SAMRO: We were misled about UAE investment

The report, which was not availed to Music In Africa upon request, comes after SAMRO members pressured the CMO to provide details about what had happened in the UAE and whether the organisation had followed the proper procedures before investing the money.

“We have recently completed a forensic audit into the investment from which it appears evident that the board was misled into believing it was possible to successfully establish a music rights management agency similar to SAMRO in the UAE, to be known as the Arab Emirates Music Rights Organisation (AEMRO),” the SAMRO board said in a statement.

“The audit has shown that the board was not made fully aware of the potential risks involved in the initiative. There were numerous occasions on which the board was not fully briefed on AEMRO, or possibly even misled.

"Crucial details on costs and contracts were not disclosed, and the board was therefore unable to provide full oversight. The board shut down the initiative when it became clear that the funds spent on trying to establish AEMRO were wasteful and fruitless expenditure.”

What’s next?

SAMRO says it is taking the matter seriously and that it will attempt to get the money it had invested back.

“We are currently investigating a series of legal steps to recover the funds and, where possible, to take action against those involved," it said. "We are totally committed to ensuring this happens, to ensure accountability and responsibility.

"We do not agree with all aspects of the forensic report, and have been constrained by the sensitivity of the process.We respect the findings and are already putting mechanisms in place to address possible shortcomings in the organisation’s governance and risk management processes.

"The board takes the forensic audit report’s recommendations to heart and is totally committed to resolving this matter and in particular, to recover the money in the best interests of SAMRO members and the music industry as a whole.”

The board said it would not accept the misuse or abuse of musicians’ funds in any shape or form.

“We are particularly focused on determining how we can recover the money that was used for the AEMRO venture and to ensure that SAMRO members gain maximum benefit from their hard work. We have added additional financial controls and will use the lessons learnt from this project to introduce structural changes to the way management reports to the board, eliminating single points of failure and ensuring the integrity of information presented to the board.”

How it all began

SAMRO said the investment was championed by former CEO Sipho Dlamini and the then chairman of the board, Abe Sibiya, in 2014. The CMO was looking to turn a profit after the body's biggest licensee, the South African Broadcasting Corporation (SABC), had failed to pay millions in royalties.

"SAMRO’s mission statement clearly states that the organisation should invest funds to generate more revenue for its Southern African members," it said. "This was the rationale behind the board’s decision to approve the AEMRO, coupled with the fact that we were losing revenue because of the SABC’s mounting losses at the time."

SAMRO said Dlamini left the top job in March 2016 without informing on any material concerns surrounding the investment. Sibiya, who took over as SAMRO acting CEO, also did not raise any concerns regarding the UAE venture.

“The initial investigation took place 18 months after Dlamini’s resignation and further investigations are under way into the relationship between all the persons directly involved in this project. The nature and reason for payments, if any, made by SAMRO to Dlamini after his resignation, also need further investigation.

“Although the forensic audit initiated by the current board has taken some time, we believe it was best to ensure a full and proper understanding of what happened, particularly as some of the current board members were not involved with SAMRO at the time. It is clear that the AEMRO investment was a failure, and we have spent a lot of time and resources getting to the bottom of it, in the interests of our members," SAMRO said.