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MultiChoice accused of ‘kickbacks’ in SABC deal

2017-11-29 10:51

* This story was updated at 19:35 to include the response by the SABC.

The minutes of a 2013 meeting between the SABC’s interim board and MultiChoice have shed more light on the controversial deal between the pay-TV broadcaster and the public broadcaster, raising heated concerns – especially about competition law – from both the Democratic Alliance and civil society groups Media Monitoring Africa and the SOS Coalition.

The minutes are among the hundreds of documents that the SABC was ordered to provide to Parliament’s portfolio committee on communications during its damning inquiry into the SABC board earlier this year. The document in question was discovered by DA spokesperson Phumzile van Damme as she steadily made her way through the documents this weekend.

The minutes appear to confirm that, for MultiChoice, the deal with the SABC for a news and an archive-based entertainment channel on their DStv platform was hinged on the future TV market and set-top box encryption as the “dealbreaker”. They also reveal contradictions in MultiChoice’s statements about DStv’s news offering, recently tainted by a report that the underperforming Gupta-founded news channel ANN7 is kept alive by R141 million a year from MultiChoice aside from a special R25-million once-off payment.

The minutes also contain a brazen statement from now disgraced former SABC boss Hlaudi Motsoeneng about state policy on set-top boxes being influenced by the SABC and they firmly tie corruption-tainted former communications minister Dina Pule to the negotiations between the two broadcasters.

MultiChoice reported to Icasa

In a statement this morning Van Damme said that the minutes contain “fresh kickback allegations”. She said that the DA has sent a letter referring MultiChoice to broadcasting regulator the Independent Communications Authority Of South Africa (Icasa) because the minutes suggest that MultiChoice made the deal with the SABC “in exchange for the public’s broadcaster political influence over digital migration”.

Says Van Damme: “The implications of MultiChoice paying kickbacks, in order to not only solidify its dominance in the pay-TV sector, but also secure influence over government policy in its favour, are serious. It speaks to a company willing to stop at nothing, including paying kickbacks to the Gupta family, thus supporting state capture, in order to get its way. It is an undisputed fact that, two years after this meeting, and the payments to ANN7, digital migration policy was changed to MultiChoice’s favour.

“The DA believes that while companies should be allowed the space to conduct business in a free market system, there must be adherence to business ethics and the law. This matter, and in particular the payments, now require thorough investigation by South Africa’s broadcasting regulator.”

William Bird of Media Monitoring Africa, one of the parties who have taken MultiChoice to the Competition Commission over the deal, claiming it signifies an effective merger, this morning said that the new document “will have significant implications for our existing case and the Competition Commission decision to investigate, but they also now offer up the very real possibility of the commission launching an investigation into cartel-like behaviour.”

The deal, in which MultiChoice pays the SABC R553 million over five years for the two channels, is also being scrutinised by the Special Investigating Unit because of a R11.4-million bonus that Motsoeneng paid himself for brokering it

The minutes appear to confirm a City Press investigation in which SABC and MultiChoice insiders told City Press that the deal hinged on digital migration and what kind of set-top boxes all South Africans (except those with DStv decoders) would have to use to watch the SABC’s popular shows in future. Sources claimed that MultiChoice had lobbied to ensure that the decoders would be basic and unencrypted.

READ: How Hlaudi sold the SABC

Smart, encrypted decoders – which had been the state’s preferred policy before being rejected by Pule ahead of the deal – would cost more but allow for new players in the future pay-TV market and options like free internet for the poorest of the poor.

Experts say smart boxes would have allowed the SABC to utilise state infrastructure to regain its grip on the market. Unencrypted boxes, they say, will allow MultiChoice almost absolute control of the pay-TV market because new infrastructure would be too expensive for new entrants to roll out.

“MMA and SOS are appalled at the manner in which the deal between SABC and MultiChoice was formed,” said Bird when shown the minutes.

“We have always held the deal was dodgy; we just didn’t realise quite how dodgy it was. The minutes smack of collusion and cartel-like behaviour.”

MultiChoice was this morning unwilling to comment in any detail.

READ: Decoding the decoders: the set-top box war

“We have a longstanding relationship with the SABC. The relationship is to the benefit of both parties. We will not comment on negotiations between the parties,” said Jackie Rakitla, the general manager of corporate affairs at MultiChoice.

Inside the meeting

The minutes tell of a very cordial meeting chaired by SABC chief executive Lulama Mokhoba and including now-disgraced SABC board chair Ellen Tshabalala, Motsoeneng and news boss Jimi Matthews, with the chief executive of MultiChoice, Imtiaz Patel, and some of his MultiChoice colleagues.

Patel is clearly anxious that the meeting is being recorded. One section of the minutes reads:

Imtiaz Patel. Picture: Lungelo Mbulwana

“Mr I Patel: May I just say, is this a recording by the way or just as a matter of interest?

...

Mr I Patel: Okay. I have to be sure. No, no. When we want to say something off the record.

Ms L P Mokhobo: Remember that we are in ??????? so whatever discussions we have will.

Mr I Patel: Will be more circumspect.”

Patel goes on to say, “We would not normally pay for a news channel. Okay. We don’t. There’s a unique relationship with eTV that everybody espouses etc. It’s got unique conditions. They’re supposed to supply us with many more channels and it’s quite tricky at this point in time. But, besides that we don’t pay for any other news channel, anyway, okay.”

This contradicts MultiChoice’s defence of its ANN7 deal, where the company said it had always paid for all news channels on its bouquet.

The conversation – where the relationship between MultiChoice and the SABC is repeatedly referred to as a “marriage” – goes straight to the issue of set-top box encryption after Mokhobo raises the issue that the communications ministry, not the SABC, determines set-top box policy.

Patel makes it clear that set-top box control is a “dealbreaker” for MultiChoice, but Motsoeneng assures the meeting there is no problem because Pule had recently made it clear in a budget speech that she would be reversing the state’s policy in place since former minister Ivy Matsepe-Casaburri’s tenure.

“Mr I Patel: But I must say though, Lulama, that this is the very important point for us. It’s a dealbreaker point, I’ll be honest. And I have reiterated it. I have said this to you before. 

“Mr G H Motsoeneng: Thank you, Chair. As far as I’m concerned, this is not an issue, anymore from where I’m sitting, because the minister pronounced herself about this matter.”

Motsoeneng speaks about the “different views” at the SABC that have “influenced the [communications department] to review the policy to check whether really this is necessary for SABC. So that is our standpoint now.”

Patel says: “…we need to justify to our board to say why would we pay you R100 million a year which is a lot of money. Ok. It’s after tax money. To make R100 million net you have to make R150 million or R200 million, R300 million in turnover. We are looking for the excuse and the excuse for us is to be able to justify to our board that you are giving us something in return. What are you giving us in return for the R100 million?”

MultiChoice has repeatedly argued why unencrypted set-top boxes are favourable for South Africans.

Yunus Carrim, who would replace Pule amid various corruption scandals plaguing her, would signal that he wanted to revert to encrypted set-top boxes. But, after he was axed, communications minister Faith Muthambi would again reverse the decision, opting for unencrypted boxes. The matter remains a hot potato. Recently, minister Ayanda Dlodlo said she supported encryption, but was removed from her post during the recent Cabinet reshuffle. New minister Mamaloko Kubayi-Ngubane has not yet spoken on the matter.

City Press reported last year on a clause in the contract that, should encryption suddenly become policy again, appears to allows MultiChoice to broadcast all the contents to date on the two SABC DStv channels for all time.

The parties agree that the minister will have to put her position in writing and that there will be a meeting between the SABC and Pule later that day. And, says Mokhobo, “we will come back to you with finality” on the encryption clause.

Patel then paints a picture of a broadcasting future where MultiChoice and the SABC create a perfect force of dominance in the market. There is also much discussion on Icasa’s “must carry” regulations that the new SABC board is challenging.

“Can you put the bug off?” says Patel near the end of the meeting, which resolves for the parties to work together as if in a marriage.

Competition issues

MMA’s Bird says that “the minutes raise very pertinent questions in relation to the case SOS and MMA took to the Competition Commission. There we had argued that the deal was potentially a notifiable merger. After several court appearances and arguments the case reached its fulcrum in the Constitutional Court last week. Importantly, the issue before the court was not on whether the deal was a merger or not but rather on the powers of investigation of the Competition Commission.

“The matter there arose precisely because the SABC had not provided all documentation to the commission. It seems from our initial glance that these minutes were not included in the material. Had they been it is likely that they would have supported our contention of a merger. We argued that a core aspect of a merger was that a central element of control of the SABC had been handed over to MultiChoice. We say this as it is clear that the adoption of a position in relation to encryption was central to the deal. Not only was it a deal-breaker element but it was also clearly an element for which the SABC was to be rewarded.

“At the same time it is important to note that there is a new board at the SABC and a new top management in Naspers. It is our suggestion and hope that a full inquiry will be instituted with full fundings made public and, that if any competition law offences are indicated, both parties will cooperate fully with the Competition Commission.”

SABC responds

In an emailed response from the SABC's chairperson, Bongumusa Makhathini, the public broadcaster's board distanced itself "from the alleged unlawful behaviour" and noted that the contents of the above mentioned minutes is why the MultiChoice agreement was refered to the Special Investigating Unit (SIU) "for urgent investigation". 

Read the full response below:

The SABC Board has noted the publication today of various internal SABC minutes dealing with the MultiChoice agreement (dated between 2013 and 2016). The content of these minutes and the reported statements of the various individuals identified underlines why the MultiChoice agreement and its related documentation was referred to the SIU for urgent investigation.

The SABC board distances itself from the alleged unlawful behaviour and reiterates its commitment to independence from both political and commercial interests. As required by the Broadcasting Act and our competition laws, the SABC cannot allow any competitor or commercial operator to interfere with and unduly influence SABC policy and commercial strategy. 

The MultiChoice agreement was first brought to Parliament’s attention during [the] Ad Hoc Committee’s inquiry into the SABC last year and, like the 2017 interim board before us, the SABC Board and management will continue to cooperate with any investigation into the alleged wrongdoing that led up to the signing of the MultiChoice Agreement. 

Confused by the digital terrestrial television saga? Read our explainer.

* This is a developing story and any outstanding comments will be added as they come in

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September 23 2018