The government, through the Finance Minister Chinamasa has shared its plans to reform State-Owned Enterprises. In that plan, we found out that both Telecel and NetOne are going to be partially privatized.
Today, the government owns 100% of NetOne. The Telecel situation is not as straight forward.
The government owns 60% of Telecel, that part is clear. The remaining 40% belongs to the Empowerment Corporation.
The beneficial owner of that 40% is not clear. President Mnangagwa’s son-in-law, Gerald Mlotshwa is one contender. James Makamba is the other contender, claiming that Mlotshwa was merely his proxy, which would make him (Makamba) the beneficial owner.
This shareholder mess makes it difficult to make decisions on the future of the company.
The government at one point said they were looking to own 100% of the company. When quizzed why that was, the Minister of ICT, Supa Mandiwanzira said,
“After we resolve their shareholder issue, we will decide what to do with it but I’d like assure you that our intention is not just to hold onto it but we may dispose it to investors, list it, or have it owned by Zimbabweans themselves.”
The government never managed to acquire the 100% and now will actually look to de-invest. The Empowerment Corporation mess will be resolved by the concerned parties themselves.
Will that mess make Telecel unattractive to investors? It will. The fighting beneficiaries to the 40% Empowerment Corporation stake may look to make power plays and scoop up more shares. The mess might get messier.
Whichever direction the government decides to go with Telecel, the shareholding mess has to be sorted.
Why partial privatization might not be the solution
Partial privatization means the government will co-own both NetOne and Telecel with private persons. Telone is also slated to be partially privatized.
We have seen what partial privatization looks like. The Telecel situation above is what could be in store for NetOne, maybe without the shareholder mess.
In Telecel, the government has a controlling stake meaning they are the decision maker as they are the major shareholder. They assumed this control back in 2016 and Telecel is not better off because of it.
The government has owned NetOne since its founding in 1996. The government has been responsible for choosing the top leadership since that time. It was under the government’s oversight that Econet came and overtook them.
The point is, the government does not have a good track record in leading companies to profitability. If by partial privatization we are saying the government does not remain the controlling shareholder, that could mean something.
If partial privatization is to work, the government should not be responsible for appointing top leadership in those companies.
The government and the politicians should not be able to appoint their own cronies to the boards of the partially privatized entities. Having friends and family of politicians appointed to parastatal boards is one of the things which got NetOne and Telecel nowhere.
The ICT minister has made it known that the government will always want to be in the telecommunications industry because it is a crucial one.
The internet presents many opportunities and threats at the same time. The government rightly views internet connectivity as one of the issues that cannot be left to chance.
However, it could be argued that the government should focus on Internet Access Providers. The government deciding to partial privatize Telone makes partial sense because of the role Telone plays bringing connectivity.
Mobile network operators (Netone, Telecel and Econet) actually get access from Liquid Telecom. The space in which Liquid Telecom finds itself in is one in which the government could be justified in wanting to occupy too. If it relates to infrastructure and the backbone for internet connectivity in Zimbabwe, then the government better be involved.
What would be the drawback if NetOne and Telecel were 100% privately owned and competitive. More taxes for the government and better competition for Econet sounds good to me.
The government is worried that the mobile operators could have their own commercial and political agendas and that’s why full privatization is not being considered. I do not think that is a good enough reason.
What about a merger?
Combined, Telecel and NetOne have 6.7 million active subscribers compared to Econet’s 7.1 million. In every single metric, the two would be better able to compete with Econet if they joined forces.
Mandiwanzira is on record saying there is no need to merge NetOne and Telecel. If the merger would see the government retain control then we have to agree with the minister, a merger would not yield any results.
A merger followed by partial privatization
NetOne and Telecel join forces to become Netcel and government relinquishes control. The board of Netcel, appointed on merit makes decisions based on business sense and politics has no bearing on any company resolutions.
Now that’s an organization better able to compete against Econet.
NetOne Zimbabwe was the first mobile phone operator in Zimbabwe, the company was launched in 1996. The company is a privately owned company in which the Zimbabwe government has a stake and was formed as a subsidiary of the Posts and Telecommunications. Corporation (PTC). Service... Read More About NetOne
Telecel Zimbabwe is a telecommunications services provider with most of its services in the mobile cellular network services. The company is owned jointly by the Empowerment Corporation (40%) and Vimpelcom (60%), one of the largest telecoms companies in the world. In Zimbabwe, Telecel is the... Read More About Telecel
Supa Collins Mandiwanzira is a Zimbabwean politician, entrepreneur, former government minister and former journalist. He is the former Minister of Information Communication Technology and Cyber Security in the Republic of Zimbabwe. Mandiwanzira is the founder of Zimbabwe's only privately owned radio station, ZiFM Stereo through... Read More About Supa Mandiwanzira