MultiChoice pulls the plug on ANN7

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CEO of Multichoice SA, Calvo Mawela reporting on the findings of MultiChoice's relationship with ANN7 during a press briefing. Picture: Ihsaan Haffejee/EWN.

MultiChoice admitted on Wednesday that “mistakes” were made in contractual negotiations with the formerly Gupta-owned 24-news channel ANN7 and that the agreement will be terminated when the deal expires in August 2018. The channel will no longer be carried on DStv after that date.

MultiChoice South Africa CEO Calvo Mawela said at a press conference at the company’s Randburg, Johannesburg head office that it would not be appropriate to renew the ANN7 contract considering “ongoing controversies”. He said MultiChoice will issue a tender to appoint and fund a new, black-owned commercial news channel soon.

“This has been a humbling exercise for MultiChoice,” Mawela said. “…We fully understood the outrage of the public given the endemic corruption in the country. We should have dealt with the concerns around ANN7 more swiftly.”

We fully understood the outrage of the public given the endemic corruption in the country. We should have dealt with the concerns around ANN7 more swiftly

Naspers CEO Bob van Dijk said the allegations regarding ANN7 have “caused me a great deal of concern”.

“Reading the news coverage in November, that is not the kind of messaging you want to see about your company,” he said.

In early December, MultiChoice said that it was aware that its deal with ANN7 had caused “real public concern” and instructed its audit and risk committees to probe the contract.

In a statement at the time, MultiChoice independent nonexecutive director Don Eriksson, who chairs the board committees, said: “The MultiChoice board has read the various media reports alleging that MultiChoice has entered into an irregular relationship for the carriage of the ANN7 channel. The board is aware that the ANN7 channel has caused real public concern because of the allegations of corruption levelled at the former owners of the channel.”

ANN7 was owned by the controversial Gupta family, which has been accused of using its close association with President Jacob Zuma to win state contracts. Zuma and the Guptas have denied the allegations of “state capture”. The Guptas sold the business in 2017 to Mzwanele Manyi, a former government spokesman, in a “vendor-financed” deal — in other words, the Guptas loaned Manyi the money to buy the channel.

Asked by TechCentral if Manyi has been told about the decision to terminate the channel, Mawela said: “We explained the whole situation to him and he has accepted our position and he is considering what we have shared with him.”

Comprehensive review

At Wednesday’s press conference, Mawela read out a statement that said that the board-appointed committee conducted a “thorough and comprehensive review” of the deal with ANN7.

“They met several times, studied all relevant contracts, reviewed five years of related payments information and e-mails, interviewed those involved and did various objective contract and cost comparisons.”

The committee found “procedural shortcomings, but found no evidence of corruption or other illegal activity”.

It found that the commercial terms of the ANN7 contract were within acceptable parameters associated with the establishment and cost of producing a news channel.

“The negotiations with ANN7 began at a time when MultiChoice wanted to add local black voices to reflect more diverse local news coverage on the DStv platform. In addition, annual payments to e.tv (which produces the eNCA news channel) had escalated substantially, heading towards R500m/year,” the statement said.

“The commercial rationale was to assist in the development of the new ANN7 channel by contributing to their costs and allow it a reasonable term of three to five years to develop. Should it fail, MultiChoice would let the agreement lapse at the end of the period, as allowed for in the contract.

“The payments made to ANN7 were not abnormal relative to other local news channels carried on the DStv platform. MultiChoice paid an amount to ANN7 for a start-up 24-hour local news channel that was substantially lower than that paid to e.tv. The terms of the agreement were renegotiated and payments increased when it became apparent that ANN7 needed to improve quality of the channel.”

MultiChoice made an upfront payment to ANN7 of R25m on 15 September 2015 but denied this was abnormal or even unusual. Critics had accused MultiChoice of paying the money to try to influence government policy on set-top box encryption.

“The process of negotiating the ANN7 agreements was a collective MultiChoice management process and not that of an individual,” the company said in the statement.No one will be fired over the ANN7 deal, Mawela and Van Dijk emphasised at the press conference.

“No correlation was found between payments made to ANN7 and the MultiChoice lobbying effort,” it added.

However, there had been “procedural shortcomings”, including failure to conduct a due diligence test on ownership of the channel. It said it has never done this for any channel.

“Given the experience with ANN7, the committee is of the view that in future such due diligence should be instituted and be made compulsory for all new start-up channels,” MultiChoice said.

The committee also found that MultiChoice should study international best practice and formalise its lobbying processes. “The new process should be adhered to by all involved to ensure that an acceptable line is not crossed in such activities.”

It added: “When concerns were raised about the owners of ANN7, MultiChoice management should have acted more swiftly to escalate issues to the board for formal consideration and decision.”

Remedial actions

It said it will immediately implement several remedial actions. These include:

  • Ensuring that robust due diligence processes will always be followed for start-up channels;
  • Requiring management to highlight issues of controversy and reputational risk at the quarterly audit and Risk committee meetings; and
  • Formalising MultiChoice’s lobbying process. In the absence of national guidelines on lobbying and interaction with regulators and government, MultiChoice management will develop guidelines for approval by the board.

MultiChoice will begin the process of sourcing a new commercial news channel that is black-owned and that “represents the majority of people in this country,” it said.

The successful bidder must be owned, managed and run by a black South African company, free from any political or other interference, it said. It must be able to provide independent, non-partisan and critical news coverage of current affairs. And it must take into account South Africa’s history, diversity of cultural backgrounds, language and socioeconomic circumstances in the way it produces content.

Mawela said MultiChoice managed its communication with the public about ANN7 poorly.

Democratic Alliance MP Phumzile Van Damme, who lodged a complaint against MultiChoice with communications regulator Icasa over the ANN7 payments — and over a controversial channel-supply agreement between the pay-television operator and the SABC — said Wednesday’s press conference “left many questions unanswered”.“While I am pleased that the investigation into the ANN7 contract did not discover any corruption or other illegal activity, the questions we have faced have been sobering,” he said. “We made mistakes and must now embark on a path of restoring public trust.”

“While we welcome MultiChoice’s efforts in conducting its own review of its carriage agreement with Gupta-owned ANN7, it is difficult to objectively assess the findings of its investigations without sight of the full report,” Van Damme said.

“A press statement, scant on detail, vaguely admitting ‘mistakes were made’, and holding no one accountable for those ‘mistakes’, simply does not cut it,” she said in a statement. “The public needs to know the whole truth about the dealings between MultiChoice, ANN7 and the SABC.

“It is quite clear now that the Icasa probe is more important than ever to ensure that the full facts are put on the table, and those responsible for any wrongdoing are held accountable.”

Van Damme also decried MultiChoice’s decision to pull the plug on ANN7.

“The DA supports a plurality of voices in the media space, and do not believe in shutting down of those we do not agree with,” she said. “This matter was never about whether ANN7 should be on air, but about the exchange of money allegedly to influence government policy.”

 

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