These are the new laws that can help save and sustain journalism.
Some countries’ constitutions specifically mention freedom of the press and access to information as a constitutional right. Others go even further, acknowledging the press's unique role in protecting democracy, yet few special concessions exist to help the cause of public interest journalism.
We are left to operate in a challenging environment, often with extreme personal safety risks and little financial support. Fighting some of the scariest people and situations with bare-bones resources.
By tweaking some legislation and introducing innovative new laws, we can attract more support from the public and businesses and help the state recover assets from misconduct and corruption.
Looking at various incentives and tax rebates, we can use legislation to improve the current environment. We can create a culture change around whistleblowing and investigative journalism, reversing the trend of the last two decades, which saw most countries suffer losses in these categories.
My home country of South Africa, ravaged by crime and corruption in the last decade, is an example of how we might benefit from these changes. Still, the principles are globally relevant and applicable to any country and tax regime willing to acknowledge the critical role of public interest media.
Executive Summary
News media organisations worldwide face a sustainability crisis that the Covid-19 pandemic exacerbated. Public interest journalism, local news and investigative reporting are all at risk and have been for over a decade while at the same time having to provide a crucial check on power.
Global research reports and some local efforts have made recommendations that could alleviate the burden of publishing journalism to serve the greater good, and we propose those here that are likely to make the most significant impact on the industry and the country.
Addressing the issue of media sustainability requires a multi-faceted approach. News organisations must reinvent themselves and rethink how they generate revenue without compromising editorial integrity.
But this is exceptionally challenging while managing the rapid decline of revenue prospects and cost-cutting simultaneously. To put this in perspective, the South African news media industry lost more than half of its workforce from 2010–2019, according to the Wits Justice Project. How can we begin to contemplate an industry turnaround in such an environment?
Therefore, we must create a more favourable environment in which the media operates through supporting legislation and incentives.
This submission outlines a number of these measures that would help public service media to navigate this crisis and, at the same time, present South Africa as a shining example for even the most progressive nations to follow. It should not matter whether the entity is set up as a non-profit or public/private organisation, but rather if it meets the definition of public interest journalism and is a member of the Press Council in good standing.
Our submissions fall into the following categories as incentives to encourage:
These suggestions will require a relatively small short-term investment but with exponential long-term returns for the State.
Alongside big business and the people of South Africa, the State has been a significant beneficiary of the good work of public service journalism.
We have seen how investigative journalism has contributed to the resignation and recall of leaders of some important institutions, allowing the country to reclaim lost ground from fraud and corruption. In several cases, there were large cash and asset recoveries off the back of the work of investigative news media.
Some estimates put the cost of corruption at 4% of GDP in the Zuma years — the #GuptaLeaks were instrumental in proving these links that ultimately saw the President resign and helped lay the grounds for the Zondo Commission of Inquiry.
Tax collection and refunds processed by South African Revenue Service under Commissioner Tom Moyane were negatively affected and recovered to record levels after his termination, thanks to investigative journalism.
The State has much to gain from supporting and contributing to a healthy public service journalism ecosystem, both directly and indirectly.
Definition of Public Interest Media
In its 2021 report on “Media Sustainability and Universal Access to Journalism” by the South African National Editors Forum, the organisation settled on a definition for qualifying media as follows:
“Public interest journalism refers to journalistic activity that is central to the democratic function and the protection and promotion of the South African Constitution, including investigative journalism, reporting on the daily affairs of public institutions, and local journalism focused on the generation of public interest stories in towns and villages and underserved rural areas.”
In conjunction with Press Council membership in good standing, we propose that this definition be used as the qualifying criteria for the organisations that would qualify for the proposals submitted below.
Compensation of Asset Recovered or Fines Imposed
The USA has six laws that compensate whistleblowers on a % of assets recovered from whistleblower events or fines imposed. Compensation ranges from 10% — 30% of assets recovered or up to 50% of penalties imposed. Under the Dodd-Frank Act, the largest payout was $200m to an investment banker in 2021.
The net effect is that tip-offs have surged, and a more robust whistleblowing culture exists.
Given how whistleblowers are treated in South Africa and many other countries, ranging from job losses and financial ruin to murder, there is very little to incentivise whistleblowers to take the risk associated with doing the right thing.
Often they need to work with investigative journalists to get the story corroborated and further developed, taking months of work and sometimes life-threatening risk. These investigations can cost hundreds of thousands of Rands, often with little return other than legal threats or worse.
Using these six American laws, we can craft legislation along the same lines that compensate both whistleblowers and investigative media for their work that leads to recoveries by the state and/or fines imposed.
For reference, these acts and the associated rewards are as follows:
This is a net benefit to the State as compensation is linked to recoveries, which would not have been possible without this work. The only cost would be processing and verifying claims, but the upside is enormous, as evidenced in the USA, which is seeing record recoveries and penalties.
In South Africa, we have also seen recoveries from the vital work of whistleblowers and investigative journalism.
Because of the work of whistleblowers and investigative journalists, McKinsey agreed to repay the state-owned transport company Transnet $63m, in 2020. Without the #GuptaLeaks, another R520m in Gupta family assets would not have been recovered.
These are just some examples of asset recoveries by the state from investigative journalism that we estimate run into several billion in recent times
With new incentives in place to compensate those who take the most risk this would lead to even more asset recoveries benefitting the state and the public coffers.
Tax-Incentivised Funding Sources
The need for more available funding in the media ecosystem is clear. But it is a complex issue as we have seen how funding has been the mechanism by which some media houses have been taken over and then compromised.
In South Africa, The Independent Newspaper Group, was once the largest newsprint publisher in the country before a series of owners stripped the assets and then the editorial integrity of once-esteemed titles. This a prime example of what can go spectacularly wrong when profit and political agendas hijack newsrooms.
Our proposals relating to funding cover a range of suggestions, namely:
- Depreciation allowances and incentives to encourage investment in news media enterprises;
- Grants and donations to public service media made exempt from donations tax, even without charitable status or non-profit corporate structure;
- Memberships and subscriptions to qualifying public interest media are tax-deductible for members of the public;
- Memberships and subscriptions zero-rated transactions for VAT / Sales Tax purposes for public interest media; and
- Making advertising by corporates qualifying spend for corporate social investment (“CSI”) scoring.
For a relatively small subsidy of an essential service sector, National Treasury could stimulate investment in the media sector that could breed a host of new and diverse media start-ups and support existing ones.
Depreciation allowance for investors
To stimulate venture capital investment in South Africa, National Treasury introduced Section 12J of the Income Tax Act in 2009, offering tax deductibility for qualifying assets. By providing a depreciation allowance on the amount invested in this sector, more and new investors were incentivised to enter the fray.
Similarly, we propose that investments in public service media organisations should be written off against taxable income by investors — thereby reducing the financial risk of the investment.
In lieu of these breaks, investors could be limited to a maximum of 25% voting rights, with any excess allocated to staff-appointed representatives to protect newsrooms from wayward owners.
Only those accountable media organisations that are members of the Press Council (South African adjudicators of public complaints) should be eligible for these allowances. And “in good standing” beyond just up-to-date membership fees. This means members who abide by Press Council rulings and exhibit ethical and editorial standards described in its code of conduct.
This would encourage greater participation in the Council and allow it to significantly raise its membership fees which could be used to invest in more skilled personnel to regulate the industry better.
Tax Exempt Grants and Donations
Currently, only Public Benefit Organisations are exempt from donations tax from gifts. Ideally, the entity status should not determine whether donations by individuals, foundations or businesses benefit from this exemption. Rather, whether an organisation produces journalism in the public interest should be determined.
Some for-profit entities make significant investments in investigative journalism that costs way more to produce than is possible to generate profits but remains prohibitive. And as donations would be subject to a donations tax, this effectively cuts off gifts as a funding source for these entities. As such, only some for-profit organisations are willing to carry the cost on investigative teams when they could use their large audiences to create social impact and change.
We propose exempting all donations to qualifying public interest media outlets from donations tax.
Tax deductible memberships/subscriptions & cover prices
Reader revenue models are also worth considering due to their success in the international environment. These models come in all guises, some opting for hard paywalls (Financial Times), metered paywalls (New York Times), a freemium model (News24), donations/ contributions (The Guardian) and membership (Daily Maverick).
While reader revenue models have had a positive impact on business model of journalism, the take-up of support has been left to the wealthiest individuals. It is estimated that only around 200,000 people currently pay for digital news subscriptions or memberships in South Africa.
To make public support of media more attractive and affordable, all contributions by the public to accredited media institutions could be tax-deductible for readers.
At the same time, these digital memberships and subscriptions by the public could be zero-rated for value-added tax purposes, which would create an additional 15% uplift in impact. We could go one step further and zero-rate newspaper cover prices to stimulate support for this important part of the industry.
Advertising as qualifying CSI spend
Corporate Social Investment (“CSI”) policies vary from one country to the next. Some are mandated by law, and others are guideline recommendations.
By adding public interest journalism to the approved list of CSI efforts, corporates could support these institutions through advertising spend, which would then qualify for CSI scores. As advertising is already tax-deductible, there would be no additional cost to the state.
It would incentivise businesses to support local media houses versus sending money to offshore digital entities like Google and Facebook, which leave South Africa untaxed. Advertising revenue generated by local media is taxed and would help fund some of these proposals.
Job creation
According to the Wits Journalism Project, South Africa lost over half of its permanently employed journalists and media professionals in the past decade. Pew Research found that newsroom employment at newspapers in the USA decreased by 53% over a similar period.
Not only is an entire generation of journalists being lost to industries offering more pay for less risk, but attracting entrants to the field takes work. Coupled with this is the lag in professional development required to progress a service industry such as this one and the need for more skilled workers.
The South African media industry is now left to reconstruct the loss of talent whilst determining how to fulfil the demands of the new skills required in the modern-day media organisation.
In addition, big organisations were forced to scale down and reduce costs. The net effect was an exodus of experienced talent that mostly went unfilled or was replaced by junior staff members at a fraction of the cost.
An entire generation of journalists and editors no longer work in the industry as available positions are reduced, and the pay rates can’t keep up. In addition, with reduced demand and a dire outlook for the industry, journalism students are actively being advised to bypass careers in journalism due to the lack of opportunities.
The migration of the news media from a business model reliant on advertising and cover prices towards reader revenue in the digital space constitutes a significant shift that requires revisiting strategies and the development of new skill sets.
How can we reclaim lost editorial skills, build capacity and talent pipelines and aid the continuous development of media professionals in countries like South Africa?
We must attract editorial staff back into the industry, ensuring a pipeline of new talent and the economic means to afford the talent in new skill sets.
The tax relief that aids in the ability to afford highly-skilled staff may assist in alleviating the problem. As temporary employees’ tax holidays were offered during the Covid-19 pandemic to aid cash flow, similar initiatives could be made available to accredited media houses for, say, their most senior editorial staff members.
We propose that this number be capped at 35 employees since most organisations can build a strong leadership and management base alongside other senior positions with this number. Smaller media organisations would not be prejudiced, and these benefits would allow a diverse range of media to grow from smaller start-ups to medium-sized and beyond. In addition, the employees’ tax holiday could offer more competitive salaries to skilled editorial and technical staff, thereby attracting people back into the industry.
To repair the pipeline of new talent entering the industry, a media studies bursary programme is proposed, where an appropriate number of students per year (in journalism, management and technology) join accredited media houses after completing their studies on government-funded “community service” programmes, similar to the medical fraternity.
Professional development
There is also a recognition that the news media industry has failed at innovation. An innovative industry is largely the responsibility of leaders and to address the need for more innovation in the media industry, the relevant industry leaders need to be upskilled.
The ability of leadership teams to establish innovating, robust and thriving media companies is of the utmost importance. Failure to innovate is a failure of leadership since it is ultimately their responsibility to build a culture and the requisite frameworks to keep delivering new editorial products and revenue streams.
To reduce the risks associated with innovation and experimentation, organisations need to migrate to a mindset and culture of product design thinking, and this mindset includes the future operation of the newsroom.
How can one successfully grow robust organisations that are continuously innovative in journalism, new products and revenue opportunities?
Data-driven audience-centricity will be the key to how journalism evolves into its level of public service, seeking out the optimal intersection of the company’s strategic goals and the audience’s demand. Designing a company culture and adequately resourcing media organisations to fulfil their innovation mandates necessitate new skills and functions.
However, to action, the above requires leaders who clearly understand what the future looks like for journalism and the business of journalism. Therefore, the CEOs and editors of media organisations need to be upskilled in innovation and leadership training.
Some of the more established journalism schools in the USA are responding to this need by creating new courses to teach these skills (https://www.journalism.cuny.edu/executive-program/).
The Covid-19 pandemic has made online learning more accessible, and it is submitted that making specific funds available for professional development is necessary for the South African media context. This could be achieved by introducing tax relief relating specifically to professional development and training in the industry.
Technology
Media organisations are increasingly forced to compete with larger business rivals, social media giants and streaming video-on-demand operations, all with much bigger technological teams and resources. This creates a challenging environment for smaller organisations and even the biggest media companies in South Africa.
Underpinning all the points discussed above and the corresponding efforts in relation thereto will be the successful use of data and technology. Future success depends on proficiency in these key areas. As traditional publishers migrated to digital platforms, systems, processes and people had to align to this new approach. The inability or reluctance to do so resulted in the liquidation of many media enterprises.
How can the appropriate technology needed to deliver the best possible service to audiences be accessed and funded?
Research and development rebates for the news industry can play a significant role here. We have seen how efforts by the Google News Initiative and South African Media Innovation Programme, for example, have helped fund projects that would otherwise not have been pursued.
Tax rebates against qualifying investments would help the industry invest in innovation projects which are currently being overlooked due to financial pressures.
Data-free browsing of digital news
Internet data costs in South Africa remain exorbitantly high for most of the population who are only able to access via mobile data networks. If public interest media websites were made free to browse through legislation forcing telecommunications companies to do so, it would encourage members of the public to visit trusted news sites.
Press Council membership and public interest definition qualifier is a foundational requirement for eligibility of this benefit.
Although some developed countries saw little change in behaviour when this was implemented (e.g Canada), South Africa has the highest average online daily consumption rates and a much higher portion of the population accessing via mobile, which could result in different outcomes. News traffic makes up such a small percentage of internet traffic that this would have a negligible impact on Telco profitability.
Conclusion
Admittedly, these proposals are wide-ranging and ambitious. But we should approach big problems with innovative solutions, and these proposals, if adopted, would make a monumental impact on an industry that has proven countless times to have an outsized effect on society.
The costs of subsidies are negligible compared to the potential returns to the State and society, and many proposals only require legislation to be passed.
In the last decade, investigative journalism and whistleblowers' sacrifices have helped the South African State recover billions of rands worth of assets. Now is the time to formalise this symbiotic relationship and show the world that South Africa is serious about reversing the diabolical treatment of whistleblowers and that it can be a leading light in progressive media support efforts.
These proposals could quickly be adopted by other willing nations who view media freedom as critical to a functioning society.
We know that South Africa is being retarded by the impact of corruption at both national and local government levels. The time is right to empower the most significant lever we can pull from the outside by creating a supportive and encouraging environment for whistleblowing and public interest journalism to prosper.
