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Media business environment in Zimbabwe
Raphael Khumalo
Extracted from Report on International conference on media support strategies for Zimbabwe
November 30, 2005

http://www.i-m-s.dk/Media/PDF/Zimbabwe

Background
Zimbabwe’s literacy rate of 90.7%1 is one of the highest in Africa, providing huge opportunities for growth in newspaper circulation. However, in today’s Zimbabwe, high literacy does not translate into wide newspaper readership and sales. Rather, economic and political factors limit the print media’s potential for disseminating information to the Zimbabwean populace.

Zimbabwe has a population of 12,7million of which 64% is 15 years of age and above. To understand how little newspapers have penetrated their potential market, one has to appreciate that 70% of Zimbabweans able to work are unemployed. And 66% of those employed work in agriculture, where wages are barely sufficient to cover the bare essentials. Of the remainder in employment, 10% are in industry, whilst 24% are in the service sector.

Constraints – Business environment Zimbabwean industry is operating at 25% of its capacity, and has been in free fall since March 1998. A drop of 8% in capacity is expected this year at a time when inflation is around 360% per annum. The decline in the manufacturing sector is largely related to the non-availability of the foreign exchange needed for importing raw materials, spares and equipment. The country’s import cover – the extent to which national foreign exchange reserves can cover the purchase of goods imported into the country - fell from 75 days in 1999 to 15 days in 2003 and 2004. In 2005 there is no cover at all, with the result that suppliers outside the country are not prepared to supply goods on credit to Zimbabwean companies, as they risk not being paid. This has caused a run on the little foreign currency coming into the country, and the Zimbabwean Dollar has declined from Z$38 to the US$ in 1999 to the current rate of Z$100,000 to the US$2.

Following the economic downturn, publishers have had to contend with major challenges posed by falling readership and advertising. The cost of producing newspapers has soared, putting papers far beyond the reach of most Zimbabweans.

Newsprint
Newsprint is produced locally by Mutare Board & Paper Mills. To manufacture newsprint, the plant needs at least US$300,000 per month in order to import pulp. This it has struggled to do, as foreign currency allocations from the Reserve Bank have all but ceased. For Mutare Board & Paper Mills to stay in business, the company has resorted to buying foreign currency on the parallel market, where exchange rates are very high. This has resulted in newsprint going up in price by more than 832% over a ninemonth period, in line with the fall in the exchange rate.

The current landed price of newsprint in Harare is Z$65,461,989 per tonne. Average consumption of a 48-page tabloid such as the Independent, with a weekly print run of around 30 000 copies, is 8 tonnes – a monthly cost of Z$2,618,479,560. As the following break down of cover price shows, 25% of revenue earned from newspaper sales goes towards meeting printing costs alone:

Revenue from advertising has to cover all other costs including, newsprint, administration overheads, selling expenses, and staff salaries. In recent weeks, two broadsheet newspapers - the Sunday Times and the Sunday Mirror – have become tabloids in an effort to cut down on newsprint consumption.

Printing Charges Printing charges from the example above are up to Z$275,000,000 per week, or Z$1,375,000,000 per month. This brings the total cost of producing newspapers in one month to Z$ 3,993,479,560. These are huge costs that publishers are barely able to cover. Publishers are continually reviewing print runs, advertising tariffs and their cover prices. Each step results in fewer advertisers and readers. Borrowing is not an option, as interest rates range from 415% to 435%. To compound matters, most advertising revenue is derived from advertising agencies, which take up to 60 days to pay.

When faced with increases in newsprint and printing charges, newspaper owners either increase their cover prices or their advertising tariffs - or both. Failure to do so would result in almost certain closure, unless publishers could somehow access grants or low-interest loans from elsewhere.

Between 2000 and 2002, a period that saw a referendum and two national elections3, the average print run for the governmentowned Sunday Mail was 81000 copies per week, while the Herald printed around 68 000 copies per day. In 1985, the circulation figures for the Sunday Mail exceeded 150 000 copies per week. The decline in newspaper circulation is closely linked to the decline in the country’s standard of living; when push comes to shove, people would rather buy mealie meal than a newspaper. To appreciate the seriousness of the problem, it is worth noting that over a nine-month period the Financial Gazette and Independent increased in price by 600%.

Advertising
But just because someone cannot afford to buy a newspaper, it does not mean they are unable to read it. Fewer newspapers are being bought by the dwindling few who can afford them, but many of these papers later find their way into the hands of many other people. The Zimbabwe All Media And Products Survey (ZAMPS) indicates that every newspaper bought is passed on to between 10 and 15 people. So advertisers could still reach a wide audience. However, in order to want to reach this audience in the first place, advertisers need products to sell. In Zimbabwe there are fewer and fewer goods for sale as there is no longer foreign exchange to pay for their importation.

Major companies like Unilever, Cains Foods, the South African supermarket chain OK, and United Bottlers will not advertise when their factories are unable to produce products such as washing powder, chips, soft drinks and the like. The shrinkage in newspaper advertising can be seen in the way newspapers have become thinner, just as the supermarket shelves have grown empty.

Distribution
Street vendors, shops, and agents sell newspapers in return for a commission. Munn Marketing, a major distributor of private newspapers, charges publishers 50% of their sales, net of VAT. In addition, they demand a 7.5% fuel surcharge to compensate for the high price of fuel. Munn Marketing is owned by ZIMind Publishers (Pvt) Ltd, the company that owns the Independent and the Standard newspapers (see ‘Media Ownership’ section of this document). There is only one other distribution company that distributes newspapers, and that is Publication Distribution. A company called Zieco also distributes magazines, as does Munn.

The distribution of government owned newspapers such as The Herald, Chronicle and Sunday Mail is done in-house by their circulation departments, which use their own trucks, as well as commuter minibuses and rural buses. Their distribution networks are much wider than those of the privately owned press, as the government owned papers have larger print runs and publish on a daily basis. They also enjoy the support of local ruling-party politicians, some of who have banned the distribution of privately owned newspapers like the Independent and Standard in their areas.

The shortage of fuel has seriously affected newspaper distribution, too. Rather than sending trucks to places like Masvingo or Chinhoyi, it is cheaper for a distributor to send newspapers on commuter minibuses. However, distribution by public transport is less reliable. The government owned press has been equally affected, even though they do sometimes receive fuel allocations from the state owned fuel procurement company NOCZIM.

When sales of newspapers decline, readership will decline too, albeit not at the same level. Take the case of a family breadwinner who, in the past, would have bought a copy of the Herald every day. That copy would have been shared with around 10 other family members. Now the breadwinner can no longer afford to buy the paper, and decides to rely instead on the copy available at the office. Ten readers will have been lost by this single act. Print runs have become smaller whilst the purchasing power of populations outside the cities of Harare and Bulawayo have been the worst affected.

Constraints – Legal and political
The impact on newspaper production of the declining economy has co-incided with the passing of legislation that has further restricted the publishing industry (see ‘Media Laws’ elsewhere in this document). The Access to Information and Protection of Privacy Act (AIPPA) prohibits any individual who is not a citizen or permanent resident of Zimbabwe, or any company in which one or more Zimbabwean citizens hold – directly or indirectly - a controlling interest, to hold or acquire shares in a mass media service. The Act also requires that all media houses be registered with the Media and Information Commission (MIC), which issues media houses with two-year renewable registration licenses. Those that do not comply run the risk of imprisonment and / or heavy fines, as well as the seizure of their equipment. Furthermore, media owners are compelled to inform the Commission of any changes in ownership, name, language or frequency of publication, as well as changes in editorial content and area of distribution. In 2004, the Commission suspended the registration of The Tribune newspaper for a year after the owners failed to inform the Commission of a change in shareholders.

Section 71 of AIPPA provides for the suspension, cancellation and enforcement of an operating license for a period of one year as a result of fraud, misrepresentation or nondisclosure of a material fact. In February 2005, a month before general elections, the Commission closed The Weekly Times for being in breach of its licensing conditions. Justifying the closure, MIC Chair Tafataona Mahoso said the Weekly Times’ "core values, convictions and overall thrust were narrowly political, clearly partisan and even separatist"4. He said the newspaper had "hoaxed" his commission in its license application by saying it would focus on development journalism. The Weekly Times was closed less than two months after it launched, taking to four the number of newspapers deregistered by the MIC since it started licensing publications in 2002.

The success of a newspaper is dependent on the ability of the journalists it hires to enquire, and to gather, receive and disseminate information. As described in detail elsewhere in this document, AIPPA makes it extremely difficult for journalists to carry out their core business. Even if registered, journalists can have their press cards suspended by the MIC if they are found to be in breach of AIPPA’s restrictive code of practice.

A two-year operating license for a media house that requires billions of Zimbabwean dollars in start-up capital makes a mockery of the country’s quest to attract investment and to create jobs. No serious investor will put money into a venture that can be closed at the whim of a government official. Buying computers, vehicles, furniture and office equipment, as well as recruiting staff, is a costly business. The Act does not give confidence to lenders of capital such as banks and other financial institutions that media houses are going concerns.

A press card valid for a year is equally problematic, as it does not allow for job security. Not surprisingly, many good journalists have chosen to leave the country rather than work under such conditions. The impact of their departure on publishers has been huge, as can be seen by the lack of depth in many news stories owing to a lack of experience and professionalism of the journalists concerned. Journalists’ pay is dictated by the industry in which they work. I doubt that publishers are profiting from employing relatively inexperienced journalists as, whatever short-term benefits may be gained from hiring these lower-paid journalists, would soon be lost in the cost of litigation arising from their inexperience.

AIPPA requires newspaper publishers to pay registration fees of Z$500,000 and an application fee of Z$20 000 when they lodge their registration. Meanwhile, a Z$1000 application fee and Z$5000 accreditation fee are payable when registering a journalist. These fees in themselves are not a burden. However, what is a burden is the annual levy of 0.5% on a newspaper’s gross annual turnover, which is also required in terms of the law.

With the current legislation in place, it is unlikely that the printing companies currently servicing the private press will want to invest in new technology and equipment, as returns on investment are not guaranteed. Their clients could be closed down any time, thus presenting the printers with serious financial problems.

British company AMI invested in the Daily News before the enactment of AIPPA (see section on ‘Media ownership’ elsewhere in this document). It is unlikely that such a company would invest with AIPPA now in place. AIPPA’s restrictions on foreign ownership singles out media from the rest of the manufacturing sector, which otherwise is a priority sector in which 100 per cent foreign ownership is permitted, according to the Zimbabwe Investment Center.

Contrary to logic, government is preoccupied with how it can survive and reproduce, rather than with how it can attract foreign investment, particularly in a sector such as the media that it considers strategic. Thus government will continue to view foreign investment in media with suspicion and disdain.

Todi, senzenjani? What shall we do?
Zimbabwe literacy rate of more than 90% is, itself, a huge opportunity. How this opportunity is exploited depends on a wide range of risk factors described above. In general, Zimbabweans expect that good times are around the corner, and believe that newspapers can somehow make the good times happen much sooner through their reporting. However, AIPPA and its terrible twin, the Public Order and Security Act (POSA), severely constrain what newspapers can report on without risk of closure.

There are huge gaps in the newspaper market - notably the lack of independent Ndebele and Shona language newspapers, and the absence of affordable A4 or even A5 sized newspapers for low-income earners in the townships and rural centers. The price of newspapers is far beyond the reach of many. AIPPA and POSA have been applied selectively against the private press and must therefore be repealed so that publishers can focus on business without the constant fear of having their papers closed.

The availability of appropriate technology would offer cheaper and even more durable newspapers. Given the high price of film, it is time the printing and publishing industry moved away from the use of image setters to plates. There is a serious need for investment in computer-to-plate production of newspapers as film for image setters is expensive and in short supply.

It is true that none of the newspaper closures in recent years were for economic reasons. However, the industry is not attracting investors with purely business intentions. Rather, titles are being kept afloat by investors who seem to be seeking to serve more overtly political agendas, as the reported buy out of the Mirror Group by the CIO seems to suggest. The reason the Independent, Standard and Financial Gazette remain in business is because they have carved out a niche for themselves in reporting political and business stories that the government controlled newspapers will not report.

Finding alternative sources of newsprint is crucial for alleviating the current problems faced by the print media. Providing the mill with foreign currency to purchase pulp will not help, as the mill itself urgently needs a major overhaul if there is to be an improvement in the poor quality of its products.

Clearly, it is difficult to predict what will happen tomorrow, let alone what the media landscape will look like in the medium to long term. The privately owned press is inaccessible to many, and is only tolerated because the government wants to give the impression that free expression is respected. However, there is no guarantee that this semblance of normality will continue indefinitely.

*Raphael M. Khumalo is General Manager of ZIMind, the publishers of the weekly Independent and Standard newspapers.

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