The long-announced intention by the Kenyan Government to shift all of its advertising spend out of newspapers and TV and on to its own website and newspaper is finally becoming a reality. This could be the final nail in the coffin of some newspapers and a drastic loss of profitability for others. Russell Southwood looks a what's happening and how it could affect other parts of Africa.
The move to take all Government advertising away from Kenya's media started with a National Treasury circular (circular Number 17/2013 dated December 17th, 2013) that was approved by Cabinet on April 22, 2015.
It recommended that all Government advertising be done through the Government Advertising Agency. The reasons given in the circular were that it would promote communications via electronic means as well as being an austerity measure to cut Government expenditure. Government advertising expenditure makes up 30% of all advertising exopenditure in Kenya.
The Government Advertising Agency was supposed to process all advertising bookings by budgeting and costing advert placement across the different departments and ministries - a move meant to promote uniformity. It was also designed to get standardised rates and enable better negotiation - generating savings as well as eliminating duplication. But despite the announcement, not all Ministries and public bodies used it.
As a result, the Chief of Staff and Head of the Civil Service Joseph Kinyua circulated a memo to the accounting offers at all ministries and public bodies at the end of February this year saying that if they placed ads in newspapers then they will be forced to pay the costs themselves. It is also rumoured that the Government will be replacing the current head of the Government Advertising Agency.
In a parallel move, the Government has printed three issues of its new MyGov print supplement which it has inserted into The Star and a mid-market freesheet called The Peoples Daily.
The President Uhuru Kenyatta has been closely involved with the initiative, saying:" The President: "We are spending hundreds of millions of shillings in advertising through the media. Let the Ministries and other public bodies advertise through the digital platform we've just launched and save that money for use in other things."
The creation of the MyGov supplement and moving ads to its own online platform gives the Government considerable power over what has always been acknowledged to be a very independent media. Could this move be one more way of curbing this independence?
One person familiar with the industry told us:"The Nation newspaper gets 80-90% of its profits from Government advertising. Its net margin is 23%. 15-20% of its revenues come from Government. For the other two (main) newspapers it's 30-40%."
"You will see The Nation's profits fall by 6-7% if the Government withdraws its advertising. It could be up to 50% of its profits. If other newspapers are close to breakeven, then they will go into a loss." The implication being that there would be perhaps the closure of a title and more job losses.
All of Kenya's media is already feeling the heat from the transition to digital, the pressure of an increased number of TV channels (140 of them) and the downturn in the economy. The Government's move to shift its advertising may be another nail in the coffin.
In July 2016 the Nation Media Group announced that it was closing QTV, Nation FM and its Rwanda radio station KFM and threatened to sue the Government for its advertising shift. It made job cuts and said more may be on the way. In October 2016 Royal Media also announced job losses. The Standard Group made cuts earlier in 2015.
The Nation Media Group's statement on the job losses put the blame firmly on the shift to digital:"We are cognizant of the changing trends of how are products are being consumed. In line with the new reality, we are reorganizing ourselves with the aim of transforming Nation Media Group into a 21st century company by embracing digital as the business model."
In an article in Digital Content Africa in May 2014 (Chronicle of a Death Foretold - Online means African newspaper industry is waiting for the other shoe to drop: http://www.smartmonkeytv.com/channel/newsletters/digital_content_africa_14_chronicle_of_a_death_foretold_online_means_africa ) we warned of the consequences of the digital transition for print newspapers.
If successful, the Kenyan Government will have provided a playbook to other African governments to weaken independent media. There are plenty of Governments that will be only too pleased to follow where Kenya leads.