It was a pan-African business deal ahead of its time — in more ways than one.
When South Africa’s Naspers media group launched a local pay-TV arm in 1985, it stole a march even on Rupert Murdoch’s Sky in Britain.
When the venture, called MultiChoice, launched digital satellite TV across several African countries in 1995, it became one of the first companies outside the US to offer such services.
Nearly a quarter of a century later, Naspers has evolved into an internet business that reaches far beyond Africa, partly due to its stake in Chinese technology group Tencent. MultiChoice is no longer part of the empire, after it listed separately this year as a business worth billions of dollars in its own right.
Yet as a snapshot of pan-African investment in 2019, the story of MultiChoice’s pay-TV foray would not be out of place today.
Despite the intervening decades, such investment is still characterised by South African businesses looking north for opportunities. Such moves are not for the faint-hearted or impatient.
It is only this year that MultiChoice’s subscribers in the rest of Africa outnumbered those at home — 7.7m versus 7.4m. In July, Econet, Zimbabwe’s biggest telecoms group, axed its attempt to create an all-African pay-TV player. Kwesé TV fell victim to both fierce competition and Zimbabwe’s own economic crisis, which has made access to foreign currency prohibitively expensive.
MultiChoice’s biggest cross-border rival in Africa is from outside the continent — China’s StarTimes, a low-cost digital TV operator that has expanded to a majority of African countries and built a base of 10m subscribers. It has gained traction partly with the backing of Chinese loans to African governments for digital-migration projects.
While pan-African investment from within Africa is growing — fuelled by this year’s launch of the African Continental Free Trade Area — the continent’s most industrial nation still stands out in what remains a difficult cross-border climate.
“There is relatively little pan-African investment that comes from within Africa,” says Andrew Jones, a partner at law firm Linklaters, who has been involved in African cross-border investing. What pan-African investment there is, he says, reflects “where the big companies are located. As such, pan-African investment by African companies is dominated by South African companies going northwards.”
According to the African Development Bank, the number of M&A deals between African companies doubled to 418 in the decade after 2006 compared with the previous 10-year period, while the value of investments more than doubled to $10bn. About a third of this total was derived from South African investment.
Even pan-African businesses that have originated outside of the country have often been powered by South African capital. For instance, the South African Public Investment Corporation, Africa’s biggest fund manager that oversees government employee pension assets, backed Nigeria’s Dangote Cement and Ecobank as they embarked on regional expansion.
Jumia, the online commerce group active in Nigeria and other African markets that listed in New York this year, has South Africa’s MTN — the continent’s largest telecoms group by subscriber numbers — as its biggest backer.
Nigeria has been a tough market even for South African investors: MTN has faced repeated regulatory assaults on its broader business in the country, and a number of South African retailers have abandoned Nigerian expansion plans over the past decade.
However, underlining perhaps why South African investors remain major pan-African players, companies such as Shoprite, Africa’s biggest grocer, have persevered.
In July, Pieter Engelbrecht, Shoprite’s chief executive, said that trading conditions for the grocer’s African operations were “relentless”, not least as local currencies tumbled in its big markets such as Angola, Zambia and Nigeria. Outside South Africa, Shoprite’s sales fell 7.7 per cent in the year to the end of June, even as they rebounded at home.
“But given our optimism for the long-term food retail opportunity on the continent, we remain resolute in our purpose to be Africa’s most affordable and accessible retailer,” he said at the time.
The resilience might be because South Africa’s immediate neighbourhood has provided an ideal testing ground for further African expansion. The region has some of the continent’s best infrastructure — roads, rail networks and container ports — as well as a century-old customs union between South Africa and its close neighbours such as Botswana and Namibia.
Border-crossing retailers that have emerged outside South Africa often have southern African origins, such as Botswana-based Choppies, or Zambia’s Zambeef.
“Southern Africa is well integrated, so it’s a relatively small next step across the border and then further north from there,” says Mr Jones.
Get alerts on African economy when a new story is published