While the company was listed on the Johannesburg Stock Exchange, said Mwasa, the outflow was limited to dividends, management fees and interest payments. But when the Irish parent company bought out the other shareholders and the South African company was delisted in 1999, ‘the scope for repatriation of profits to Ireland was considerably enhanced’, Mwasa said.
‘In the period between 1999 and 2010 operating profits are estimated to be in the region of a total R4 billion. During that period operating margins were increased from 12.5% in 1999 to 21.1% in 2010 … Far from boosting employment opportunities, the ownership by INM has been accompanied by a significant reduction in employee numbers. From a high of 5,223 at the time of the initial transaction in 1994, employee numbers have been reduced steadily to a current level of around 1,500.
‘The ongoing severe pressure to repay debt owed by INM plc ensures that operating margins remain under considerable pressure in South Africa as profits generated by INMSA are used to repay the Irish debt. This situation is merely an extreme version of the 18-year-old practice of extracting profits from South Africa regardless of what was appropriate for the South African trading environment.’
The trade union concluded by noting that a local owner of South Africa’s largest print media group which had merely spent or invested the proceeds of 18 years of profits, had not slashed employee numbers, and had made adequate tax payments, would have benefited the country more. In addition, South African ownership might have involved black economic empowerment and prepared the group for ‘the complex and volatile future facing the media industry’.
The consequences of this profit extraction were evident in the newsrooms. Little by little, what could be cut was cut. The newspapers’ libraries – where years and years of cuttings and photographic prints were stored for the use of journalists and the public – were shut down. Political coverage was centralised into a single Political Bureau, serving all the newspapers. Sub-editors were moved from the staff of individual titles into a common pool – the Independent Production Unit – where they worked on a conveyor belt system, picking up stories from an ever-running queue, with little regard for the different styles and personalities of the newspapers. Conscious of the damage this ‘one size fits all’ approach would do both to staff morale and to the look and personality of the newspapers, Whitfield and other editors – notably Alide Dasnois’s principled and popular predecessor on the Cape Times, Tyrone August – resisted the creation of the Independent Production Unit, but failed. August resigned shortly afterwards.
Hardly a week passed without some new cost-cutting plan from management, some of them ludicrous. (One suggestion was that the vital Reuters wire feed be cut.) First in Cape Town, then in Johannesburg, the printing operations were closed, with the loss of 350 jobs, according to Mwasa. For the first time in more than a hundred years, Newspaper House in Cape Town no longer throbbed in the afternoons and early mornings when the huge presses were switched on, spewing out newspapers for loading onto the big trucks which blocked the traffic in Burg Street.
Finally, the historic old building itself was sold and INMSA leased back a few floors from the new owners. The Cape Times, Cape Argus and Weekend Argus were housed on the fourth floor, and it was not a happy place. The editorial computer system – bought on the cheap, according to rumours circulating among journalists – would frequently break down, causing sub-editors to swear furiously as careful work was lost, and prompting ever angrier calls to the overworked emergency technicians. Each change to the computer system seemed to staff to be designed to increase rather than to decrease their workloads.
Perhaps the single greatest source of anger in the Cape Town newsroom was an air-conditioning system that alternated between freezing cold and blasts of heat if it was working at all. On summer evenings journalists never knew whether they would have to wear jackets at work or sit in a stifling atmosphere with little air circulating. Cape Times chief sub Glenn Bownes would explode: ‘I can’t f****** work like this.’ His sentiments were shared by most on the floor as they fought over decent chairs and wondered if the grubby carpet would ever be replaced.
On 2 June 2009, in response to a message from Tony Howard to staff about ‘tough trading conditions’, Alide Dasnois wrote to him summarising the situation on the Cape Times. She said she had worked on five of the group’s newspapers, on three of them as editor, and had ‘witnessed the relentless stripping away of the capacity of those papers to offer the quality journalism which our readers demand and deserve’.
Reporters on the Cape Times were routinely writing three stories a day, she said, often conducting interviews by telephone; the paper was battling to retain top-quality journalists because of poor salaries and interminable promotion processes; it no longer had features writers or features editors; the books page was put together by the editor’s PA; the paper had only one arts reporter; essential wire service pictures and copy had been lost; editors had been told to prepare pages in black and white and minimise colour to cut costs; advertising-to-editorial ratios had crept up; and the drive to maintain revenues put editors under constant pressure to accept ‘advertising which breaks all the rules’; the Cape Times could no longer afford to pay for the popular Zapiro cartoon and had to write ‘cringing letters to other contributors apologising for paying a mere “honorarium” rather than a respectable fee’.
‘Much of this,’ she suggested to Howard, ‘dates from long before the current “severe economic downturn” to which you refer. It is the result of processes put in place over the years by shareholders and executives whose goal seems to have been to extract as much profit as possible from the South African assets in order to pay out handsome dividends and bonuses.
‘What you refer to as “prudent cost management” is little more than looting.
‘As a result of all this, the Independent Group newspapers are no longer able to play the role they should be playing in the construction of our democracy. We have lost any sense … of journalism as “the first draft of history”. We are failing in our duty to our readers.
‘Little wonder, then, that our circulations are falling.’
Howard did not reply.
4
No trust in the future
By 2009 it was clear that INM plc, Independent Newspapers’ parent company in Dublin, was in serious trouble. The extraction of profits from the South African subsidiary to pay generous dividends to Irish shareholders had taken its toll. In 2008 INM plc paid out €98 million in dividends and in 2007 €73 million. In that year the South African operation contributed a quarter of the group’s operating profit. There was not much more to extract, in spite of the best efforts of Tony Howard and his team.
In Ireland an epic battle was raging, much of it in public, between the main shareholders, Sir Anthony O’Reilly (with 28% of the shares in the parent company) and his rival Denis O’Brien (with 26%). Partly in an attempt to fend off efforts by O’Brien to take over control, INM plc had been borrowing heavily from banks and other financiers in order to buy new assets and to buy back shares on the Dublin stock exchange. By the end of 2008 the group had borrowed €1.4 billion, of which €335 million was due within one year. A €200 million bond, due for repayment on 18 May 2009, was rolled over month by month. Speculation was that O’Brien, who probably had the money to pay the €200 million, would not do so except through a rights issue on favourable terms, which would make him the controlling shareholder, since O’Reilly was thought not to have the cash to ‘follow his rights’ and take up the shares to which he would be entitled.
Both the O’Reilly management team and O’Brien insisted that none of the group’s print assets was for sale, but it was clear that something would have to give. Rumours began to circulate that the South African company might be sold.
Rather than leave staff powerless while the future of their newspapers was being debated in Dublin, Alide Dasnois and a colleague on Business Report, Ann Crotty, decided in 2009 to launch a staff trust, with support from Tuwani Gumani, general secretary of the Media Workers Association of South