The council of communications regulator Icasa has agreed that the broadcasting and telecommunications regulator will investigate a complaint lodged by the Democratic Alliance against MultiChoice about payments to the SABC and ANN7 that have been described by critics as “kickbacks” designed to try to influence government policy.

DA MP Phumzile Van Damme said on Sunday that Icasa confirmed to the party in writing that “the matter has been referred to its compliance and consumer affairs division for investigation”.

The DA lodged the complaint with Icasa in November 2017, requesting that the regulator conduct an inquiry into the payments, which it said were “allegedly in exchange for political influence over government policy on digital migration”. MultiChoice had been waging a war with rival e.tv and others over the encryption of digital terrestrial television.

“The DA is pleased that Icasa has agreed that the payments require investigation. South Africa deserves to know whether the payments were indeed above board, as MultiChoice has maintained,” Van Damme said in a statement.

“The DA believes that while companies like MultiChoice should be allowed the space to do business and create much-needed employment, their conduct must at all times be within the bounds of the law, in line with business ethics and in an environment where competition is not stifled,” she said.

“There is no issue with companies lobbying for policy positions through debate, but a situation where policy is bought cannot be allowed. It is tantamount to policy capture.”

In negotiations for a channel supply agreement with the SABC, signed in 2013, MultiChoice exerted considerable pressure on the public broadcaster to include a clause that would prevent it from carrying its channels, including SABC 1, 2 and 3, on encrypted digital terrestrial platforms.

In minutes of the meeting between the SABC and the pay-television operator, submitted to parliament by the public broadcaster and published by Van Damme, MultiChoice executive chairman Nolo Letele said the non-encryption clause was a “condition precedent”, meaning it was a requirement of the five-year deal, which was worth more than R550m to the SABC.

‘Always our intention’

In November 2017, Letele, through MultiChoice spokesman Jackie Rakitla, said it was “always our intention to do a deal with the SABC, as the public broadcaster, and we would have done so, irrespective of what the response was to our request for that specific clause to be inserted”.

But Van Damme said at the time that the clause showed that MultiChoice “sought to pay the SABC” for the supply of channels in return for the public broadcaster’s “political influence over digital migration”.

“They support allegations in media reports … that MultiChoice paid Gupta-owned ANN7 millions in exchange for similar influence over government’s position on set-top boxes,” she said in a statement then. MultiChoice has rubbished those allegations.

The meeting came in the middle of an ugly confrontation between MultiChoice and e.tv over whether South Africa should use encryption and “conditional access” (a mechanism for controlling set-top box access) in its migration from analogue to digital terrestrial broadcasting.

MultiChoice has long argued that encryption in government-subsidised set-top boxes would give prospective pay-TV competitors an unfair advantage. It also said that encryption was not in the interests of consumers or the country. E.tv said it needed encryption to allow it to source quality content and that free-to-air television risked becoming “ghettoised” without it.

The final channel distribution agreement signed between the parties showed that the SABC acceded to the non-encryption clause. MultiChoice agreed to pay the SABC R100m/year excluding VAT, with the contract value escalating by 5% annually.

Clause 2.1.5 of the agreement, which was signed on 3 July 2013, less than a month after the meeting between MultiChoice and the SABC, stated in part: “The SABC agrees that the SABC FTA (free-to-air) channels will not at any time be encrypted, or allow any conditional access system to be applied in respect of the channel signals for the SABC FTA channels transmitted on the SABC DTT (digital terrestrial television) platform in South Africa so that viewers are able to view the SABC FTA channels without requiring anything other than the installation of an M-Net DTT set-top box.”

Van Damme at the time accused MultiChoice of paying “kickbacks” to “not only solidify its dominance in the pay-TV sector but also secure influence over government policy”.

“It speaks to a company willing to stop at nothing, including paying kickbacks to the Gupta family, thus supporting state capture, in order to get its way. It is an undisputed fact that two years after this meeting, and the payments to ANN7, digital migration policy was changed to MultiChoice’s favour,” she said.

MultiChoice said no kickbacks were paid. “This was part of a negotiation meeting with the SABC. The final decision on this proposal lay with the SABC board.”

In early December, MultiChoice said that it was aware that its deal with ANN7 had caused “real public concern”. As a result, the broadcaster’s board had instructed its audit and risk committees to probe the contract.

‘Real public concern’

In a statement, MultiChoice independent nonexecutive director Don Eriksson, who chairs the board committees, said: “The MultiChoice board has read the various media reports alleging that MultiChoice has entered into an irregular relationship for the carriage of the ANN7 channel. The board is aware that the ANN7 channel has caused real public concern because of the allegations of corruption levelled at the former owners of the channel.”

ANN7 was owned by the controversial Gupta family, which has been accused of using its close association with President Jacob Zuma to win state contracts. Zuma and the Guptas have denied the allegations of “state capture”. The Guptas sold the business earlier this year to Mzawanele Manyi, a former government spokesman, in a “vendor-financed” deal.

“These allegations have negatively impacted the reputation of MultiChoice,” Eriksson said in the statement. Because of this, the board asked the audit and risk committees to:

Assess whether there had been any corporate governance failures at MultiChoice and report back to the board. Based on what was contained in that report, the MultiChoice board would take the necessary action.
Assess whether the total amount paid to ANN7 was comparable to payments made for other locally produced channels with due consideration being given to the estimated costs of running a 24-hour news channel.
Draw on any expertise and skills necessary in order to fulfil the mandate given by the board.
Adv Kgomotso Moroka, one of the MultiChoice board members, was asked to assist the audit and risk committees in their investigations.

News24 reported in November 2017 that MultiChoice made a “questionable payment” of R25m to ANN7 and increased its annual payment to ANN7 from R50m to R141m. The payments were revealed in the so-called “Gupta Leaks” e-mails.

“The payments came after the family seemingly assisted former communications minister Faith Muthambi in getting President Jacob Zuma to transfer certain broadcasting powers to her, something MultiChoice was lobbying the minister for,” News24 reported.

“Following the transfer of powers, Muthambi controversially pushed through a decision in favour of unencrypted set-top boxes, which benefitted MultiChoice.”

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