WORKING for Zimbabwe’s parastatals used to be very much revered and prestigious. Not anymore. Parastatals are associated with corporate rot, nepotism, corruption non-payment of salaries, non-existent services, and scandals. Examples are the executive salaries scandal, the demise of Ziscosteel, dodgy loans between ministers and State Owned Enterprises (SOE). The list is endless.
Recently we witnessed the suspicious and dramatic takeover of Telecel by the government. Its sub-plot reads somewhat like this;
Government forces a lot of changes in the NSSA board of directors;
Government announces that it wants to buy a mobile phone company but does not have $40m that is required to complete the purchase;
The government orders NSSA’s new board of directors to provide the $40m that is required for the purchase of the mobile phone company;
The NSSA board refuses to provide the money and correctly points out that the pension fund does not have authority to lend to private companies, it only lends to banks (so that they can lend on to private companies): even this is done under very limited circumstances;
NSSA suddenly announces that it has permits and it is setting up a building society therefore allowing it to lend directly to people and businesses and then;
The government buys the mobile phone company with the $40m that has been provided by the NSSA through the new pensions fund building society;
The government (that failed to raise $40m to buy the mobile phone company) announces that it will inject $30m into the pension fund’s new NSSA building society.
It is sounds like a soap opera but it describes the Zimbabwean Government’s takeover of Telecel.
It is important to understand the conflict of interest that arises when the State owns and runs companies in certain potential conflict situations.
Supa Mandiwanzira, the Information Minister, told the country that the takeover of Telecel was done in pursuit of the indigenisation agenda. He went on to suggest that the government may offload the company to foreign investors one day. Telecel already has some ‘indigenous’ shareholders but these were totally ignored and replaced ‘in pursuit of the indigenisation agenda’. That is clearly in conflict with the indigenisation agenda and makes us wonder how indigenous one has to be in order to qualify under the indigenisation policies.Advertisement
To give context to the mobile phone conundrum, we take a brief look at Zimbabwe’s mobile phone industry. Zimbabwe has three mobile phone networks; Telecel, NetOne and Econet. Up until recently, the government-owned and controlled NetOne with the other two owned by the private sector.
Following the recent announcement of the $40m takeover of Telecel, the government now controls two of the three networks. Reports from 2015 suggest that control of Telecel and NetOne will give the government approximately 44% of total subscribers to mobile phones, the other 56% of subscribers is controlled by Econet.
The government’s ownership of Net One was already disadvantageous on the other two networks in many respects. State takeover on Telecel makes the situation worse for Econet as it is left to fight its battles against the Regulator alone. Government is also the regulator of the mobile phone industry and one wonders what it will do where the interests of Telecel clash with those of Net One. State ownership of SOEs mean that the government is competing with itself directly within its private enterprises thus creating a clear conflict of interest situation.
It is a bit like the Dynamos Football Club coach being the referee in a match between Dynamos and CAPS United. The ‘regulatory’ decisions of the minister concerned can be compromised; he has to consider the implications of his ‘industry’ decisions on the company whose performance he is also accountable for. In other words, he is likely to resist a good industry policy if he felt that such policy may have a detrimental effect on the company that he is responsible for. The following recent incidents highlight the potential areas of conflict;
A short few years ago, Econet tried to reduce their tariffs and the government refused to sanction such a reduction despite the potential benefits to mobile phone users.
Sometime last year, the government then ordered all mobile companies to reduce their tariffs to a set tariff structure. The government argued that this was for the benefit of customers.
In the past few weeks the government announced minimum tariffs for data. When Econet announced increases in tariffs on data there was a public outcry. The government backed down and withdrew the tariffs it had announced leading to a public spat with Econet. The two government controlled networks did not take any action.
The inconsistencies in the above decisions reasonably suggest that the decisions were made to suit conditions of one of the three competing companies. Why else would a government refuse to sanction a reduction of tariffs that would benefit its citizens?
The takeover of Telecel by the government is very worrying because, the minister did not explain the wider policy context in which the takeover was executed. A few questions come to mind;
Why would a cash-starved government that is failing to pay wages be so determined to buy a mobile phone company that they cannot afford even though they already controlled another network?
In the light of its record in mismanaging state owned enterprises like PSMAS, NSSA etc., what is the logic of taking over privately owned companies and handing them to the state which has such an awful record?
Now that the government has taken over Telecel, what is it going to do with it? Do they want to keep it or ultimately dispose of it?
If the government is planning to own Telecel for a long time, what is it going to do differently to what the previous owners did?
Would keeping Telecel not mean that government will own two companies (NetOne and Telecel) that would be competing against each other? Is the government planning to merge Telecel and NetOne into one state owned enterprise, thereby reducing competition in the sector? If so, what are the timescales?
If the Government already had $30m to inject into NSSA’s new building society (and NSSA had to give the government $40m to purchase Telecel), why did the government not only borrow $10m from NSSA to add the $30m that they already had and use it to pay for Telecel?
Government has recently announced the need to introduce Chinese style regulations on public platforms like WhatsApp and Facebook. We wonder whether the takeover is part of a wider state nationalisation strategy to control social media in the build-up to elections in 2018.
We also wonder whether Econet is next in line in the Government’s bid to control all mobile communications. Recent utterances and threats by Minister Mandiwanzira against Econet point at that possibility. It would not be a shock if the government ends up controlling the mobile phone sector and use it as a weapon to control citizens.
Davis Mutori is an Economist and a concerned citizen. He writes in his own private capacity. He can be contacted on email@example.com
Judge Benjamin Paradza is a Judge of the High Court of Zimbabwe practicing Law as Barrister and Solicitor in New Zealand. He is the Interim President of Zimbabweans United for Democracy (ZUNDE) You can contact him on Info@zunde.org.