Page 8 - Integrated Annual Report

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INTEGRATED ANNUAL REPORT 2021
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
LETTER TO SHAREHOLDERS(CONTINUED)
life span of many decades, or to duck away with our capital gains to date.
Businesses that carried the flag through the Pandemic:
We remain a holding group with control of a diverse range of good quality assets in quite different industries. While almost all have been adversely affected by COVID-19 over the last year, several have been sufficiently robust through the pandemic to continue to pay dividends to shareholders. These have as a result been the key to HCI’s financial stability through the period.
HCI Coal:
One of the key supports of our business through the pandemic has been our coal division. It contributed R180m to the group during the year and continues to be a strong cash producer. We have successfully simplified its operations by the sale of Mbali colliery virtually at the end of its life of mine. Essentially it is a sale of the wash plant which is clearly more useful to the purchaser than to us. The increase in the price of export coal did however allow us to squeeze significantly more value from the mine than we had budgeted, and the sale offered a far simpler exit than we had planned.
Effectively our division is now limited to the Palesa colliery. This is a mine producing solely for Eskom under contract. While it remains with a secure contract for a few years more, its longer-term future rather depends on efforts being made to revitalize that SOE.
The past year has been difficult for us in this regard and Eskom no doubt has had to remedy very serious and intractable issues which led it to constrict the amount of coal it was able to take from us. Nevertheless, it seems to be making headway and we have every expectation our cooperation with Eskom will improve over the coming year rather than stagnate. We remain a relatively cheap, reliable, B-BBEE supplier. As Eskom streamlines its offtake requirements, and rids itself of the endless bribery that has characterized control of important parts of its supply chain, as it is patently doing, we believe the biggest challenge the business faces will resolve itself, namely the stability of Eskom’s ability to take the volume of coal set out in our contract.
eMedia Holdings:
This business is at the eye of the storm around Government’s digital migration efforts. Essentially it is now about sixteen years since South Africa undertook to clear various parts of the radio frequency spectrum licensed to eTV, for the exclusive use of transmission of mobile data.
What ought to have happened is that households should have been converted to receiving television on cheap digital distribution platforms. Instead, government tried to insist solely on a terrestrial platform (“DTT”) operated by Sentech which is wholly inadequate to the task.
Worse, government efforts to distribute boxes required for converting homes to this platform failed to ever take off. Even today fewer than 4% of television households currently access DTT. Distribution of boxes, supposedly through the Post Office, never started and government policy has apparently now changed to avoid it being responsible for such box distribution, leaving no one else responsible for doing so.
Over the last few years any progress in relation to digital migration has ground to a complete standstill in a world with an endless succession of Ministers of Communication. All efforts we made to engage with the government and the regulator, ICASA, failed to produce a single meeting and all correspondence was essentially ignored.
Some 60% of our audience remains on analogue. A further 26% has digital access only through DSTV. This is of course not access to free television. Failure to pay one’s subscription for pay television results in all channels including free channels being switched off. 16% now has access through our Open View satellite platform. We have spent some seven years building this platform at enormous cost, outside of any arrangements with the state and other broadcasters.
This year’s SONA address by the President claimed broadcasters had agreed with the State to definite switch off dates in various areas that would clear the spectrum needed by mobile operators across the whole country within a year. ICASA followed through by announcing an auction for the spectrum and soliciting bids therefor from mobile telephone operators. ICASA reserved no spectrum for 5G broadcasting even though the ITU is far advanced in developing a standard for 5G-FeMBMS broadcasting and is expected to finalize this standard next year.
The consequence of this complete anarchy is that we were obliged to ask for an interdict restraining the auction which was duly granted pending a judicial review of the matter.
The frightening thing about this fiasco is that it appears the state has no understanding that its conduct, if not restrained, would mean the death of free television.
It remains a highly contested area subject to litigation, but we are determined to have it resolved in a manner where our economic interests are considered as well as the right of the public to access free television.
With this backdrop one may well be forgiven for reading the rest of this comment on our media group in line with the satirical comment: “Other than that, how was the play Mrs. Lincoln?”.
Nevertheless, this year was a spectacular success for eMedia in a truly difficult environment.
Television advertising in the country shrank miserably