Carrim: Naspers conveniently forgets
• Former minister says media group is not being honest
Former communications minister Yunus Carrim has hit back at Naspers and described as “bizarre” suggestions that then CEO Koos Bekker was hands-off in MultiChoice’s vigorous campaign to change government policy on encryption.
Former communications minister Yunus Carrim has hit back at Naspers and described as “bizarre” suggestions that Naspers CEO Koos Bekker was hands-off in MultiChoice’s vigorous campaign to change the government’s policy on television set encryption.
Carrim’s comments have made Naspers’s attempts to distance itself from mounting controversy around MultiChoice’s payments to ANN7 and SABC almost impossible.
After initially refusing to comment, Naspers, which owns 80% of MultiChoice, on Friday issued a statement referring to “persistent baiting of Naspers to intervene in the affairs of Multichoice”. It claimed some of this baiting was designed to pressure Naspers into forcing Multichoice to take the Guptaowned ANN7 television station off the air. The nature of MultiChoice’s satellite platform was to provide the largest number and the most diverse voices. “The public decides what to watch. Media freedom and diversity are values worth protecting in an open democracy.”
Naspers’s response failed to deal with the issue of the surprisingly large sum that was paid to ANN7 in exchange for carrying a news channel that had a small number of viewers.
Corruption Watch has asked MultiChoice to account for its “unusual display of generosity”. The nongovernmental organisation said on its website that in the absence of explanation for the R167m payment to the Guptas there were suggestions it was linked to former communications minister Faith Muthambi’s decision to push through a decision in favour of unencrypted set-top boxes, which favoured Multichoice.
“In short, the suggestion is that MultiChoice made an unusually large payment to the Gupta company [which] in turn ‘persuaded’ the minister to support MultiChoice in getting its way on the choice of set-top boxes,” said Corruption Watch.
In its statement, Naspers said Bekker met Carrim once. “This meeting took place in Pretoria and was for the full duration also attended by minister Pravin Gordhan, whom we greatly respect. Minister Gordhan can attest to the content of the meeting and whether any Guptarelated or any other illegal matter was discussed.”
On Friday, Carrim said: “Mr Bekker conveniently forgets the meeting we had in Cape Town within a month of my appointment, which he requested and MultiChoice [CEO] Imtiaz Patel several times urged.
“Bekker’s main purpose was to persuade me about the folly of set-top box encryption and seemed irritated that I would not agree with him.”
Carrim said he did not believe ANN7 should be removed from MultiChoice’s platform. Attempts to link his comments to those calling for the removal of ANN7 from DStv were disingenuous.
The Competition Commission is also keen to look into the deal between MultiChoice and the SABC. In November, the Constitutional Court heard argument from the commission about access to documents dealing with the transaction.
The prospect of Naspers being dragged into an FBI investigation into the Gupta family should send a chill down the spine of every South African invested on the JSE.
Because of the opacity of the Naspers’s control structure and the unusual nature of its investment in Tencent, it’s impossible for investors to know what the implications of a high-profile corruption scandal would be for Naspers’s 33.25% investment in Tencent.
The major vulnerability lies in the nature of Naspers’s investment in Tencent’s hugely valuable internet businesses. Because of restrictions on foreign ownership of Chinese technology companies, Naspers does not own shares in any Chinese operations directly. Instead, it owns shares in an intermediary, the Hong Kongbased Tencent.
The intermediary has contracts with a slew of Chinabased internet businesses that make up Tencent. This gives Naspers indirect rights to receive cash flow and exercise some control.
The enforceability of the contracts are questionable under Chinese law because they are designed to circumvent the law.
Naspers makes no reference to this unusual variable interest entity structure at all, but Tencent does. In its 2016 annual report, Tencent states that the company’s legal advisers contend that the arrangement does not violate applicable laws and regulations in China but adds, “The company’s PRC (People’s Republic of China) legal advisers also advised that there are substantial uncertainties regarding the interpretation and application of the currently applicable PRC laws, rules and regulations.”
Few people believe the Chinese government will take an overly legalistic or aggressive approach to variable interest entities, a structure also used by Alibaba.
But a messy, drawn-out independent investigation into allegations of corruption could prompt some tweaking of the South African investment.
Not only is Tencent a major force in the life of most Chinese people, but President Xi Jinping has made fighting corruption a cornerstone of his reign. Little of Tencent’s remarkable growth would have happened without the government’s backing. (Founding CEO Pony Ma is a senior member of the Communist Party of China.)
In that context it is easy to understand Naspers’s determination to distance itself from MultiChoice’s engagements with Guptaowned ANN7 and the SABC.
The slim chances of keeping Naspers out of the fray were dealt a deadly blow on Friday when former communications minister Yunus Carrim responded to comments by Naspers earlier in the day. He placed Koos Bekker — and therefore Naspers, as Bekker was CEO at the time — at the centre of the saga. “It’s bizarre to suggest that Bekker was hands-off from MultiChoice’s vigorous campaign to change government policy on encryption,” said Carrim.
Up to 2014, MultiChoice was the single largest contributor to the group’s revenue, profit and cash flow. Back in June 2013, when the controversial meeting with the SABC took place MultiChoice was a critically important part of Naspers. And the encryption issue posed a major threat to profit and cash flow growth.
So when Naspers CEO Bob van Dyk brushed off requests for comment on the growing scandal around MultiChoice’s dealings with Gupta-owned ANN7 and the SABC, implying it had nothing to do with Naspers, it was understandably greeted with a sense of disbelief.
The statement released by the Naspers board when it eventually broke cover last Friday will have done little to address the disbelief.
Talk of the “persistent baiting of Naspers to intervene in the affairs of MultiChoice” is to take a clinically legal approach that ignores the importance of the pay-TV company to Naspers as well as the mood of the country.
To suggest the transaction with ANN7 was nothing more than a bid to promote media freedom and diversity of voice does not explain the huge sums of money paid to the Guptas and their cronies.