Naspers shareholders toast court ruling

The Naspers share price has been under quite a lot of pressure in the past few weeks; as usual it reflects movements in the Tencent share price. But despite the share-price pressure there has been some good news for Naspers shareholders over and above evidence that management was prepared to reverse an 18-year ban on the sale of Tencent shares.

In a remarkable setback for SA’s competition authorities a few weeks ago, the Competition Appeal Court set aside a predatory-pricing order against Media24. The media company had been found guilty of using predatory pricing to drive out independent publications in the Welkom area between January 2004 and 2009.

The Competition Commission argued that Media24 had used a newspaper called Forum as a “fighting brand” aimed at preventing Gold Net News (GNN) and other potential new players from gaining a foothold in the market. The 2015 ruling by the Competition Tribunal was a major development for the competition authorities as it was the first ruling on a predatory pricing case. The tribunal agreed with the commission that Media24 had used predatory pricing to drive GNN out of business. The tribunal ordered Media24 to provide 90-day credit facilities for the printing and distribution of current and new entrants to the Welkom market. The tribunal said Media24 used Forum as a “fighting brand” to ensure GNN could not survive. Forum charged advertising rates that were below its costs. Ten months after GNN was finally forced to close, Forum also closed down, leaving Media24’s second paper, Vista, in a dominant position from which it was able to hike its advertising rates.

The Competition Appeal Court ruling not only lets Media24 off the hook but it essentially kills any prospect of predatory pricing cases in future. This will be enormously useful for Media24’s stablemate DStv when it comes to dealing with fledgling competition that MPs hope to encourage.

Basil Read’s net loss of R1bn for the year to December 2017 is hopefully not a bellwether for SA’s listed construction sector. Amid fiercely competitive state tendering firms are struggling — and looking for profits offshore.

Much of Basil Read’s losses come from onerous contracts, impairment of goodwill and a write-down of debtors. Current liabilities of R2.1bn well exceed current assets of R1.4bn. This has led auditor PwC to flag material uncertainty about the company continuing as a going concern.

Tight group cash flows have negatively affected execution of projects. The resultant penalties have made matters worse, despite the group having negotiated a debt standstill agreement and new funding terms, while recently raising new capital.

Some new mining projects with decent margins and further unit sales in the mixed housing development Cosmo City bode well for the future. But unless the government starts spending on major infrastructure projects, one of SA’s smaller elite construction and engineering companies might wither before it can seek salvation elsewhere.

Despite years of efforts to transform the sector, everdiminishing industry returns for bigger construction players might soon leave empowerment partners floundering. That empowers no one. The government needs to start spending on big-ticket infrastructure, especially in water and sanitation.