By Wesley Diphoko for IOL
The Chinese government is flexing its muscle against consumer technology companies and South Africans are affected. It started with just Ant Financial, Jack Ma’s company, and now almost all Chinese consumer technology companies are under the scrutiny of the Chinese government including Tencent, a company which is partly owned by South African founded technology giant, Naspers. It is the Naspers exposure to Tencent that should worry South Africans, here’s why.
Tencent shares have plummeted by over 16% since the Chinese government ordered the company to cease all exclusive music streaming rights and licensing deals with record labels globally. On 24 July 2021) the Chinese technology giant was also fined 500,000 yuan (US$77 000) by authorities, following an official investigation that found that the company has engaged in monopolistic practices that gave it an unfair advantage over its competitors.
Initially, it was Jack Ma led companies that were receiving attention and now there’s more. The Chinese government has also been going after other fintech companies, including those owned by Didi (China’s Uber). As Didi prepared to IPO in the U.S., Chinese regulators announced they were reviewing the company on “national security grounds”, and are now levying various penalties against it. The government has also embarked on an “antitrust” push, fining Baidu — another top Chinese internet company — for various past deals. Leaders of top tech companies (also including ByteDance, the company that owns TikTok) were summoned before regulators and presumably berated. Various Chinese tech companies are now undergoing “rectification”.
As a result of these developments in China, Naspers & Prosus (Naspers sister company) fell sharply in Amsterdam and Johannesburg trading after China’s move to place restrictions on the country’s education-technology sector caused a plunge in shares in online giant Tencent. Earlier this week, Prosus was down 8.5%, while Naspers plunged 8.4%.
The current situation with Naspers should be a matter of concern for South Africans as the Public Investment Corporation is heavily invested in this company.
It’s also important to note that this happens at a time when other tech companies are performing well. Negative developments around Naspers will ultimately impact on South African pensioners who are investors via the PIC.
This should be a matter of concern as changes in China seem to be significant and may last for a foreseeable future. It seems China’s leaders want to prevent the emergence of alternative centres of power. The value of Ma’s business empire has collapsed. China’s attack on its tech companies seems far more comprehensive — it’s not just attacking the biggest internet companies, it’s attacking the entire sector (consumer tech). At the same time China is not attacking companies with the focus on hardware (e.g Huawei) but more on the companies in the consumer and software side of tech, areas that Naspers has invested heavily in.
It’s important that developments in China are understood for what they truly are. The ground seems to be shifting. China is now focusing on the most important part of technology and less on fun stuff in consumer tech.