Up in smoke
Multimillion rand IDC investment in Maverick magazine
FOR A MAN who once described his life as “one big, unadulterated risk”, Yugoslavian-born media entrepreneur and Maverick magazine publisher Branko Brkic‘s latest bid to sell Business Century Publishing raises questions as to whether he punched above his weight, overextending himself and cutting corners in the process.
Chief among those is whether Brkic had the empowerment credentials to secure a multimillion rand investment from the Industrial Development Corporation (IDC), whether in his dealings with investors he skirted his fiduciary responsibilities to the board and whether public money invested in Maverick was paid back to the IDC.
Maverick deputy editor Phillip de Wet referred Finweek to Mark Willcox, managing executive of controlling shareholder Mvelaphanda Holdings, with regard to questions related to the sale of the company, saying Mvelaphanda was “making the decisions”.
It’s understood staff at Business Century know little of the company’s fate. Brkic – who De Wet says is “out of commission” – hadn’t officially spoken to staff.
It emerged last week that one of the prospective buyers is media giant Avusa, in which Tokyo Sexwale’s Mvelaphanda Holdings bought a 30% stake for R1,4bn last year. However, Avusa CFO Howard Benatar would neither confirm nor deny the offer to buy, saying he was “not aware of discussions”. “It’s news to me,” is all Benatar would say.
Gary Alfonso, MD of Africa news channel CNBC Africa, is believed to have also shown an interest in adding Business Century to its stable in preliminary discussions with Brkic, says a source at CNBC.
Willcox wasn’t available to comment. Earlier last week, Willcox denied the company was in trouble. He said the sale was a business proposition to “inject” Business Century into a bigger company.
However, Finweek has learned from sources involved in Business Century during its first two years of operation that the IDC may have risked public funds in an investment (and industry) that showed no signs of growth from the outset.
IDC Media and Motion Picture Unit head Basil Ford insists that when the IDC invested in Business Century in 2005, it was 44% blackowned. “The IDC makes funding decisions on the basis of a range of criteria, which were met by this investment. Although the IDC is a major player in transformation, black economic empowerment is just one of the selection criteria,” Ford says.
Ford wouldn’t confirm an estimated R5m investment in Business Century. Neither would he say whether the IDC had recouped its investment in Business Century. In a written response to questions from Finweek, Ford said the IDC wasn’t at liberty to disclose private and confidential information about its clients.
Having cut his teeth in the print repro industry in Yugoslavia, Brkic emigrated to SA in 1991. He started Maverick in November 2005 on the business proposition that the sustainability of print titles in SA depended on editorial quality.
However, the old chestnut of sales and advertising was a hard nut to crack.
One of Brkic’s early blunders was a decision to publish Ymag. In 2004 YMag publisher Earl Joseph left his post as senior manager of communications at the Gauteng Tourism Authority to start Business Century Publishing with Brkic and they launched Maverick in 2005. Joseph secured a deal with YMag to design and produce the magazine. But the deal merely ensured Business Century broke even, according to a former board member.
By late 2006 Business Century’s fortunes turned for the worse. The cost of producing a glossy book and general operational costs exceeded revenue, resulting in the sale of a 35% stake in the business to empowerment tycoon Sexwale’s Mvelaphanda Holdings for just under R10mn. The deal was meant to be a “second round” financial transaction, according to Brkic.
However, former Business Century chair Nomatemba Noruwane says financial investments appeared to disappear in operational and production costs. Says Noruwane: “At one point we were asked to make financial investments. But I was seeing no returns on investments and wasn’t convinced that any investment I made would be profitable.”
Noruwane resigned late last year when investors demanded their cash back soon after Sexwale’s bail out. “There was no accountability, which affected my ability to be actively involved as chair,” she says.
Among the investors was late Nigerian-born Business in Africa (BIA) publisher Everest Ekong, who is believed to have sunk R2,6m in Business Century in 2005 for a minority stake in the company, says former BIA director Portia Mofikoe. Ekong, who had decided to cash in his shares when Sexwale gained a controlling stake, wasn’t paid out, Mofikoe alleges.
Early last year Brkic added Empire (a media, arts and culture monthly magazine) to Business Century’s stable in an attempt to cast its net over a wider market. But skim through the magazine and you’ll see an advertising ratio trailing far behind the cost of producing the title.
It was a sudden and unanticipated turn of events that may have broken Brkic’s back. In November last year, low-cost airline kulula. com ditched Maverick as its preferred in-flight business read, cutting the business monthly’s total circulation by around 60%.
At the time Maverick sold about 3 200 copies/month in stores and had a subscriber base of around 4 400, according to data provided by the Audit Bureau of Circulation in September 2007. Another 17 000 copies of Maverick were handed out free, the bulk to kulula.com as part of Brkic’s costly drive to build brand awareness. The withdrawal of the airline therefore meant Maverick’s circulation of around 24 817 dropped significantly.
For sale. Branko Brkic