TV licence warning in South Africa

As the government weighs its options to cover the lost revenue from TV Licence failures in South Africa, industry experts warn that imposing a new streaming tax may backfire spectacularly.

This is because streaming services like Netflix, Disney+ and Amazon Prime are unlikely to absorb the cost of such a tax and would likely pass the levy on to subscribers through higher monthly fees.

With South African consumers already under immense pressure and entertainment being one of the first budget items cut to reduce spending, the levy may hurt the wider industry.

The SABC’s TV licence regime has been a dismal failure in South Africa, with less than 20% of South Africans with a licence paying the annual fee.

The cost of chasing down those who do not pay is also higher than the revenue the broadcaster will get from them paying their fees.

This has led to a debate about how the government can fund the state broadcaster in a stable and sustainable way.

Communications Minister Solly Malatsi said that his department is looking for an alternative funding plan that will not burden households more.

However, one of the proposals that has gained the most attention among stakeholders is the so-called streaming levy or media subscription levy.

This would shift the burden of funding to local and international streaming platforms and other media groups, such as MultiChoice and eMedia, to fund the SABC.

Malatsi said he does not support a direct tax on households as they are already constrained.

Reach Africa’s sales director, Leslie Adams said the biggest concern with this type of levy is that consumers may ultimately pay anyway.

He said that streaming services absorb levies as part of their operating costs in some countries, but this is unlikely to be the case in South Africa.

“We’ve already seen Netflix, Amazon Prime and Disney+ increase their prices multiple times in the past few years,” he said.

“If this levy goes ahead, chances are high that South Africans will be the ones covering the cost through higher subscription fees.”

Streaming levy plan could backfire

Adams said that the poor economy and budget strain have already caused many South Africans to cut back on entertainment spending.

Household finance surveys show that streaming and entertainment services are already the first to go when considering ways to save costs.

This was reflected in both the NedFinHealth survey and Old Mutual Savings & Investment Monitor (OMSIM) for 2024.

Adams said that if prices rise again, more people might turn to illegal streaming, free ad-supported content, or even ditching paid services altogether.

A streaming levy could work in South Africa, but only if it doesn’t make streaming unaffordable.

“The levy must be reasonable. If it’s too high, streaming platforms will pass the cost onto consumers or cut local investments, hurting viewers and the industry,” he said.

While companies like Netflix, Amazon Prime and Disney+ are unlikely to leave the South Africa because of the levy, they could end up scaling back their operations, reduce local content investments or bundle the costs in a way that makes streaming less affordable for South Africans.

Adams said that streaming services already face high costs in South Africa, where bandwidth isn’t cheap, and many platforms partner with telecom providers to keep data costs manageable.

“Adding another tax into the mix could make things even more complicated,” he said.

Different streaming models must also be considered, as a flat tax won’t work for platforms that operate differently.

“Additionally, private broadcasters like MultiChoice and eMedia could also contribute, as a local content levy for these broadcasters would ensure that funding responsibility is shared more equitably, rather than placing the entire burden on global streaming platforms,” Adams said.

Importantly, the tax would be better received if the funding raised went back into the local industry rather than the government budget’s black hole.

The SABC fell into financial trouble because of the failed TV licence regime, its own mismanagement, and political interference over the years.

Adams said that the broadcaster would have to prove that it can manage funds responsibly.

“Before imposing a new tax, the government must fix inefficiencies and ensure transparency so this revenue benefits South African content producers,” he said.