1. HON. DOMINIQUE AZIMBE AZUMAHTHE JOINT COMMITTEE ON LOCAL GOVERNMENT AND RURAL DEVELOPMENT ANDCOMMUNICATIONOFFICE OF PARLIAMENTPARLIAMENT HOUSEACCRAHon. Chairman to the Committee,RE: AMA RESPONSE TO AAG AND AGI PETITION AGAINST INCREMENT IN ADVERTISING RATES BY ACCRA METROPOLITAN ASSEMBLYThe Accra Metropolitan Assembly (AMA) engaged in a modernisation campaign of its services tocitizens and city planning. The initiative coined “A better Accra for a better Ghana” are in line withthe objectives of the national development plans and are enhanced by the selection of Accra by theMillennium City Initiative.As part of this modernisation campaign, the concession for advertising space in the city had to bereviewed under two (2) major development area: a- The modernisation of revenue generation from the cityModern cities generate a large part of their revenues from the “sale” of their visual space. Indeed,over the years, competition between industrial and telecom companies has increased the valuecorporations are willing to pay to be noticed by their potential customers. Cities offer prime visualspace and all large cities have a concession rights and concession rates in place to reflect the valueof their visual space. The revenues from these concessions enable cities to provide more and higherqualities services to its citizens, whether individuals or corporate.Accras advertising rate until 2009 did not come to reflect accurately the value advertisers arewilling to pay for being seen in the city. We note the Advertising Association of Ghana (AAG)claim that AMA new advertising rates are in line with those of cities such as Lagos, Johannesburg,Nairobi or Cairo. We are doubting this claim as our information from official sources is verydifferent. We expect that onus to be on them to provide us with official documentation to back theirclaim. b- The modernisation of the citys landscape and planningA recent survey conducted by the World Bank raised our awareness on the high level ofdissatisfaction amongst Accra citizens for the quality of life in the city. City planning and citymaintenance came high on the list of the items they would like to see improving over the nextplanning years. This prompts us to take measures that, in priority, serves the citizen of Accra andimprove their level of satisfaction.Over and beyond the collection of revenues, cities have used Private Public Partnership (PPP) co-operations to provide better services to its citizens. This is even more relevant in our environmentwhere the revenues of the authorities are limited and the needs of the people are great.Besides, a city landscape needs to be managed to provide a visibly attractive and save environmentfor the citizen.
2. At the moment, there are no form of PPP which enhance the value of the advertising space for thecitizen of our city. In fact, the visual pollution created by the outrageous overuse of the visual spaceof the city is appalling. The current unchecked advertising space means that our visual landscape isslowly redefined by the colours of competing brands rather than by citys natural and architecturalbeauties. Some of the traffic junctions boosts up to 12 billboards; on some of the streets, the centralisland hosts advertising on lamppost and light-boxes while the sideways host billboards and thetrees are branded with flags and other form of advertising spaces.The safety of the citizens is also at risk. A large number of the outdoor advertising infrastructuredoes not match internationally acceptable standards for safety with regards to wind conditions andother weather and crash risks. It is also unclear for us which structures are insured in case ofproblem. Earlier this year, during a heavy rainfall, 2 of the giant billboards crashed on the street.This event prompted us to consider very carefully the security aspect of those structures and todevelop rules and regulations to protect our citizens. 2- Citizen-centred Private Public PartnershipsCurrently, the advertising spaces provided do not offer needed and planned public infrastructures.It is our goal to engage with interested parties in PPP agreements similar to those signed in othercities in Africa concerning city furniture such as bus shelters, bins, maps and information boards,streetlights, etc.We are especially looking forward to establish this kind of partnerships with the Ghanaiancompanies currently in the advertising sector. We are however rather disappointed to see that theirreaction, through the actions of the AAG leads them to fight the battle against progress instead ofembracing the changes as an opportunity to structure their business model for better operationalprofits and services for their own clients.It is time for the advertising space to be better managed, either by the advertising companiesthemselves or, by obligation, by the AMA. The overwhelming amount of space exploited in the citymeans that the price of advertising rendered cheaper by the simple offer and demand economic rule.By self regulating the availability of the space, the advertising companies could increase their pricesto advertisers per spot. This would also enable them to decrease their maintenance costs and toinvest in better and safer infrastructure.For the advertisers too, the advantages are numerous. None the least to actually increase the valueof their brand by being profiled in a more exclusive fashion. Indeed, there is little value for anadvertiser of its advertising space is surrounded by an overwhelming amount of other advertisingspaces for other brands (often competitors).What we suggest here is not for the advertisers to spend more money on advertising but to buy lessspaces, rented at a premium, which provide more value. There will be no impact on the cost ofmarketing, thereby no impact on the cost of the products to the citizen of our country. The impactwill be positive on the value created by marketing spending. Besides, we would like to point outhere that the advertising industry in Ghana is a very profitable one featuring growth rates of around300% over the past 4 years according to OMD, a leading media and advertising firm.Instead of thinking along those progressive lines, the AAGs approach has been to antagonise theirrelations with the AMA. Indeed, they accuse our team lead by our budget officer to have
3. antagonised them during our last meeting but their false claims and unfunded reports do notcontribute to a win-win negotiation ground and is, indeed, antagonising: a- The advertising rates in other cities:In its letter, the AAG compares the rate of large cities in Africa to the new rates of Ghana, which isnot the case. We thereby invite them to provide us with supporting official documents to justify thisclaim b- The cost analysis of billboardsThe table provided in their letter includes incorrect information:− The cost indicators are heavily overstated− The number of billboard faces is not indicated nor reflected in the analysis conducted, e.g. 2, 3 or even 6 faces in some cases, and hence giving false cost allocations.− The depreciation amount includes operational costs while only the infrastructure cost should be included in the depreciation value.− After the cost break down, the depreciation is then added to the total costs, incurring double counting.− Rental charges to advertisers are highly understated in this table c- The percentage based comparison of past and present situationThe advertising rates in Accra have been left unchanged and not indexed to the value of advertisingspace for several years, creating a backlog in rate increases. A similar situation was found by ourgovernment concerning that tariff of road tolls. In the case of the road tolls, the final increase was of1000% while it does not mean that increase was not representative of the service provided to theroad users.In such cases, a percentage based comparison of past and present situation is not relevant becausethe past price was so much out of line compared to the reality. d- Analysis of rate incrementThe 2010 rates indicated in this table 2 are not correct according to our latest rates published in theLocal Government Bulletin published 23 April 2010. For instance, an Unipole of 108m2 in in ZoneA1 is rated at 14,040 GHS per annum and not 42120 GHS as published in the table 2. All otherprices are also overstated.Further, the AMA has implemented a zoning system for the tariffication of the advertising space. Inits table 2 the AAG takes only the price for the highest priced zone to compare them to the past rate,thereby trying to make their point more dramatic than it actually is.As a conclusion, we have tried to engage with the AAG but national progress and the well-being ofthe citizens at large cannot be stalled by the interest of a few parties who have taken advantage ofinformation asymmetries so far and are unwilling to embrace change and negotiate on realisticterms. 3- Rational behind the Local Government Bulletin published 23 April 2010Fairness was AMA’s guiding principle for fixing the 2010 fees. While seeking to achieve the
4. regulatory and revenue objectives, any fees charged must have an objective and justifiable basisrather than being arbitrary. In addition, the fee structure should capture all objects that are within thescope of regulation and leave little room for discretionary charges. a- Fees per Square MeterPrevious years fee fixing has been based on consultation and advice from Advertising Associationof Ghana (AAG). Recent consultations on this identified anomalies with the previous year’s feestructure and the new 2010 fees aim to correct these anomalies. One example of these anomalies is: Structure Type (Billboard) 16 Sheet 40 Sheet 96 Sheet Unipole Size of Advertisement Area 6 16 36 110 (Sq Meters per Face) 2009 Fee – Cat A-1 (GHc) 1000 1000 1500 5200 Fee Per Square Meter 166.67 62.50 41.67 47.27This shows that small structures have been charged a higher fee per square meter than largerstructures. The effect of this is that AMA has been encouraging larger structures in contradiction toAMA preference for smaller structures that are less of a nuisance. On the other hand structureowners get a higher value from their customers for larger structures while paying AMA a loweramount than they do for smaller structures i.e. the higher the value to the structure owner, the lowerthe value to AMA.As experts in their field, Advertising Association of Ghana (AAG) should have recognised thisanomaly and highlighted it to AMA. While assuming that AAG has been acting in good faith andmay not have noted this anomaly, it is rather unfortunate that its members have been thebeneficiaries at AMA’s expense. Nevertheless AAG should be aware of the risk that it may be seenas putting its members interest ahead of AMA’s interest in a situation where there is a conflict ofinterest.As a result AMA needed to correct the anomaly in the fees by standardising on a square meter basedfee that contributes to regulating the size of structures through paying more for bigger sizes. This isin line with internationally accepted business practice in the industry.16 sheet billboard structure owners, including AAG members, have in the past years accepted andpaid the fees for these structures. As a result AMA considered this as a fair fee for determining theminimum per square meter fee for advertisement area. In the interest of fairness, AMA applied afurther 22% reduction to the 16 sheet fee to GHc 130 per square meter for 2010 while bringing theother structures in line with this minimum fee. By so doing, AMA will be aligning its fee structurewith its preference for having smaller structures. The control of these smaller structures is alsoachieved through specific differential fees based on type of structure. b- Fees per LocationAn option of identifying location categories and charging fees per location regardless of size was
5. considered and rejected because this option would not help to regulate the sizes. However theexposure values of different locations was recognised in previous fee fixing through definingdifferent location categories. The proposed 2010 fees has expanded this zoning to apply to allstructure types with differential fees for different structure types and sizes by location. 4- The future of the advertising concessions in AccraIn the coming year and under the guidance and advice of the Millennium Cities Initiative we expectto build sustainable and winning PPP for all involved, and most of all for our citizen and theadvancement of the nation.This project includes the regulation of the use of the visual space in the city as advertising space andthe setting of standards and planning for outdoor advertising infrastructures and city furniture.With that, we hope that those changes will host more co-operative interaction of the AAG and eventhat the players in the outdoors industry will show a willingness to self regulated before AMA findsitself compelled to regulated their activities.