A summary of a “forensic” investigation presented to members of the Southern African Music Rights Organisation (Samro) last week appears to have exposed mismanagement worse than even its biggest critics had anticipated.
At an extraordinary general meeting in Johannesburg, Samro bosses laid the blame for R47 million lost in a failed Dubai investment squarely at the feet of former CEO and Universal Music SA managing director Sipho Dlamini.
Dlamini has hit back, claiming that he is being made the scapegoat for a scandal the Samro board had full knowledge of and which mostly took place after he left in 2016.
Samro has nevertheless threatened to take steps against Dlamini to recover the money, even while members question the board’s supposed ignorance.
This comes as the organisation faces an ever worsening liquidity crisis as the distributions it owes composers and music publishers outstrip its resources.
Samro is South Africa’s only collection society of its kind and collects in the region of R400 million a year on artists’ behalf. It is a key source of income for the music industry.
The forensic report by SekelaXabiso is damning of virtually every aspect of Samro’s disastrous attempt to set up a new collecting society in the United Arab Emirates (UAE) called Aemro, which was supposed to bring in additional income.
Samro has, however, not made the actual report available to members or even to Dlamini.
Instead, it has given members a presentation on the main findings.
According to this presentation, Dlamini “misled” the board about its prospects and “prematurely” hired two fixers in Dubai, Mohamed Khalaf and Yaser Aljabal, who were paid “exorbitant” salaries of 128 000 dirham (R518 200) a month.
The investigators say they “are of the view” that when the plug was pulled on Aemro two years later, someone “concocted” fake long-term contracts for the two “just to extort money from Samro” in the form of settlements worth just under R7 million at the time, Samro members were told.
Only Dlamini knew about the supposed contracts, they add.
Dlamini strongly denies all these findings and calls the suggestion that contracts were faked “false and defamatory”.
SAMRO KNEW EVERYTHING
Dlamini told City Press the report presented to Samro members is “an unbalanced report littered with factual inaccuracies”.
“This project was undertaken with the full approval and support of the Samro board at the time. It is regrettable that I am now being singled out and made a scapegoat, especially when the vast majority of expenditure on the project took place after I left Samro back in March 2016,” said Dlamini.
The report does to some extent criticise the board for failing to “sufficiently interrogate critical details” of the project.
Dlamini said that the board’s supposed ignorance was
There were extensive planning sessions and the board also sought legal advice from the UAE about the possibility of setting up Aemro, he said.
Most of the money spent in Dubai was spent on the two local fixers Khalaf and Aljabal, who owned 20% of Aemro through their company IPR Management. They were paid in total nearly R30 million by Samro, but the report said that they “did not add any value to Aemro and failed to deliver on their contracted obligations”.
The two have since registered a company in South Africa called IPR Africa, which has ANC Youth League leader Reggie Nkabinde as their partner.
According to Dlamini, the two earned their keep at least up to the point when he left Samro.
They “carried out detailed and thorough functions required for the establishment and obtaining of all local regulatory permissions for the business ... The individuals also engaged extensively with other executives and general manager staff members at Samro,” said Dlamini.
“The vast amount of expenditure was paid to them by the board of Samro after I left and I cannot comment on whether they added value to Samro at that time or not,” he added.
Dlamini himself was paid a monthly consulting fee of R235 000 after leaving Samro in 2016. The presentation suggests this was related to Aemro, but Dlamini says it was to broadly facilitate the handover to his successor.
‘IT’S TIME TO TAKE ACTION’
The revelations about Aemro were greeted with disbelief and anger among musicians present at the Samro extraordinary general meeting.
Kwaito legend Eugene Mthethwa said the entire Samro board should be suspended and investigated.
“The same board members who should be accountable are throwing Sipho under the bus ... Everyone on the board should be accountable. They were also reckless because they have allowed one person to make decisions that gambled with artists’ futures.”
Veteran music producer Sello “Chicco” Twala says urgent action must be taken against everyone involved.
“We want to clean up all these collecting societies because they are using musicians as a cash cow.”
Gospel Music Association founder Tebogo Sithathu raised concerns about Samro members only being given a presentation instead of the actual forensic report.
“The presentation seems to be soft on the board in terms of its responsibility to look after members’ monies. We are adamant that we still want full accountability,” he said.
Former managers at Samro, meanwhile, have told City Press that the waste of money on what they consider to be ill-considered investments like Aemro are the norm at the collecting society, including:
. Samro House, the entity’s headquarters in Braamfontein, was acquired for R56 million in 2007, after which the nonprofit company spent at least an additional R63 million refurbishing it. There are “several vacancies” in this massive office complex, according to Samro’s most recent annual report.
. Samro spent R74 million on “software development” from 2014 to last year, but its systems are still infamously inefficient and unable to provide members with something as basic as a itemised statement.
. Samro made a related party loan to set up an allegedly ill-conceived needle time organisation called the Performers Association of SA (Posa). This debt of R16 million will most likely be written off after Posa was absorbed into the existing needle time organisation Sampra after two years of relatively small collections. The insiders say even an elementary understanding of the market would have dissuaded Samro from making this investment.
Samro finds itself with a rapidly increasing negative liquidity ratio – meaning it would not be able to immediately pay all its short-term debts if it was forced to do so. Those debts are the distributions it owes to composers, songwriters and music publishers.
In 2012, Samro still had cash and investments that outstripped the distributions owed to artists. In 2013, this ratio fell into a small deficit. By the end of last year, Samro had R134 million less at hand than it would need to immediately pay out the R589 million in royalties it owes members.