/ 25 January 2013

Parastatals ‘bullied’ into supporting the ‘New Age’

President Jacob Zuma addressed business breakfasts hosted by the New Age but paid for by the parastatals.
President Jacob Zuma addressed business breakfasts hosted by the New Age but paid for by the parastatals.

The New Age is owned by the politically well-connected Gupta family, which enjoys friendly ties with both President Jacob Zuma and Public Enterprises Minister Malusi Gigaba.

Evidence of the direct involvement of the ministry in the parastatals' doing business with the newspaper comes in the wake of disclosures that Eskom andTransnet spent R25-million on sponsoring New Age business breakfasts. The breakfasts, which feature political heavyweights, including Zuma, and which industry experts say are highly profitable for the newspaper – are also broadcast live by the South African Broadcasting Corporation at no cost to the sponsors or the New Age.

The newspaper is secretive about its business and does not submit its circulation for auditing, but state and parastatal support appears to form the backbone of its circulation, advertising and sponsorship income.

According to accounts by several sources and documentary evidence, Siyabonga Mahlangu, who is special legal adviser to Gigaba, has been key in putting pressure on the state-owned enterprises. "Mahlangu was the person who arm-wrestled all the parastatals to support the New Age," a former board member of a state-owned enterprise said.

A parastatal manager said Mah­langu, a former ANC lawyer, was perceived as serving the political interests of Gigaba, who considered the good opinion of the New Age and its political and financial backers to be valuable.

But Gigaba's spokesperson, Mayi­hlome Tshwete, denied it and said the minister "has never instructed, implied or insinuated for the New Age to be given preferential treatment". He said Mahlangu also denied claims that he had pressured any parastatals "into deciding which newspapers they should buy".

Intimately involved
However, the Mail & Guardian has seen evidence that Mahlangu was intimately involved in working out the details of SAA's subscriptions to the New Age. Two well-placed sources, who asked not to be identified, also said that Mahlangu had initiated discussions with SAA about the New Age and, as a result, the airline bought more copies of the paper than before and at a higher price.

One of the sources also claimed that Eskom had been put under similar pressure, which resulted in the parastatal's decision to contract the New Age to host six breakfast sessions at a total cost of R7 185 658.

Eskom refused to answer questions about Mahlangu's involvement but said: "The decision to sponsor was reached as a result of mutual discussion over a period of time.

"The main benefit for Eskom and its shareholder was brand awareness and highlighting of the need to conserve electricity. The breakfasts also created opportunities for constructive engagement with our stakeholders in different parts of the country."

A person privy to discussions within Eskom, however, confirmed that pressure to sponsor the breakfasts had come from Gigaba's department.

In the case of SAA, according to documents seen by the M&G, before the intervention by the department of public enterprises early last year, the airline was already receiving a total of 40 770 copies of the New Age a month, or roughly 2 000 a day, for R2 a copy.

Internal SAA assessment
In March last year, the New Age had a meeting with George Mothema, the head of stakeholder relations in the office of the SAA chief executive officer, Siza Mzimela.The newspaper punted a proposal for subscriptions to be pushed up to 7 000 a day at the full cover price of R3.50 a copy and for SAA to commit itself to advertising amounting to nearly R10-million a year. But the proposal ran into resistance from the SAA marketing staff, who argued the New Age was poor value for money because it charged advertising rates comparable to its competitors but had a much lower circulation and readership. Tellingly, the internal SAA assessment was that the only real value the newspaper offered was with "government marketing".

But, despite this, the company concluded an agreement in April for 3 000 copies a day at the full cover price, which means SAA now gets about 63 000 copies a month. By comparison, the airline's next biggest subscription is to the Star, which supplies about 50000 copies a month at less that R4 a copy, a steep discount on its R6.70 cover price.

It appears SAA also committed itself to spending a relatively small amount annually on advertising in the New Age.

But the airline's spokesperson Tlali Tlali said: "The assertion that SAA received an instruction from the shareholder's office to get into a contract with the New Age is pure fiction.

"The New Age is one of the daily publications supplied to SAA. We recently increased subscription volumes after we held discussions with the publication. The decision was based on and informed by a number of considerations. These included the need to improve on our service offering in line with our customer needs and global airline trends. This move also provides for product variety for our passengers."

Malicious allegations
A former New Age insider, who asked not to be named, said: "That newspaper's relationship with government is rock solid. You could say there is a mandate to support the New Age.

"We tried to source advertising from the private sector, but they would ask us: 'Guys, where are the numbers?' They would not advertise without circulation figures.

"But with the parastatals it was different … In some cases, more junior media practitioners in government would also be cautious of advertising in the paper because they could not justify the spending.

"A simple phone call from one of the Guptas to a minister and the junior official would phone back, asking why the New Age had tried to make him look stupid by going above his head and calling his superior. After that, he would agree to advertise."

The New Age dismissed the allegations as malicious and untrue.

A previous version of this story incorrectly named Denel as one of the implicated parastatals. We regret the error.

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.