Parastatals squeezed over New Age

The department of public enterprises is alleged to have leaned heavily on state-owned enterprises to support the New Age newspaper. 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, Transnet and Denel 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 SABC 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 (See “Dawn of advertising riches with no circulation” below). Getting stuck in 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”. However, the M&G 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. Et tu, Eskom? 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. 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. Proposal 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 50 000 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. ‘Pure fiction’ 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.” 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.

Dawn of advertising riches with no circulation figures

Thousands of unsold copies of the New Age newspaper were returned to its offices daily, according to a former employee who spoke to the Mail & Guardian this week. The ex-employee also alleged that on the instructions of the owners, the Gupta family, the returns were sent to India to be recycled. “They didn’t want it done in South Africa in case it got out,” said the source, who left the paper in 2011. New Age’s chief executive, Nazeem Howa, dismissed the allegation as “malicious”, but refused to divulge details of the paper’s returns or sales figures. The M&G had asked the newspaper to reveal its single- copy sales for the past six months; what percentage of its claimed “50 000 sold-for copies” were bought in bulk by parastatals; and what percentage of its total revenue for the past six months came from the state. It had not done so by the time of going to print. A survey of advertising space in the paper in December 2012 and January 2013 conducted by the M&G indicates that advertising bought by parastatals comprised roughly 48% of the total. Advertising purchased by other governmental departments, municipalities and state entities comprised 28%, and the Gupta family’s companies, such as Sahara Computers and JIC Mining Services, bought about 10%. The total amount purchased by the private sector was just 17%, with the main corporate advertisers being Anglo American, Coca-Cola and OUTsurance. The New Age is not a member of the Audit Bureau of Circulations (ABC), meaning that its sales figures cannot be verified. Howa told Politicsweb in mid-August 2012 that its print run was 100 000 copies. And in response to a City Press article at the weekend, he said the New Age’s “sold-for copies” totalled “nearly 50  000”. The gold standard for advertisers is accurate figures for single-copy sales, the newspapers that people spend their own cash on because they want to read them. Howa did not distinguish between single-copy sales and once-off bulk sales and subscription agreements with parastatals. ABC typically declares both ­categories separately. Good governance? Writing on his blog this week, Anton Harber, the director of the Journalism Programme at Wits University, argued that “the state sector is probably in contravention of the rules and laws that govern their expenditure because they have no way of evaluating the New Age’s advertising and sponsorship proposition”. The public finance management act sets out the fiduciary duties of the boards of the public entities, including ensuring that expenditure is in the entity’s best interest and taking steps to avoid fruitless and wasteful expenditure. Advertising revenue has performed strongly since the paper launched in December 2010, despite the lack of clarity about its sales. According to market survey agency Nielsen, the newspaper raked in R49-million in advertising in the first half of 2012, propelling it into the top 10 of daily newspapers within 18 months of its launch. A full-page advert, according to the paper’s 2011 rates, cost R129 000. The former employee claimed this was “drastically inflated, especially because there are no circulation figures. But the parastatals still pay”. The ABC’s slogan, “transparency you can see”, reflects its primary objective: to “provide accurate and comparable circulation figures” to assist advertisers and publishers in buying and selling to each another. Bang for your buck For advertisers, it is a way of assessing how much comparative bang for their buck they can get. A circulation manager said: “It’s great for the New Age: guaranteed government money and no way for anybody, government or the competition, to challenge its claims.” The latest available “All Media Products Survey” from the South African Audience Research Foundation (July 2011-June 2012) pegs the New Age at an average daily readership of 87 000. The average reader-to-copy sale ratio for the New Age’s daily news competitors is 7:1, which means that the New Age’s copy sale figure could be pegged at 12 428. This is a long way short of Howa’s 50 000 “sold-for copies” claim, unless his figures are padded out with bulk sales to government entities. * Got a tip-off for us about this story? Email [email protected]

The M&G Centre for Investigative Journalism, a non-profit initiative to develop investigative journalism in the public interest, produced this story. All views are ours. See www.amabhungane.co.za for all our stories, activities and sources of funding.