job Fund. He agreed that none of these institutions or artists had united to date.  He welcomed Mr Mokoena’s input and thought it would be useful to get his input again in future.

The Chairperson asked Mr Mokoena to ensure that he obtained the contact details of the DAC.

The Chairperson finally reminded Mr Xaba that the Committee needed a clearer and more detailed report, with less acronyms, before the next meeting.

The meeting was adjourned.