Up in smoke

Mul­ti­mil­lion rand IDC in­vest­ment in Mav­er­ick mag­a­zine

Finweek English Edition - - Openers - MAL­COLM RAY mal­colm.ray@fin­week.co.za

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

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