How R2bn buys a big picture
Survé is looking to the future, writes Gill Moodie
It was the question that perplexed many this week: Why spend R2 billion on a group of newspapers that have lagged in recent years in digital transformation and where many titles are suffering declining circulation?
They were directing the question at Dr Iqbal Survé, the Sekunjalo Group executive chairman who, it was announced this week, had reached an agreement with the Irish owners of Independent Newspapers to buy their South African division.
But Survé argues this is precisely the view that comes with being limited by the lens of being in print media.
The doctor and sports-medicine expert, whose BEE firm listed on the JSE in 1999 and whose diverse interests range from fishing to telecommunications and healthcare, says he is a “macro person” and takes a bigger view of things.
“I understand the world – and I understand it politically, economically and socially … If you look at where Africa is going, I think it will grow unbelievably fast in the next two decades,” Survé told City Press in an interview in his Cape Town head office this week.
“And it’s going to be driven by macro drivers like infrastructure investment, literacy, the integration of African economies. We cannot fall behind that. Media will have to grow with that. Fundamentally, when the economy grows, media grows because media equals advertising.
“In 10 years you’re going to be giving newspapers away for free and the model of newspapers will change quite dramatically, but the economy of Africa must grow – even South Africa must grow, if we could just get our act together a bit more. We tend to be a family that fights with each other all the time.”
Survé, who has extensive business holdings on the continent, said earlier this week that he would like to expand into media in Mozambique, Angola and other southern African countries once the deal was finalised.
Independent Newspapers is the biggest collection of English newspapers in the country and includes The Star, Cape Times, Cape Argus, The Mercury, Daily News and Pretoria News, as well as the fast-growing isiZulu Isolezwe.
It also owns the IOL online news platform, community newspapers and magazines.
The deal is still subject to the final agreement being signed by both parties, shareholder approval by the Irish and approval by the Competition Commission. Survé has not yet released much detail about the consortium composition, except to say it is a broad-based black empowerment group that includes trade unions, among others.
“There is no doubt that the (Independent Newspapers) business has had a challenging time in the context of the investment into the business,” he said.
“Due to the fact that there were significant dividend outflows to Ireland, a lot of the investment that should have taken place with the surplus capital generated did not take place.”
And he admits: “There is no question that businesses in general are declining in all print media spaces – there’s no one that’s going to suggest otherwise.”
However, the Indie business “at a fundamental economic level is doing quite well and there are huge cash flows being generated”, he said.
Survé, whose consortium offered the lowest in the final round of bids, believes it nailed the deal because it did the due diligence upfront – advised by Citibank – instead of waiting to see if it was a preferred bidder. This appealed to the Irish, Survé believes, because Sekunjalo’s was a firm offer with more certainty than that of the other bidders, who could easily drop their offers after doing due diligence.
Due diligences can also become drawn-out, he said, adding: “They didn’t have the time, to be frank, and they saw we were serious.”
Sekunjalo is known to go into companies with the intention of transforming the management cultures in line with what Survé has described as a “gentler capitalism”.
With Premier Fishing – in which a majority stake was bought in 1998 and which became the subject of a Harvard Business School case study – the aim was to empower black workers, increase their involvement in management and do away with corrupt practices.
The company has also had its brushes with controversy. The LeisureNet implosion in 2000 nearly sank Sekunjalo, which held an 11% stake in the firm, and it was at the centre of a controversy last year over questionable tender processes involved in an R800 million contract for maintaining state-owned research and patrol vessels.
The government announced an inquiry into the matter. However, in April last year, it emerged that the ship maintenance tender inquiry was to become a general commission of inquiry into the overall effectiveness of the fisheries department, which the Public Protector said it would investigate.
Does Survé aim to change the management culture at the Indie?
He said he makes a point of not forming a view on something until he has had the opportunity of engaging with it.
“What I can say is that I look at Independent Newspapers as a compressed spring that could explode. I think the talent that I see at Independent is amazing. It’s a question of nurturing that talent.
“My approach is to gather intelligence and get people to be part of that process and listen to what they have got to say. Ultimately, you and your top team have to make the decision – because the decision is the allocation of capital … I’m a firm believer that people on the ground are far better equipped to understand what the requirements of a business are than you or I.”
Innovation and digital transformation was key to his vision for the Indie, he said, and the acquisition of digital assets – thereby competing head-on with Naspers, the parent company of Media24 – is definitely on the cards.
“I do take risks and I am an innovator and can mobilise people. I have done that very successfully. I know there are competitors out there that are seriously worried.
“Technology is my strength and I’ve quietly invested in a lot of tech companies … The great opportunity at Independent is that they’ve done well in print despite what everyone says – maybe at the cost of a couple of areas – but they haven’t done well online. And you take that content platform and a whole lot of things, and suddenly you explode.
“Online isn’t just about online news. There are various universes you can go into online.
“Even journalists are going to have to change. You have to become multitaskers and you need to write across the various platforms.
“You can’t just write for a newspaper any more. You need to write for digital and you need to write differently for digital … Maybe I’m a wrong, but I don’t think journalists will be averse to that. It’s a new lease on life,” Survé said.