Sunday, February 11, 2024

SABC COO Ian Plaatjes and TV boss Merlin Naicker suspended, ad boss Reginald Nxumalo resigns over undisclosed 7.5% profit-share deal with Discover Digital running SABC+.

by Thinus Ferreira

The South African public broadcaster's COO Ian Plaatjes and head of video entertainment Merlin Naicker have both been suspended, with the SABC's ad sales boss Peginald Nxumalo resigned when he heard about his impending suspension, following their failure to disclose a 7.5% profit-share deal with Discover Digital that runs the broadcaster's SABC+ video streaming service.

In an internal memo on 7 February the SABC told staffers that COO Ian Plaatjes and head of video entertainment Merlin Naicker have been suspended this week in news first reported by City Press on Sunday.

Their suspensions came after legal advice from the Werkmans law firm. 

The Werkmans legal opinion comes after the SABC did its own internal audit into the secretive profit-sharing deal that came to the conclusion that the three executives failed to act in the SABC's best financial interests.

According to Werksmans Ian Plaatjes, Merlin Naicker and Reginald Nxumalo allegedly deliberately concealed the crucial information of the 7.5% profit-share agreement from the SABC's executive committee during their presentation of the deal, before it was signed and also misled the committee when they said the public broadcaster would get 100% of the advertising revenue made through SABC+.

Werkmans found a prima facie case for gross dishonesty by Ian Plaatjes, Merli Naicker and Reggie Nxumalo in the SABC+ deal with Discover Digital.

Lungile Binza is now acting SABC COO and Lala Tuku, SABC head of local content, is now acting head of video entertainment. The SABC failed to make any public announcement about the high-level suspensions to the public.

Mmoni Seapolelo, SABC spokesperson in response to a media query told TVwithThinus "The SABC is as a matter of principle not at liberty to discuss matters pertaining to an employer-employee relationship in the public space".

Ian Plaatjes, Merlin Naicker and Reginald Nxumalo allegedly concealed the additional 7.5% profit-share agreement from the SABC executive committee in the deal that the SABC agreed to with Discovery Digital for SABC+. 

Discover Digital ran Telkom's Telkom ONE streaming service which was taken over by the SABC. The SABC has a R35 million contract with Discovery Digital, renewable for 5 years, to run SABC+ as its over-the-top (OTT) video streaming service.

The SABC projected to initially make between R100 and R200 million with SABC+.

Ian Plaatjes, Merlin Naicker and Reginald Nxumalo signed the deal with the profit-sharing clause without the SABC's head of legal Nthuthuzela Vanana and Madoda Mxakwe who was acting SABC CEO at the time.

In the internal SABC memo sent to staff this week, the SABC said Ian Plaatjes and Merlin Naicker are on a "leave of absence" and that "management urges staff to give Lungile Binza and Lala Tuku the necessary support as they assume these roles" of acting SABC COO and head of video entertainment.

The controversial 7.5% profit-share agreement that was apparently kept secret, came to light when Ntuthuzelo Vanana asked what the specific clause meant.

According to Werkmans, the SABC business plan for SABC+ that was presented to the SABC's executive committee members during a meeting on 7 November 2022, stipulated that the SABC would get 100% of the revenue generated by SABC+, which used to be Telkom One.

The committee approved this proposal, but then the SABC's legal division picked up and queried the appearance of the 7.5% advertising revenue sharing clause on 16 November 2022 during the contract drafting process.

According to Werkmans, Ian Plaatjes and Stephen Watson, Discover Digital managing director, then allegedly told the SABC that the 7.5% advertising revenue share was part of the SABC+ deal. 

Ian Plaatjes signed the SABC+ deal with Discover Digital a day later on 17 November 2022, meaning that Discovery Digital gets a 7.5% of the advertising revenue made through SABC+, above the company's quoted fees.

According to Werkmans, Merlin Naicker misrepresented his own involvement in the 7.5% revenue profit-share agreement and failed to make sure that all costs related to the creation of SABC+ were clearly defined and accounted for.

Werkmans found that Merlin Naicker "During the contract drafting phase, was copied in emails between the legal department, the group chief operating officer Ian Plaatjes and Discover Digital. Evidently, he was privy to the discussion with respect to the 7.5% ad insertion clause in the contract and failed to query its inclusion as it contradicted the approved business plan."

According to Werkmans Reginald Nxumalo "was aware of the 7.5% as a number but could not join the dots on what it was for. His response was tantamount to withholding vital information".

Werksmans found that "After the COO, via an email of 15 March 2023 identified the group executive for sales as one of the persons who were involved in the negotiations of the 7.5% advertising revenue share, he confirmed his involvement as a member of a committee to the Telkom One contract negotiations, notwithstanding his previous lack of knowledge of what the 7.5% was for".

"Especially since the 7.5% is in addition to the fee paid to Discover Digital for managing the SABC+ platform, this was a significant cost item that should not have fallen through the cracks."