S. Africa's media giant takes risks that pay off

S. Africa's media giant takes risks that pay off

Reaping rewards of Tencent investment

File photo shows the headquarters of Media 24, owned by Naspers Limited, in Cape Town, South Africa. REUTERS
File photo shows the headquarters of Media 24, owned by Naspers Limited, in Cape Town, South Africa. REUTERS

Johannesburg: With a history harking back to the apartheid era, South African media giant Naspers Limited has evolved into the biggest company on the continent, with investments spanning the world.

The Cape Town-based firm, valued at a little under a trillion rand (about $64 billion), has grown from a small newspaper publisher into a global multimedia and e-commerce investor with an appetite for emerging markets.

Its internet ventures contributed 68% to full year revenue for the period ended 31 March 2016, with its main measure of profit jumping 21% to $1.2 billion, the company said.

Founded in 1915 as Die Nasionale Pers (The National Press), the company initially published newspapers in Afrikaans, the language spoken by the descendants of Dutch immigrants in South Africa.

Its media and publishing arm, Media24, still controls South Africa's Afrikaans press -- in line with its founding concept of promoting the Afrikaner identity.

"Naspers was initially founded to promote Afrikaner nationalism ... during a difficult time in the history of Afrikaners," who had lost their independent republics to British control, said Lizette Rabe, a media historian at Stellenbosch University.

"They have always been innovative with forward thinking strategies ... Maybe that is why their past political alliances have not affected them."

Naspers's Afrikaans newspapers were strongly supportive of the National Party, the apartheid party that enforced white supremacist policies before collapsing when the country's first democratic election brought black majority rule in 1994.

During an event marking Naspers's centenary last year, Media24 chief executive Esmare Weideman took the unexpected step of apologising for the company's role in apartheid.

"We acknowledge complicity in a morally indefensible political regime and the hurtful way in which this played out in our newsrooms and boardrooms," she said.

Rabe believes the apology from the company, which now boasts more than 80 newspapers in English and Afrikaans as well as 60 magazine titles, was an "obligation" given its past. "It was morally imperative to do so."

The internet boom in Asia has been one of Naspers's key growth drivers, and the company looks set to capitalise on the booming use of the technology in Africa.

One of its best investments has been Tencent Holdings Limited, a Hong Kong-listed firm now described as one of the world's largest internet companies, in which it holds a 34% stake.

With more than a billion users of messaging services such as WeChat, Tencent revenues were up 36%, spurred by mobile growth and advertising.

Naspers first bought into Tencent in 2001, three years after it was founded, and the gains from its stake have made Naspers Africa's biggest company by market capitalisation.

"Naspers' acquisition moves are well calculated and the company is not afraid of going into lesser-known territories," said Owen Nkomo, chief executive of Inkunzi Investments.

"This is one South African company that has become a dominant global player in the media and internet scene," he told AFP.

"Their link with the apartheid regime is no longer relevant today. What matters is value to shareholders."

Robust investment in online entertainment and e-commerce companies has extended its footprint to more than 120 countries across Latin America, Asia, Europe and Africa.

"The risks have paid off," said Nkomo, adding that China was a difficult landscape to penetrate.

He cautioned that although Naspers was reaping the rewards of its Tencent investment, any changes in internet regulations in China could adversely affect the company.

Naspers ventured into Russia in 2007, taking a 29% shareholding in Mail.ru, an enterprise that runs VKontakte, Russia's Facebook-style social network. It also owns a majority stake in e-commerce business Avito.

Delivering annual results last month, chairman Koos Bekker said the firm would "continue seeking new growth opportunities".

As a pioneering satellite television provider, through its subsidiaries Multichoice and Multichoice Africa, the firm enjoys a lion's share of the pay-TV market in sub-Saharan Africa.

The cable television company has the sole rights to broadcast the popular English Premier League, along with the German Bundesliga and other major European leagues.

Last year it launched a video-on-demand service, Showmax, as a rival to Netflix.

"The whole company is structured around entrepreneurship," said Nadim Mohamed, investment analyst at First Avenue Investment Management. "They have taken full advantage of opportunities in emerging markets and the bulk of their money comes from outside the country." 

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