State capture allegations MultiChoice’s problem, not Naspers’ – Bob van Dijk

RYK VAN NIEKERK:  On the line is Bob van Dijk. He is the CEO of Naspers, the media giant that is South Africa’s investment darling.

Bob, welcome to the show. Naspers has been hitting the headlines in recent times for the right and the wrong reasons. The company’s share price has nearly doubled since the beginning of the year, mostly on the back of the stellar performance of Tencent. This of course has flowed through to Naspers’s half-year results that were announced earlier today.

But recently the company also made headlines for the wrong reasons, mostly due to concerns related to the corporate governance at digital television subsidiary MultiChoice.

Bob, we’ve seen serious allegations made, massive amounts paid to Gupta-owned companies, including ANN7 and certain negotiations between MultiChoice officials and the SABC board that may have influenced policy decisions in government. Are you concerned about these allegations?

BOB VAN DIJK:  Let me start by saying that we take it seriously. To give you context, and if you look at our results, you will see that we operate many, many businesses in more than 100 countries around the world. And MultiChoice is one of them. These operating companies often have partners and other shareholders and we need to respect the autonomy of these operating companies.

So in this case, you have a number of allegations around issues in MultiChoice – and the responsibility for dealing with those lies very clearly with the MultiChoice board. They have to deal with the matter and have to strictly follow their governance procedures, and we from a group point of view will verify that the MultiChoice board has addressed these issues appropriately.

RYK VAN NIEKERK:  If you look at the current political narrative in South Africa, with allegations of serious state capture, we’ve had companies like KPMG, McKinsey, SAP, big international companies, also being fingered in some shape or form. Don’t you think Naspers at a group level should be more actively involved with investigating these allegations?

BOB VAN DIJK:  MultiChoice is one of many companies that has a board, right, with other shareholders in there. The issues involve MultiChoice.

RYK VAN NIEKERK:  Do you think that is a good enough reaction? Surely it could be appropriate to commission an independent forensic investigation into those allegations because they are so serious and because they could have such far-reaching consequences?

BOB VAN DIJK:  We think the issues are serious. There is no question about that. We fully acknowledge that and they need to be properly addressed. But the MultiChoice board is the appropriate entity to address them and we as a group need to verify and be absolutely sure that they’ve been appropriately addressed. We run more than 100 businesses and whenever an issue occurs in one of these businesses that has appropriate local governance, we can’t go and investigate each single issue that has an appropriate governance structure to deal with them.

RYK VAN NIEKERK:   Has this issue been discussed at a Naspers board level?

BOB VAN DIJK:  We specifically don’t disclose what exactly gets discussed at the Naspers board level either.

RYK VAN NIEKERK:  Has the MultiChoice board announced any steps to investigate these issues?

BOB VAN DIJK:  The MultiChoice board is the right one to put those question to, and I’m sure they are addressing the issue. You should address the questions to them.

RYK VAN NIEKERK:  There was a story today on one of the Media24 websites stating that Imtiaz Patel was involved in some of the negotiations that could be regarded as potentially influencing government policy. Would it not be better served to maybe remove some of those individuals who would have been involved, and announce an independent investigation?

BOB VAN DIJK:  I think what needs to be done at the MultiChoice board level is that an appropriate investigation needs to be done. They would obviously have to make sure that the composition of whoever is sent to this is appropriate, given the issues they are researching. Let’s be clear about that.

And again we, as a major shareholder, will need to be satisfied that that’s been done in the proper way with the proper constitution.

RYK VAN NIEKERK:  So it’s fully up to the MultiChoice board to announce an independent investigation? You are going to leave that decision to the MultiChoice board?

BOB VAN DIJK:  The MultiChoice board has responsibility for MultiChoice as a business. So when they get accused of something, it’s obviously their responsibility to deal with that. It’s our responsibility to make sure that we are satisfied with them dealing with that in an appropriate way.

RYK VAN NIEKERK:  Are you satisfied that they are dealing with this in an appropriate way?

BOB VAN DIJK:  I think, again, the question should be addressed to the right people at the MultiChoice level. They have obviously not concluded whatever they are doing at this point in time. So it’s too early to answer that.

RYK VAN NIEKERK:  If this was a subsidiary in the European or US jurisdictions, would you handle it in exactly the same way?

BOB VAN DIJK:  Absolutely.

RYK VAN NIEKERK:   But surely these are significant allegations of potential corruption, bribery and we’ve seen on the Financial Times front page allegations made against Bell Pottinger, which can be regarded in the same light. Again, I ask the question: should you not maybe, at a group level, get involved to try and diffuse the situation if there was no wrongdoing?

BOB VAN DIJK:  We will see what MultiChoice comes back with. And if we are not satisfied with that, we’ll take further steps.

RYK VAN NIEKERK:  I’m sure you have communicated with the MultiChoice board regarding this. When could we expect a response from MultiChoice, because they haven’t been speaking to the media at all in recent weeks?

BOB VAN DIJK:  You must put that question to the right people at MultiChoice.

BOB VAN DIJK:  I just want to maybe clarify something. I’m the Naspers Group CEO and if you want to ask questions about MultiChoice addressing these specific issues, I recommend you ask them of them, not to me. It’s part of the much larger business that we run on a daily basis.

RYK VAN NIEKERK:  I will indeed ask those question of them

Just on the operational performance of, Naspers, Tencent is obviously going from strength to strength. What are your views? Do you think that the current short-term performance can continue at its current trajectory?

BOB VAN DIJK:  We’ve had a very solid six months and if you look at revenue growth, Tencent has obviously come through with absolutely stellar results. What we also see is that our e-commerce growth rate and revenue has accelerated significantly.

We saw last year e-commerce as a whole at about 24% year on year, and now that level is 38%. It’s pretty rare to be able to accelerate growth that much from a larger base.

At the same time we see that the profitability of e-commerce and the developments fund and the [overheads] are down at a good clip, which is exactly what we would like to see for businesses that are scaling up.

RYK VAN NIEKERK:  You are also in a very aggressive investment phase into new technologies and new applications. Can you take us through the process – how you actually identify new opportunities you want to invest in, and how many of those proposals cross your desk on a monthly basis?

BOB VAN DIJK:  We actually take a proactive approach rather than a reactive approach to investment proposals. We have a number of people in different parts around the world who basically propose business opportunities they believe have potential to grow very significantly and deliver the returns over time. And if we get convinced of a certain segment or specific business model, then we actually go and look for companies that might fit the bill, and we proactively approach some of these that fit that thesis. That we do a few hundred times a year. In excess of 400 companies we reach out to, to get to know them better, to see if those have life and opportunities. And the vast, vast majority of those underserved companies actually don’t have a fantastic [case for] investing in.

And what we estimate the difference is, we have the right business model that we present and we can look at the companies and we find great runs of these businesses, and that tends to be the businesses … and we put them back in the end.

RYK VAN NIEKERK:  Coming back to South Africa, you have significant businesses here – Media24 the publishing group. As with any media company across the globe there are pressures facing it. What are your prospects for Media24?

BOB VAN DIJK:  Media24 has had a number of different business sides. As you may know, there’s the institutional print and news business that’s facing tough times, like I think any traditional print news business does. I think the online news business of Media24 has done well, shown strong operation growth and is on a very encouraging trajectory. And that businesses looks quite healthy.

Ryk, if you look at the next few years in our … a difficult task of building a great online news business that we need to monetise better all the time for it to be a healthy long-term business, a print business that will be tough to manage and will require restructuring over time. And then other growth business then I think will be able to make up the future of the company.

RYK VAN NIEKERK:  And MultiChoice – the pay-television business operationally? What were the developments there?

BOB VAN DIJK:  In sub-Saharan Africa times have been exceptionally tough for Africans with currencies – in the last year some currencies have been stable but if you take a two-and-a-half year perspective, about every currency has been significantly devalued from economic hardship across sub-Saharan Africa and consumers have really felt the pinch – and we have suffered. Obviously consumers suffer hard and our business has suffered with them. It’s been, from an Africa point of view, a really difficult time and we’ve suffered in the continent and we’ve actually in many cases done our best to adjust the programming to what people really want, and either limit price increases or you can give prices where that could help consumers in distress. It has now bottomed out in terms of the [prevailing] macro circumstances that the business can stabilise and we can start rebuilding from here.

I think South Africa also has been seeing tough times. I think a solid performance from MultiChoice, given the circumstances.

RYK VAN NIEKERK:  Just coming back to transparency – at your most recent AGM, there were quite a few questions from shareholder activists and some fund managers, shareholders, regarding transparency within the group. Those concerns were mostly related to the executive remuneration policies. Do you think at a group level the company is transparent enough in communicating with shareholders and other stakeholders?

BOB VAN DIJK:  I think one of the things we’ve had is extremely strong governance. You don’t survive that long as this company with this kind of track record that we have. I think that’s really important.

The sentiment around disclosure has changed quite a bit in the last few years. I think there is increasing focus on it, and shareholders are becoming quite vocal around it. Now I think that trend is unmistakable and we need to adjust to it. I don’t think it’s specific to us as a group that we are getting asked to disclose further, and I think we have to report like any other company in that circumstance. The requirements are going up significantly in terms of disclosure, and we have to develop it. A good example is King IV. If you look at the additional requirements that come with King IV, we will obviously comply with that, and I think that will go a long way to address shareholders’ requirements.

RYK VAN NIEKERK:  From another shareholder again, back to the MultiChoice situation, he writes in Business Day today that he tried to engage Mr Bekker regarding the developments at MultiChoice, but the response was less than forthcoming. Do you think that within that commitment to corporate governance you’ve just sketched, the handling of these MultiChoice issues falls within the top corporate governance guidelines?

BOB VAN DIJK:  Our governance states pretty clearly how we deal with the matter at hand. So we have a MultiChoice board that needs to assess the matter and assess whether the allegations are substantiated. The allegations are serious. The MultiChoice board needs to take them seriously and address them. And we will in turn make sure that we are fully [informed] with what they have done. So to ask Koos Bekker, who is the chairman of Naspers and is not involved with MultiChoice directly on what is happening at the MultiChoice board level – I can see why that has nothing to do with governance.

RYK VAN NIEKERK:  Just lastly, has anyone within the group and MultiChoice been suspended regarding these allegations?

BOB VAN DIJK:  Not at this point in time.

RYK VAN NIEKERK:  Thank you Bob. That was Bob van Dijk, the CEO of Naspers.

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