THE availability of Netflix, Amazon Prime Video and other on-demand content services (OCS) in South Africa could be at risk if the government adopts a proposal that they cough up licence fees to operate in the country.

These and other contentious proposals are contained in the government’s draft White Paper titled Audio and Audiovisual Media Services and Online Content Safety: A New Vision for South Africa 2023.

Chloe Castle, the CEO of Dear South Africa, which encourages citizens to air their views on legislation, said the proposal raised many questions.

“The private streaming companies have made the delivery on the content ‒ not the broadcaster. The consumer is already heavily burdened with layers of tax which is a concern,” she said.

Castle said if the legislation passed, streaming services such as Netflix, Amazon Prime Video, and Disney+ would only be able to operate in South Africa if they applied for a licence to do so.

“If the value was already present (through public service broadcaster SABC), why are private content streamers outgrowing the local broadcasting services?”

However, streaming services won’t automatically be required to pay a licence fee because there is a list of measures which will determine if they qualify. These include whether:

The programmes available on the audio-visual content service fall under a person’s editorial responsibility.
It is available for use by South Africans for economic purposes and the annual turnover for the South African market in the preceding financial year was R50 million or greater.
If the regulator deems the global size of the international (foreign-based) business can affect economic activity in South Africa.

The White Paper also states that “where providers of OCS are exempt from licences, the decision should be subject to review every four years based on socio-economic factors, influence, and audience size”.

The White Paper provides for the SABC to have a legislative mandate to operate international satellite television, radio and internet or online services.

“The Independent Communications Authority of South Africa will continue to issue individual and class licences,” said Castle. “However, a broader category of audio and audiovisual content services licences will replace the current broadcasting services licence category.”

The SABC is in for a “comprehensive overhaul” based on international best practices to ensure that it has adequate funds.

In its last annual report tabled in October, the SABC said it had collected R815m in TV licences but the “evasion rate” ‒ uncollected TV licence fees ‒ remained high at 81%.

The White Paper said the current SABC Bill was considering a proposal by MultiChoice which was based on the Nordic funding model. According to this proposal, TV licences should be phased out and replaced with a “ring fenced” levy to be collected by the SA Revenue Service (Sars).

“With their current failures and insufficient capacities, we are raising the question: What value add will the public broadcaster bring with collecting these additional licence fees?” said Castle.

She said South Africans were already burdened by a variety of taxes from income tax, VAT and fuel levies to pay-as-you-earn and customs duties.

“We pay for subscription services (plus VAT), and the data or internet service (plus VAT), as well as buy the devices on which to view the content (purchase price plus VAT). In addition, private content providers are also taxed on income received.”

The Organisation Undoing Tax Abuse (Outa) said it was not clear how Sars would collect the levy.

“How would they know who has a TV and who doesn’t, because otherwise it is just another tax and only taxpayers would then pay for TV licences. But it’s not only taxpayers who own TVs, so it becomes a prejudicial sort of cost,” said Outa CEO Wayne Duvenage.

He said SABC had a social and commercial element and the social element had to be covered by tax allocations because it wasn’t viable to run a service broadcasting in 11 languages, getting the news out to various communities.

“The news is important, plus education, and if they could just measure that social element of the SABC that should be paid by us.”

Duvenage said it was “crazy” to tax companies like Netflix, because they were paying tax anyway, because they had offices in the country; but if there was a loophole and international business were earning revenue that left the country and escaped the tax net, then measures had to be implemented to address the problem.

He said South Africa should look at international best practice around streaming services.

“How does Netflix, that’s American-based, operate in the UK? How do they operate throughout Europe? Find the model that works. It’s not right that South Africa should lose out on the tax opportunities, but you also don’t want to apply conditions that are archaic and are not world best practice, and then eventually see the headlines that say that Netflix leaves South Africa.

“Where you have a situation that we the viewers, people who want the entertainment, all sectors of society, the education that comes from some of these things, that all of this is lost because of a draconian government process that says they have to be licensed, but they have to pay their taxes here.”

Sars spokesman Siphithi Sibeko said the recommendation that Netflix and other streams pay operating licences was a matter of principle.

“All entities that operate in a given space or revenue-related area have to be registered,” he said. “It is happening with everything else. People must be registered. There are registration implications for revenue-generating entities.”

Public comment on the draft White Paper by the Department of Communications and Digital Technologies closes on September 8.

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