A CITY PRESS IN­VES­TI­GA­TION How Hlaudi sold the SABC

IN­SIDE THE MUL­TICHOICE DOC­U­MENTS THE SABC DIDN’T WANT PAR­LIA­MENT OR THE COURTS TO SEE SEV­EN­TEEN SOURCES RE­VEAL HOW HLAUDI’S R533 MIL­LION DEAL WAS DONE, RE­SULT­ING IN A R33 MIL­LION BONUS LIT­TLE-SEEN AMEND­MENT CON­FIRMS MUL­TICHOICE COULD BROAD­CAST SABC SHOWS

CityPress - - Front Page - CHARL BLIGNAUT and LLOYD GEDYE charl.blignaut@city­press.co.za

SABC and Mul­tiChoice staff, who worked on the deal be­tween the two com­pa­nies in 2013, have re­vealed it was all about a set-top box pol­icy – good for some, but bad for the coun­try – and it put the pub­lic broad­caster’s archive at greater risk than pre­vi­ously be­lieved. “Ba­si­cally, Hlaudi [Mot­soe­neng, the SABC’s head of cor­po­rate af­fairs] sold the SABC for a R30 mil­lion bonus,” al­leged one for­mer se­nior SABC staffer in­volved in the con­tro­ver­sial deal. It stip­u­lated that Mul­tiChoice pay the broad­caster R553 mil­lion, over five years, for two new chan­nels on DStv.

After the deal was fi­nalised in 2014, Mot­soe­neng scored an al­leged R33 mil­lion bonus, R11.4 mil­lion of which he has al­ready been paid.

The Mul­tiChoice deal loomed large at this week’s par­lia­men­tary in­quiry into the fit­ness of the SABC board to hold of­fice. It has been flagged for fur­ther in­ves­ti­ga­tion by the Pub­lic Pro­tec­tor and is the sub­ject of a Com­pe­ti­tion Com­mis­sion in­ves­ti­ga­tion.

The sole re­main­ing nonex­ec­u­tive mem­ber of the failed SABC board, chair­per­son Mbu­la­heni Magu­vhe, walked out of the in­quiry this week after re­fus­ing to hand over doc­u­ments, some of which per­tain to the Mul­tiChoice deal.

City Press has ob­tained all avail­able doc­u­ments per­tain­ing to the deal. They re­veal how Mot­soe­neng drove it through, de­spite its neg­a­tive ef­fect on the broad­caster and the coun­try’s dig­i­tal fu­ture.

It’s all about set-top box con­trol

Sev­en­teen sources and ex­perts – within SABC and Mul­tiChoice, or for­merly em­ployed by both – told City Press the deal was struc­tured around the con­trol of set­top boxes.

For­mer SABC board mem­ber Kr­ish Naidoo told City Press the deal was “un­law­fully and ir­reg­u­larly signed by Mot­soe­neng on be­half of the SABC”.

The deal, the sources said, had very lit­tle to do with the SABC agree­ing to sup­ply two new chan­nels to Mul­tiChoice – namely, the SABC News and SABC En­core chan­nels on DStv. But it had a great deal to do with Clause 7 of the con­tract – and clar­ity on a lit­tle-seen amend­ment to this clause, which con­cerns set-top box con­trol.

In re­sponse to de­tailed ques­tions, SABC spokesper­son Kaizer Kganyago said: “This mat­ter is be­fore the Com­pe­ti­tion Com­mis­sion and is be­ing dealt with there. We there­fore wish not to com­ment any fur­ther.”

Mul­tiChoice has re­peat­edly de­nied claims that the deal was about con­trol of set-top boxes, say­ing again this week that the deal was busi­ness as usual. But sources paint a very dif­fer­ent pic­ture. “The orig­i­nal deal was for a 24-hour SABC News chan­nel on DStv, and was brought about through [for­mer com­mu­ni­ca­tions min­is­ter] Dina Pule. The chief ex­ec­u­tive of­fi­cer at the time, Lu­lama Mokhobo, picked it up,” said one.

But SABC board min­utes, seen by City Press, re­veal that a busi­ness plan stated that R778 mil­lion would be needed to run the news chan­nel for four years. In Jan­uary 2013 the chan­nel was “moth­balled” as a re­sult of a lack of fund­ing.

“Hlaudi picked the deal up again, sidelin­ing Lu­lama,” says the source – a state­ment con­firmed by all the oth­ers.

“No risk as­sess­ment was done – even though, by then, it was a far worse deal for the SABC than the first one, and it now also con­tained a sec­ond chan­nel [En­core].”

Sources and board min­utes show the deal was driven through the in­terim board by the now-dis­graced SABC chair­per­son, Ellen Tsha­bal­ala.

Naidoo, a lawyer by pro­fes­sion, said the deal was one of the new board’s first con­cerns.

“When the board met in Septem­ber 2013, I ap­proached [Tsha­bal­ala] to do a le­gal opin­ion on the deal, which we had read about in the me­dia ... I think I was the only one who saw it, be­sides the chair­per­son and Hlaudi,” said Naidoo this week.

He said he was im­me­di­ately struck by the fact that it was “un­law­fully signed by Mot­soe­neng against the SABC’s own Del­e­ga­tion of Author­ity Frame­work. The per­son who should have signed it was then CEO Lu­lama Mokhobo.”

Sources close to Mokhobo say the deal was “the be­gin­ning of the end for her” and a ma­jor rea­son she re­signed.

More wor­ry­ingly, said Naidoo, the deal gave Mul­tiChoice un­heard-of con­trol of the SABC’s archive, a na­tional as­set.

But most strik­ing, he added, was “that the en­tire con­tract – and even pay­ment in terms of the con­tract – was sub­ject to Mul­tiChoice’s pre­ferred set-top box con­trol, which is un­en­crypted”.

“This made the deal highly un­usual ... I con­cluded that it was fa­tally flawed and should be put aside.”

In the end, said Naidoo, “about six board mem­bers voted against the deal and about eight for it ... The deal made it clear that the board was di­vided into two camps” – and that the anti-Mot­soe­neng camp would end up be­ing purged. But what does this mean for South Africans?

In the pend­ing dig­i­tal ter­res­trial TV era, all South Africans – ex­cept those al­ready us­ing DStv de­coders – would need to buy or be given a set-top box if they wanted to keep watch­ing SABC TV.

When the deal was signed, gov­ern­ment had con­cluded as early as 2008 that this should be a smart box, which is en­crypted, to al­low for the growth of new free-to-air and com­mer­cial chan­nels – thus en­sur­ing a safer trans­mis­sion of TV con­tent against piracy – and also to al­low poor South Africans free ac­cess to the in­ter­net through their smart box. But the deal Mot­soe­neng and Mul­tiChoice signed in July 2013 is sub­ject to SABC con­tent be­ing avail­able on an un­en­crypted set-top box, or “dumb box”. At the time, the of­fi­cial state pol­icy was the op­po­site – that set-top boxes

would be en­crypted smart boxes.

“Sadly this agree­ment was seen rather as a way to en­rich a few man­u­fac­tur­ers, which did not make sense,” Mokhobo told Par­lia­ment this week.

The state’s set-top box pol­icy was con­tro­ver­sially changed by Com­mu­ni­ca­tions Min­is­ter Faith Muthambi in 2014.

An­a­lysts be­lieve that Mot­soe­neng re­lied on her to amend the coun­try’s Broad­cast­ing Dig­i­tal Mi­gra­tion Pol­icy for the deal to work for the SABC.

Muthambi did not an­swer ques­tions at the time, nor did she re­spond to ques­tions this week.

This week, Mul­tiChoice gen­eral man­ager of cor­po­rate af­fairs Jackie Rak­itla re­sponded to ques­tions, say­ing: “The SABC agree­ment is a stan­dard sup­ply con­tract sim­i­lar to the ones we have with other chan­nel sup­pli­ers lo­cally and in­ter­na­tion­ally ... It is im­por­tant to point out that we en­tered into the SABC agree­ment on the un­der­stand­ing that the pub­lic broad­caster fol­lowed due process be­fore sign­ing it.”

How the deal was ham­mered home

Sev­eral in­de­pen­dent sources told City Press how, in 2013, ex­ec­u­tives were called to Mot­soe­neng’s of­fice, pre­sented with the un­signed con­tract and asked to re­view it. The next day, some of them raised “huge is­sues, huge con­cerns ... A lot of th­ese had to do with Clause 7 and the SABC’s pol­icy on en­cryp­tion, and the fla­grant vi­o­la­tion of it in this con­tract.”

At that meet­ing, and sub­se­quent ones, Mul­tiChoice was rep­re­sented by me­dia law ex­pert Greg Ham­burger.

Said one source: “He said he was given in­struc­tions that he can­not change any­thing. None of our con­cerns could be ad­dressed. We looked to Hlaudi, who was not in­ter­ested. He said we were stum­bling blocks, that the deal will and must hap­pen. Only cos­metic changes were made in the end.”

An­other source men­tioned a meet­ing where Ham­burger told SABC ex­perts that Clause 7 “was cat­e­gor­i­cally non-ne­go­tiable ... The deal was all about en­cryp­tion; that was clear.”

In Fe­bru­ary next year, Muthambi will have to an­swer for her re­ver­sal of pol­icy in the Con­sti­tu­tional Court, after the Supreme Court of Ap­peal ruled against her – say­ing she had failed to prop­erly con­sult rel­e­vant par­ties be­fore de­cid­ing not to en­crypt the boxes – in a case brought by e.tv and other par­ties.

The lit­tle-seen amend­ment

City Press has ob­tained fi­nal amend­ments made to the deal in 2014, after Muthambi re­versed the set-top box pol­icy. They con­firm that set-top box con­trol is cen­tral to the deal.

The ad­den­dum is a penalty clause of sorts. It stip­u­lates that, should the SABC be forced to change its pol­icy – and its con­tent be­comes en­crypted on a smart box – Mul­tiChoice could con­tinue to dis­trib­ute what it had al­ready broad­cast of the SABC News and SABC En­core chan­nels, “with­out pay­ment of any fees”, for­ever.

This week, a very se­nior source said: “As I see it, the 2013 con­tract’s unprecedented and highly ir­reg­u­lar ref­er­ence to set-top box con­trol was a way of pay­ing Hlaudi to lobby gov­ern­ment. Once pol­icy changed, it was a way to make sure it stayed that way – to en­sure less com­pe­ti­tion in the fu­ture.”

Mul­tiChoice did not re­spond to spe­cific al­le­ga­tions this week.

The ir­reg­u­lar busi­ness plan

City Press’ in­ves­ti­ga­tion has also found that the En­core chan­nel’s busi­ness plan was only ap­proved by the SABC board in 2015 – but the deal was signed in 2013.

City Press ob­tained a copy of the res­o­lu­tion, which is in di­rect con­tra­ven­tion of the SABC’s Del­e­ga­tion of Author­ity Frame­work.

“You are sup­posed to have a busi­ness plan be­fore a con­tract is signed,” said a source in­volved in con­clud­ing the deal.

Mot­soe­neng, sources said, had to be con­vinced of the need for a busi­ness plan. Then, a num­ber of sources de­scribed be­ing called to a meet­ing and told that they needed to gen­er­ate a busi­ness plan for the chan­nel. “As the deal was al­ready done, we had to do the plan ret­ro­spec­tively to then present it to the board,” said one of them.

“It took four or five months to do a job that should take three weeks – be­cause we did not want to do it.”

All sources de­scribe Mot­soe­neng’s anger at the slow pace of work. But many de­scribe a “war” with the Mul­tiChoice prod­uct team to win a more favourable agree­ment on what SABC archive con­tent would be broad­cast on En­core.

“They ex­pected a lot of SABC’s hottest con­tent, es­pe­cially re­cent SABC1 dra­mas. They wanted En­core to com­prise about 80% that,” said a source close to the ne­go­ti­a­tions.

“We in­sisted drama would be max­i­mum 20% and en­ter­tain­ment 80%, and [em­anate] from the deeper archive – not new stuff – as we needed to keep our pre­mium con­tent for our own chan­nel for [con­ver­sion to] dig­i­tal ter­res­trial tele­vi­sion one day.”

An­other said: “What I have heard is that Hlaudi told Verona Duwarkah, then head of TV, and An­ton He­u­nis, then head of com­mer­cial en­ter­prises, to ac­com­pany him to Mul­tiChoice.

“Hlaudi and [Mul­tiChoice group CEO] Im­tiaz Pa­tel sat alone to­gether for an hour. They were told the deal was signed for a news chan­nel and an en­ter­tain­ment chan­nel. Verona asked what would fea­ture on the en­ter­tain­ment chan­nel. Im­tiaz said: ‘Any rub­bish.’ “Verona replied: ‘We don’t pro­duce rub­bish.’” Sources be­lieve the En­core chan­nel was cre­ated to in­crease Mul­tiChoice’s spend on the deal.

Mul­tiChoice and SABC did not re­spond to ques­tions re­gard­ing this ac­count.

Rak­itla said: “Th­ese meet­ings take place at dif­fer­ent times and at dif­fer­ent lev­els, and may or may not in­volve var­i­ous lay­ers of man­age­ment as and when nec­es­sary.”

Is it against the law?

There are many ar­gu­ments that the deal con­tra­venes the Elec­tronic Com­mu­ni­ca­tions Act and the Broad­cast­ing Act, but a court will have to de­cide.

The deal is be­ing tested at the Com­pe­ti­tion Com­mis­sion, where it is be­ing ar­gued that the SABC lob­bied Muthambi to amend the Broad­cast­ing Dig­i­tal Mi­gra­tion Pol­icy, in con­tra­ven­tion of the acts. This ar­gu­ment is set to be raised in the Con­sti­tu­tional Court in Fe­bru­ary.

The Com­pe­ti­tion Com­mis­sion in­ves­ti­ga­tion is be­ing in­sti­tuted after the Com­pe­ti­tion Ap­peal Court ruled in June that the deal be re­ferred back to the com­mis­sion for a full in­ves­ti­ga­tion.

The chal­lenge to the deal was brought to the Com­pe­ti­tion Tri­bunal last year by me­dia group Cax­ton, Me­dia Mon­i­tor­ing Africa and Save Our SABC, which ar­gued that the Mul­tiChoice con­tract con­sti­tuted a merger.

In a let­ter writ­ten in Septem­ber by Romeo Kariga, the com­mis­sion’s se­nior le­gal coun­sel, he said the fail­ure of the SABC and Mul­tiChoice to dis­close all doc­u­ments to the com­mis­sion was de­lay­ing its in­ves­ti­ga­tion.

He went on to state that the SABC and Mul­tiChoice handed over some doc­u­ments in July, and after fur­ther re­quests, Mul­tichoice sup­plied more in Au­gust. But the SABC did not com­ply.

“In­stead of op­er­at­ing as a trans­par­ent and ac­count­able pub­lic in­sti­tu­tion, the SABC seems hell­bent on deny­ing ac­cess to key doc­u­ments,” said Wil­liam Bird, direc­tor of Me­dia Mon­i­tor­ing Africa.

City Press un­der­stands that key doc­u­ments still to be pro­vided in­clude var­i­ous ver­sions and ad­denda to the con­tract be­tween Mul­tiChoice and the SABC, as well as doc­u­men­ta­tion about Mot­soe­neng’s bonus pay­ment stem­ming from the deal.

Mul­tiChoice told City Press it had de­liv­ered all doc­u­ments to the com­mis­sion, but the par­ties were still wait­ing for the Com­pe­ti­tion Ap­peal Court to rule that it was sat­is­fied that full dis­clo­sure had taken place.

At the launch of the En­core chan­nel in May last year, Magu­vhe de­clared: “You can be our bride and we will be the bride­groom ... We love you so much, Mul­tiChoice, we want to en­ter into a mar­riage.”

This is a joint in­ves­ti­ga­tion be­tween City Press and the SOS Coali­tion (soscoali­tion.org.za), which cam­paigns for in­de­pen­dent, cred­i­ble pub­lic broad­cast­ing that ad­vances South Africa’s con­sti­tu­tional democ­racy. SOS made Gedye’s in­ves­ti­ga­tion pos­si­ble

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