/ 11 December 2020

Rhythm FM is R52-million of dead air

Graphic Rhythmfm4 Twitter
(John McCann/M&G)

It has been more than five years since Eastern Cape’s Rhythm FM was awarded a licence to operate by the Independent Communications Authority of South Africa (Icasa), but it is yet to make a single broadcast, despite a R52-million facility made possible by taxpayers’ money.

Shareholders say they have been left in the dark, there are allegations of mismanagement and now a R6-million civil suit has been launched against Rhythm FM by Slip Knot Investments, the landlord for the East London-based operations. 

MSG Afrika, chaired by media entrepreneur Given Mkhari, has a 19.8% shareholding in Rhythm FM. 

Documents show that funding was set aside for the station by the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF).

A Rhythm FM document dated November 2014 shows that the IDC put up R41.1-million, the NEF R8.4-million and shareholders R2.5-million. 

“I would like to propose that the shareholders put up the R2.5-million as their contribution and continue to pursue the [Eastern Cape Development Corporation] for the balance,” the document read. 

(John McCann/M&G)

According to the latest share register, the NEF owns 15.76% after other shareholders diluted their interests for the fund to have a stake in the station. One shareholder, who didn’t want to be named, called it suspicious that all shareholders — except for MSG — had to dilute their interests to make space for the NEF, But MSG’s holding grew from 19.5% to 19.8%.

Five shareholders said they do not know how the funds have been used or why the station has not launched.

One shareholder, Thabiso Phetuka, said she cannot be part of “questionable business” in which they feel they were used to secure the licence.

“This is a pity because the disability sector of the [Eastern Cape] would have benefited from such a venture. However, as ECDEET [Eastern Cape Disability Economic Empowerment Trust] we have observed a lack of transparency and poor governance in this project.”

Veteran presenter Putco Mafani, who is part of the Amazomoya Media Consortium, which owns a collective 12.9% shareholding that was diluted from 20%, sent an affidavit to Icasa alleging governance malfeasance. 

“It became apparent to [Amazomoya] that Rhythm was not properly managed or administered. While it appears evident that [MSG] has conducted itself in a manner which shows that it has substituted itself in place of the board and proper governance structures.” 

Questions were sent to Mkhari, who delegated his responses to Nkhume Kudzingana, Rhythm’s sole director. Kudzingana dismissed claims of MSG’s mismanagement. He said Icasa had slowed the launch of the station because of delays regarding signal, and that the regulator had, in October, given the station eight months to launch with an extended frequency coverage. 

But Icasa’s Paseka Maleka blamed Rhythm FM for the delays that caused it to be charged for failing to broadcast, with the matter now being monitored by Icasa’s complaints and compliance committee. “[Rhythm] had until 2017 to commence services. However, it failed to do so. Following engagements with the licensee, a formal referral was made to the [compliance committee] for adjudication in 2019. Therefore, the commencement period is prescribed.” 

The NEF said Icasa had caused the delays, but this had been rectified. 

In papers filed at the high court Slip Knot Investments said it is owed R5 976 634.71 after Rhythm FM allegedly reneged on a seven-year lease that began in April 2017 but was terminated in September this year. 

The papers were served on former directors Bonnke Shipalana and Tabby Tsengiwe and the MSG. 

Shipalana, who is part of the Shimama Consortium that has a 16.16% holding after dilution, and Tsengiwe said: “Since being part of Rhythm FM, from the [licence] bidding phase until today, we have never been in a meeting with any of the funders where dispensation of the funds was discussed and never been involved in planning or disbursement of any funds at Rhythm FM,” they said.

This was echoed by shareholder Xoliswa Njoli, who is part of the Women in Media Consortium, which has had its shareholding reduced from 25% to 20.1%

Kudzingana said: “The company is fully audited by a reputable audit firm, is compliant and all the shareholders and funders have access to the financials. Therefore, the allegations of abuse of relationship are baseless and are rejected. The transmission network delays as stated above, have impacted other aspects of the project, including landlord.”

Tshepo Ramodibe said the IDC was not privy to information suggesting the misuse of funds.