Samro under fire over Dubai investment

It was a case of “Hello and Dubai” when it came to a R48 million investment to set up a music rights collecting society in the Middle East, first reported by City Press in November. And now that it is time to account for the loss, composers, songwriters and music arrangers say the SA Music Rights Organisation (Samro) is dragging its feet to try to avoid further scandal.

Various groups are accusing Samro’s board and management of:

  • An investment decision that is either “shockingly stupid or deeply suspicious” and that was not approved by members in a special resolution, as required by Samro’s memorandum of incorporation.
  • Following one poor decision with another when appointing forensic investigators to probe the debacle and again not consulting members – who wanted a transparent and independent process.
  • Stalling the release of the report because a former acting CEO’s account of what happened contradicts the testimony Samro management gave the investigators; exposing a woeful lack of risk assessment conducted by Samro before ploughing $3.5 million (R48 million) into establishing the failed Arab Emirates Music Rights Organisation.

City Press has seen a letter sent to members by Samro’s chief executive Nothando Migogo on July 26, saying the forensic report into the investment (spearheaded by former CEO Sipho Dlamini in late 2015) was delayed until Monday this week.

She attached a letter by advocate Boyce Mkhize, lead investigator in the case, from forensic auditing firm SekelaXabiso, to explain why.

Mkhize wrote: “Having produced an interim report to the board, we came across information that contradicted some of the initial statements we had received and which were part of the interim report.”

Sources said they believed this information was an email from acting chief executive, Reverend Abe Sibiya, giving an explanation of what happened in Dubai.

His letter, written in July and obtained by City Press, confirmed members’ suspicions that Samro had clearly not brought the global rights collection body Cisac on board before diving into the investment; that proper risk analysis was patently lacking; and that Samro’s delegation flew to Dubai but never met with all the necessary partners once there.

But by Friday the report had still not been released. Asked why and also to respond to the claims from angry members, Migogo said: “The forensic audit is taking longer than initially expected due to the complexity of the issues and the number of parties involved, as well as the legalities to be considered in publishing any contents of the report.

“Good progress is being made and we will inform our members when the report is ready for discussion ... We choose not to respond to your other questions until the report has been shared with the membership. It is only fair that they receive feedback from the organisation itself, rather than through the media.”

During a heated meeting at Samro earlier this year, characterised by fisticuffs and fainting, the musicians threatened to shut down Samro for good, with the Dubai debacle high on their list of grievances.

Samro, a non-profit organisation, is South Africa’s only music and performing rights collection society, collecting about R350 million a year from TV and radio stations as well as live-event promoters for the use of music.

It is effectively owned by songwriters, composers, arrangers and their publishers who assign their song rights to Samro to collect royalties on their behalf.

President of the Gospel Musicians Association Tebogo Sithathu this week told City Press: “We want that report. We have been in contact with the Samro chair and told him we want to know what these contradictions are in the information given to SekelaXabiso because that’s a red flag.

“We also want to see the terms of reference of the investigation and we want answers to the allegations in the media that the investigator, Mr Mkhize, has been found wanting ethically.

“Was due diligence done in appointing the investigators? We fear that the credibility of the report is already tarnished and it hasn’t even been released yet.”

City Press has reported on allegations of corruption contained in an internal audit report when Mkhize was chief executive of the Mpumalanga Economic Growth Agency. Mkhize has vehemently denied the claims.

“The allegations were never investigated. I was never given the chance to tell my side of the story. They were used to rubbish my name and, even so, they would have no bearing into an objective investigation into Samro based on facts.”

At the time of investing in Dubai, Samro’s management was reported to have boasted that creating the first music rights collecting society in Dubai would yield up to R1 billion in profit for the musicians.

But a 2015 report in the international Licensing Journal by Harriet Balloch and Rob Deans of law firm Clyde & Co shows the fee review by the United Arab Emirates Ministry of Economy, regarding the registration of intellectual property rights in the country, indicates otherwise.

While the cost of obtaining a licence would be relatively inexpensive, says the report, meeting the requirements of the licence, including creating a massive database of rights holders, would be prohibitively costly, believed to be in the region of R200 million.

“It’s a good thing Samro bailed when they did,” said a source, “else they might have lost five times the amount. They obviously never studied the Licencing Journal report or else they would never have taken the risk.”

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