NEWS

McKinsey, Bell Pottinger, KPMG And Now MultiChoice: What NOT To Do Under Gupta Leaks Spotlight

"A company needs to understand that it is not so much about what they need to say, but what the public needs to hear."

28/11/2017 06:01 SAST | Updated 28/11/2017 07:06 SAST
Mike Hutchings / Reuters
MultiChoice owns DStv and M-Net.

Analysis

MultiChoice is the latest company staring down the long barrel of a loaded Gupta gun that's aimed directly at the conglomerate's brand.

That same metaphorical gun, packed with allegations of dodgy business links to the controversial family and its associates, has already critically injured firms like McKinsey, KPMG, Bell Pottinger and SAP.

Those companies reacted similarly when allegations of underhanded business links to the Guptas first emerged: denial; an internal investigation; an accountability-lacking report; the axe falling on some employees' heads and lastly, an unconditional apology. Then, embarrassed silence.

Here's what not to do when you're in the Gupta spotlight.

  • Five months ago, Software company SAP denied paying kickbacks to a Gupta-linked company and said it would investigate media reports which showed it agreed to pay a 10 percent "sales commission" to clench Transnet contracts. In October, co-president of global customer relations‚ Adaire Fox-Martin‚ said an internal investigation found there was misconduct in issues relating to the management of Gupta-related third parties. The company instituted formal disciplinary proceedings against three employees and apologised "wholeheartedly". It later admitted that its South African operation paid about R107 million in bribes to Gupta-linked associates to secure contracts at Transnet and Eskom.
  • When Bell Pottinger was accused of sowing racial division in South Africa through a social media campaign orchestrated on behalf of the Guptas, then CEO James Henderson said, in an interview with BBC Radio 4, that they were being "called guilty before any real evidence has been shown". Atul Gupta also denied any links with the social media project. A few months later, The Public Relations and Communications Association stripped Bell Pottinger of its membership, calling the incident "the most awful piece of PR malpractice". The lead partner on the Gupta account, Victoria Geoghegan, was fired and three others suspended. The firm also issued a "full, unequivocal and absolute" apology. The company has since collapsed.
  • Consultancy firm McKinsey initially denied subcontracting 30 percent of its business with Eskom to the Gupta-linked Trillian. After an investigation, it then conceded that some of its administrative processes were not followed. The company resolved to pay back the fees it charged to Eskom (should it be found that the deal was unlawful) and has suspended doing work for state-owned enterprises.
  • Auditing company KPMG also refuted allegations it was involved in, or condoned, any alleged money laundering activities amid claims of Gupta-linked corruption. After KPMG International conducted an investigation into its local branch, it found "work that fell considerably short of [its] standards". Trevor Hoole, its CEO at the time, tendered his resignation and a number of leadership changes were made. An investigation by the South African Institute of Chartered Accountants (SAICA) into the matter is currently underway.

Last week, News24 reported that Naspers-owned MultiChoice allegedly made a once-off payment of R25 million to ANN7 -- which the Guptas sold in August to Mzwanele Manyi -- and increased its annual payment to the broadcaster from R50 million to R141 million.

Marketing and brand specialist Chris Moerdyk said MultiChoice would be foolish to follow the same path in dealing with allegations levelled against them; and should rather opt for total transparency from the outset.


READ: MultiChoice 'Could Join The Ranks Of KPMG And Bell Pottinger' Over Gupta Deal.

"What any company should do is not be immediately defensive... A company needs to understand that it is not so much about what they need to say, but what the public needs to hear. They must delve into absolute detail in their responses and go through a lot of trouble to clarify things completely," Moerdyk said.

He said MultiChoice was in a difficult position because of public pressure to drop ANN7 from its offering.

"Other companies have made mistakes by first going into a state of denial and hoping the allegations will go away until evidence is so overwhelming that they have to admit to their mistakes... But the tragedy is that is takes an awful lot to permanently damage a brand," Moerdyk said. "I don't think this issue will cost MultiChoice very many subscribers."

News24 reported that the payments came after the Guptas apparently assisted former communications minister Faith Muthambi in getting President Jacob Zuma to transfer certain broadcasting powers to her -- after which she pushed through a decision in favour of unencrypted set-top boxes, which benefited MultiChoice.

MultiChoice has since denied those allegations.

In its response to News24, MultiChoice said it was standard practice to pay for mainstream news channels.

"While we understand that some people may not be aware of it, it is standard practice to pay for mainstream news channels -- particularly for local, 24-hour news channels. The fee structure for the ANN7 contract is in line with the costs of developing and running such a channel, and ANN7 is definitely not the highest-paid local news channel on the DStv platform", it said. MultiChoice said the once-off R25 million fee mentioned in the article was "also not unusual".

MultiChoice is a Naspers-owned company, as is HuffPost SA.