Title: Peripheral Capital Goes Global: Naspers, globalization and global media contraflow.

Tomaselli, K. G.

Abstract

Naspers, a South African media conglomerate worth USD$64 billion in 2016, operates across a range of media and information platforms in 120 countries, including many ‘emerging markets’. Naspers is an exemplar of media markets’ contra-flow, conceptualised as the movement of information, media content, consumer goods and capital from the ‘developing world’ into more developed markets. This study i) examines how Naspers has diversified its core media holdings

(print and satellite) into digital information service providers and e-commerce; ii) how this was achieved both globally and domestically; and iii) how this diversification allowed Naspers to maintain its pre-eminent position in the South African media market.

South African financial magazine articles, between 2010 and 2014, reporting on

Naspers’s globalisation, are thematically examined with regard to globalization, diversification, ownership and control and collaboration. These themes frame a

1 political economy analysis of how Naspers penetrated, expanded and solidified its e-commerce business operations nationally and globally.

Keywords: Naspers, Tencent, globalization, emerging markets, diversification,

BRICS, contra-flow

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Introduction

Although a global conglomerate and the dominant company listed on the

Johannesburg Stock Exchange (JSE), little has been published on Naspers

(National Newspapers). While some historical research has been done by Botma

(2008), Anonymous (1989) and Viljoen (2006), our study focuses on the contemporary phenomenon of Naspers’ digitization and globalization. We briefly discuss Naspers at a macro-level, in terms of contra-flow of information between

South Africa and China and Naspers’ stake in Tencent Holdings in the context of

China’s battle for dominance in cyberspace (Thussu et al., 2017). Apart from passing references (Wasserman and Rao, 2008; Saville, 2011; Wasserman, 2015) and atheoretical much reportage by online media, the only case studies found were student projects (Giannakos, 2008; Li and Gao, 2011).

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Once a predominately print-media company, Naspers’ constitution has undergone a reconfiguration that has seen the company’s Internet/ e-commerce platform become its main source of global capital. Adopting a political economy approach, and drawing much of the data from online archival newspapers published by prominent

South African financial magazines, we illustrate the manner in which a small regional media house, heavily dependent on its patron-relationship with the previous apartheid government, has transformed itself into a global player in the digital arena.

While Naspers is South African, the case study resonates internationally, not only because of the reach into many global emerging markets, but also because it demonstrates how corporate media longevity can be assured through redeploying accumulated assets into new ventures. Naspers’ astute (and often lucky) identification of perceived gaps in less developed and relatively unsaturated markets found risky, but frequently profitable returns.

Naspers after 2000 bought into media and IT firms throughout Europe, India, China,

Nigeria, the Philippines, Latin America, and especially in Russia. A nationally- focused, previously ideologically-driven newspaper company thus became primarily a content service provider after 1990. To start, a sketched overview is provided of

4 the current scope of global and South African businesses in which Naspers has a significant interest, to indicate their varied geographic locations, most of which are in ‘emerging’ or ‘transitional’ economies across the world.

The early establishment of subscription television, initially encrypted terrestrial, was followed by satellite delivery, recently extended to include online streaming. The establishment of MNet in 1993 in turn gave birth to DSTv in 1996 and ShowMax in

2015. Trading under the umbrella of MultiChoice, the conglomerate includes programme production and curation companies as well as a distribution network of franchised international channels. The company’s branching out into online distribution, such as on-demand downloads and streaming, is covered later in the article.

Below, we summarise the main ventures according to business type, indicating the names of the companies in which Paspers is invested, their geographic location and the main domain competitors. This section is not comprehensive nor chronologically sequential, but offers a taste of the global nature of the enterprises.

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Internet and e-commerce platforms are the most important in terms of market value.

Such notable companies include minority shareholderings in Tencent (China) and

Mail.ru (Russia). Allied to e-commerce are online messaging services, grab-all services that integrate messaging, addressing and cross-platform referrals. In China,

WeChat, owned and controlled by Tencent QC, provides an omnibus service of video streaming, micro-blogging, video calls, games, shopping, gaming and financial transfers. In global terms, its closest competitor is Facebook, not permitted within the boundaries of China. Mail.ru (Russia) is the second biggest investment after Tencent.

Online retailing and online classifed advertisements are areas of growing value to digital commerce in general and to Naspers specifically. Online ‘classifieds’ were an early foray into the digital marketplace and provided a direct transition from print media experience. OLX was founded in 2006, and Naspers bought a majority shareholding in 2010. Further investment increased their share to 95% in 2014.

Naspers operates in 45 counties and retains its position as the largest online classified company in Brazil, India, Pakistan, Ukraine and other Eastern European countries. In Russia, Avito, another Naspers classifieds site, underscores the

6 advantage of classifieds in that no logistical backup is required, since sellers and buyers interact directly without third party involvement.

Less than 2% of retail sales in South Africa are transacted online, although the portion is much higher in other emerging markets; China, for instance, conducts about 17% of retail sales online. Therefore, the potential for expansion is significant.

Naspers’ first South African venture in this area was in 1998 with Kalahari.com. In

2014 the corporation acquired a 42% share in the American company, Takealot.com, subsequently merging it with Kalahari under the name of Takealout (van Zyl,

2015:np). In 2017, Naspers acquired a majority stake in Takealot (Fin24, 2017:np).

The Middle East has proven a lucrative area for retail, with souq.com operating out of Dubai, UAE, and selling into the Saudi and Egyptian markets.

Online sales need logistical backstops, including payment platforms. Naspers initiated PayJar in 2010, renaming it PayU the following year, solely in order to facilitate online purchases from Naspers’ retail acquisitions.

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Delivery is another vital support mechanism for online trade. A minority stake in

Flipkart (India) acquired in 2012 was sold in 2018, but investment in online food delivery was increased in Swiggy (India), Delivery Hero (Germany) and iFood

(Brazil) (Bloomberg, 2018). Finally, other ‘backend’ services include bus ticketing and travel, most notably RedBus and Ibibo Group, both in India.

Historical Background

Naspers started as a Cape-based mutual company in 1914 producing Afrikaans- language newspapers from 1915, founded by a consortium of affluent members of

Cape society geared towards promotion of the Afrikaans cultural movement

(Anonymous, 1989: 119; Giliomee, 2003: 374). The firm increased its capital through diversification, specifically with the expansion of its business operations nationally.

Diversification satisfied its cultural objectives (political and ideological mobilisation of Afrikanerdom) and to a lesser extent its commercial premise (Anonymous, 1989:

121).

Naspers’ thus engaged in a series of acquisitions, mergers and start-ups that expanded its businesses nationally. Initially spearheaded by the Afrikaner cultural

8 movement working towards cultural, political and economic development (see

Anonymous, 1990), Naspers became an important mouthpiece for the National Party

(NP) that ruled apartheid South Africa between 1948 and 1994 (Anonymous, 1989:

119-139).

The firm’s premier family magazine De Huisegenoot1 (later changed to Huisegenoot

– House Companion), cross-subsidised the company’s newspapers 2 since the magazine generated most of Naspers’ profits at the time. In the early stages of NP rule during the 1950s, Huisgenoot’s shifted the direction and structure of its conservative content to advance Afrikaner Nationalism. Huisgenoot embraced the

‘Graphic Revolution’ (Viljoen, 2006: 18) and mass culture production,3 by reneging on its “brand identity” fro being an “idealised and formalised [Afrikaner] cultural life to [a more] profit-driven populism” (Froneman, 2004: 61). This would see

Huisgenoot’s magazine cover and content shift from male-dominant use of historical figures and monuments of Afrikaner history to female-orientated, romanticised and imagined Afrikaner community, with more visual content (Viljoen, 2006: 18-21). This change is an early example of the pragmatic flexibility that allowed Naspers to thrive while other businesses experienced more turbulent trading conditions.

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One ingredient for Naspers’ commercial success was its direct alignment to the government during apartheid (1948-1990). Naspers provided much of the intellectual, if often mildly critical, support for the policy of racial separation. Perskor

(Press Corporation), established in 1971 (after the merger between Afrikaanse Pers and Voortrekkerpers), operated in northern South Africa. Perskor was much more reactionary, and competed with Naspers for readers (Anonymous, 1989: 132).

Naspers was always relatively more liberal and allied with the verligtes (the enlightened faction of Afrikanerdom) to contest Perskor and its’ conservative state, religious and civil society allies in pushing through economic reforms from the mid-

1970s (Anonymous, 1989: 119). These reforms responded to structural shifts in the political economy that required the development of mass black working-class dormitory townships to service metropolitan industries, as well as the development of literate workers and black trade unions. A growing racial integration in the economic sphere characterised apartheid reform during the 1980s (Webster and

Buhlungu, 2004: 229).

Where Perskor’s newspapers and constituency were parochial, inward looking and anti-liberal in terms of promoting a narrow view of Afrikaner Nationalism, Naspers’

10 orientation was always flexible, politically open-ended and conducted with an eye to changes in the maturing political economy. Subsequently, when Perskor ‘unbundled’ its remaining businesses through the 1980s, Naspers’ used this opportunity to consolidate its market share by purchasing Perskor’s prominent remaining newspaper publication, Die Vaderland (The Fatherland), as well as other business entities. Perskor then focused on its regionally based newspapers and ceded the national market to Naspers.

The ideological outcome was that Perskor’s reactionary politics was muted during an extended period of ‘reform’, even as the right-wingers in government preferred an uncompromising apartheid that was unyielding to local and global economic shifts. By the late 1980s, Naspers had established complete hegemony of the

Afrikanaans-language newspaper market as its rival Perskor had been rendered non-existent nationally (Anonymous, 1989: 138). This was one of the first examples of Naspers’ acquisition and incorporation of existent companies into its own stable.

The battle between Naspers, with its corporate and ideological centre in the Cape, and Perskor, the Afrikaans media powerhouse of the then Transvaal and Orange

Free State, was a mirror of the internal battle between the Southern and Northern

11 factions of the NP. Fortunately for Napers, the Cape aligned branch of the NP, led by the then Prime Minister P. W. Botha, proved to be hegemonic faction, enabling

Naspers to ride on its success. In forging a beneficial relationship with the NP’s reformists Naspers published favourable articles on NP governance. In return, the

Party provided exclusive stories, government advertising and lucrative school textbook contracts among other privilege to Naspers’ companies (Mouton, 2000:

162-63; Van Vuuren, 2017:85). The relevance of this mutually advantageous relationship between Naspers and the NP would be borne out when the government agreed to the establishment of a pay-television network.

M-Net, MultiChoice - DStv – from single channel to global conglomerate

In the early development of Naspers, no single event changed the business patterns and economic fortunes of the company as much as did the establishment of the pay- television channel, M-Net, and its subsequent growth into an international provider,

DSTv (Direct Satellite Television). These developments are included because they are essential for an understanding of the way in which Naspers would subsequently be able to expand globally.

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The state introduced television in 1971 and five years later the first broadcast occurred. Initially non-commercial, advertisments were introduced after a year, which had an adverse impact on the newspaper industry’s bottom line as its revenue decreased significantly. Naspers had protected its investments in the liberalising environment after 1978 by requesting the government for a licence to set up a private commercial broadcaster. Recently declassified archives include correspondence between P.W. Botha and Naspers Chairman, Piet Cillie, in which the latter reminds the Prime Minister that in the face of dwindling newspaper sales, a television licence was necessary for Naspers in order to remain “one of the tap roots of National power, and Afrikaner leadership” (cited in van Vuuren 2017:89). However, when the other press houses voiced displeasure about this private agreement, the government included all four. Argus, Times Media, Perskor and Naspers, were invited to own shares in the subscription service that operated on a for-profit rather than an ideological basis. Thus, in 1986 was M-Net born.

Naspers and the other newspaper groups obtained the pay-television license upon accepting the government’s condition confining broadcast content to entertainment and sports. M-Net was allocated a daily two hour ‘open window’ of free-to-air broadcasting during a prime-time slot (17:00 – 19:00) when the locally produced

13 soapie Egoli (Anonymous, 2005: 559) was aired. M-Net thus enjoyed twenty years

(1987 – 2007) of ‘free-to-air’ commercial time at taxpayer expense.

Soon after M-Net was launched in 1986, Naspers acquired sole ownership by purchasing shares owned by the other newspapers. M-Net’s early struggles to obtain traction amongst subscribers who were well serviced by SABC’s three channels might have convinced Times Media, Argus and Caxton (previously,

Perskor) that this venture would not be as profitable as initially expected (Shapshak,

2016). The significance of Naspers’ decision to assert full ownership of M-Net was that it was the only print company that had taken a risk by branching towards an entirely new media platform, in this case pay television, thus providing the company a precedent if it decided to embrace additional different media platforms. Naspers’ ownership of M-Net afforded the upcoming young excutive, Koos Bekker, significant leverage as he had pioneered the idea of Naspers expanding its business operations towards television broadcasting. Subsequently, Bekker was appointed as the Chief

Excutive Officer of M-Net and tasked with allocative control of the fledging subsidiary

(Shapshak, 2016). While M-Net would struggle during its infancy, eventually the company became the premier pay-subscription service throughout the African continent. This is unpacked in detail in the next section.

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The honeymoon ends.

Notwithstanding successive states of emergency imposed between 1984 and 1989, a ‘border war’ conducted against ‘communist insurgents’ and growing internal resistance, by the end of the 1980s the Afrikaans media increasingly came to oppose apartheid along with their liberal English counterparts. The government acquiesced to internal and external pressures in 1990, and put in place political procedures for a change of regime by peaceful means. The government’s war against the press had created a division between the NP and Naspers that would become a contributing factor that led to the parting of ways between both parties (Stemmet and

Barnard, 2004: 158).

Going global – round one

M-Net began broadcasting via analogue satellite in 1992. In anticipation of the digital opportunities that would be offered by the launch of the PANAMSAT 4 (PAS4) satellite in 1996 over the Southern hemisphere, MultiChoice was launched in 1993 as Naspers’ mother company for its growing and diversifying satellite television business. The firm was in 1995 listed on the Johannesburg Stock Exchange (JSE) as a separate company, though MultiChoice remained wholly owned by Naspers.

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PAS4 allowed for the migration of the subscription service onto a digital platform, initially comprising 16 channels, a huge advance at the time (Telecompaper, 1995).

A subsidiary company, Direct Satellite Television (DStv) was established to manage the subscription function of the business. M-Net was redefined as a content brand, along with others such as ‘SuperSport’ in 1995 to produce sports content production and acquisition, followed by ‘Kyknet’ (Looknet) in 1999, specialising in Afrikaans- language content acquisition and curation. PAS4 opened up new market opportunities, allowing for a fullscale penetration of the continental African market, the Middle East, and even Greece via satellite, with varying degrees of success. The transnational nature of MultiChoice’s expansion throughout Africa resulted in the company’s establishment as the pre-eminent content provider and carrier throughout

Africa (Anonymous, 2017: 43-45). MultiChoice transnational operations were prominent within Anglophone (English-speaking), Lusophone (Portuguese- speaking) African countries (Anonymous, 2014; Anonymous, 2017).

This second technological transference (the first being Huisegenoot’s adoption of graphic imagery for mass media production) saw the restructuring of M-Net. Within a single decade, the analogue single-channel, single company of 1986, became a multi-company conglomerate (although for some years, the analogue single-channel

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M-Net, ran alongside the digital bouquet). DStv’s expansion did not detract from M-

Net, which increased nationally, and its programmes were relayed on the broader global services that stretched across Africa and the Middle East. However, as a component of the overall consortium M-Net constituted a relatively small part. From its South African offices, DStv offered the basis of Naspers’ global launch into information technology. The South African company thus became a global player in emerging markets, for which South African entrepreneurs had the necessary experience, stamina and survival skills (Anonymous, 2007: 138; Timberg, 2007).

Media24 - Entering cyberspace

Across the temporal length of Naspers' transition, the emphasis moved from ideology to financial sustainability, though the two are always synergetic and co- dependent. The result was that by the 1990s Naspers was expanding from national production into to the distribution of content, globally sourced on a massive scale, across Africa, Asia, Arabia, Russia, China, Europe and India. This shift was typified by Ton Vosloo, then Naspers’ Chief Executive Officer as a move from “exclusive nationalism to an inclusive nationalism” (Giannakos, 2008: 53). By 2014, however, the new managing director, Bob van Dijk, was based in The Netherlands, symbolically marking Naspers as no longer ‘national’ but international.

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Naspers’ metamorphosis into a global e-commerce conglomerate began in the late

1990s, when online Web platforms were introduced in the South African media market. The introduction and increase of online Web applications occurred as an offshoot of traditional media operations that provided rural areas accessibility to new outlets of archived information generated by their own contribution.

Online Web platforms were exemplary of Naspers’ vertical integration, since

Naspers’ news print division was expanded vertically into a new online media platform. Online Web platforms provided Naspers the opportunity to access and service markets outside national borders and exploit part of a global market, and in doing so, ensured some African presence in transnational cyberspace (Berger,

2004: 63). Naspers’ online publication eBeeld provided the model for a comprehensive Internet strategy led by its subsidiary, M-Web. This development would lead to Naspers launching its online syndication, News24 (Rossouw, 2005:

214).

The evolution of online Web platforms eventually led Naspers to institute their Web operations into a dedicated and separate unit (Naidoo, 1999 cited in Berger, 2004:

64). Naspers’ implementation of technological convergence had become an essential process in their newspaper operations. The news production at Die Burger

18 incorporated a multi-media (web-first) strategy that placed its online news production ahead its print production and publication. Following internationally renowned and prominent multinational media companies, dissemination of breaking news would appear as ‘hot takes’ on their various online publication platforms and social media sites before being printed, with more in-depth analysis, on their print newspaper

(Verweij, 2009: 79-80).

The significance of Naspers’ implementation of Internet-related platforms for their print division was that the company had identified a new avenue to a technologically- based Web-first strategy for their print media businesses. This highlighted the extent to which interaction with Internet-related intricacies had been embraced. The technological advancement of the communication, computer and media sectors resulted in the technical restructuration of newsroom operations based technological convergence, and the reconfiguration of newspapers’ syndication (dissemination methods) (Verweij, 2009: 80; Avilés and Carvajal, 2008: 222).

Naspers’ acceptance and use of Internet resources to restructure its flagship

Afrikaans newspapers (Die Burger and Beeld) resulted in an evolution of organizational convergence. This took the form of the amalgamation of Naspers’ various newspaper production, duplication and distribution into a centralised media

19 platform. In 1998, Naspers incorporated their print publications into their newly branded print media division, called Media24 and its newly launched online Website,

News24.com, whose separate staff customise and translate content into English.

Subsequently, News24 became the premium online news source in South Africa and

Media24 fully embraced Internet platforms by launching various online projects

(Media24, 2018). Media24 launched the first online isiZulu news service

(Izindaba24) and the first news-focused user-generated content platform

(MyNews24). Media24 further collated their online Afrikaans Websites (Beeld, Die

Burger, Volksblad and Rapport) onto a single news site, called Netwerk24. At the same time, Naspers’ other Internet subsidiary company, M-Web, operated its own independent portal site offering online access to various content offerings, including the Mail & Guardian. Moreover, Naspers began to supply readership with content directly to cellular phones through the Irish-owned Independent Newspaper’s subsidiary (I-Touch) after 2009 with Mail & Guardian online following suite in

September 2003 (see Knight, 2002 on the latter service).

Political economy of Naspers

The relevance of the political economy approach is based on its examination of infrastructure within the media, information and communication industry (Durham

20 and Kellner, 2009: xxix). Political economy of communication investigates the ever- expanding global media industry and closely focuses on news corporations’ adoption of strategies that have led to an integration of networks and interests in emerging and established international markets (Wilkin, 2001: 24). Below, the focus is on certain concepts within the political economy of communication with the primary concepts being globalisation and diversification.

A crucial consideration is diversification – and the counter-vailing concomitant convergence of media platforms. Naspers’ primary core business has shifted to

Internet platforms, the original core print business being sidelined by complementary broadcasting and other digital technologies, with e-commerce and Internet provision leading the way. Issues of both vertical and horizontal integration – and the consequent expected synergies indicate that in fact each territory acts relatively insulated from the other.

The central concept of ownership and control remains relevant not only by the percentile stake owned by the corporation, but also by the absolute size and value of the various components that can skew the entire operation. At a corporate level, not all individual companies perform equally. Highly asymmetrical disparities of the components provide a resource ‘dividend’ in buoyant conditions. They could

21 however leave the company open to exposure in economic down-turns. Thus, the subsidiary can end up dictating terms to the principal. Naspers admirably illustrates the changing sectors and alliances within the global information industries with emphasis on the BRICS countries (Brazil, Russia, India, China and South Africa)

Globalisation is the central factor as geographic expansion into territories where huge populations and gradually increasing standards of living have increased consumer spend at a far greater rate than in established markets. This progression has been key to the success of the overall Naspers corporation.

Drawing out themes

The study draws on a data sample of online newspaper articles from four of the most prestigious South African financial online magazines (Business Day Live, Financial

Times, Moneyweb and Fin24). The periodization of the data sample was confined between 1 January 2010 to 31 December 2014, due to this period representing the early stages of Naspers’ expansion of its Internet operations. Naspers’ e-commerce operations were co-terminous with the gradual shift in relevance between its pay- television and e-commerce platforms. An issue of objectivity, in relation to Naspers being the parent company of Fin24, was taken into consideration. However, the

22 validity of the data sample was balanced by incorporation of three magazines not affiliated with Naspers.

The data is interpreted through a thematic analysis, to identify and interpret patterns of meaning within the online newspaper articles. Once familiarisation of the archival newspaper article has occurred, a process of systematically coding the data to generate initial codes follows, and the identification and construction of themes will be the final stage of the thematic process (Clarke and Braun, 2014).

Theme 1: End of an Era (The fall of Naspers’ Pay-television platform)

The thematic analysis of the archival online newspaper articles identified three important themes that provided insight into Naspers’ peripheral platform (Internet and e-commerce) that became its source of capital globally, specifically within

BRICS.

The first identifiable theme focused on Naspers’ pay-television platform transition from being the company’s primary source of global capital to being surpassed by the company’s e-commerce platform. When Naspers’ implemented its fourth

“technological spurt” by investing in various Internet and e-commerce businesses

23 globally, it was fuelled by the success of the company’s first transnational enterprise; its pay-television division (specifically, MultiChoice). Naspers’ technological spurts consisted of the following: print to broadcasting, broadcasting to cellular phone, cellular phone to Internet and e-commerce (Jones, 2014).

MultiChoice’s expansion into the various countries (mostly into Africa) had generated the requisite profits needed for the firm to engage in another horizontal-based expansion towards a new media platform (Internet). Naspers was able to transition along the horizontal industry of media platforms due to its experience from shifting one media platform to another (print to broadcasting). “… MultiChoice had been the cash cow on which everything else [had] been built (Cairns, 2015).

Naspers’ pay-television division contributed significantly in initiating the company’s early global expansion by providing investment into the e-commerce market.

However, when Naspers began to grow in value, its “once heralded pay-television division” was surpassed by Naspers’ ever growing e-commerce and Internet division.

This does not mean that Naspers' pay-television platform was abandoned. Rather,

Naspers' pay-television division was still able to increase its subscribers, as sales from its units increased by 18% in 2014 (ZAR20.19 billion rand) and the company expected further sales growth as "African markets move from analogue TV to digital

24 decoders" (Spillane, 2014). The Naspers’ target development expenditure increased by 42% to 44%, as the company had targeted various platforms for growth by increasing its development spend by 42% (to ZAR4.4 billion rand) to service its various platforms. Naspers' pay-television division was still able to increase its subscribers, as sales from its units increased by 18% (ZAR20 billion rand) (Spillane,

2014).

Naspers’ transition eventually saw the company become predominately e-commerce based, with its print and pay-television platforms registering little value in the company’s stock market valuation (Derby, 2014). This was further highlighted by

Bekker, who stated that Naspers’ e-commerce investments (Mail.ru and Tencent) would be the driving forces of its pay-television expansion further into Africa

(Moneyweb, 2012a).

Naspers did not view its pay-television division as a hindrance to the company’s overall market value, since it and the firm’s print media platforms were core businesses linked to the ideological roots retained by Naspers (Mosime, 2014).

Thus, Naspers sought to keep its pay-television division operational at a certain profit margin, similar to its legacy print media, and identified means to consolidate its pay- television business. Consolidation of its pay-television platform was affected by

25 implementing a new vertical integrated-based developmental plan that rolled out a digital terrestrial television (DDT) infrastructure for Naspers’ subsidiary DStv that

"[would make] pay-television affordable to even more people in Africa" (Moneyweb,

2012a).

However, David Reynolds, a London-based analyst, cautioned that Naspers' pay- television operations in Africa faced the possibility of "declining margins due to growing numbers of TV shows online", specifically transnational subscription video- on-demand (SVOD) companies, such as Netflix and Amazon (Moneyweb, 2012b; see also Daniel, 2018; Petersen, 2018). Internet-based streaming video-on-demand

(SVOD) providers, such as Netflix and Amazon, had encouraged Naspers to explore linking its pay-television platform with the Internet, However, the slow Internet broadband connection in South Africa saw Naspers implement its Internet based ideas on pay-television to satellite television, via the PVR (personal video recorder) service of the DStv Explora decoder. The PVR service would "[pretend] to be the

Internet and [worked] quite well for certain products" (Bekker, 2012 cited in

Moneyweb, 2012a).

Bekker was concerned that competition with DStv, would arrive not from another satellite-based pay-television service, but rather from an Internet-based streaming

26 video-on-demand service (i.e. Netflix). A Netflix-type competitor would be problematic as the company offered that same service as DStv, but on an Internet platform that was experiencing vast improvement with regards to Internet infrastructure (i.e. broadband) and which would eventually lead to SVOD being on par with satellite-service pay-television. SVOD companies (Amazon and Netflix) could challenge MultiChoice for its African subscription base directly by "[setting] up a site and serve the consumer directly" (Moneyweb, 2012a) without having to pay local taxes (Vermeulen, 2018).

Naspers' caution regarding SVOD centered on the notion that those companies would "[seep] around the edges" before an "eventually" full frontal attack

(Moneyweb, 2012a). The concerns raised by Bekker further highlighted Naspers’ stance of consolidating its legacy and core business platforms, by identifying potential avenues of growth and challenges from potential competitors for Naspers’ pay-television platform business. Moreover, in the year 2014, Naspers still saw

“future growth” opportunities within its pay-television division and included the division, together with its Internet and e-commerce platforms, in its heavy expenditure in acquisitions and development in its e-commerce and digital terrestrial television businesses. Investors and analysts observed that Naspers' pay-television

27 division had a “modest” growth rate, compared to 2013, as it was "no longer the biggest contributor" to Naspers' revenue (Internet and e-commerce platform had overtaken it). Nevertheless, pay-television would be "the biggest contributor" to

Naspers profits (Planting, 2014).

Theme 2: The Tail (Tencent) wags the Dog (Multi-Choice)

In May 2001, Naspers ventured into its ‘fourth technological spurt’ (Jones, 2014), and invested a 46.5% stake in Chinese Tencent Holdings, which operated an instant messaging platform named QQ. Naspers’ investment in Tencent, as well as a

Russian-based Internet company called Mail.ru, was the second instance in which the company engaged in the horizontal shift from television to Internet and e- commerce. Most importantly, the experience of Naspers’ previous technological shift

(print to television) had provided the company invaluable experience required to navigate this move. Bekker was frank:

We created the second biggest ISP in Beijing in 1998 and we lost the battle

there. We eventually lost US$80-million and had to fire people and close it

down because of mistakes we made. We’ve failed quite a lot but if you’re

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going to fail, get into the market quickly, fail quickly and learn from it.

(Atagana, 2011)

Naspers’ decision on Tencent followed on various investment failures in China before the company eventually struck gold (Tarrant, 2014). Initially, Naspers was

"hammered” when purchasing part of Tencent (Shapshak, 2014) as Tencent was a very different company compared to its current constitution. At its neophyte stage,

Tencent’s main product was a desktop messaging client, called QQ. However,

Tencent would transform itself and enjoy success based on its ability “to react to the sweeping and fundamental changes which happened in the personal computing and internet markets” (Tarrant, 2014). In turn, Tencent shifted from messaging alone to incorporate mobile and smart phones, e-commerce, gaming and social networking.

For the first decade of the investment, South African investors were indifferent to

Tencent. However, when from late 2012, Tencent’s share price value doubled on the Shanghai Composite Index, Naspers’ stock, aided by the significantly weakened rand, also doubled in value. By 2014, Naspers’ shares in Tencent totalled 34% of the Asian company and was worth ZAR517 billion rand, constituting 97% of Naspers’ total JSE market value. In 2014, the market valuation of Naspers’ shares in Tencent held significantly more weight in the company’s market valuation when compared to

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Naspers’ other business ventures. Naspers’ other global e-commerce and Internet businesses in Brazil and Eastern Europe, together with its pay-television subsidiary and legacy print media, were only valued at ZAR16 billion (Tarrant, 2014).

The weight of Naspers’ investment in Tencent, with regard to its market valuation, would prove to be both worthwhile and problematic. Naspers’ shareholding in

Tencent created a narrative that negated the ‘existence’ of Naspers itself on the JSE and produced a scenario in which an investment in Naspers would effectively be investment in Tencent’s stock (Harris, 2014). However, the competitiveness of the

Internet market, due to the relatively low entry point for Internet companies could foresee competitors providing stiff competition for Tencent, thus lowering its market valuation (Moneyweb, 2012b).

Since Naspers shares in Tencent were perceived as being overweight in the company’s market value, there had been mixed views between investors and analysts on whether Naspers' should unbundle its 34% shares in Tencent. Investors and analysts opposing the unbundling process noted that Tencent had been the main driving force "behind the extraordinary returns...witnessed from Naspers over the past 4-5 years" (Harris, 2014). Moreover, the unbundling of Tencent would only constitute "an enormous short-term value unlocked" since Naspers had created

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"enormous value for [its] shareholders for a long time and should continue to enjoy the benefit of capital allocation if they [believed] in growth prospects for Tencent"

(Harris, 2014).

Theme 3: Emerging markets

The final theme concentrated on the global expansion of Naspers’ business enterprises being in predominately emerging markets. That Naspers’ e-commerce investment through joint-venture partnerships in emerging markets was located within the BRICS association and also Indonesia was an unintentional consequence of the company’s strategy of identifying countries’ with emerging markets and evaluating their economies as offering growing and stable opportunities. These expansions underscored that the globalisation of Naspers’ Internet and e-commerce activities, as well as their other media platforms, were structured predominately towards e-commerce markets located in stable states with potential economic growth (Spillane, 2014). Tencent's growth had occurred faster due to the escalation of salaries of Chinese citizens and their living standards.

A second pearl in the Naspers crown is another e-commerce company based in

Russia, Mail.ru. Naspers’ investment in Mail.ru was based on Mail.ru’s potential for growth, since initially it was simply “doing emails and that gave Mail.ru a mass

31 audience but no real revenue" (Moneyweb, 2010). In the early years, building online advertising into the mail provider base was unsuccessful; so the strategy changed to offering its captive market “different online portals”. This was only partially successful, but the horizontal shift in business operations towards online gaming proved very lucrative (Moneyweb, 2010). Gaming also provided massive profits for

Tencent in its early development. Consequently, Mail.ru became (and remains) the biggest games company in the Russian-speaking market, a position that frees capital for the company to penetrate the Russian social networking market with the investment into a Facebook-type company called Vkontakte (Moneyweb, 2010).

Thus, in order for Mail.ru to monetize its large subscription base, the company had to diversify horizontally into different e-commerce and Internet related business entities (i.e. online gaming) to accrue profits required for its own expansion.

Naspers' interest in diversifying its business operations in India was based on the

“rich potential” of India's e-commerce market that had the prospect of creating a

USD100 billion dollar company. Tencent identified the potential of India's e- commerce market and joined Naspers to "further expand their footprint in India"

(Fin24, 2013). Both companies bought shares in Ibibo (Naspers 80% majority stakeholder and Tencent 20% stakeholder), that had acquired a Bangalore-based

32 online bus ticketing company, called redBus. The interest in redBus was based on the company's generating "more than 2 million users" (Kruger, 2013). The Indian online bus ticket market was under-penetrated at less than 6%, therefore, redBus had room to grow locally and nationally before any thoughts of global expansion.

Naspers’ Investment in Ibibo, and the subsequent acquisition of redBus, brought home the huge market scale of India’s e-commerce market. Still in India, Naspers’ decision to invest in Flipkart increased its e-commerce market scale further. Flipkart was similar to Naspers’ first big Internet investment, Tencent. Flipkart was sold in

2018 to Walmart for USD 15 billion. Citing the need to reinforce the firm’s balance sheet and future growth of its e-commerce ventures, Naspers’ sold its remaining

Flipkart shares to Walmart (11.18%) for USD 2.2 billion, representing a 300% asset growth over its original investment. The Walmart buyout was intended to compete with Amazon (de Villiers, 2018), beating Amazon’s bid. An online bookstore that had the advantage of being an "early-mover" in establishing its presence in the Indian

Internet and e-commerce market, Flipkart had initially suffered some logistical problems and had encountered greater competition from transnational players (i.e.

Amazon) that resulted in hindering the company from acquiring a greater Indian e- commerce market share, at least until the Walmart purchase.

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Naspers’ decision to become a predominately mobile Internet and e-commerce- based company would see it focus on Brazil’s e-commerce market. It invested in

Movile, which processes a variety of mobile related functions, such as online advertisements and games. Turning towards Eastern Europe, Naspers’ mobile division invested in a Polish company that had created a mobile online comparison service. This subsidiary developed an app that was one of the first to bring an online shopping comparison programme to mobile users in Poland (Moneyweb, 2010).

Further expansion in e-commerce activities in central Europe resulted from the acquisition of eMag-Romanian, while in the Middle East Naspers bought Souq.com in the United Arab Emirates and Markafoni in Turkey. At the time of their purchase, these companies were yet to turn profits. In 2014 van Dijk noted that Naspers’

Internet businesses in Russia, China, India and Brazil were growing at a faster rate than equivalent businesses in mature markets. The emerging market scenario was so attractive that Naspers sold their Swiss online retail company, Ricardo.ch, as a means of "[freeing] up capital for ongoing investments in emerging market e- commerce" (Schweizer et al., 2014).

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Conclusion

This paper opened with an early 20th Century historical account of Naspers as a vehicle for the mobilisation of Afrikaner cultural capital when the primary issue for the company was ideological, not monetary. The Cape-based newspaper and magazine producer became the single most important Afrikaans press house, deeply supportive of the Afrikaner and National Party project. However, by the

1970s, Naspers had moved ahead of the political thinking of the rightwing elements of the Party, and with the move towards democracy were at the forefront of Afrikaner enlightenment. Naspers moved from press into broadcasting in the early 1980s, and through a series of technological advances and astute business moves, Naspers’ small venture into television evolved into a continental African-wide digital satellite venture, in the process providing a financial war chest that allowed them to expand into other areas. Naspers made yet another important sideways move into the area of e-news, initially building on the content of their print newsrooms, and rapidly expanded into e-commerce. Capital raised from the legacy media, print and broadcast, allowed Naspers to buy into a relatively unknown e-commerce Chinese company, Tencent. Literally the ‘goose that laid the golden egg’, Tencent’s value

35 unlocked further e-platform opportunities in a range of emerging markets, many of them in the BRICS country.

The political economy based thematic analysis was devised to animate the texture of the four year period of how financial journalists reported it. The reporting was erratic, perfunctory and lacked conceptual depth but the data extracted from sample of articles enabled us to construct an explanation of capital contra-flow with regard to this single company – though other companies exist – that illustrates political economy theory from a southern perspective.

What has not been discussed, but remains a future endeavour, is how

Naspers/Tencent muscled out Google, Amazon and Facebook (in China especially), while in 2018 enabling Walmart’s consolidation in India via its purchase of

Flipkart. And, what kinds of agreements were enterered into between

Naspers/Tencent with the Chinese government that enabled their dominance? Was it purely that South African capital took greater risks? Was it better product? Was the ability of South African business to operate more effectively in emerging markets a factor? Did Naspers’ experience in unstable and unpredictable African conditions prior to its Tencent partnership prepare it for an incursion into the more stable but

36 then still under-served regional Asian digital political economy? These are questions that the current study has generated and which require further attention.

What is also lacking in the magazine commentaries and reporting were the different strategies applied by Naspers in its relationship with Tencent in comparison to

American digital corporations. Rather than attempt to dominate through wholly- owned national companies in China, Russia, India and Brazil, Naspers funded

Tencent as a Chinese start-up, thereby securing immediate access to China, while at the same time leveraging Tencent’s operational knowledge of the Chinese political economy and operating conditions, taking into account ideological considerations in relation to the regulatory mechanisms imposed by the Chinese government.

Naspers has been particularly adroit at identifying opportunities that less adventurous corporations, particularly those founded in the technologically highly- developed ‘first world’ would not touch. Furthermore, that not all enterprises enjoined by Naspers have been financially or socio-politically successful; indeed, part of the business strategy seems to have been to build in a measure of redundancy that allows Naspers to ‘walk away’ from a proportion of attempted businesses. Taken as a whole, their financial success has been impressive; however, the real transformation has come from two directions. Firstly, they have

37 expanded globally. Secondly and crucially, the move away from characteristically media enterprises (print, book publishing, broadcast) to comprehensively monetarised pursuits of telecommunications and gaming, retailing and ‘backend’ financial and logistical services. Thirdly, as a consequence of these two movements,

Naspers is no longer interested in being a political or ideological player; rather they are a global profit-driven conglomerate, more aware of political and economic trends on a international basis than the relatively parochial conditions ‘at home’.

Funding

No financial support was provided for this research.

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1 De Huisegenoot was founded in 1916 when Afrikaners were undergoing political and cultural alignment amid British colonial rule. Naspers later changed the title of the magazine to move away from the Dutch sounding name and finally settled on Huisegenoot [Enjoy the Home] (Viljoen, 2006:18). 2 De Burger (The Citizen) later changed to Die Burger), Volksbad (People’s Journal) 3 This phrase referenced the rise of mass produced imagery from word-orientated images (Boorstin, 1961 cited in Viljoen, 2006: 19).

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