Six months after Canal+ took control of MultiChoice, MPs have begun to question why the deal was approved, highlighting a disconnect between the letter and spirit of the law.
At the heart of the matter are MPs decrying laws that allowed South Africa’s largest privately held media company to be taken over by a foreign company.
Canal+ and MultiChoice acted lawfully, and the only way that the deal could be reversed is if Canal+ does not meet the conditions set by authorities. Such action has never been taken in South Africa.
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When the deal was first mooted, it faced regulatory hurdles and resistance from internal stakeholders because the country’s regulations — under the Independent Communications Authority of South Africa (Icasa) and MultiChoice’s own memorandum of understanding — limit foreign voting rights to 20%. At the time, it was also unclear how the French group would tackle the issue of black ownership in the transaction.
The two companies did their homework and found a structure that addressed both concerns, satisfying Icasa and the Competition Commission.
On Tuesday, members of the parliamentary committee on communications & digital technologies aired their grievances, saying local laws should not have allowed for the French group to take over Africa’s largest pay-TV provider.
Parliamentarians from the EFF, MK and ANC who spoke on the day were upset that the French group had found a way around the legal technicality, so much so that Icasa did not actually make a determination about the deal because there was no transfer of ownership of MultiChoice’s broadcast licence in South Africa.
Legislation change
Tsholofelo Bodlani from the DA said: “Is the Electronic Communications Act suitable for such transactions? I’m not convinced. I do not believe that these operations and transactions are happening in a conducive legislative environment.”
Without a change in legislation, the deal cannot be reversed. This is why Sixolisa Gcilishe of the EFF called for a revamp of the act.
“These are the things we’ve been speaking about in this committee, that we have a lot of outdated laws. This situation shows that we have outdated and weak laws. I would have expected Icasa to recommend to parliament that we urgently amend the law and close this control loophole and protect these sovereign assets from foreign control.”
The ANC’s Shaik Imraan Subrathie questioned whether it risks relegating South Africa to being a consumer as opposed to a co-creator of technology and content.
These concerns are at odds with the regulator’s assessment of the transaction, as the body concluded that a combination with Canal+ would make MultiChoice more globally competitive.
“The merger responds to increasing competition from global streaming platforms (Netflix, Amazon Prime, Disney+) and the rapid digitisation of the media and entertainment industry in South Africa,” said Icasa’s executive for licensing and compliance, Fikile Hlongwane, during the session.
“The combined entity would have global reach, strong local roots and the ability to promote African content internationally.”
Similarly, the Competition Commission concluded that the transaction would not hurt competition locally. That said, the body did seek to “protect public interest concerns raised by several stakeholders given the role MultiChoice played in the broader audiovisual ecosystem in South Africa”, said deputy commissioner Hardin Ratshisusu.
Broadcasting licence
The post-transaction structure saw MultiChoice Group restructured so that the holder of the broadcasting licence in South Africa and the entity that contracts with South African subscribers, MultiChoice (Pty) Ltd — or LicenceCo — would be carved out and become an independent entity.
The rest of the group’s video entertainment assets would remain part of the MultiChoice Group.
LicenceCo would continue to hold the subscription broadcasting licence in South Africa and contract with MultiChoice’s local subscribers.
It will be majority owned by historically disadvantaged entities, namely Phuthuma Nathi, which will ultimately hold a 27% economic interest in LicenceCo; two established black-owned and managed companies, Sonja de Bruyn’s Identity Partners Itai Consortium and Sipho Maseko’s Afrifund Consortium; and a workers’ trust.
MultiChoice Group’s shareholding in LicenceCo will ultimately give it a 49% economic interest and 20% share of voting rights.
The MultiChoice Group will retain its existing 75% direct interest in MultiChoice SA, which will exclude LicenceCo.
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