Government Plans To Make TelOne Manufacture Computers And Other Gadgets, Very Bad Idea

So, the Zimbabwe Transitional Stabilisation Programme which was launched by Mthuli Ncube last Friday has an interesting piece of detail tucked away in the appendices. In a table that is titled, Compendium of Infrastructure Projects there is a section for ICT projects which has a subsection dedicated to TelOne which is under the heading, TelOne Upgrading Programme. Under that, there is an item whose description says:

Assembly and Distribution of Digital ICT Gadgets

The project scope is defined as:

Local manufacturing of ICT equipment such as computers

The project did not have any milestones associated with it up to year 2020 as other projects (but not all) have. The estimated total cost is $6 million and the project is expected to be financed through loans with the government itself putting in $2 million in 2019 and $1 million in 2020.

First, not a bad idea for gadgets to be assembled in Zimbabwe

There is no reason why a local company should not assemble or manufacture computer equipment. We have the human capital to pull it off, hack we have the silicon to build some of the components. More than that the market for low cost generic computer equipment and mobile devices exists on the African continent and it is a growing market.

That company should not be TelOne

Besides TelOne being fully owned by the government, I am quite bullish about the company and I think if they continue on the trajectory they are on they will become one of the most successful companies in Zimbabwe.

TelOne is a services company that has never ventured into hardware. Hardware manufacture is not an obvious industry. Global giants like Amazon and Microsoft attempted to get into hardware and they have scars to show for it even now.

Yes Amazon has the Kindle and is now manufacturing the Echo and they recently announced plans to manufacture stuff like toasters and stuff to build their voice assistant into these products. These are more of home electrical goods which are commodities in the strict sense of the word.

Computer equipment is a different story. It requires a lot of focus because of that integration of hardware and software and the margins are thin unless you are Apple and we all know no one is. Samsung besides being one of the biggest manufacturers of mobile phones does not see much profit from that line of their business.

This is not the time to burden TelOne with a totally different business vertical that will result in them running into more debt than the paltry $6 million that has been put down as the total project cost. This is as if TelOne is not battling a huge debt as it is and as if TelOne does not need more capital for their current business.

The opportunities before TelOne in their traditional business are huge: the home and office demand for internet connectivity, the space of video content they have just entered, cloud solutions for which they already have data centres and need to build more. They should be left to focus on this space, it should keep them busy for a very long time.

Future growth

Of course TelOne cannot just be happy with the opportunity that is currently visible, they need to look for other areas of growth. Such areas should not be orthogonal to their orientation as a services company though particularly the very hard hardware space.

There are still a lot of opportunities to emerge as we move into ‘Everything As A Service.’ These are the opportunities TelOne should be exploring. They should be scouting the startup universe for collaborations and potential acquisitions. Assembling computers is a pipe dream and they should spit it out immediately.