In addition to implicating Williams, Manyi was at pains to distance himself from alleged irregularities, emphasising several times that they had happened before he came on board. (Delwyn Verasamy/M&G)
Beyond the public relations drive, there is not a lot that is clear about Mzwanele Manyi’s deal to buy the Gupta family’s media assets.
But his financial activities as the ostensible new owner of ANN7 and The New Age may face intensified scrutiny. Manyi could very well find himself categorised as a domestic prominent influential person (or PIP), under the Financial Intelligence Centre Amendment Act.
Under the amended law, which Manyi vehemently opposed during its passage through Parliament, PIPs, their family members and their close associates are subject to enhanced due diligence by accountable institutions. These institutions include banks, attorneys, estate agents and stockbrokers.
According to David Loxton, a partner at law firm Dentons, a domestic prominent influential person is someone who holds, or has held, a prominent public function.
This would include senior government officials and leaders of political parties, but also individuals who hold prominent positions in the private sector, he explained. The definition includes a chairperson of a board of directors, a chairperson of an audit committee, and the executive officer or chief financial officer of a company that provides goods or services to an organ of state.
“This way, captains of industry whose companies do business with the state will also be closely monitored by the Act,” said Loxton. Therefore, it would be “inaccurate” to suggest that the monitoring of influential people’s business affairs is selectively focused on state officials.
“It is arguable that Mr Manyi falls within the definition and will be subject to increased controls due to his risk profile,” said Loxton. The only way Manyi wouldn’t be classified as a PIP would be by a narrow interpretation of the definition. But such an interpretation “is highly unlikely”, Loxton said, because South Africa “is seeking to be seen to align itself with international best practice”.
Yet questions remain about the implementation timelines of certain provisions of the amended Act, particularly as they relate to influential people in the private sector.
The Act was signed into law in late April this and gazetted in May, but the power to determine when certain provisions kick in lies with the minister of finance, Malusi Gigaba.
In June, Gigaba announced that certain provisions, including those relating to the new definitions such as the one for PIPs, would come into effect on October 2. Others are due to come into effect after October, but no later than the end of 2018.
But aspects of the provision relating to prominent people in the private sector doing business with the state can only be operationlised after a monetary value has been finalised and gazetted, and after a database of the people in this category has been drawn up.
In its draft guidelines on the implementation of the Act, the treasury said: “It is envisaged that the minister will delay the operational date of this paragraph in the legislation, given that information about persons who may fall in this category is not publicly available currently.”
The Democratic Alliance’s David Maynier has previously warned that “the process of determining the threshold amount, taken together with the process of generating the required database, may cause an undue delay or even an indefinite delay” in implementing the Act.
Meanwhile, the deal between Manyi and the Guptas’ Oakbay Investments has already faced a good deal of public questioning.
In an announcement this week, Oakbay said it had sold its shareholding in Infinity Media, which operates the ANN7 news channel, for R300‑million, and its two-thirds stake in TNA Media, the publisher of The New Age, for R150‑million.
Both went to a former shelf company named Lodidox, of which Manyi became the director in June, and whose registered address appears to be in a residential street in Meadowlands, Soweto.
Manyi confirmed to the Mail & Guardian that he was the sole shareholder of Lodidox, but failed to respond to detailed follow-up questions about the transaction.
Manyi and Oakbay said in a joint statement that the deal, which is being financed by the vendor, was testament to the company’s “commitment to transformation”. Beyond that, details are vague.
Manyi said the vendor financing arrangement was “on acceptable terms”, but it is not clear whether it will cover the full R450‑million or whether Manyi will have to source third-party funding.
Vendor financing is typically associated with black economic empowerment transactions, said Riza Moosa, head of banking and finance at law firm Norton Rose Fulbright. But what it means is that the seller of the asset is providing funding or security in favour of the buyer.
“In its simplest form, the seller is lending money to the buyer in order for the buyer to buy the asset,” Moosa explained.
Vendor-financed transactions can take two forms, the first being an arrangement by which the seller sells the asset to the purchaser “on loan account”. In this scenario, the purchaser may make no immediate or upfront payment — but instead repays the money over a period of time with, for example, money earned from dividends.
If the transaction took this form, it raised the question of whether Oakbay retained some rights to the assets in the event Lodidox or Manyi was unable to repay the loan, Moosa argued.
The more common form for vendor-financed deals sees the seller provide security to a third-party financier, such as a commercial bank or development finance institution, on behalf of the buyer. The financier then loans the buyer (who may also be required to contribute additional security) the money to make the purchase.
Manyi did not answer questions on whether he would be seeking third-party funding or whether the deal would take another form.
The lawyer said it was not unhealthy for a business to have debt, “provided the debt can be serviced and doesn’t cost the company too much”. The value of the business and its revenue-generating capacity is an important function of how much debt it can sustain, he noted.
In the case of ANN7 and The New Age, the valuations have been questioned by media industry figures and investment professionals on social media. Business Day reported that a valuation done on Infinity Media in 2015 priced the TV channel at R52‑million, suggesting Manyi substantially overpaid to buy it, though he reportedly responded that the valuation does not take into account the prospects of the businesses.
A company valuation would be a core assessment done by a lender as part of its due diligence, Moosa said, and ordinarily parties wanting to buy or invest in a business employ independent experts to conduct these.
The approach taken by development finance institutions in assessing an investment would not be that different from the methods used by commercial lenders, he added.
Important questions needed to be asked about the deal, including whether an independent valuation had been done, as well as whether third-party funding would be sought, said Moosa.
Furthermore, in vendor-financing schemes, if a buyer cannot repay its debts, the asset will often revert to the seller. – Additional reporting by Phillip de Wet