Primedia's position as the most empowered company in the media sector could be due mainly to the limited disclosure by other media groups.
Primedia has done a lot to improve its empowerment status in the past few years, but comparing it with other groups is difficult. Johnnic Communications' slide from first position last year to sixth in the sector this year is partially due to its poor disclosure and not necessarily a decline in its empowerment credentials, though the group is weaker in the ownership stakes.
Empowerdex says Primedia is the only group in the media sector that answered questions comprehensively. The media sector does not have an empowerment charter. However, some of the groups in the sector fall under the information & communications technology (ICT) charter because they have interests in broadcasting assets, which fall under the charter. The response of groups in the sector was poorer than in most other sectors, which suggests there is a need for an industry charter. At present there are no discussions about a media charter.
Kagiso also responded poorly to the survey, though there is some information on black economic empowerment (BEE) in its annual report.
Primedia's final score of 60,68% put it 21st in the overall survey of the top 185 listed empowerment companies, so despite the poor response of the sector Primedia has improved its empowerment credentials.
The top empowered company this year, Telkom, scored 80% in the survey. It has a 15,1% direct BEE shareholding and its management is 70% black. Primedia compares favourably. According to Empowerdex, 41% of the group's executive management is black. The black board management, including nonexecutive directors, is 53%. Black women account for 40% of management positions. Though the group's black equity is poor, with less than 10% of the economic interest accruing to black groups, its black equity, unlike other JSE-listed companies, belongs to black groups. Primedia's empowerment partner, Mineworkers Investment Corp (MIC), which is chaired by Paul Nkuna, paid for the equity through profits realised from earlier empowerment transactions. The BEE group has been building its interest in Primedia slowly, preferring to pay for it directly rather than get into debt structures that favour financiers.
Primedia says it is still committed to achieving a 25% equity holding by historically disadvantaged individuals as soon as possible. It has developed a range of strategies to achieve this, including facilitating direct equity ownership in underlying subsidiaries with the view to swapping these stakes into Primedia.
As noted in last year's Top Empowerment Companies, the media sector has suffered a decline in empowerment shareholding. This was compounded by the demise of black-controlled Nail and the unbundling of Johnnic Holdings. This is partially a reflection of the unsustainable historical empowerment funding structures.
MIC exerts direct influence through a controlling voting pool arrangement with the Kirsh Consortium, which represents the interests of CEO William Kirsh and his father, Primedia founder Izzy Kirsh.
According to the department of trade & industry's (DTI) BEE codes of practice, which were released late last year, paid-up equity and funded equity may be accounted for differently in future.
The sector's runner-up, Kagiso Media, is another group on the JSE where the black equity is paid up and fully controlled by a black firm.
Though Kagiso Media scored highest in its BEE shareholding, it lagged behind on other pillars of broad-based BEE such as skills development and enterprise development.
Johncom, last year's winner, scores zero on direct empowerment because of the collapse of its BEE special purpose vehicle. The group's only real BEE shareholding comes from indirect investment, which the DTI's codes of practice do not recognise. There is speculation that the company will announce the names of empowerment partners this year, with management playing a big role. The group also failed to disclose its corporate social investment (CSI) participation in the survey. However, Johncom's 2004 annual report says the company contributes 1% of its aftertax profits (about R2m in 2004) to CSI and divisions within the group have their own initiatives. It does not mention its skills spending.
Primedia scored 99% on skills development, which has the heaviest weighting in the balanced scorecard. The group performed well in the past four years in terms of meeting transformation targets, with improvements of 39%, 55% and 266% at middle, senior and top management levels respectively.
Primedia's 40% stake in 2004 Premier Soccer League champions Kaizer Chiefs, a black-owned soccer team with its roots firmly in Soweto, helped contribute towards enterprise development.
