How Hlaudi Motsoeneng sold the SABC

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 set-top 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.