Independent, PIC detractors fight for political control

In early 2012, much of the Western world was still reeling from the effects of the 2008 financial markets crash, and the subsequent global economic slowdown. Other than the housing market and banking itself, no industry was hit harder by the effects of the ensuing recession than media.

Our industry relies heavily on the health of the general economy, and the ability and willingness of consumers to spend and take on credit. We almost never do well in the context of a recession or reduced consumer spending.

It was therefore unsurprising that at this time, a lot of media investors were looking for a way out of their exposure to this vulnerable (at least in their eyes) industry. Foreign investors in particular, were growing wary of transnational media assets.

It was in this climate that Independent News & Media (INM), the Dublin-based owners of Independent News & Media South Africa (INMSA), decided they would sell the group they had acquired in 1994, at the dawn of South Africa’s democracy.

The initial price demanded for INM’s ownership of the INMSA was e280 million (about R3.4bn at 2012 exchange rates). Independent is South Africa’s largest publisher of newspapers.

It accounts for almost a quarter of all newspapers sold in the country, and over 60 percent of all English-language papers sold. Newspaper advertising is under pressure both here and abroad, but Independent’s share of the South African advertising pie holds steady at almost 45 percent of the total (for paid-for newspapers).

Thus an asset of great commercial and strategic value became available in mid-2012 when the Irish group decided to sell.

Changing hands

Whether the seller could have realised the R3.4bn asking price is an interesting but idle point. In the end, events conspired to dampen the appetite of some overseas groups who were in the bidding to acquire Independent and eventually to depress the price at which the group changed hands.

Of the dozen or so bidders that had initially put their hands up, only about five made the final shortlist, which was determined by the seller and their transaction advisers to have the financial and operational wherewithal to acquire, pay for and run Independent Media in South Africa. One of those was the Sekunjalo­Independent Media consortium, which I put together and led, and which successfully acquired the group for a price of about R2bn (accounting for subsequent currency fluctuations), R1.4bn less than what was asked for by the Irish owners.

Sekunjalo was advised by Citibank, a respected global financial institution, in this transaction on both price and terms. Sekunjalo consortium and its partners, which include the Chinese Development Bank - through the CAD Fund has invested the bulk of the funding in Independent. In the three years since the company was incorporated under the Sekunjalo Group, a concerted campaign of sabotage through misinformation and destabilisation has been waged against it from primarily three quarters:

* The opposition DA party in alliance with ex-staffers of Independent, who saw the takeover as a threat to the power and absolute control they had over the group and its titles during its years of Irish ownership.

* Some Independent journalists, such as ex-Business Report staffer Donwald Pressly, were virtual plants of the DA in our newsrooms.

* Competing media houses, who perceive a commercial threat in a black South African-owned Independent group.

Independent already has the lion’s share of commercial newspaper advertising, but lags far behind its competitors on government advertising.

Therefore, if the group were to win a greater share of public sector advertising, the likes of Times Media Group (publishers of the Sunday Times and heavily dependent on state largesse) would be virtually wiped off the map as a media player.

A group from Independent that attempted to put together a rival bid to buy the company off the Irish, supposedly resting upon an ill-defined and, at that point, unfunded employee trust that never included the majority of Independent’s employees.

All three of these groups pulled out all the stops in 2012/13 to prevent the sale of Independent SA to Sekunjalo. The first salvo was launched by DA MP Peter van Dalen, who wrote to Dublin to persuade the Irish owners not to sell to Sekunjalo.

At no point in his letter did he make a commercial case about Sekunjalo’s unsuitability. Instead he made an explicitly political case, in which he attempted to blackmail a foreign company into supporting the DA’s opposition to the South African government and ruling party.

This was followed by an avalanche of public opposition to Sekunjalo led almost exclusively by institutions representing white interests and white economic control: the then-DA leader Helen Zille, the Mail & Guardian under the editorship of Nic Dawes, the SA National Editors Forum under the chairmanship of Nic Dawes, Andrew Bonamour’s Times Media and Koos Bekker’s Naspers-Media24 etc.

All of these attempts failed, and the Sekunjalo-led consortium gained a controlling share in Independent Media SA in September 2013.

That, however, doesn’t mean the campaign stopped. It has since adapted and shifted focus, mainly to the Public Investment Corporation (PIC).

It is now led by the DA’s finance spokesman David Maynier, and uses as its conduits a group of white journalists of a particular generation, presumably because they are not apologetic or embarrassed about being the drivers of a virulently racist agenda to keep the South African media in white hands at all costs.

Detractors

Not a day goes by in which they don’t attempt to paint the PIC’s investment in Independent and its support of the Sekunjalo bid as problematic, ignoring that the PIC has billions invested in virtually every large South African media company.

Our detractors are also not above telling lies in their attempts to undermine Independent and the PIC, and have spent the last three years saying that government pension money was used to “bankroll” Sekunjalo’s takeover of Independent.

The PIC invests some R1.8 trillion here and abroad on behalf of the Government Employees Pension Fund.

It is studiously careful about how it invests these funds, and conducts the most stringent due diligence processes on its potential investments, without exception. It is one of the most professionally run and most successful fund managers in the world. By way of example, the PIC committed a team of 12 professionals to conduct a due diligence process lasting six months, which looked at both the Sekunjalo consortium and Independent, the asset being acquired, before approving the transaction.

Nor is the PIC’s exposure anywhere near the R2bn as has been alleged by a series of sensational and evidence-free articles emanating from the DA and their army of dutiful media stooges.

The PIC loan and investment together into Independent was no more than R850m, concluded on normal commercial principles, with a strict repayment timetable that we have not deviated from in the last three years.

Some R150m has already been paid back to the PIC, with a portion also accounting for the 20 percent equity taken by the corporation in Independent.

In total, the PIC is responsible for just over a third of the total cash commitment in the Independent transaction, with the bulk of the equity funded by the Sekunjalo consortium (including Chinese partners). You would never learn any of this reading the writings of Pressly, Ed Herbst, Terry Bell, Ann Crotty et al, all of whom will twist, distort and outright deny the truth in service of their agenda, which is nothing less than keeping white control of the media (and the South African economy generally) intact.

The PIC has both a commercial and an explicitly political mandate. The political mandate is to invest in the transformation of the South African economy and to target investment in sectors that have a potential to boost the development goals set in our National Development Plan.

In line with the transformation goal, the PIC will invest in any commercially sound venture aimed at transferring the ownership and management of white or foreign-owned companies to black South Africans.

It will also hold equity in some companies in order to help white-owned companies boost their empowerment credential to minimally respectable levels. This is why it has equity in major media groups, all of which are either still white or foreign-owned.

Today, Independent is unique amongst big South African media houses as the only one that is black-owned and controlled.

That scares the living daylights out of Van Dalen, Maynier, Pressly, Bell, Herbst, Alec Hogg and the other adherents of a white-controlled media.

It is one thing to lose direct political control, about which they are still bitter. But now economic and even cultural power is slipping through their fingers, slowly but surely.

It is interesting to watch the lengths to which they will go to retain it.

* Dr Iqbal Surve is the founder and majority shareholder of Sekunjalo and, since 2014, executive chairman of Independent Media SA.

BUSINESS REPORT