OPINION | August 31, 2017 12:35

Like O'Reilly, Guptas at risk of crashing and burning - Stephen Mulholland

JOHANNESBURG -- Veteran journalist and former Times Media Limited CEO, Stephen Mulholland, is on form in this piece in which he unpacks the Guptas’ sale of their media businesses to former government spokesperson Mzwanele ‘Jimmy’ Manyi. The Guptas’ claim that their media business is worth R450m has been met with much scepticism. Manyi has also been accused of being front and a possible solution for the Guptas’ banking woes. But by looking back on previous media empires in South Africa, Mulholland also reminds us of Irishman Tony O'Reilly’s deal to flog off Independent Media to Iqbal Survé for some R1.3bn, a deal ultimately backed by pensioners’ money courtesy of the PIC. Today, O’Reilly is a shadow of himself, dragged down by bankruptcy and mounting legal action against him. Does the same fate await the Guptas, and possibly even worse? – Gareth van Zyl 

By Stephen Mulholland*

No one should believe for a second that a struggling TV station such as the Guptas' ANN7 combined with their thin, poorly read daily newspaper, The New Age, with the total net asset value of both close to zero, are worth R450m.

This is the impressive sum which the shady Guptas have allegedly lent to that peripatetic clown, Mzwanele "Jimmy" Manyi, former government mouthpiece and, until recently, a desperate job seeker.

Manyi will briefly be a semi-billionaire but he best not become too comfortable in that role. He is simply a front for the Guptas, hopeful that respectable banks who have excommunicated them will deal with the doubtful Manyi.

My advice to them and to Manyi is: don't hold your breath until that happens.      

Manyi is now strutting about proclaiming himself to be the new Koos Bekker, who could buy and sell Manyi and his imaginary R450m before breakfast.  

In the bulk of cases the principal asset of media enterprises is goodwill. This, in turn, rests on the levels of satisfaction which such enterprises deliver to their readers, viewers and advertisers.

Of course, printing presses and property once accounted for useful portions of media assets but that is no longer the case. Modern presses, for which there is a declining market, are expensive while older models are labour intensive with spare parts in short supply.

Read also: Ed Herbst: Creating a 'Black Naspers'

In the digital age the printed word and images are largely destined to become history while television is fiercely competitive in a war between players with deep pockets, such as Naspers, Murdoch's News Corp, NBC, CBS, ABC, Warner Bros and Thomson Reuters.

Radio will remain a junior player relying increasingly on listeners in cars. With low levels of capex required, content cheap and contact with the audience simple, radio looks like a survivor.

This is with the exception of course of the SABC, captive, as it is, of the short-sighted stupidity, commercial ignorance and deep-seated corruption of the ANC party hacks running it, their snouts deep in the taxpayers' pockets and guided by innumerate braggarts like Hlaudi Motsoeneng.      

Media goodwill can evaporate overnight as was seen with Rupert Murdoch's News of the World. After almost 180 years of publication and a circulation close to 3m (the largest circulating English language newspaper in the world), it was closed down amid scandals involving murder and interference in police investigations via phone hacking.

Thus, goodwill is not only the most important asset in media valuation it is also the most perishable. To close the News of the World cost Murdoch GBP250m (R4.2bn).

In the case of The New Age and ANN7 there is a low level of regard for them in the public at large, given their origins, amateur skill sets and blatant policies of support for Jacob Zuma's incompetent and corrupt administration.

Speaking of which one cannot avoid a comparison with the takeover by the oily egotist Iqbal Survé of what is laughingly known as Independent Newspapers.

This company enjoyed a long and distinguished career as the Argus Group until it was acquired on the cheap by the Irish hustler, Tony O'Reilly, who proceeded to milk it dry before flogging it to Survé for some R1.3bn financed by that other milking cow, the Public Investment Corporation.

The PIC's exposure to Independent Media has been disclosed by BizNews is as follows:

      R166 333 000 - direct equity (25%)       R579 683 083  - debt loan       R183 000 000 - debt loan       R346 096 192 - debt converted to bridge finance

One hopes, in the interests of thousands of state pensioners plus those now ploughing their way to retirement, that Surve does repay that PIC loan. Again, don't hold your breath.

Our immaculately dressed finance minister, Malusi Gigaba, is hinting that the PIC might be drained of a piffling R10bn to try to bail out SA Airways, that monument to ANC corruption and incompetence.

It is breathtaking that SAA, owned by the people and financed by the taxpayers, could allow African hotshots from Angola, Zimbabwe, Senekal and Nigeria to fly free and build up a debt of more than R1bn.

We are told that Angola is to repay R850m but how, in the name of all that is logical, could SAA permit passengers to fly for nothing. That's a lot of seats to give away. Suggests, doesn't it, that SAA is flourishing and wants to be generous to our neighbours?        

The deal with Survé, funded by the PIC, capped a gloriously profitable sortie into South Africa for O'Reilly. It was a real coup for the former international rugby player who bought control from Anglo American for R600m, paid his Irish operation some R4.5bn over 15 years and then walked away with R1.3bn of state pensioners' retirement benefits, courtesy of the PIC.

Once worth US$1bn (R13bn) today he is broke with one bank alone, BNY Mellon, chasing him for US$100m (1.3bn) in promissory notes. His bankrupt estate is being pursued by numerous creditors in Ireland, the UK and the Bahamas. He now lives with his son.

How the mighty are fallen, says the Bible. This may well describe the reputational and financial disaster that awaits our political gangsters and their fellow travellers such as the Guptas.

Stephen Mulholland is a retired editor and publishing CEO. In 1966 he founded the Sunday Times Business Times. He was editor of the Financial Mail and Business Day and SA correspondent of The Wall Street Journal. He was CEO of Times Media Limited and the Fairfax group in Australia.