Over the last few years SAMRO has been rocked by a forensic investigation into SAMROs Arab Emirates Music Rights investment (AEMRO) which cost SAMRO member’s R58 million over two years of board deliberations.
CEO (2013-6) Sipho Dlamini was the prime mover behind an elaborate ruse to set up AEMRO in Dubai. This caused SAMRO to right off R49.5 million in their 2017 financials in what Sekela Xabisa forensic audit labeled a “concoction.” Insiders allege five individuals got away with R30 million.
Dlamini together with SAMRO COO Bronwen Harty resigned and moved to Universal Music Africa as Managing Director and Head of Operations respectively.
After Dlamini’s resignation, the interim CEO was Reverend Abe Sibiya wrote. In an open letter he wrote: “After the French CMO (SACEM) challenged our application, we had no option but to write a strong legal letter to CISAC ( through Linklater) to voice our displeasure and disappointment at the shocking outcome even though on paper we were noted together with CAPASSO as recommended for provisional status…. “If the outcome returned with a positive result, SAMRO would be operating in Dubai today and all rights holders would be rushing to sign up with AEMRO. Only one board member from my recollection was always sceptical and he made it known. It should be recorded in the minutes and resolutions.”
In November 2019, the previous SAMRO board was fired on a Section 71 of the company’s act and a new board elected. The new board proceeded with litigation against the previous board for receiving “an additional R1.4m in fees,” claimed a source, clarifying that these fees were for an extra twenty special meetings relating to AEMRO deliberations.
AEMRO was a very expensive “lunch in Dubai” as the chair of the board at the time Jerry Mnisi described in an open letter. Samro wrote off R49.5m in its 2017 financials on AEMRO, and in 2018 a further R9.4m impairment cost. The Sekela Xabisa forensic audit into this labelled AEMRO, “a concoction.” The 2018 financials suggest criminal proceedings whilst the current chair Nicholas Maweni advised members to “swallow the pill.”
Multi-jurisdictional copyright lawyer Graeme Gilfillan said, "UAE cost reality advises that whilst US$3.5 million may do for a glance at the opportunity, properly applied risk management principles would have informed that a great deal more money would have been required and committed in order to adequately address and succeed the opportunity. In that regard SAMRO members can take some relief in that the financial risk had the folly continued, could and would have been 3 to 5 times the amount, which SAMRO could ill-afford."
Dlamini and Harty were also blamed by SAMRO for the purchase of the Zeus monitoring system which according to a board member cost members between R70-120 million and has not worked since. SAMRO will have to to start from scratch in building a user-friendly system that members can interact with.
Members have begun to express their dissatisfaction with the organisation quite openly about the issues of non payment on unidentified works, the inequality of the three tier membership structure as well as the confusion around Public Domain works. They believe SAMRO leadership is predicated on the strengthening of the multi-nationals and the biggest CISAC societies and wish to dismantle the market share structure and its dominance of the industry. And they wish to see to it that money flowed to the right people going forward and collections going back.
SAMRO member Linda Maseku put it this way: “SAMRO’s modus operandi seems to be: collect as much as possible do very little to ensure distribution reaches all it should retain the funds as long as possible so they can qualify to be listed as ‘Undoc.’ “SAMRO ought to be transformed, to a more transparent and member centric organisation and not this executive self-serving detestable organisation it is today. For a member to resort to PAIA, the public protector and other avenues just to get access to answers is worrisome but, what are we to do when the referees like DTI and DAC aren’t even concerned to intervene. I know I speak for thousands out there, some who aren’t even aware they have been victims of SAMROs deliberate omissions or misacts just so SAMRO could retain a chunk of their collections to make use of.”
SAMRO Board, officers, management and affiliates are under scrutiny to such an extent that their website was hacked over the weekend with only a sign saying “this domain name may be for sale.” It was rumoured that the website was actually crashed from within to hide potentially damaging documentation. When samro.org went back up online on Monday morning it had a new look. The pressure upon SAMRO to move to improve is relentless.
"The idea to lunch into foreign territory was as a response to the need to increase earnings for the benefit of SAMRO members through launching into foreign territory and setting up a new CMO formed out of a partnership with two Dubai nationals." Sibiya
SAMROs DP scandal
Since inception SAMRO have used a fake person called “DP” to take artists royalties, in particularly black artists. DP earns its income due to the arrangement split in SAMRO’s distribution rules. Currently the royalty split is 83.33% to DP and the balance to the arranger.
“DP” is not a natural or juristic person. It is a patronym for a composer author construct called “Domaine Publique.” DP has its own IPN # (interested party name number) which is inserted as an interested party on a work so as to claim a royalty share.
Hlengiwe Mhlaba (who discovered this through special audit) exposed that DPs illegal collection is costing traditional and gospel artists, such as herself hundreds of thousands of rand. In response, SAMRO asked members to vote on the “apportionment of public domain royalties.” This was published in a pamphlet titled “DP Presentation,” and was accompanied with 4 specific royalty split options between the composer author and “DP.”
International CMOs have arrangement rules offering different splits between arranger and composer. GEMA in Germany is 25% and PRS (UK) gives 100% to the arranger (in line with UK law). The proposed SAMRO vote offers members the opportunity to alter the current system. However, members will not vote and suggest this as part of an attempted “cover up.”
Member Linda Maseko who is currently in legal process with SAMRO said, “They think they can insert their own interpretation into the statute that governs the “DP.”Just because they ran some workshops on this matter does not change what the law states and any vote on this matter is still not allowed in law and therefore illegal just as it was when it was opposed last year.” Members refused to vote then (August 11 2018), and they are refusing to vote at the forthcoming EGM (August 8th 2019). Work in the public domain is by law “free for use by all,” (Professor Owen Dean). DP is a breach of statute and members cannot by law vote on public domain. They say the only solution is to scrap DP altogether.
Added to that in terms of copyright, the DP arrangement split also runs against the law. Mahlaba has argued that her adaptation of musical and literary works in the public domain is original and that the copyright in the arrangements belong to her. The origins of DP are at the origins of SAMRO which was established in 1963 by ex SABC CEO Gideon Roos. SABC was always and still is SAMRO’s biggest client. SABC pays SAMRO in excess of R100 million per annum. From 1963 to the present day SABC has been paying SAMRO for public domain works. This is what SAMRO refers to as a “historical legacy issue.”
“DP” is one of 7 sources that funds a distribution channel named in the SAMRO financials as “royalty distributions written back.” Money that is due to the composer author of a work, arising from any of the seven sources including “DP” is paid out to a select group of publishers who have no legal claim to the work.
These royalty incomes are paid out on the basis of market share splits. Income primarily goes to Sony Music Entertainment, Warner Chapel Music (Gallo), Universal Music and Kobalt Music Group.
The cost of this to black South African music could be anywhere between R1 and R1.5 billion over the last fifty-five years. The cost to songwriters and arrangers of public domain, traditional and indigenous songs is estimated to be R30 - R40 million per year.
“Royalties Written Back to Distribution,” a collection pool for unidentified works has increased from 0.9% of revenue in 2006 to 12.5% of revenue in 2019, totalling 59.2 million rand ($3.3 million), according to the organization. Proper data management and monitoring could accurately account for the flow of royalties, but has been lacking.
A number of royalty incomes are subjected to market share splits where income primarily goes to Sony Music Entertainment, Warner Chapel Music (Gallo), Universal Music and Kobalt Music Group. These music publishing giants together with some ten independent publishers make up 85% of market share. The remaining 15% is paid out to the 17 000 SAMRO members. Imagine a candidate member having to compete in the market share system with a publisher that has 5000 authors?
Split Membership and the off-shore account
The practice of “split membership” allows for a member to arrange for the collections of their global income to occur in another country, removing South Africa from the income and reporting. It was used to circumvent sanctions during apartheid and continues to this day.The SAMRO 2019 audited report shows a paltry 3% of its income coming from outside South Africa. Membership at SAMRO is largely unequal. It is structured on three tiers. A SAMRO member is classified as initially a ‘candidate’ member, who can later graduate to an associate member and then the fortunate few are classified as full member. At the top are full members which number 595. In their ranks are 95 publishers, nearly 60% of which are deregistered or nonexistent. Full membership is known to be secretive and privileged. Only full members get to vote for other full members and board members. The three-tier membership pyramid with an earning disparity of 4.6 million times between top and bottom composer.