Analysis
Fake news is a poor investment, expert analysts told HuffPost SA in response to Mzwanele Manyi's decision to buy the Guptas' The New Age newspaper and TV news channel ANN7.
The R450 million Manyi paid for the acquisition was well beyond its market value as well, according to a 2015 evaluation published in the Business Day on Tuesday.
"I've never run a newspaper but did run eNCA 24 hour news for nearly 10 years. No chance #ANN7 is profitable or worth R300m," Patrick Conroy, managing director of TV service Openview HD and previous managing director of eNCA, said on Twitter yesterday.
Conroy told HuffPost SA: "The numbers just don't add up. I fail to see how a shareholder will get return on their investment. There is almost no advertising on the channel and the sponsorships of the past are drying up. So it begs the question -- where will the profits come from?
"Unless there is greater transparency of the financial model, I personally would not invest."
Conroy added on Twitter: "If all 7500 #ANN7 & #NewAge staff earned average of R25k pm the salary bill would be R187m per month!"
Conroy's statements echo those of the Business Day's investigation, which valued Infinity Media Networks -- the Gupta-owned company that housed both ANN7 and TNA -- at R41m for 100 percent equity value, according to a 2015 report.
Another highly respected wealth expert, who asked not to be named, said that his investment capital firm lost clients in the past for even speaking in public interviews hosted on ANN7. "My clients don't want to be associated with a company involved with 'Gupta-money," the source said. "Fake news is a bad investment."
The news comes amid calls by the EFF to boycott ANN7 and The New Age after Monday's announcement. "We know that The New Age has been a sole beneficiary of many corrupt deals in state institutions like SAA and SABC, as well as in many state departments," it said.
"This means The New Age should be returning all the money it made through illegal and questionable deals like that with the SABC Morning Live Business Breakfast."
Save South Africa and the Democratic Alliance (DA) have also spoken out, with Save South Africa saying Manyi's purchase was a "disgrace to the notion of real black economic empowerment".
Details of the purchase, revealed yesterday, indicate that Manyi purchased the entities through vendor-financing, whereby, in Manyi's own words, "you ask the owners to loan you money to buy this thing."
After repeated calls the Huffington Post has still not received comment from Manyi.