Resisting Political Corruption: Econet Wireless Zimbabwe (Research Case
Study)
S. Ramakrishna Velamuri
Associate Professor
China Europe International Business School (CEIBS)
699 Hongfeng Road
Pudong, Shanghai 201206
People’s Republic of China
Tel: +86-21-28905890 (Switchboard); +86-21-28905663 (Direct)
Email: rvelamuri@ceibs.edu
Electronic copy available at: http://ssrn.com/abstract=1009452
Abstract
This case study documents the story of Zimbabwean entrepreneur Strive Masiyiwa in his quest to
obtain a mobile telecommunications license. First the Post and Telecommunications Corporation
of Zimbabwe (PTC) and then the Ministry of Information, Post and Telecommunications of the
government of President Robert Mugabe place obstacle after obstacle in his path, but Masiyiwa
challenges their decisions and actions in the High Court and the Supreme Court. Throughout this
five year process (1993-1998), he remains determined to obtain the license through ethical
means. A number of individuals and organizations impressed by his values and come to his help
and this assistance, along with the independence of the Judiciary, is instrumental in his firm
being given the license in July 1998. The case represents an in-depth study of a successful
example of resistance to political corruption.
Electronic copy available at: http://ssrn.com/abstract=1009452
Resisting Political Corruption: Econet Wireless Zimbabwe (Research Case Study)
1 Introduction
Strive Masiyiwa was born in 1961 in Zimbabwe. He attended primary school in Zambia and
secondary school in Scotland. When he went back to Africa to fight for the liberation of his
country from white rule, one of the senior officers told him – “Look, we’re about to win anyway,
and what we really need is people like you to help rebuild the country 1 .” He then went back to
Britain and obtained a Bachelor’s degree in Electrical and Electronic Engineering (Cum Laude)
from the University of Wales. After a short stint in the computer industry in Cambridge,
England, Masiyiwa returned to Zimbabwe in 1984 and joined the Zimbabwe Posts and
Telecommunications Corporation (hereinafter, PTC) as Senior Engineer.
Masiyiwa was part of the second wave of black managers to join the PTC, whose management at
that time was predominantly white. The first wave of black recruits into management was made
up of political appointees who joined the organization soon after the independence of the country
in 1980. The second wave was recruited on merit, rather than on political considerations.
“I was the second wave because I came and I joined them at the end of ’84 into ’85, so I
was (part of) the professional group that came and did not require political patronage to
come in. It was very interesting because it was a time of tremendous change. There were
senior white management around the whole PTC, and then there were these black
appointees in senior positions, that didn’t do very much except politics. Below you had
an organization that was 80% white, that was over the next two or three years to become
1
As reported in Time magazine’s List of Global Influentials 2002; Masiyiwa was named by Time magazine as one
of the 15 most influential global leaders in 2002, out of 100 nominees put forward by Time correspondents around
the world.
80% black. So it was an interesting time from that point of view to be a young engineer
in almost a political cauldron” (Strive Masiyiwa - Interview transcript).
Masiyiwa describes his time at PTC as “bittersweet,” in that on the one hand he was excited at
the prospect of making a contribution towards changing a network from one that had been
designed for a privileged few into one that had to cater to the needs of the masses; on the other
hand, he was frustrated at the highly political nature of the decision making process. For
example, on one occasion he participated in a project for installing a 200 line exchange in a
village that had only three subscribers, two of them being the local police station and a crocodile
farm. On a personal level though, he was comfortable, because he was respected by his
superiors, and was almost always given the resources that he asked for.
2 The First Entrepreneurial Venture
Masiyiwa had at that time no intention of starting his own business. His family had owned a
small business, and he knew only too well the sacrifices that owning a business entailed. He
often had to wake up at 3 AM to help with business activities before going to school. After
school, he could only play with his friends for a limited time before he was told “we are a serious
family,” and had to help with the business. He had grown up admiring the families of children
whose parents were professionals. During his time at PTC, he felt that he had escaped the hard
business life, thanks to his professional degree.
His entry into an entrepreneurial career happened by accident, when he decided to build himself
a house. He asked his employer for a loan, and as a senior officer was sanctioned what he
thought was a generous sum. He then asked an architect friend to design his house, and
subsequently went to a builder to get an estimate of the cost. To his surprise, the estimates were
almost twice the amount of the loan he had been sanctioned. He then went back to the loan
officer at PTC and proposed that he would build the house himself, because he was convinced
that it could be built at a much lower cost. This proposal was rejected because he lacked
experience in construction. Masiyiwa then set up a building company called Retrofit Engineering
in 1987, and started to look for work in order to acquire the experience to build his own house.
He was still employed at PTC. He inserted small advertisements in the “Classifieds” section of
newspapers, and gave his mother’s phone number for interested parties to call. Because he
lacked capital, he focused initially on renovating people’s homes or making additions such as
garages. At this time, Zimbabwe, and particularly the capital city of Harare, was experiencing a
construction boom. Before long he had a building team of 100 people and a full time secretary.
Some of his friends got involved in the business. He then decided to concentrate on electrical
installation, because he understood it better than building. After a year or two of balancing his
full time job at PTC and running his new business, he decided that the latter was big and
profitable enough for him to give up his job. By now, he had completely forgotten about building
his own house.
3 The abduction
By the late eighties Masiyiwa had acquired national prominence as a business leader. An
incident occurred on June 17, 1990 that was to have a very profound impact on Masiyiwa’s life.
He was abducted at gun-point from his office by the Central Intelligence Organization (CIO).
There are conflicting reports as to why he was detained 2 . He was told that he was being arrested
2
I came across two explanations for the abduction. According to the first, Masiyiwa had obtained a loan from the
IFC without going through the “normal political channels” (Campagnon, 2001). This explanation was considered
implausible by some of my interviewees. The second was that there were different power factions within the
and taken to the CIO headquarters under the Emergency Powers Act. However, he was taken to
the Goromonzi detention center, which had gained notoriety only some months earlier, when a
young woman by name Rashiwe Guzha had been taken there, and no one had seen her since. She
was (and still is) presumed dead. Guzha’s case had been widely reported in the press.
As soon as Masiyiwa was taken away, his secretary informed one of his friends, who in turn got
in touch with Anthony Eastwood, a partner in the law firm Kantor & Immerman and a wellknown human rights activist. Eastwood urgently filed an application to the High Court
compelling the CIO to release Masiyiwa.
Masiyiwa was stripped naked, interrogated, and left in a cell until 9 PM, when his captor
returned, handed him back his clothes, and asked him to get into a car. “I thought I was a dead
man. I prayed in the car. In fact, I had been praying all day while in the cell. People say that I am
a religious man; it started on that day 3 .” He was taken to a hotel in downtown Harare and asked
to get out. A police officer told him several months later that he was very lucky to be alive.
“The CIO abducted me in 1990 and it was the nature of my interrogation which made me
realise that the Mugabe government was determined to destroy any successful business. I
was the most high profile black businessman at the time because I had just been named
by the Chamber of Commerce the Businessman of the Year. Following my abduction by
the CIO the news spread quickly about what had happened within the black business
circles although it never appeared in any newspaper. A few months after my abduction a
well-known black businessman called Joseph Mapondera was killed in a car crash. This
man was related to President Robert Mugabe, and the latter went to his home to pay his
condolences. Joseph's cousin another businessman was at the home when Mugabe arrived
Mugabe government, with the CIO being one of them. They had decided to harass him to send a message to a rival
power faction.
3
Strive Masiyiwa – cited in an undated newspaper article, titled “CIO detained Strive Masiyiwa”
and raised the subject of harassment of black businessmen by security agents and used
my case as an example. John Mapondera told the President that there was a view amongst
black businessmen that this was part of the government drive to establish socialism in the
country. Mugabe denied it and said he would be willing to meet with black businessmen
and use the occasion to show the country that he believed that black people should be
encouraged to set up businesses. A few weeks later a meeting was set up and I was part
of a delegation of seven prominent businessmen who met Mugabe and discussed the need
to encourage black people to set up in business. The meeting was highly publicised and a
few days later we launched the IBDC as an organisation to promote the development of
black business in the country. John Mapondera was the first President and I was the first
Secretary General.”
“In getting the government to understand that business was a good thing I succeeded
beyond my wildest imagination but the result was that suddenly every senior government
official and minister wanted to be in business and it led to a lot of corruption and
patronage. This was not my intended objective” (Strive Masiyiwa - from written
responses to clarifications sought).
Masiyiwa and the other prominent black Zimbabwean entrepreneurs were concerned that blacks,
who made up 95% of Zimbabwe’s population, had virtually no ownership of its economic assets.
One of the biggest problems they faced was access to capital, since they had no assets that they
could offer as collateral to banks.
The IBDC was set up and declared in its 1990 manifesto that its task was that of “identifying the
economic, political, legal, and social factors, including the institutional framework, that militate
against the development of a vibrant Small and Medium Scale Enterprise sector. The formation
of the centre stemmed from the desire to institutionalise the problem identification and problem
solving strategies thus giving continuity and permanency to its advocacy programme.” The
IBDC sought government guarantees, subsidized interest rates, and preferential allotment of
governmental contracts to compete against established foreign businesses. Tandon (1996) points
out that the IBDC did achieve some success: it was given a US$10 million grant and a US$40
million loan facility from the Zimbabwe government; a Credit Guarantee Company of Zimbabwe
was established that gave government guarantees to commercial banks for business loans to
indigenous entrepreneurs; a Venture Capital Company and a Small Enterprise Development
Corporation (SEDCO) were set up; a government program was set up that stipulated that
contracts in the construction industry of less than Z$10 million should first be offered to
indigenous contractors, and 30% of the value of large scale building contracts should be subcontracted to small and medium enterprises; finally, international donor organizations from
Norway, Ireland, Britain, Austria, and the US also provided some funding. Masiyiwa’s business
benefited from his association with the IBDC, and from the political connections that this
association facilitated. At its peak, Retrofit was the biggest electrical engineering company in
Zimbabwe, with annual revenues of approximately Zim$100 million (approximately US$33
million at the prevailing exchange rates). The International Finance Corporation (IFC), an
affiliate of the World Bank, was a shareholder in the company, as was the Zimbabwe
Development Bank. Even though Masiyiwa estimated that his company carried out the electrical
installation of 30-40% of the major buildings in the capital city of Harare, its main business was
projects for the armed forces. Retrofit thus had high-level security clearance - it was even given
the contract for President Mugabe’s rural home. Masiyiwa also represented the IBDC in
international forums.
Around this time, Masiyiwa set up two other ventures. The first was a construction company
called Omega, which he closed down when the construction boom ended. The second was a
telecommunications service provider called Cosmos in partnership with a colleague from the
IBDC. Masiyiwa later withdrew from this partnership.
Masiyiwa married Tsitsi, whom he had known for several years, soon after the abduction
incident in 1990. Masiyiwa was not a very religious person until his abduction. Tsitsi recalls that
after surviving the harrowing experience, Masiyiwa would never go to bed without saying his
prayers. Tsitsi was also university educated, had a successful career of her own for some years,
and was a devout Christian.
4 Interest in mobile telecommunications
In spite of heading a very successful electrical engineering company, Masiyiwa continued to be
passionate about telecommunications, particularly mobile telephony.
“I had tracked it even in my PTC days. I read a lot both from an industry point of view and
for my general interest, so it didn't happen, you know - as an engineer I probably knew
what was happening mobile-wise right through from my university days, you could see you know, we knew about the development work before the commercial stuff came. We
knew what we could do with radio and what was beginning to happen, so that by the time
the first mobile networks were launched commercially, I know the first US networks were
probably launched by the late 70s, but they were cumbersome things. But by the mid-80s I
knew exactly what was going on in the industry, and what I also knew was that it was
going to be the first opening for private players into telecommunications, and I felt that
from a technical rather than from an entrepreneurial point of view, because the fixed
networks that we'd been building, things like networks like the PTC, they relied on - the
whole structure was because it required Government intervention. You needed to be a
Government in Africa to dig up the streets. Once you got on to radio I knew that the private
sector would come in, so I think by the early 90s, I probably - you know, whilst I was busy
doing Retrofit stuff and all this business stuff, probably 90% of what I read was to do with
mobiles. You know, I read everything, I studied everything, I covered every ground, even
though I couldn't afford to go to conferences as much as I would like to, I never attended a
single power conference even though I was in the power engineering sector. If you saw me
go to London, I tied it to a mobile telecom conference. So it became a burning passion for
me ... “ (Strive Masiyiwa – Interview transcript).
Initially, he was interested in satellite mobile technology, in particular Motorola’s Iridium
project, which he believed offered an ideal solution to Africa’s telecommunications problems.
However, he was discouraged by the large capital outlays involved, and therefore turned his
attention to terrestrial mobile technology. In 1993, he started discussing with his friend Dr.
Nkosana Moyo his plans for setting up a mobile telephone network in Zimbabwe. Moyo had a
doctorate in Physics and an MBA, both from English universities. He had joined the financial
services industry, and was the Managing Director of the Merchant Banking Division of the
Standard Chartered Bank in Zimbabwe. The two had met some years earlier and had become
friends. Moyo was very excited about Masiyiwa’s plan for setting up a mobile
telecommunications network and its impact on Zimbabwe’s economy and society. Based largely
on Masiyiwa’s enthusiasm and his knowledge of the telecommunications industry, he proceeded
to sanction the largest loan his bank had ever sanctioned - Zim$120 million (approximately US$
40 million) - to Retrofit to launch the cellular telephone business. Moyo indicated that the reason
for sanctioning such a large loan to the venture at such an early stage was that “it was a selfevident technology.”
When asked whether he saw mobile telephony as a business opportunity with profit potential or
as a cost-effective solution for Zimbabwe, Masiyiwa explained,
“Oh, yes, definitely. I saw that (a profit opportunity). But, I saw the opportunity to
provide a service in a way that had never been provided before. At that time, although
cellular was very much a prestige thing, the average African country that had even
introduced cellular had an average of five thousand, two thousand subscribers, and I
believed that that was a misuse of the technology, where it was just for the rich. And I
wrote furiously about this and said: Look, there’s no reason why this technology should
not open up. At that time things like prepaid had not been developed, which would see
millions of people become subscribers. And we were one of the first people to introduce
it in Africa. So I was very, very clear in my mind which way I wanted to go” (Strive
Masiyiwa – Interview transcript).
Moyo’s team approached PTC on behalf of Retrofit with a proposal for a joint venture to operate
a cellular network. PTC officials rejected the proposal, saying there was no demand for cellular
phones in Zimbabwe.
Masiyiwa then reached an agreement with Telecel International, a company that was involved in
the cellular telecommunications business in six African countries. In July 1993, Retrofit
indicated its desire to set up a private cellular phone network in Zimbabwe and requested PTC
for a license. This request angered PTC officials, who wrote a letter claiming that the Act by
which PTC was constituted conferred upon it a monopoly on telecommunications services, and
that licensing a private firm was out of the question. A manager in Standard Chartered Bank,
who was a lawyer by training, advised Masiyiwa that PTC’s claim of having a monopoly in
cellular telephony was wrong. He advised Masiyiwa to get in touch with a practicing lawyer who
could argue the case before a judge.
Masiyiwa scouted around for a specialist in telecommunications law. Through a friend who
worked on the USAID program, he made contact with a New York based lawyer, Judith O’Neill,
who had acquired a deep understanding of international telecommunications law. O’Neill
informed Masiyiwa that she knew the African telecommunications laws very well, and that they
were watertight in favor of the state owned monopolies. Masiyiwa insisted that she should take
another look at the Zimbabwe PTC Act. She agreed to do so, and responded that there was
indeed a clause concerning radio transmission that probably negated PTC’s monopoly. She then
said that they would have to persuade a judge, but cautioned that taking the legal route would be
both very expensive and very unlikely to succeed, as judges rarely decided against governments.
5 The first legal challenge
Masiyiwa then recruited Eastwood into his team, and they hired an advocate Adrian De Bourbon
to argue in the High Court of Harare that PTC’s authority to issue a license was contemplated
under the Radiocommunication Services Act. Their arguments were complex and had less to do
with jurisprudence than with the technical differences between cable and radio transmissions.
Judge Gibson made a commendable effort to understand the technicalities, and after six weeks of
deliberation ruled in Retrofit’s favor in January 1994. She gave PTC two months to consider
issuing Retrofit a license.
PTC then appealed to the Supreme Court that since parliament, through the PTC Act, had given
it a monopoly, issuing a license would be unlawful. Based on how the arguments had gone in the
Supreme Court, Masiyiwa’s team was confident that Justice McNally would rule in their favor.
However, in June 1994, the Supreme Court reversed the High Court’s verdict and ruled that PTC
did have a monopoly, and that the Radiocommunication Services Act did not cover cellular
phone systems.
Masiyiwa received the news of the Supreme Court verdict from his lawyers one Saturday
evening, and was shaken by this setback. Tsitsi feared that he would go to pieces. He went to bed
and did not come out for the next twenty four hours. Ever since they had met, Tsitsi had been
inviting him to go to church with her every Sunday, but Masiyiwa had not shown any interest
until then; his faith was something very private to him. After this latest crisis, he relented and
accompanied her to church one Sunday. From this point on, he dedicated himself to being a
Christian. He made a commitment to go to church every Sunday, read the Bible, and consciously
tried to pursue the Biblical principles in his daily life. Commenting on this turning point in his
life, Masiyiwa said,
“You know, I’m a born-again Christian, and that was a decision I took. I’ve been brought
up in a family, Catholics and Methodists and so forth, but at a certain point I took a
decision that I wanted to go out and practice my convictions, and every day I must
persuade myself that I am practicing my convictions. And, as a businessman in that
environment, there was nothing more obvious than to succeed, to do anything it was all
about patronage and corruption. You know, to get a contract, anything. So perhaps more
so there was a revulsion in me that that was the area I had to make a stand in, that I didn’t
see that we would have a future in African business as long as it was totally associated
with corruption. If you go to the average man on the street and you ask them what they
think of business people, they talk of kick-backs, corruption. We didn’t have an image to
present to the next generation. And so I decided that I wanted to make that stand” (Strive
Masiyiwa, Interview transcript).
Masiyiwa also admitted readily that he had not come to this conviction in his earlier business
dealings.
6 The constitutional challenge
A few days after the adverse Supreme Court verdict, Masiyiwa received an important piece of
advice from a person who had been present at the historic negotiations at Lancaster House in
London that paved the way for Zimbabwe’s independence in 1980. This person suggested a
constitutional argument against the PTC monopoly. Masiyiwa then went to meet De Bourbon
with a copy of the Constitution, and pointed to Section 20, which said – “Every Zimbabwean has
a right to receive and impart information without hindrance.” Masiyiwa suggested to De
Bourbon that PTC’s monopoly undermined this fundamental right of Zimbabweans that was
enshrined in the Constitution.
De Bourbon explained that if they filed a constitutional appeal, it would require all the Supreme
Court judges to make a Constitutional Court, and to then rule on the constitutional validity of
PTC’s monopoly. He recommended against Masiyiwa taking that course of action, because it
would be seen as a direct challenge to the President and the Government.
“This is no longer the PTC now, you’re going – we have to go against the Minister of
Justice, we’ve got to go against the full government to get this removed, because you are
effectively asking the Supreme Court to strike a law. He said: So think about it, because I
wouldn’t recommend it. Go and find something else to do” (Adrian De Bourbon, as
recounted by Strive Masiyiwa – Interview transcript).
Tsitsi was also not in favor of challenging the government, because she felt that it was a battle
that they could not win. O’Neill, on the other hand, was fully in favor of filing the appeal.
Masiyiwa and his team prepared the groundwork for the appeal for six months, and filed it in
December 1994. They supported the appeal with the evidence that Zimbabwe had only 145,000
telephones, which translated to 1.3 telephones per 100 people; over 95,000 applicants were on
the waiting list; and it took an average of five tries to complete a call. As De Bourbon had
anticipated, the government’s reaction was very negative. Masiyiwa explained,
“(T)he Government was just absolutely livid, you know. I mean, people told me that they
had - people come and tell me the things that the President had said, and that the generals
had said - I mean, the whole system turned on me, the Secret Service, everything. Retrofit
lost all its Government work. We didn't just lose the Government work, we were never
paid even to this day for any work we had been doing. We were just ordered to leave
Government sites, work, everything (Strive Masiyiwa, Interview transcript).
Masiyiwa, his family, friends, and his associates started receiving physical threats and even death
threats. He used to be taken by the police for questioning. One tactic that they tried was to arrest
him on a Friday afternoon, so that they could hold him in prison until the next Monday, when the
courts opened. This was a tactic that was commonly employed by the police to break a person’s
spirit. However, Masiyiwa would always slip away before the police arrested him (he even hid in
the trunk of a friend’s car to elude the police), and would spend the weekend in hiding. He was
followed, and his telephones were tapped. Plainclothes agents would follow him to his prayer
meetings. On one occasion, he went to a bank that was on one side of a park called Unity Square
in downtown Harare. After finishing his work at the bank, he wanted to cross the park on foot to
go to a hotel on the other side. It so happened that there was a demonstration taking place in the
park, and he was curious to read the banners. As he was walking through the park, someone
tapped him on the shoulder from behind and said,
“Mr. Masiyiwa, don’t turn around, I need a favour from you. I need you to get out of this
park immediately before my colleagues see you here. I’m one of the people that has the
responsibility to track your movements. I don’t want to file a report that you were here,
because there are people who are desperate to show that you are doing this for political
reasons, and I know you’re not. I’m a great admirer of yours, so please, please, my dear
brother get out of the park now” (as recounted by Strive Masiyiwa – Interview
transcript).
By this time, Masiyiwa had also become disenchanted with the government-business nexus, and
with the government’s attempts to take over white owned businesses.
“Although the Mugabe government embraced the idea of the development of black
entrepreneurship in the country, it soon became clear that Mugabe now wanted to see
only black owned businesses and wanted the blacks to take over the white owned
businesses. This naturally found a lot of resonance amongst some of my colleagues in the
leadership of the organisation (IBDC). I did not want to have anything to do with this
approach so I resigned” (Strive Masiyiwa – written response to question on his role in
IBDC and the reasons for his resignation).
When Masiyiwa realized that he could not save Retrofit, he approached the CEO of its biggest
supplier, TA Holdings, and asked him to buy the company. The CEO was interested in the deal,
but Masiyiwa insisted that the telecommunications activity would not be part of the sale. The
CEO readily agreed, because he saw the telecommunications activity as a political liability.
Masiyiwa therefore brought the telecommunications activities under Enhanced
Telecommunications Network (hereinafter, Econet), a firm he had constituted in August 1994.
He retained his secretary, a driver, and a couple of employees, and with this small team, he
began a new adventure in cellular telephony.
7 Econet Wireless – the early days
Johane Sango was one of the people who moved with Masiyiwa from Retrofit to Econet.
Masiyiwa had paid for him to complete his high school, and he had joined Retrofit immediately
thereafter in 1992. He recalls the difficult initial period.
“It wasn’t an easy task. Were it not for our belief that the Lord will provide, I tell you we
wouldn’t have got through. Mr. Masiyiwa, in particular, believed he had a vision from
God. It wasn’t just an idea which cropped up just like that, or just imagined he could do
something great – I mean, Econet, but rather it was a vision from God, and he believed
that if it was a vision from God, God would see it through. He would provide the means.
I can tell you with no form of revenue in the beginning, it was not easy to go through
with people who you have to pay salaries, you have to pay rentals, Mr. Masiyiwa in
particular, had to travel” (Johane Sango – Interview transcript).
In 1995, Masiyiwa was appointed to the Board of the Southern African Enterprise Development
Fund by US President Bill Clinton.
By this time, the PTC had also woken up to the opportunities in cellular telephony. At that time,
the GSM technology could only be operated between 890 and 960 Mhz, and there was room for
only two operators within this range. The PTC took over one slot 4 . The ruling party announced
that it was setting up its own mobile service, took over the other slot, and set up a committee
4
The Herald, January 4, 1996: “PTC enters race to establish cellular telephone network”
made up of the Commander of the Army, the Minister of State Security, and the Minister of
Communications. It purchased equipment on credit from Ericsson, and this equipment arrived in
Zimbabwe from Sweden. Masiyiwa saw this as an attempt by the ruling party to kill Econet’s
battle for a license. As soon as the equipment arrived, he took out a court injunction against its
use. Ericsson, fearing that the equipment might be impounded by the court, hastily shipped it to
Durban, South Africa, where it was stored in a warehouse.
The Supreme Court ruled in August 1995 that PTC’s monopoly over telecommunications under
section 26(1) of the PTC Act contravened Article 20 of the Zimbabwe Constitution, and stated
that
“It is axiomatic that for the corporation to monopolise telecommunications services in
Zimbabwe, and then to furnish a public switched telephone network of notorious worth,
available to but a small percentage of the populace, manifestly interferes with the
constitutional right of every person to receive and impart ideas and information by means
of this persuasive two-way communications system 5 .”
The Supreme Court also concluded that at the current rate it would take the PTC 14 years to clear
the backlog of 95,000 applicants who were waiting for a fixed line. In his ruling, Chief Justice
Gubbay gave the Minister of Information, Post, and Telecommunications Cde David
Karimanzira until December 6, 1995 to show cause why the monopoly should not be scrapped.
The Minister filed a counter-appeal in November 1995 seeking time for the PTC to put in place a
regulatory framework and to conduct a major study of the restructuring of the PTC.
At this time, an individual with several years experience in international banking (hereinafter
referred to as “Banker”) started working with Masiyiwa soon after the Supreme Court verdict in
5
The Herald, August 31, 1995: “Phone Monopoly not Justifiable – Supreme Court”
1995 6 . He had returned some months earlier from a one year international assignment with a
multinational bank. The two had met during their IBDC days and gotten to know each other quite
well. As soon as he came back, he set up a financial consultancy service. Masiyiwa was so
occupied with the court battles that he felt he needed help in putting together the funding for
Econet. The court decision was expected in four months (in December 1995), and he thought that it
would be the last obstacle before Econet could start operating a cellular telephone network. Banker
wanted to set up a financial institution of his own, but he agreed to help his friend for four months.
Banker had not anticipated how tough it would be to raise finances for Econet.
“It was almost impossible, because every bank looked at us as anti-establishment, and
therefore up until then there hadn’t been any move or party or forum that seriously
challenged the establishment, and Econet appeared to be that. So the entire banking
community, myself – you will see from my CV that I started banking as early as 1979, so I
knew everybody in the industry, and Strive thought that would be a useful asset, and I
could open doors that he couldn’t. So all the Chief Executives of financial institutions were
people I knew personally, and I went to them to say: Can you please help us fund
[indistinct] and they all said: We can’t have Econet in our books. Because we were viewed
as anti-establishment, except for one South African bank that stood with us and that was
Stanbic. They had a totally different view, and subsequently a Government bank helped us
with the funding for the operations. That was the Commercial Bank of Zimbabwe. The then
Chief Executive took a totally different view and said: I want to support this vision. I
believe in what you people are trying to do (Banker – Interview transcript).
6
This interviewee requested not to be named.
Marion Moore, a white Zimbabwean 7 , joined Econet as Chief Financial Officer in November
1995. She had professional accounting qualifications and had worked for several years in the IT
industry and later for an American multinational firm. She was looking for an opportunity to
work in a local Zimbabwean company, and was told that Econet was looking for a finance
professional. She had followed Econet in the media, and was attracted by the achievements and
courage of Masiyiwa. Her second interview was with Masiyiwa himself. She described it as an
unusual one, in that she was asked many personal questions about her family. He was also
interested in her IT background. She came away from the interview with the impression that she
and Masiyiwa had gotten to know each other quite well. She recollected the atmosphere in the
firm, which by then had grown to about 35 people:
“It was the most amazing company to work in, and what I can say is those three and a
half years we were fighting the battle, were probably the most valuable working
experience I’ve ever had, and I learnt about resilience of willpower and leadership. And
in those years Strive – and I think that was one of the things, he’s on a huge pedestal for
me, he’s sort of one of my heroes – and in that time his own dedication and his own – he
did it selflessly because when – I mean, we ran on no money, that was another revelation
to me is that you can operate with very, very little money, and with the will anything can
be achieved” (Marion Moore, Chief Financial Officer, Econet 1995-1999 – Interview
transcript).
Masiyiwa explained that he placed great importance on the character of a person at the time of
recruiting. Usually, a managerial candidate would have been seen by the Human Resources
Department and other senior managers before he or she came to Masiyiwa to be interviewed. The
7
I mention Marion Moore’s race because racial issues were still very much at the forefront of Zimbabwean politics,
economy, and society. It was not very usual for a black businessman to recruit a highly qualified white manager, nor
was it usual for the white manager to agree to work for a black boss.
questions Masiyiwa posed to the candidate were more to do with character than with professional
competence. He drew inspiration from the Bible – in particular the Book of Exodus, Chapter 18,
verses 19-21 – for defining the attributes he looked for in employees. In these verses, Moses
receives advice from his father-in-law Jethro about the type of people he should recruit to help
him. The verses refer to able, God-fearing, and truthful men who hate covetousness. Masiyiwa
believed that professional competence was a necessary but not sufficient condition for
recruitment; it was a baseline requirement without which a candidate would not be considered.
But Masiyiwa looked for more things than professional competence alone. He recounted the case
of one very highly qualified candidate for a senior finance position whom he had rejected.
Masiyiwa had asked him about his family, and about his children. The candidate had initially
replied that he had only one child, but had hesitated before replying. When asked why he had
hesitated, he responded that he had another child, from a relationship with his high school
classmate. He explained that he had not married the mother of his first child because he had
moved to a big city to pursue his university studies. For Masiyiwa, the fact that the candidate had
not included his first child in his initial response was indicative of a serious character flaw.
Due to the capital intensive nature of the cellular telephone business, fundraising was considered
a key competence. Moore was responsible for the financial management, whereas Banker settled
into a fundraising role. During this period,
“Banker had to figure out how to persuade somebody that we would succeed one day,
and keep going. And of course, one of the key people he had to always persuade was
Nigel Chanakira.” …. “I wasn’t alone in what I was trying to achieve. There were a
number of people who sat in the background, young guys like myself who were
committed as much as I was, people like Nigel Chanakira who owns Kingdom, which as
you know is one of Zimbabwe’s largest banks.” …. “Him and I are both Christians, as is
Banker, and a lot of our conviction about how to run a business properly was debated
between the three of us, but there was also another man who’s Nicholas Vingirai. There
is a group in Zimbabwe called Intermarket.” … “His is probably the largest banking
group. He played a very pivotal role in the background” (Strive Masiyiwa – Interview
transcript).
Chanakira had earlier worked in the Central Bank of Zimbabwe, before setting up Kingdom
Financial Holdings. When he was asked why he had offered support to Masiyiwa, he replied –
“The Lord spoke to me that I had to help him.”
The Supreme Court ruled on December 6th that PTC could not prevent other players from
entering the telecommunications field, and that even if a new regulatory framework was
introduced, Econet would have to be considered on a “first come, first served” basis. The
Supreme Court also gave Econet permission to proceed to build a network.
Soon after the Supreme Court verdict, Masiyiwa traveled to Johannesburg, South Africa, for
meetings with Siemens and Ericsson for the purchase of equipment for Econet. He concluded a
deal with Ericsson that he would pay US$1 million as deposit and receive the equipment that was
originally meant for the ruling party of Zimbabwe and that was lying in the Durban warehouse.
In return, Ericsson would become the sole equipment provider to Econet. He then offered Telecel
International a 40% stake in the company. Telecel accepted and agreed to put up US$ 1 million
to fund the purchase of the equipment.
As the equipment was being loaded in Durban for shipment to Harare, Masiyiwa received
information from his friends in government that Mugabe was considering issuing a Presidential
Decree in January 1996 upon his return from his Christmas vacation. The decree would
effectively overturn the Supreme Court verdict. A Presidential Decree, provided for under a
special Presidential Powers Act, was meant to be used only in situations of national emergency.
De Bourbon suggested that if Econet could install some equipment and commence transmission
before the decree was issued, it could claim grandfather rights 8 to the radio frequency. As soon
as the equipment from Ericsson arrived, Masiyiwa’s team hurriedly installed a couple of base
stations and managed to conclude some transmissions. They then claimed one of the two
available slots for operating the GSM system between the 890 and 960 megahertz range. By
January 1996, Econet had purchased 22 base station sites on a 25 year lease. These sites were
located between the two largest Zimbabwean cities of Harare and Bulawayo. On February 2,
1996, Econet took out an advertisement in the national newspapers announcing that it had
acquired GSM cellular infrastructure equipment, which had been configured to provide cellular
services in the 890 to 960 Mhz range. The advertisement also gave notice to the public that there
were no other GSM operators, either public or private, operating in that range. Approximately
5,000 subscribers had already applied for service. Engineers from Econet started installing the
relay stations.
8 The Presidential Decree
On February 5, 1996, President Robert Mugabe issued the presidential decree requiring private
parties to obtain a license from the Ministry of Information, Post, and Telecommunications
before setting up a cellular network. This decree effectively restored PTC’s monopoly until a
licensing board could be set up and the lengthy process of issuing the license could be
completed. Mugabe told Newsweek magazine that he was not out to get Masiyiwa, but to ensure
8
A grandfather right is “a clause in a statute… which permits the operator of a business … to be exempt from
restrictions on use if the business or property continues to be used as it was when the law was adopted” (Law.com
Dictionary).
other interested parties an equal chance of getting a cell phone license. The outgoing Minister of
Information Cde David Karimanzira criticized Masiyiwa for taking the government to court9 .
When asked to explain the reason behind the presidential decree, Masiyiwa simply said – “I
don’t pay bribes.” 10
Members of the government also pressurized Telecel International (which had agreed to take a
40% stake in Econet and had advanced the US$1 million for the equipment purchase) to ask for
repayment of the money. In return, the government promised Telecel the second cellular license.
Accordingly, Telecel demanded its money back, and recruited new partners, among them Leo
Mugabe, the President’s nephew, some ministers, and other prominent people.
Masiyiwa now turned to an American friend in Johannesburg, who was the Vice President for
Africa of Southwestern Bell Corporation (SBC). This friend helped Masiyiwa negotiate a deal
whereby Ericsson would repay the US$1 million it had taken for the equipment and convert it
into a loan. This friend then approached MTN, the South African telecommunications company
in which SBC had a stake, to take up an option for a 40% stake in Econet in return for 8 million
South African Rands. The deal with MTN also included technical assistance to Econet.
In April 1996, Masiyiwa challenged the constitutionality of the Presidential Decree in the
Supreme Court. He also wrote to President Mugabe, expressing his disappointment at the
Presidential Decree, and indicated that the President had been poorly advised in this decision.
Mugabe replied to the letter, suggesting that Masiyiwa meet with the Justice Minister.
“I had a meeting with the Minister of Justice, and I gave him our legal opinion to the effect
that the Presidential decree itself, that the President had no power to issue the Presidential
decree. And he agreed with that. Yes. The Minister of Justice said he had reviewed our
9
Newsweek, July 29, 1996: “Wrong number – Paying the penalty for challenging the state”
The Vancouver Sun, June 9, 1996: “Unspeakably useless phone system tells the Zimbabwean story”
10
position, and he was of the view that we should be licensed immediately. And all this
across the table to us. But there was something he said and, I knew that we had a problem,
so ... 11 It was a one-on-one meeting just attended by me and my lawyer Anthony Eastwood,
and I said actually they're buying time and it was true. They had realized that they had to
avoid a situation where I would file papers against the President, and remove the
Presidential Powers Act - which by the way, Mugabe used so devastatingly during the
election. I had an opportunity to pull down that whole piece of legislation. But we realized
that they were buying time, and within days they convened Parliament. You must
remember that at that time the Zimbabwe Supreme Court had a very independent team of
well respected jurists who would have spared no time to deal with this piece of
legislation. Mugabe then decided to introduce a new law through parliament using an
amendment to the Telecommunications Act. This was pushed through a parliament which
was 98% ruling party in a matter of days. They then re-issued the decree through the new
Act. We then had to withdraw the earlier application against the Presidential Powers Act.
One of the MPs (Members of Parliament) was a friend of mine, (she) said they were briefed
on why they had to do it. She just cried. She said: I just went home and wept and wept and
wept, because they had portrayed me as a most dangerous individual being paid by foreign
Government to destabilize the country. And she knew that it wasn't true” (Strive Masiyiwa
– from interview transcript and written response to clarification sought).
Soon afterwards, in June 1996, President Mugabe appointed a Cellular Technical Committee
under the amendment to the Telecommunications Act to work on the tender and license
conditions. In August 1996, Econet’s team of lawyers went back to the Supreme Court to present
11
When I asked him to tell me exactly what the Minister had said, Masiyiwa was very uncomfortable about
revealing it. I decided not to insist on it.
their arguments against the amendment to the Telecommunications Act, and in particular against
the licensing process. The argument they used was that the government was acting in bad faith
and was attempting to extend the monopoly through bureaucracy.
In September 1996, the PTC launched its own cellular phone service in Harare with 2,000 lines,
using a US$ 24 million loan from international financial institutions.
Masiyiwa was by now in danger of running out of money. Newsweek reported that he had
already invested US$5 million of his own funds. Throughout Masiyiwa’s battles with the PTC
and the government, he received a steady stream of visitors, such as Ministers and other
governmental officials, who would say to him:
“Come on Strive, be reasonable. Dear God, let’s end this. Why are you fighting? Let’s go
and see the President and Cabinet Secretary, let’s talk to this guy. I said: Listen, I’ll go
tonight. I’ll go and see him. And let’s restructure this, let’s accommodate A, B and C into
this. It was always there. But the more I went, the more my convictions became clearer
and clearer that I was making a stand, that I had to go this way, and the rewards would be
greater if you stood by what you believe in” (as recounted by Strive Masiyiwa –
Interview transcript) 12 .
On December 18, 1996, the Supreme Court, in a unanimous judgment, ordered the new Minister
of Information Ms. Joyce Mujuru to grant Econet a license by the end of February, 1997. The
Court stipulated, however, that the license should be granted only if the provisions of the
amendment to the Telecommunications Act were met. It added that if the government did not
grant Econet or any other operators licenses by February 1997, then “Econet shall be deemed to
be licensed for a period of three years.” 13 The court also ordered the Minister to pay four-fifths
12
13
See also Newsweek, July 29, 1996: “Wrong number - Paying the penalty for challenging the state”
Financial Gazette, December 19, 1996: “Masiyiwa wins cellular court battle”
of Econet’s court application costs. Chief Justice Anthony Gubbay was critical of the
government’s delaying tactics:
“I think the Minister is intent upon securing for the PTC the practical advantage of
establishing itself in the market before another rival is admitted. There is a distinct
element of unfairness in the delay. It is symptomatic of an absence of respect for the right
of others to establish a mobile cellular service and of the corresponding right of the
public to enjoy that facility other than through the (PTC) corporation. 14 ”
Although, the verdict had been favorable to it, Econet now had no choice but to participate in the
tender process for a license. The team started working day and night to put together a
competitive tender.
9 The tender process for a second license
Econet applied to the Supreme Court towards the end of January 1997 seeking confirmation that
it was duly licensed. It argued that the government had failed to comply with the December
verdict of the Supreme Court requiring the completion of the licensing procedures. The Supreme
Court gave Minister Joyce Mujuru until February 26 to show cause why Econet should not be
licensed by the court. In early February 1997, the High Court stopped the Ministry of
Information from allocating the two available GSM frequencies to anyone other than Econet
until the Supreme Court’s show cause notice to the Minister of Information was complied with.
An official in the Ministry stated that the High Court order only stopped the allocation of a
license, not the processing of bids.
On February 14, 1997, the Cellular Technical Committee sent to the Government Tender Board
(GTB) an evaluation of the six bids that had been submitted for a second cellular license. A legal
14
Financial Gazette, December 19, 1996: “Masiyiwa wins cellular court battle”
analyst commented – “Masiyiwa’s only hope is now the Supreme Court. If he wins the case, this
will kill the current tender selection exercise and literally bring him back from the brink. But if
he loses, he can kiss goodbye to this long struggle and be content, maybe, with whatever costs
the court may impose on the government, if it does so, for the waste of his efforts15 .”
On February 19, 1997 The Herald reported that unidentified sources had indicated that four
contenders had been shortlisted by the Committee. Telecel was the leading contender and Econet
was last on the list. The Financial Gazette reported on February 20 that Leo Mugabe, President
Mugabe’s nephew, was one of the partners in Telecel, the frontrunner. Another partner was
James Makamba, a Member of Parliament and former business partner of Solomon Mujuru,
husband of Information Minister Mujuru. Telecel had also enlisted as partners the Zimbabwe
Wealth Creation and Empowerment Council, which was a coalition of the Affirmative Action
Group (a more militant offshoot of the IBDC), the Indigenous Business Women’s Organization,
the Zimbabwe Farmer’s Union, the War Veterans’ Association, and the National Miners’
Association of Zimbabwe.
In early 1997, Masiyiwa received an unexpected telephone call from the Zimbabwean Vice
President Joshua Nkomo, who was over 80 years old. Nkomo invited Masiyiwa to visit him.
“And he (Nkomo) said to me: I read about this. Every time I hear your name it’s to do
with this fight, tell me about it. And I told him the whole story. We must have spoken for
maybe two hours. And he started crying. He said: This is not what I fought for, this is not
the Zimbabwe I fought for. So he went to see the President. He found the President in a
Cabinet meeting, and just stood in the middle of the room and said: Why, why, why are
you doing this? And then Mugabe turned around and said: Okay, let’s talk about it later.
In the evening the Vice President called me and said to me Mugabe had agreed to issue a
15
The Financial Gazette, February 27, 1997: “Dramatic climax to Econet court battle”
third license, so Zimbabwe would have three operators instead of two. And I said fine.
And he said: But do you accept one condition, that the other people should be
shareholders in the company? He (Mugabe) simply said that you cannot be alone in the
business, you have to have other shareholders and you should accommodate others in the
company 16 . I said: I am not going to accommodate anybody. I’ll take the company
public, anyone who wants to buy a share can buy” (as recounted by Strive Masiyiwa –
Interview transcript).
In what was seen as a major rift in the political leadership on the cellular license issue, Nkomo
threatened to resign from the government in protest against the government’s decision to award
the license to Telecel. A compromise was then worked out whereby all four of the contenders –
Telecel, Supercell, Tritell, and Econet - would have a share in the second cellular operator, to be
called Net Two (PTC’s cellular service was called Net One). Masiyiwa, however, made it clear
that he would not participate in such a project.
The Information Minister Joyce Mujuru filed an affidavit in the Supreme Court complaining that
Econet’s “constant barrage of litigation” had delayed the introduction of a cellular phone service.
On March 6, 1997 The Financial Gazette reported in an article titled “Mugabe orders Econet
licensed” that Acting President Nkomo (Mugabe was away in Europe) had written a letter to
Mujuru with the following message: “His Excellency, the President of Zimbabwe, Cde. R. G.
Mugabe, has agreed and directed me to inform you that Econet, a company owned by Strive
Masiyiwa, must be licensed as one of the three GSM cellular operators in Zimbabwe. Your
Ministry is hereby directed to take all necessary steps to bring the President’s directive into
effect expeditiously.” The same article reported that Mujuru had professed ignorance of such
instructions, saying: “I am not aware of any instruction from President Mugabe or Vice President
16
Another condition was that Masiyiwa’s share in the company should not exceed 25%
Nkomo to issue a license to Masiyiwa.” The article also reported that Masiyiwa had withdrawn
his application in the Supreme Court for Econet be duly licensed as a result of the failure of
Mujuru to meet the deadline for presenting her arguments. He stated that he had received
assurances from the highest office in the land that he would get the license.
On March 7, 1997, The Chronicle reported Mujuru as saying that the Tender Board had awarded
the license to Telecel, and that she had obtained consensus from all concerned parties that 1520% of the shares in the second cellular operator would be offered to the losing bidders,
including Econet 17 . Masiyiwa was again reported as denying that he had agreed to such an
arrangement. He also protested that Telecel had been given access to the tender documents
before the other contenders, and that Econet had obtained the highest number of points in the
tender evaluation process.
Mugabe made a statement to press reporters in an official visit to Paris on March 8, 1997 that
was again not very encouraging for Masiyiwa. He said that telecommunications was a sensitive
area where the government would continue to play a role, and that there was one person (in
apparent reference to Masiyiwa) who thought he had a right to the country’s second license just
because he was assisted by certain foreign companies 18 . It was also reported in the media that
Mugabe had spoken to Mujuru only hours before she announced Telecel as the winner of the
tender, and had asked her to ignore Nkomo’s directive 19 .
Mujuru stated that after the awarding of the second license to Telecel, the government would
only award a third license if the first two licensees proved unreliable. The Financial Gazette
reported on March 15, 1997, that “Zimbabwe’s top political leadership split into two opposing
camps this week as an unprecedented battle for control of the country’s economic levers spilled
17
The Chronicle, March 7, 1997: “Nkomo fumes over cellphone tender”
The Sunday Mail, March 9, 1997: “Telecommunications a sensitive area”
19
The Financial Gazette, undated: “Masiyiwa’s chances dashed yet again”
18
into the open, threatening a fragile political unity painstakingly hammered out after a 1980s
armed conflict.” In the same article, Nkomo was reported as saying – “The young man
(Masiyiwa) was running around (setting up his cellular phone infrastructure) and now they are
taking things from him. This is not acceptable 20 .”
Moore recalls that news of the award of the cellular license to Telecel was a very big blow to the
morale of the Econet team.
“I think one of the most – the thing that affected me and that I remember especially when
I’m being faced with defeat and bad news and adversity, I remember when we lost the
tender which we had worked day and night on for about two months – and when I say
and night, Strive himself worked for 20 hours a day. I don’t know where he gets the
energy, I don’t know how he stays awake.” …. “And we put in an excellent tender. I
mean it was – we got Ericsson, it was done in a very professional way and, it was never a
waste, because very soon after we did the (Zimbabwe) tender, we did the Botswana
tender for the network. When we won that (Botswana) tender, it was amazing how the
framework of the tender was duplicated. At the time when we lost, we all sort of sat back,
and it was like the elections had been lost, and wondered how we had ever thought that it
would be a fair tender. I mean, we really did question ourselves. So after three initial days
– and I’ll never forget the first day because it was a sad Saturday, we thought that after
they actually saw what Econet were capable of doing they would have to admit that this
was the company to do it, and they didn’t, and it was like three days later that all of a
sudden, Strive came in with a smile on his face, a lot of energy, and said: Right, we’re
going to inspect the tender, we’re off to find out why Telecel won that tender, and we’re
going to question it if it’s not right.” ……. “And that time with the team was one of the
20
Financial Gazette, March 15, 1997: “Fierce political storm brews over tender saga.”
best as well, because it was hilarious, and everybody had their little section where you
had to pick their (Telecel’s) tender document to pieces” … “And their marketing plan for
instance, I think theirs was three pages long, ours was a 56 page document with detailed
retail outlets, you know, with detailed marketing plans because, of course, we’d gone into
all that before. We had clear ideas about how we were going to market the product. They
had no retail outlets, they had no marketing plan, they got 70%, I think we got 25% or
something. That was the most glaring one.” ….. “By the time we put our document
together, it was about a 1,000 (page) document to submit to the courts to appeal and to
say that there had been unfair marking” (Marion Moore – Interview transcript).
Around this time, there was a transition in the leadership of Econet’s legal team. Eastwood, who
had been leading the team from Kantor & Immerman, had to stop working because of a family
crisis. A young lawyer, Tawanda Nyambirai, took over the leadership. The strategy they outlined
after the announcement of the award of the second license to Telecel was to fight the government
in the High Court over corruption in the licensing process, rather than continuing the battle in the
Supreme Court. Nic Rudnick, a white South African who was now settled in Zimbabwe, had
worked on the Econet case under Eastwood since 1995 and continued to do so later under
Nyambirai. He described the atmosphere in the law firm and in Econet during the court battles,
“Well, there was a great sense of feeling amongst the team that this was a principle case,
it was a case for justice, it was a case against corruption, and there were excesses at that
stage of the Zimbabwean government. And it was a fairly young firm, so there was, I’d
say, a fair amount of idealism and determination in the lawyers, and Anthony Eastwood
was the oldest lawyer heading the team, but he in his day was a human rights activist here
in South Africa, so he was quite happy to lead the fight. And, as I say, it was more than a
legal fight, it was a fight as opposed to a legal battle.”……….. “So he (Eastwood) was a
very intelligent person, and an excellent lawyer, someone with a lot of courage, and
someone to whom this case just appealed right from the beginning.”…… “Tawanda was
a locally trained lawyer, probably one of the most intelligent people I’ve ever worked
with, also very, very principled, very dedicated, excellent lawyer, incorruptible, and he’s
the kind of person who still lives in Zimbabwe. He bought a farm about a year ago in
Zimbabwe in the middle of these farm invasions, because he as a black Zimbabwean was
entitled to buy a farm. And he bought from a white farmer who was leaving the country,
and Tawanda insisted on paying him the proper market price for it. So I’m saying you’re
dealing with someone who could literally have got a farm – we’re talking about a lot of
money – for half the price of what he did, and I think it’s quite rare to find someone who
is prepared to put their money where their principles are.”……. “The employees (of
Econet) weren’t paid because they just didn’t have the money. And the lawyers weren’t
being paid either, and that caused some friction within the (law) firm, because one had
Tawanda and myself who were insisting that we would do this case for nothing if we
needed to, but it was a big case and it used a lot of resources and it used a lot of time and
it drew in a lot of people, and some of the partners objected and said: Well, if you’re not
going to get some money, you need to drop it.” …… “..But I think on the whole the firm
was quite accommodating in that they allowed the case to continue without being paid”
(Nic Rudnick – Interview transcript).
By the second half of March and April 1997, the general feeling in Zimbabwe was that
Masiyiwa’s chances of getting a cellular license were very bleak. An industry executive was
quoted as saying – “It’s not a question of faith or hope in this or that thing. It’s really a question
of getting things done, and as things stand now, Masiyiwa appears to stand no chance of getting
this project off the ground. There are simply too many forces that are too strong ranged against
him 21 .” In spite of this pessimism, the staff at Econet, which had grown to 51, carried on
working normally – the administration department was fine tuning procedures to ensure that
everything would work smoothly when the license came, the engineers were installing base
stations and undertaking service and maintenance, and six members of staff were in South
Africa, receiving intensive training at MTN. Banker recalls those days,
“The last 12 months were the most difficult, were the most difficult of the whole period,
because there was even maybe some inner fear that if we get to December and we still don't
get a hearing, are we going to be able to go for another four months? Really, there's a
saying in Shona custom that an elephant feels the weight of its tusks when it's about to
arrive at its destination, these tusks are heavy. That's exactly the situation we were in. But,
you know, by faith, the thing that held everything together was faith. We stood and
subscribed to Christian principles, and that became the source of our strength, of our
inspiration, because we really needed supernatural power, we needed supernatural strength
to go through that situation. There's no way in our own natural ability, I can explain and say
we were so smart, we are strategists, or take credit whatsoever for what happened. I can't,
because I know myself, I cannot explain a lot of the things that happened. I cannot explain
how we managed to keep all those people. Our creditors believed in us, and stayed away. I
see them taking other companies to court who committed less than what we had, we did at
that time. But they stayed with us. So really, it was faith and just favour from God and from
all those people that supported us. And in that we found ourselves going along, the church
was praying for us, the Christian community, countrywide. Each time we're thrown out of
21
Financial Gazette, April 17, 1997: “Masiyiwa says he’s down but not out”
court the Christians will say: We are setting some time to pray and fast. This is too much.
You know, the whole nation was praying for us, so it was difficult for anybody out there to
say I want to fix these guys. Well, they just felt sympathy” (Banker – Interview transcript).
Masiyiwa himself was not immune to the frustration and despondency that his staff were
experiencing when faced with these obstacles. Around this time he was diagnosed with an illness,
and was under medications for an extended period of time. In his moments of weakness, he
received unconditional support from Tsitsi and his Pastor, Langton Gatsi. Tsitsi, after her initial
reservations, had come around to sharing Masiyiwa’s conviction that Africa’s future depended on
the strength of its entrepreneurial class. She followed the court battles on a day-to-day basis and
started contributing her insights to Masiyiwa. Pastor Gatsi, to whom Masiyiwa would turn for
support in his darkest moments, “created a spiritual support for his soul 22 .”
There were regular prayer meetings in the company to help sustain the morale of the staff. Wellwishers from the outside the company participated frequently in these meetings.
“You know, when you have such a prayer meeting, and Mr. Masiyiwa being a Christian,
he has a lot of other contact people, I mean in the Christian circles, they may be pastors,
they may be brothers in Christ, they just come and share. If somebody feels that he has a
word for Econet, they’ll just come and share, especially in those early days, one would
just have a word, a word of encouragement you know, because it wasn’t easy. I can tell
you a lot of people (employees) left.” … “A number of people had been recruited, but to
go for maybe three/four months without a salary, they are not used to doing that, and if
you don’t share the same vision that no, things will be okay, that we know where we are
going. Yes, it may be difficult for now, but things will be fine. But not everyone shared
that vision, so a lot of people left. So, those people who were there sometimes needed
22
From interview notes with Pastor Gatsi.
encouragement, you know. So Christian brothers would come, share a word of
encouragement here and there. I was amazed, really, especially by Mr. Masiyiwa himself,
because you can imagine all of these pressures, we haven’t got their salaries, this and
that, you know you still have to pay rent, you have to do that, and all the pressure was
upon him” (Johane Sango – Interview transcript).
Tsitsi remembers a pastor who came to their home to stay and prayed and fasted for forty days.
Women would come to the Masiyiwa home and spend time with Tsitsi, and pray with her.
On March 19, 1997 Mujuru ordered Masiyiwa to either sell his equipment to Telecel, or
surrender it to the government for no compensation. She said that if he did not comply, the police
or state security service might be instructed to arrest him, for having violated the security and
defense laws of the country. According to her, Econet was broke and not in a position to run a
mobile cellular business. She also claimed that the equipment that Econet had installed in the
various parts of the country belonged, in fact, to Ericsson. She threatened Ericsson that if the
equipment was not sold to Telecel, the government would confiscate it. Lars Andersson, a
representative of Ericsson in Harare, clarified that his firm had supplied the equipment to Econet
under a commercial agreement, but he refused to disclose the terms of the agreement. Masiyiwa
stated emphatically that his firm owned the equipment, and that he would overturn in court the
award of the license to Telecel. He also applied to the High Court to bar the Minister from
seizing his equipment. Mujuru then withdrew her threats – “I accept that I have no right to direct
the applicant as to what it must do with the equipment and I claim no right to seize the
equipment or to have it confiscated by the state 23 .”
One press article reported that a middleman for three government ministers had stated outright to
Masiyiwa – “The price for a license is $400,000 US.” He then reportedly consulted with the
23
Financial Gazette, March 27, 1997: “Masiyiwa asks High Court to bar the govt from seizing his equipment”
ministers, who were in an adjoining room, and returned to say – “OK. You can pay in
instalments 24 .”
10 The challenge to the tender outcome
Econet now presented a 100 page letter to the Government Tender Board (GTB), which was
made up of senior civil servants and came under the Ministry of Finance, outlining its objections
to the award of the license to Telecel. One point of contention was that whereas the tender
document had specified the GSM technology, Telecel had submitted a proposal for the
incompatible CDMA technology. Another was that Telecel had misled the GTB by stating that it
was the largest cellular operator in Africa; Econet challenged this claim, pointing out that South
Africa’s MTN and Vodacom were the continent’s two largest operators. Upon receiving the
letter, the Chairman of the GTB instructed Telecel to stop all action arising from the license
award until the complaints of Econet and the other bidders had been addressed. He then asked
the Minister of Information Mujuru not to confirm Telecel as the winner of the tender process,
and gave her three weeks to respond to Econet’s complaint point by point. This decision by the
GTB was received with disbelief in government circles. A week after the three week deadline
established by the GTB had expired, Mujuru refused to respond – “There is no point in providing
you with a point-by-point response to the appeal. The Tender Board has no power to suspend the
license as the Chairman purports to have done 25 .”
There were also allegations of a conflict of interest against Minister Mujuru: in addition to her
husband being a business associate of James Makamba, a leading member of the Telecel team, it
24
25
The Christian Science Monitor, March 1, 2000: “How one entrepreneur beat corruption”
Financial Gazette, April 24, 1997: “Govt mulls more cellular licenses”
was also reported that she had been listed as Makamba’s referee in the tender document that
Telecel had submitted 26 .
The Zimbabwe Independent reported on April 4, 1997 that a member of the Cellular Technical
Committee, which had been appointed by the Minister of Information, had resigned over
irregularities in the evaluation of the bids, and that other members would soon follow suit. “It
appears the minister, in her haste to ensure all went according to plan, has in the process
estranged herself from the technical committee, the tender board, and even the attorney general’s
office 27 .” The Government of Zimbabwe Attorney General had on an earlier occasion refused to
pursue the government’s case in court stating that it had no merit, thus forcing the Minister of
Information to hire private lawyers to fight her case against Econet 28 .
On April 11 (Friday), 1997, police stormed into Econet’s offices to investigate whether the
company had illegally installed telecommunications equipment, and whether it had advertised in
the press inviting the public to purchase its shares. They were looking for Masiyiwa but could
not find him at the office. His employees asked them to get in touch with the law firm Kantor &
Immerman. Masiyiwa’s lawyers reached an agreement with the police that he would report to the
police station on the following Monday. His declaration was taken on Monday, but no charges
were pressed 29 .
The lawyers representing the government tried to force Econet into liquidation. According to
Rudnick,
26
News Digest, April 2, 2997: “Favoritism charge takes Zim cellular license saga to new juncture”; Financial
Gazette, April 3, 1997: “Losing bidders demand cancellation of license”
27
Zimbabwe Independent, April 4, 1997: “Telecel project goes ahead despite tender suspension”
28
Office of Telecommunications Technologies, US Department of Commerce, July 17, 1997: “Telecommunications
Update for Zimbabwe”
29
Zimbabwe Independent, April 11 to 17, 1997: “Police storm Econet offices”
“They tried to – because Econet didn’t have any money, there were a few companies that
it owed money to, and they went and approached those firms, those companies, and said:
Econet hasn’t paid you. Will you cede the debt to us? We’ll pay you, you cede the debt to
us and we’re going to apply for the liquidation of Econet, and what an easy way to get rid
of this whole problem” (Nic Rudnick – Interview transcript).
When this happened, Chanakira was asked to step in and pay off those creditors. One day, when
Masiyiwa’s company had run out of money again, another friend suddenly walked into
Masiyiwa’s office and said that he had just had a huge windfall on one of his contracts, and he
felt in his spirit that he had to give that money to Econet.
One day, soon after the press had announced that Telecel had been awarded the second license,
an American missionary walked into Masiyiwa’s office, and demanded an Econet phone line.
Masiyiwa informed him that they could not give him one. The missionary then insisted on
paying immediately for a line, which would be given to him after Econet got a license. In return
for having prepaid for a line, he demanded certain privileges as a subscriber. They worked out a
price of Zim$10,000 for the line. The missionary then asked them to draw up a list of all their
friends (mostly members of Church groups), who were all approached with the scheme. Even the
Catholic Commission for Justice and Peace contributed funds. All those who had prepaid were
offered special numbers, which meant that they would not have to pay for certain services.
The Zimbabwe Independent dated April 11-17, 1997 also carried an article by the Secretary
General of the Christian Communicators Association of Zimbabwe, which stated
“We have, as Christian journalists, media workers and artistes followed Strive
Masiyiwa’s battle to operate what he has already set up, an efficient, privately-owned
network.” …. “While acknowledging the right of the government to award contracts to
organizations or companies of its choice, and while respecting the government tender
board’s adjudication processes, we feel that there needs to be an element of transparency
to retain the public’s faith in the state’s decision-making process.” ….. “Masiyiwa has
constantly been at the receiving end of government decisions, which seem to have been
made to blatantly frustrate the genuine initiative of this indigenous businessman.” …..
“We therefore see the tender board decision to award a second cellular network to a
certain clique with strong political connections as confirmation that there exists an
element of partiality. The government is not above the law and must follow the Supreme
Court ruling which has underscored Masiyiwa’s right to operate a cellular network”
(Zimbabwe Independent, April 11-17, 1997: “Transparency needed in the award of public
tenders”)
A large number of people wrote letters to the editorial offices of national newspapers expressing
support for Masiyiwa, and stating that they would only subscribe to Econet’s cellular service.
Masiyiwa could not walk a few blocks in downtown Harare without being stopped several times
– people used to shake his hand and encourage him to continue fighting. The international media
also covered the Econet story – a Danish television crew made a documentary about Econet.
When it was shown on television, it provoked a question in the Danish parliament, and led to the
Danish ambassador in Harare being asked to place on record Denmark’s disapproval at the way
Masiyiwa had been treated. About 4,000 students of the University of Zimbabwe held a
demonstration in Harare in mid-April in protest against the rampant corruption in the public
tender system. Further demonstrations were scheduled nationwide with participation from the
Zimbabwe Human Rights Association (Zimrights), the Zimbabwe National Students’ Union, and
other civic organizations. The Chairman of Zimrights, Mr. Reginald Matchaba Hove, said in an
interview – “We call on government to stop harassing this indigenous entrepreneur, Strive
Masiyiwa, who was only trying to take advantage of the opening up of the economy to create
new jobs, new services, and new wealth. We strongly condemn his continued persecution 30 .”
Towards the end of April 1997, in a new development that added pressure to the government, the
GTB submitted to the High Court a full record of its deliberations during the evaluation of the
cellular bids. It was revealed that the GTB had reached a compromise decision and had originally
recommended that both Telecel and Econet should be jointly licensed under a 50/50
shareholding, and that the Secretary of the Office of the President, Charles Utete, had given
instructions to the GTB to exclude Econet. Utete denied this accusation.
High Court Justice Gillespie gave the Minister of Information Mujuru until May 31, 1997 to
respond to Econet’s affidavit to have the award of the license to Telecel cancelled. On May 24,
Mujuru made a statement admitting that the tender process leading to the award of the second
license to Telecel was flawed, and that she would not contest the High Court order setting it
aside. She clarified, however, that she was in favor of a re-evaluation of the bids, and was
opposed to the second license being automatically awarded to Econet. She added - “The failure
of the tender at the point of the tender board’s participation in the exercise is attributable to the
infiltration and manipulation of the board by the applicant’s (Masiyiwa’s) own officers 31 .”
Mujuru’s woes grew when she was reportedly reprimanded by Mugabe for making a
disrespectful statement towards Vice-President Nkomo – she had said that he was an old man
who no longer understood or remembered things. Pro-Nkomo groups pressured Mugabe to
dismiss Mujuru. Mugabe was reported to have told the central committee meeting of the ZANU-
30
31
Zimbabwe Standard, April 13-19, 1997: “Call for board of enquiry into current tender system”
The Herald, June 12, 1997: “Mujuru admits phone licensing flawed”
PF that the party was being weighed down by “loose discipline, loose thinking, and loose talk.”
Mujuru then wrote to Nkomo apologizing for her remarks.
Econet received a pleasant surprise in its preparation for the court hearing to challenge the award
of the license to Telecel. One of Econet’s lawyers checked the marks that had been awarded to
Econet and to Telecel for the different criteria laid down in the tender specifications, and found
that the GTB had made a mistake in adding up the marks to arrive at the final total. If the
addition had been done properly, then Econet should have won by a narrow margin. This
discovery made a huge difference to the court hearing, because a legal opinion from the judge
was no longer necessary; the challenge to the Telecel award could be substantiated on factual
issues alone.
11 The final victory
The dates for the High Court hearing of Econet’s appeal were set for September 18 and 19, 1997.
After the hearing, Justice Sandura’s assistant informed the press that because of the huge amount
of documents that needed to be studied, a decision would be made only by the end of the year.
The High Court’s decision finally came on December 31, 1997 – Justice Sandura revoked the
license awarded to Telecel, and ruled that the second cellular license be awarded to Econet. By
this time, Telecel had already started installing its infrastructure; its Chairman announced that his
company would contest the High Court decision.
On January 15, 1998, the new Minister of Information Chen Chimutengwende, who had replaced
Mujuru, said that the government had unconditionally accepted the court ruling, which meant the
automatic invalidation of the Telecel license. He added that “Econet was under no obligation to
take on board Telecel as a business partner 32 .” Telecel filed an urgent appeal to the Supreme
Court against the High Court ruling. In the affidavit that he filed in response, Masiyiwa stated
that Telecel’s appeal was designed to “coerce” his company into offering Telecel some form of
shareholding 33 .” High Court Justice Smith ruled on February 10, 1998, that Telecel’s appeal to
the Supreme Court did not suspend Econet’s license.
On February 18, 1998, the Cabinet announced that it was issuing a third license to Telecel, which
accepted the license and withdrew its appeal to the Supreme Court.
This decision to grant Telecel a license without any tender was received with outrage by
Zimbabweans. An editorial titled “A travesty of justice” in the Financial Gazette dated February
19 was scathing in its criticism of the government.
“In one single strike, President Robert Mugabe’s government unashamedly overturned
repeated and unambiguous rulings of the country’s highest courts, the very foundations of
the rule of law, just in order to curry favor with its cronies stunned that they cannot have
things go their way all the time.” …. “Oblivious to the widening pain gripping the nation
because of its failed policies, the crumbling regime ordered Telecel, an open club of the
government’s blue-eyed boys and girls, duly licensed to operate a third cellular telephone
network, a decision already soundly shot down by High Court judges Wilson Sandura
and George Smith in separate judgments in the past two months.” … “Yesterday it was
wrong and technically impossible to grant Zimbabwean Strive Masiyiwa a license to run
a third cellular phone network, we were told. But today, because the government’s
32
33
The Herald, January 16, 1998: “Cellphone saga effectively ends”
The Herald, January 29, 2003: “Telecel’s urgent appeal to be held today.”
supporters have come unstuck and looked certain to remain so forever, it is suddenly all
right and necessary to have another network 34 .”
By April, Econet had drafted an interconnection agreement with PTC that they hoped would be
signed by the end of May. The agreement was expected to earn PTC Zim$64 million annually in
the first year; this would increase to Zim$600 million by the tenth year. Econet’s staff had
increased from 51 at the end of 1997 to more than 100 at the end of May 1998. More than 20,000
subscribers had applied for service. Rudnick, who had been working in Kantor & Immerman
until June 1998, was invited by Masiyiwa to join Econet as an employee. He described his first
impressions as a staff member.
“Well, what impressed me straight away was that whilst I’d been working on the court
case with – I got to know a number of the Econet people, and as a lawyer I always felt
that what they were doing was working on a court case, and then I discovered that in the
three years that they had been working, they had actually been working, they hadn’t been
sitting and waiting for the court case to end. They
had prepared themselves in a very detailed way as to how the company was going to be
run. They had spent their time assessing equipment so that they were now able to buy
their equipment almost immediately, because they had tested almost every component
time and time again. They knew who the contracts were going to, they had done their
bids, they had got the best pricing, they knew – you know, they were up and running,
they weren’t now trying to get things moving. They hit the ground running from the day
the license was awarded. The only thing that slowed Econet down in the beginning was
raising capital.” … “You know, the engineers, whilst they’d been helping with the court
case, they’d spent those years designing the network and planning it to a meticulous level
34
Financial Gazette, February 19, 1998: “A travesty of justice”
of detail. The marketing people had been preparing brochures and booklets and strategies
and branding. You know, there was an enormous level of thought and preparation that
had gone into it. And I remember going to a cocktail party in their offices the month
before I actually joined them. Remember I was still their lawyer during this time, so I was
a part of it even though I wasn’t physically there, and the excitement in the air was
palpable. Now things were happening. And a member of staff showed me around this
building, and he said to me this was the IT department, this was the Billing, and it was
completely empty. They didn’t yet have the money to put these things in, but they’d
ordered everything, they knew where every computer was going to go, the cabling they
were going to put in, the points were there, they had – you know, it was planned, and they
had floor plans of where desks were going to go, where people were going to sit. It was
very organized” (Nic Rudnick – Interview transcript).
Douglas Mboweni, an IT specialist, had joined the company as Billing Manager in April 1996. He
indicated that right from the beginning, Econet’s management wanted to benchmark itself against
the best organizations in the world on corporate governance practices.
“Basically what we focus on is creating a world class standard kind of organization. Right
from the level of the CEO, …….. , what we keep our eyes on always is what are the
international trends in management. What should we be focusing on. What are the things
that we should be using to measure our progress as an organization. The systems that we
should have put in place. The kind of standards that we should apply” (Douglas Mboweni –
Interview transcript).
Econet assets were valued on 30 June 1998 at approximately Zim$240 million, which was
equivalent to US$ 13.25 million (at the prevailing exchange rate of 1US$ = Zim$18.06). This
was made up of Zim$ 121 million in fixed assets, Zim$ 118 million in pre-operating expenditure,
and Zim$1 million in current assets. This was mirrored on the liabilities side by Zim$ 66 million
in long term capital, and Zim$ 173 million in current liabilities (short term loans, overdraft
facilities, and creditors). Econet planned to raise a further Zim$ 540 million of proceeds from an
initial public offer (IPO) of share capital (290 million) and debentures (250 million) to fund its
expansion. Half the share capital was to be placed with institutional investors in London, who
had shown great eagerness to participate in Econet’s equity capital.
Masiyiwa and his team felt that the IPO was necessary so early in the company’s life because
they were having great difficulty in raising funds from traditional sources such as banks.
“The challenge we faced at that time was that nobody understood this business. The only
other operator who was out there was Government, and therefore the banks, none of the
banks had ever financed a mobile cellular company. So there were no reference points, no
experience at all, and we challenged – in fact, I remember in the early days when we
were in need – we went to a lot of local merchant banks and said: We need finance for 17
base stations. So they added them up and calculated it and said: My goodness, this is too
much. How many customers? Well, we said, we’ll probably start with 1,000 and rise.
They said: No, no, no, no, no, why don’t you start with two base stations and let’s see
where that goes? We said: No, the cellular business doesn’t work that way.” …. “And
some people even believed that Net One, which at that time was sitting on about 15,000
customers, and they were all contract customers, and their handsets were expensive, they
said: Look, the market that is left out there is no more than 3,000 to 4,000 customers”
(Banker – Interview transcript).
The license for Econet to operate was officially signed by the Ministry only in July 1998.
Ironically, Econet, as part of a consortium, was awarded a telecommunications license in
Botswana (February 17, 1998) before it got one in Zimbabwe. It had been a long road from the
time Masiyiwa first approached PTC way back in 1993. When Econet officially opened its doors,
it had 30,000 subscribers who were eagerly waiting to be connected.
12 Market leadership
Econet was quick to launch its prepaid cellular service. The combination of this innovative
product and the goodwill it had accumulated with the people of Zimbabwe over the five years of
court battles for the license would take it to a position of market leadership in just three months,
even though PTC’s cellular service (Net One) had been launched nearly two years earlier in
September 1996.
“Every spare moment I have, I read. What that does - I mean, I'm reading everything,
brochures, what people are doing, what's going on in the game. Look, it's a big industry,
but one of the things that helped me was that because of that, I saw where prepaid was
going very quickly, even before your Vodacoms and what have you, I figured out what
prepaid was going to do. I remember going to look for a prepaid platform. We couldn't
find one. People were saying: But it's still a conceptional thing. We said: No, no, we must
have prepaid. So prepaid was to play a pivotal role in giving us market leadership,
because what we recognized was the fact that the African consumer was the perfect
consumer for prepaid, because the issues of credit management, credit control, credit
cards, all this was not relevant. That doesn't mean that somebody doesn't have money,
you know.” … “And so prepaid for me was an incredible strategic tool when it came
through, and so we were very quick in spotting it. We had to go to Israel to get prepaid
technology, because the Israelis were the ones who were playing with it and had the
cutting edge” (Strive Masiyiwa – Interview transcript).
Masiyiwa also recognized that marketing was the key to success in the cellular business – he had
Orange of the UK as the model to emulate. His second in command, Zachary Wazara, was
recruited from the advertising agency Lintas. For example, the prepaid product was branded
Buddie, which soon became the generic term for all prepaid products. The product targeted to the
business segment was called Excel, and it allowed customers to have two cellular numbers on
one phone. Other products that were new to the Zimbabwean market were introduced quickly,
such as voicemail, faxmail, the Short Messaging Service (SMS), and the News on Demand, for
which the content was provided by CNN. The company was also the first to offer a 24-hour
customer care service.
The IPO itself took place in September 1998 and was hugely successful – it was oversubscribed.
However, just the month before, when Econet’s IPO campaign was in full swing, Mugabe’s
government decided to send Zimbabwean troops to the Democratic Republic of Congo (DRC) to
support President Kabila against rebels, who were being backed by Rwanda and Uganda.
“The IPO went very, very well. It was oversubscribed, and I remember at the beginning
of the IPO we were looking at all the things that could go wrong were political, because
we were dealing at that stage with what we thought was an irrational President. We didn’t
realize at that stage how irrational. What he did was he went to war in the Congo, in the
middle of the IPO” (Nic Rudnick – Interview transcript).
The decision to intervene militarily in the DRC only exacerbated the already severe economic
problems of the country. The Zim$/US$ exchange rate, which had hovered around 18 in July
1998, fell sharply to 30 by mid-September when the Econet share started trading on the
Zimbabwe Stock Exchange, and continued to deteriorate to 38 by end September. Considering
that Econet was heavily dependent on imports to finance its network development, this fall in the
value of the Zim$ reduced the purchasing power of its IPO proceeds by half.
“It affected our roll out very dramatically. Simply, the equipment that we thought we
could buy we could no longer buy, so it affected coverage, not so much in the cities but
the rural area coverage it would have been given didn’t take place. And then with time
and the very rapid uptake of subscribers, we had congestion problems in the cities and,
that was also – our capacity was affected by – we just had to buy less equipment” (Nic
Rudnick – Interview transcript).
“If we’d had that (our original purchasing power of our listing) our roll out would have
been brilliant. And of course, from that moment we were working from the back foot, and
they still are. They’re under-configured, the network is so congested. They need capital.
It was such a pity. If they’d had that start – you know, what I really as well resent, is that
– and I think the Government made such a faux pas for the country – is that if they’d
allowed Strive to start up when he applied, we would have an incredibly efficient
network now. We would have been able to buy at a decent price, we would have had the
whole infrastructure in before all this economic hardship started hitting the ground”
(Marion Moore – Interview transcript).
In spite of this difficult macro-economic environment, Econet had 63,000 subscribers by the end
of its financial year June 30, 1999, which was 85% higher than the original forecast of 34,000,
and which gave it a market share of 55%. Agreements had been signed with the 20,000 member
Government Workers Association, and the 30,000 member Civil Service Cooperative Society.
Revenues stood at Zim$ 434 million. The company also achieved the very unusual feat in the
telecommunications business of reporting a profit in its very first year of trading; the average
time to profitability in the capital-intensive cellular business was considered to be three years.
The Econet share was quoting at approximately Zim$ 4.50 by the end of June, giving the
company a market capitalization of Zim$ 3.26 billion (US$ 86 million).
In November 1999, Masiyiwa was named one of the top 10 outstanding young global leaders by
the International Junior Chamber. Past recipients of the award had been the late US President
John Kennedy, slain Filipino leader Benigno Aquino, ice hockey star Wayne Gretzky, and
former US Secretary of State Henry Kissinger. The Zimbabwe Independent cited
telecommunications experts who believed that the competitive spirit unleashed by Masiyiwa in
Botswana and Zimbabwe had contributed to the highest cellular penetrations in Africa, with
cellular phone numbers exceeding fixed lines 35 .
Due to foreign exchange being unavailable, Econet’s management could not expand capacity as
projected, and decided during 2000 to concentrate on the more profitable contract users. They
consequently curtailed the sales to new prepaid customers.
In February 2000, the government conducted a referendum in which people were asked to vote in
favor of or against proposed constitutional reforms. Mugabe’s party aggressively campaigned for
a “Yes” vote, stating that the reform would introduce checks and balances in the political system
and reduce the powers of the President. A few days before the referendum, a six-word text
message started to circulate on the Econet cellular phones – “No Fuel No Forex Vote No.” Soon
the message was being sent from subscriber to subscriber hundreds of thousands of times.
Masiyiwa immediately ordered an investigation into the origin of the messages to ensure that no
one in Econet could be accused of starting this political campaign. He concluded that the
35
Zimbabwe Independent, November 5, 1999: “Masiyiwa lands global leadership award”
messages had originated with the subscribers themselves. Mugabe’s party lost the referendum,
the first time it had been defeated in a public vote. According to newspapers and government
sources, Masiyiwa’s name was mentioned in several cabinet meetings. The President believed
that there was a political motive behind the messages, and that Masiyiwa was supporting the
Opposition party Movement for Democratic Change (MDC). Masiyiwa was informed that
Mugabe had said that he should be eliminated. The government denied any such comment by
Mugabe 36 . Security police sympathetic to Masiyiwa recommended that he should leave the
country because his life was under threat 37 .
The government then introduced a bill, the Postal and Telecommunications Bill, which would
give it sweeping powers to eavesdrop on telephone conversations and to intercept e-mail
messages between individuals and companies.
Pastor Gatsi encouraged Masiyiwa to leave the country. The Econet Board had been looking at
ways to reduce the company’s exposure to the volatile Zimbabwean economy (see below).
Masiyiwa decided to move to Johannesburg, and his family soon followed him.
13 The strategic decision to internationalize
Given the fast deteriorating economic environment, the Econet management took in February
2000 perhaps its most significant strategic decision: to reduce the exposure to Zimbabwe by
developing other markets in Africa and beyond. The vision of the company, which had been “To
provide telecommunications to all the peoples of Zimbabwe” (IPO prospectus August, 1998),
was now reformulated “To provide telecommunications to all the peoples of Africa.”
36
37
Wall Street Journal Europe, April 25, 2000: “Zimbabwe falls victim to politics of vengeance”
The Namibian, May 8, 2000: “Mugabe targets top business”
“We did a strategic review and we basically concluded that one of the biggest risks we
had is single country exposure. Okay. Although at the time we had two exposures, we
had Botswana and Zimbabwe, we realized that single country exposure was one of the
risks we had to mitigate. There was an absolute howl amongst shareholders, because
shareholders, particular market analysts, they can't see beyond this afternoon. They said:
How can Strive get up, abandon a company two years into operation? If you guys want to
expand, why don't you send a marketing department to be based in South Africa. You
don't have to leave Zimbabwe. I said: Listen, the biggest risk this company has is single
country exposure. They couldn't see it. I packed my bags - basically we sent Nic
(Rudnick) forward together with another of our guys who's now based in London, called
Marco Signorini, and told him to come and set up this office. So they came from scratch,
they looked around. Finally they got this building where we are here, and I came in and
lived in a hotel just down the road here, and we began to build. Now you've got to realize
that we're coming from a country where there's a foreign currency control regime. So we
could not transfer capital. So coming here was a massive challenge. That's why a lot of
Zimbabwean business wouldn't do what we did, but we said: Look, we will find a way to
build the relationships and access the capital, but we wanted to be in South Africa for
basically five reasons” (Strive Masiyiwa – Interview transcript).
The five reasons cited by Masiyiwa for being in Johannesburg, South Africa were: 1) Access to
capital; 2) Access to international skills; 3) A banking system that was accustomed to supporting
international companies; 4) Networks of senior managers; 5) Logistics – Johannesburg was the
city with the largest number of international airlines in Africa.
The macro-economic environment in Zimbabwe continued to deteriorate during the financial
year 1999-2000, with high inflation, shortages of essential commodities such as food and fuel,
and a falling currency. In his statement to the shareholders in the Annual Report for 2000,
Chairman of the Board Prof. Norman Nyazema wrote,
“The crisis experienced by the country during the 6 months to June 2000 worsened the
already deteriorating macro-economic environment. The economy was characterized by
severe shortages of foreign currency, high interest rates of over 70%, inflation of
approximately 60% and a serious decline in business confidence which resulted in the
withdrawal of international credit cover to Zimbabwe by financiers and the suspension of
bilateral and multilateral aid by the donor community. Furthermore, the exchange rate
although officially pegged at Zim$ 38 to the US dollar was trading at an unofficial rate of
around Zim$ 63 to the US dollar, which further increased operating costs” (Prof. Norman
Nyazema – Chairman’s Statement, Annual Report 2000).
In spite of these difficulties, the company performed impressively, increasing its subscriber base
from 63,000 in 1999 to 94,000 in 2000, revenues from Zim$ 434 million to 1.279 billion, and
profits after tax from Zim$ 8.4 million to 78 million. At the end of June, the company’s shares
were quoting at approximately Zim$ 17, which gave Econet a market capitalization of Zim$
14.67 billion (US$ 386 million at the official exchange rate of 38; US$ 233 million at the parallel
rate of 63). Less than two years after start-up, Econet was the second largest company on the
Zimbabwe Stock Exchange in terms of market capitalization. Since its shares started trading in
September 1998, it had outperformed NASDAQ’s telecommunications sector. Salomon Smith
Barney rated Econet one of the most exciting shares in Africa for international investors. In spite
of the economic problems in Zimbabwe, HSBC recommended the Econet stock as a “buy 38 .”
The company entered into new battles with the Ministry, with PTC, and with the Post and
Telecommunications Regulatory Authority of Zimbabwe (POTRAZ), which was set up in
October 2000. Rudnick was quick to point out that these battles were not unique to Econet, or
even to Zimbabwe –
“in the whole of Africa – Zimbabwe is no exception to that – the idea of having a
Regulator is something new.” … “but the attitude of the Regulator which comes from the
Government and is the same people who opposed us years before, is significantly
influenced by what happened during the court case. Their attitude to us, the manner in
which they treat us, how they respond to requests from us, is directly influenced by the
history. But they haven’t continued to fight us anywhere near on the same scale that they
did in the early days, and I wouldn’t say that it’s a continuation” (Nic Rudnick –
Interview transcript).
One contentious issue was the earth station that Econet had set up in Harare to carry international
telecommunications traffic to and from Zimbabwe. PTC objected that Econet’s license was only
for domestic traffic and wanted to close it down. Another was the new fee structure that
POTRAZ had introduced, which was considered unviable by the cellular operators. A third was
the tariffs that Econet and other cellular operators could charge to their customers – these had to
be authorized by POTRAZ. For example, the highest tariff Econet was allowed as of July 2002
was Zim$ 26 per minute. An internationally accepted benchmark in cellular telecommunications
was an average tariff of 25 US cents per minute. Based on the official exchange rate of Zim$ 55
per US$, the highest tariff worked out to an attractive 47 US cents. If the more realistic parallel
38
Wall Street Journal Europe, April 25, 2000: “Zimbabwe falls victim to politics of vengeance”
market rate of Zim$ 700 per US$ were used, the average tariff of Econet would have to be
roughly Zim$ 175 per minute, nearly seven times its current maximum. Econet and the other
cellular operators were having great difficulty in getting POTRAZ to agree to use the parallel
market rate of exchange as a reference point for determining the tariffs.
The macro-economic situation deteriorated further in the year 2000-2001. US dollars were not
available at the official rate of Zim$ 55. By April 2001, the Zim$ was being traded in the parallel
market at 200 to the US$. Inflation continued to be high: 70%.
In January 2001, a consortium of which Econet was a member was awarded one of the three
cellular licenses in Nigeria, a huge market with a population of 120 million. The license fee was
US$ 285 million. Econet was originally allocated 40% of the equity in the Nigerian company,
which was called Econet Wireless Nigeria, but could not put together the resources to pay for
this equity share. Consequently, an agreement was reached whereby it was given a 5% share and
the responsibility of managing the business: it would provide the CEO and other senior officers,
and would receive a management fee in compensation. Zachary Wazara, who had been the CEO
of the Zimbabwean company after Masiyiwa’s move to Johannesburg, was sent to head the
Nigerian operations.
During 2000-2001, Econet lost roughly 30% of its skilled workforce of technicians and IT
specialists. On the one hand, the company was unable to sufficiently compensate its employees
for the inflation in Zimbabwe; on the other, new cellular networks that had come up in other
African countries and beyond prized the experience of the Econet employees, and offered them
salaries denominated in hard currencies.
“So from a morale point of view, when you're going to face the trauma in the country,
you're going to face a morale problem anyway, okay. I discussed this with so many of my
industrialist colleagues. It's a massive problem, because how do you sufficiently
remunerate an employee who faces inflation of 250%? How do you remunerate such a
guy? It's impossible. So you've got to face the fact that your employee cannot be satisfied
with his situation. That's just a fact” (Strive Masiyiwa – Interview transcript).
To stem the tide of departing skilled workers, the management devised a strategy of deploying its
trained Zimbabwean workforce on short and long term contracts in its international operations.
By this time, the company was also present in Lesotho and Morocco. These international
operations served as attractive postings for employees who were frustrated with their
remuneration in Zimbabwe.
“Zimbabwe traditionally, after South Africa, is the greatest skills pool in Africa. It's got a
very well structured training, educational infrastructure. I mean, I'll give you an example.
We have 66 ex-patriots in Nigeria, 40 of them are Zimbabwean (as of July 2002). They
came out of that (Zimbabwean) operation. If you go to Lesotho, most of the technicians
are Zimbabweans. We literally use Zimbabwe as a training pool for taking people to
move on.” … “Now, it does two things for us. Firstly, the trauma of the political
problems of Zimbabwe has seen a massive exodus of trained Zimbabweans. It is on a
major scale. Over 100,000 in the United Kingdom, all who have left in the last two years.
Had we not opened a valve to take people out of that system, we would have lost half of
them. Your accountants, your engineers, they'd be out of the country, because the biggest
tragedy of the Zimbabwean situation is that although Mugabe's policies from a public
perspective appear to be directed at the white farmers, the white farmers are not leaving
the country, they've nowhere to go, it's the black professionals who are hurt by the fall in
the currency. So you've got a massive exodus of young black professionals. So for us, our
key people are part of Econet Wireless International, and basically we're able to move
technicians, engineers, accountants, around inside our global operation” (Strive Masiyiwa
– Interview transcript).
The Econet share also fell to Zim$ 14 by April 2001, in part affected by the sharp fall in the
stock indices and in telecommunications indices worldwide.
Econet’s operational performance in Zimbabwe in 2000-2001 continued to be impressive: 43%
growth in subscribers to 133,979; 123% growth in revenue to Zim$ 2.86 billion; and 230%
growth in EPS to 32.20 cents.
All three cellular companies had stopped investing in their network infrastructures because of the
exorbitant cost of buying US dollars. This had led to very high congestion in the network, and a
drop in the quality of service. No new subscribers were being accepted, which meant that there
was a black market for telephone lines. Several employees and outsiders admitted that the
immense reserve of goodwill that Econet had with customers when it started operations in July
1998 had now eroded considerably.
“I think they have lost their goodwill with the clientele. People have forgotten. And, I
mean, let’s face it, customers and the public are fickle. They had enormous goodwill. I’ve
never known a company that had the goodwill that Econet had when they listed. A lot of
people I know refused to have any cellphone until the Econet network came on line”
(Marion Moore – Interview transcript).
In spite of this erosion in popularity, Econet still fared better than its two competitors on
indicators such as brand awareness, purchase intention, breadth of product and services offered,
etc. The two areas in which it was not considered the best were geographical coverage (Net One
was the best) and tariffs (Telecel was the lowest).
In addition to the congestion problems faced by the cellular operators, all Zimbabwean
companies were faced with the problem of recruiting skilled employees and retaining them.
Young, educated Zimbabweans were leaving the country in huge numbers due to the grave
economic and political environment.
Perhaps the biggest and most dramatic problem faced by Zimbabwe was a social one: roughly
25% of the adult population was HIV positive, and the life expectancy at birth of Zimbabweans
had gone down to under 40 years. The incidence of AIDs was particularly high in the most
productive segment of the population, i.e., between the ages of 19 and 55. Masiyiwa explained
the strategy in Zimbabwe,
“So our whole approach to Zimbabwe is basically, it’s like a ship. Take down the sails,
put it into a safe harbour, because it’s in the middle of a storm. Now, my customer on the
ground is saying: You know, I’m suffering from congestion, I want more coverage. I
have to listen to him with half an ear, my deaf one. My management is feeling pressure,
they say: Look at the competition and they’re doing all that. And I say: But they don’t
have to publish accounts, we do. So even the way we look now at how they do their
expansion, it’s a completely different approach. So that is why we have, for instance,
developed things like Your Fone, the pay phone business. I’m sure you saw that. All that
was to how do we maximize return in terms of network capacity? The public pay phone
generates more revenue than a normal cellphone. Prepaid, although Buddie is extremely
popular, does not generate as much air time as a contract, so we deliberately make
decisions here to say: limit the delivery of prepaid, so it’s not available, so it becomes a
black market product. But all those are really strategies to carry the business through the
storm” (Strive Masiyiwa – Interview transcript).
There was a steep fall in the Econet share price during April 2002, when the stock fell to Zim$ 4,
as a result of the panic selling by foreign investors withdrawing en masse from Zimbabwe.
The financial year ended June 30, 2002 was another outstanding year for Econet Zimbabwe, with
the subscriber base increasing by 4% to 139,402, sales by 112% to Zim$6.06 billion, average
revenue per user (ARPU) by 77% to Zim$ 3,708, and net profit by 267% to Zim$ 1.02 billion.
The Zim$ had fallen to 700 per US$ in the parallel market, and Zimbabwe was now considered
one of the fastest shrinking economies in the world. In spite of performing excellently, the
market capitalization of the company had fallen to under US$ 5 million (at Zim$ 4 a share, and
at the parallel rate of 700). See Table 1 for a summary of Econet’s performance for the period
1999-2002.
As of June 30, 2002, less than a year after Econet Wireless Nigeria (EWN) was launched, it had
achieved a subscriber base of 415,000 for a market share of 50%, after a marketing campaign
that industry experts characterized as outstanding. EWN employed 500 people, and had already
provided coverage to 12 Nigerian cities. Telecom Lesotho (TCL) launched both fixed and mobile
services in May 2002, and had achieved a subscriber base of 12,400 for a market share of 20%.
Econet Satellite Services (ESS), headquartered in London, had installed a US$ 1.2 million
satellite port outside London, and two earth stations in Nigeria. The Maori tribe had been given a
license in New Zealand, and had chosen Econet as its partner. Econet had taken a 63% equity in
the company, which was called Econet Wireless New Zealand (EWNZ). In Botswana, Econet
was in a consortium with Portugal Telecom called Mascom Wireless, which had a market share
of 70%.
On the whole, it was clear the Econet share had lost its popularity with investors. On the one
hand, the economic environment in Zimbabwe had deteriorated to such an extent that foreign
investors were not interested in investing there. Zimbabwean investors, who could not take their
capital out of the country, had lost their appetite for Econet for several reasons: no dividends had
been declared for a couple of years; many investors did not really understand why Masiyiwa had
left the country; they were not very knowledgeable about the group’s international operations;
and they saw frequent changes in the top management team in Zimbabwe, as managers were
seconded to the newer international operations such as Nigeria and Lesotho.
“... they’re an unpopular share at the moment. They’re not a popular share. You know,
within the investors, people are not very happy with Econet. I think they feel a bit let
down mainly because Strive’s gone, and also all the senior management that were there
are not here any more” (Marion Moore – Interview transcript).
Econet Zimbabwe also had, by the end of June 2002, an unpaid US dollar denominated debt with
Ericsson that was long overdue and that it was unable to repay because of the exorbitant cost at
which the US$ was trading in the parallel market. Ericsson had threatened to cut off all support
to Econet Zimbabwe until payments started flowing in. Some interviewees felt that the company
had had several windows of opportunity, especially in 1999 and 2000, for raising fresh equity
capital to repay this foreign currency denominated debt. They felt that Masiyiwa had been slow
to reduce this foreign exchange exposure, because he was hesitant to dilute his shareholding in
the company.
By December 2002, the group had been restructured, such that Econet Zimbabwe had no foreign
currency denominated debt. Its total debt in early June 2003 stood at Zim$ 1.4 billion. Network
development had resumed in December 2002 and progress had been made in clearing up the
congestion. New lines were being issued on a limited basis to corporate customers. All new
equipment was being purchased on a cash basis. Masiyiwa also indicated that the first dividend
would be declared in June 2003.
In accordance with the restructuring, the mobile telephony, fixed telephony, satellite
communications, and Internet services activities in all countries, except Zimbabwe, came under
the Econet Wireless Group (EWG), which was domiciled in Botswana. The Zimbabwean
operations were left out because of the difficulties involved in getting approval from the
Zimbabwean government. EWG therefore was the umbrella company for Nigeria, United
Kingdom, New Zealand, Lesotho, South Africa, Morocco, and Botswana. By June 2003,
Masiyiwa’s team had concluded discussions for raising US$ 255 million through a private
placement (205 million in equity and 50 million in debt) to fund the group’s expansion plans.
The investors were in the process of conducting due diligence on the group’s operations before
releasing the funds.
Out of these additional funds, US$ 150 million would be invested in Econet Nigeria which
would take EWG’s share in the Nigerian operations from 5% to 37%. Similarly, the share in the
Botswana operations would be increased from 6% to 56% (not including 14% owned by Econet
Zimbabwe). The remainder of the funds would be used to fund the development of the New
Zealand network, and to expand the UK operations.
The consolidated turnover and EBITDA projections of the newly capitalized EWG were:
2004
2005
2006
2007
Turnover (in US$ millions)
648
850
987
1036
EBITDA (in US$ millions)
211
295
369
385
Masiyiwa was hopeful of listing EWG on the Johannesburg stock exchange by the end of 2003.
14 Zimbabwe: a brief history 39
The British settled an area that was to become Southern and Northern Rhodesia (named after
their founder Cecil John Rhodes) and the capital of Southern Rhodesia was established at
Salisbury (now Harare) in 1890. It was administered by the British South Africa Company. After
the Company’s charter was abrogated in 1923, the white settlements were offered a choice of
either joining the Union of South Africa, or continuing as a separate part of the British Empire.
The settlers chose the latter option, and Southern Rhodesia formally became part of the British
Empire. Legislation was passed in 1934 that reserved certain areas for the white settlers. In 1964,
Northern Rhodesia became the independent state of Zambia.
The white settlers in Southern Rhodesia showed little interest in granting political representation
to the blacks. At the same time, an increasing number of whites wanted independence from the
United Kingdom. The United Kingdom was prepared to grant independence only if Southern
Rhodesia took the first steps towards eventual majority rule. The whites, under the leadership of
Prime Minister Ian Smith, refused and unilaterally declared independence (UDI) on November
11, 1965. Southern Rhodesia was renamed Rhodesia. The British government considered the
UDI illegal and unconstitutional, and cut off ties with the Smith government. The United Nations
also imposed very severe sanctions which amounted to an almost total embargo on trade.
The Zimbabwe African People’s Union (ZAPU), which had been formed in 1962 under the
leadership of Joshua Nkomo, split due to internal conflict, and a new party emerged under the
leadership of Ndabaningi Sithole called the Zimbabwe African National Union (ZANU).
Although the two parties shared the same basic goals of liberating the people of Africa from
39
This section draws from GlobalEdge’s on-line Zimbabwe history, from BBC’s online history of Zimbabwe, and
from a document titled “Zimbabwe’s Struggle for Liberation” authored by Allison Ray (Fall, 1997).
colonialism and imperialism, the ZANU was in favor of immediate armed confrontation,
whereas ZAPU wanted to continue the strategy of soliciting international intervention. The split
had occurred loosely along tribal lines, with the ZANU being aligned with the majority Shonas
of the northern region (in and around Harare), and ZAPU with the minority Matabeles of the
southern region (in and around Bulawayo). During the sixties there were frequent armed
conflicts between the two parties, which prevented them from uniting against the white settlers,
who were being provided military support by South Africa’s apartheid regime. By the early
seventies, the rivalry between the two nationalist parties had declined, and they formed the
Patriotic Front in 1976, which was jointly headed by Joshua Nkomo and Robert Mugabe.
The negotiations in Geneva in 1976 between the nationalists and the white minority were
inconclusive, which led to the nationalists resuming guerilla warfare. The conflict was finally
resolved at the Lancaster House Conference in England in 1979, with an agreement that free
elections would be held in which all parties and all the people would be allowed to participate. In
1980, Mugabe was elected prime minister of the free nation, which was now called Zimbabwe.
Although Mugabe was successful during the first two years after independence in pursuing a
policy of national reconciliation, factional differences between Nkomo and Mugabe continued.
In 1983 and 1984, government troops were deployed in Matabeleland in the south to quell an
unrest by pro-Nkomo dissidents, during which the troops are accused of committing atrocities.
The situation eventually improved with the signing of a unity pact in 1988, which also led to a
merger of the two parties into the ZANU-PF. In 1987, Mugabe became the executive president
of Zimbabwe. He won the presidential elections in 1990, in which his ZANU-PF party won a
landslide victory, taking 147 of the 150 seats in parliament. Mugabe won a comfortable second
six year term in 1996.
Mugabe’s government made impressive progress in education and the provision of healthcare
during the period 1980-1990 - the adult literacy rate had reached almost 90% by the early
nineties 40 . This progress came through an increase in public expenditures, which during most of
the 1980s were around 45% of the GDP. The government’s deficit also grew steadily in this
period from 9.7% of GDP in 1980/81 to 13.6% in 1994/95. This increase in government
expenditures “crowded out private investment and fueled inflation, while shortages of imported
goods constrained investment and growth.” 41
In 1991, the Government introduced the Economic and Structural Adjustment Program (ESAP),
with support from the World Bank, in the form of a US$ 125 million loan and a US$ 50 million
credit. The ESAP sought four objectives: 1) reduction of fiscal deficit through downsizing of the
civil service (see below) and reduction of subsidies to state owned enterprises; 2) liberalization
of trade policies and exchange regulations; 3) deregulation of the domestic economy; and 4)
establishment of a social safety net for the vulnerable groups. The Government made good
progress on objectives 2) and 3), but not on 1) and 4) 42 .
In 1998, the Government came under severe pressure from the war veterans who had fought in
the 1970s for the liberation of the country from colonial rule. These veterans felt that 18 years
after independence, the Government had failed to keep its promises of paying them a decent
pension and of giving them land. It was reported that they threatened Mugabe with dire
consequences if these promises were not honored. Mugabe ordered the Treasury to pay the war
veterans Zim$ 5 billion as grants and pensions. This payment had not been budgeted for and
therefore the Treasury had no alternative but to print money to make these payments.
40
OECD/AfDB report on Zimbabwe, 2002.
Operations Evaluations Department (The World Bank Group), February 1, 1996: “Structural Adjustment and
Zimbabwe’s Poor”
42
Operations Evaluations Department (The World Bank Group), February 1, 1996: “Structural Adjustment and
Zimbabwe’s Poor”
41
With a view to redistributing white owned land to blacks, parliament approved legislation in
1992 allowing the compulsory acquisition of land provided adequate compensation was paid, but
a lack of funds slowed down this process. Roughly 30 million acres of land was in the hands of
just 4,500 white farmers. While the vast majority of the population was in favor of the
redistribution of the land, they were dismayed at the manner in which it was implemented. In
1997, the government announced an accelerated land resettlement program, and published a list
of 1,000 properties whose white occupants were ordered to voluntarily leave their land. They
were asked to seek compensation from the United Kingdom.
In August 1998, the government decided to send Zimbabwean troops to support the leader of the
Democratic Republic of Congo, Laurent Kabila. This decision, coupled with an already
deteriorating economy, put pressure on the Zimbabwean dollar, which fell almost 100% in value
in the space of a couple of months with respect to the US$. In 1999, a parallel exchange rate
emerged which reflected the true demand and supply of the US$ in the Zimbabwean economy.
By the end of June 2002, the official rate of the US$ was Zim$ 55, but the parallel market rate
was as high as Zim$ 700.
In February 2000, the government conducted a referendum on constitutional reform that would
have allowed it to seize white owned land without any compensation. This referendum was
defeated; the first time the ZANU-PF party had lost a public vote since it cam to power in 1980.
Militia groups, made up of war veterans and unemployed urban youth, forcibly occupied some
500 farms by mid March and in some cases killed the white farmers. Mugabe, while recognizing
that these invasions were illegal, expressed its inability to evict the invaders. Mugabe and the
ruling party characterized these invasions as spontaneous. However, the Zimbabwe Human
Rights Non-Governmental Organizations researched these incidents and published several
reports indicating that considerable planning had gone into them. These reports also pointed the
finger at the ruling party, the army, and the CIO for having supported the violence.
Many white farmers emigrated from Zimbabwe, thus affecting the agricultural production in the
country. The country went from being the “grain bowl” of Southern Africa to facing food
shortages. The second half of the nineties saw the population increasingly disenchanted with the
Mugabe regime, as a result of political oppression, human rights violations, widespread
corruption, and economic mismanagement leading to steep increases in the prices of basic
commodities. By 2000, the unemployment rate was estimated at 55%. In 1999, the Movement
for Democratic Change under Morgan Tsvangirai emerged as an organized opposition, and in the
2000 elections won 57 of the 120 seats. See Exhibit 2 for a summary of economic indicators for
the period 1995-2001.
The 2002 presidential elections were very controversial, with Mugabe being accused of using
state powers and institutions to steal victory from the MDC. Kare Vollan, head of the 25-member
Norwegian Observer mission, said: "The presidential elections have failed to meet key
criteria 43 ." The 54 nation Commonwealth suspended Zimbabwe for 12 months. By this time
international agencies such as the IMF and the World bank had also suspended aid to Zimbabwe.
See Table 2 for a summary of Zimbabwe’s economic indicators.
15 Institutions
This sections briefly reviews the institutional framework in Zimbabwe in the period 1993 to
2002.
Political institutions: After the merger of the ZANU and the ZAPU into the ZANU-PF,
Mugabe’s party was unchallenged until 1999, when the Movement for Democratic Change
43
CNN, March 13, 2002: “Mugabe wins Zimbabwe poll”
(MDC) emerged as a viable opposition party. It is a measure of the electorate’s discontent with
the ruling party that the MDC was able to capture 57 of the 120 seats in the elections held in
2000.
The Judiciary 44 : The general common law of Zimbabwe is Roman Dutch Law, mixed with
English Common Law. The Court System is divided into a number of tiers: the Supreme Court,
the High Court, the Magistrates’ Courts, and the Local Court. The judiciary was respected both
nationally and internationally as independent and impartial. There were many instances in the
1980s and early 1990s in which the Courts had demonstrated their independence. The land
invasions by war veterans in 2000 brought the Courts into direct confrontation with the
Government. There was repeated sharp criticism of the judiciary, and especially of the white
judges, by the President, the Minister of Justice, parliamentarians of the ruling party, and the war
veterans. The criticism systematically sought to link the decisions of the Judges to their supposed
nostalgia for the colonial times. In 2001, the Chief Justice of the Supreme Court Anthony
Gubbay resigned, with more than a year of his term to serve. According to the delegation that
prepared the International Bar Association report,
“The position taken by Minister Chinamasa (and by President Mugabe) is that Chief
Justice Gubbay resigned his position voluntarily. The delegation is satisfied that this is
not the case and that Chief Justice Gubbay was forced into early retirement by relentless
pressure from the Government and state controlled Government supporting media that he
should resign, coupled with unfair and untrue allegations about him and threats of
violence which the Government appears at least to have condoned 45 .”
44
45
This section draws from a report of the International Bar Association titled “Report on Zimbabwe Mission 2001”
International Bar Association: “Report on Zimbabwe Mission 2001”
Civil Service 46 : The Civil Service increased from 10,570 posts in 1980 (only 31% blacks) to
193,000 in 1994. As part of the Economic Structural Adjustment Program (ESAP), the civil
service was drastically reduced in 1995 by 23,500 to 169,500, with a further reduction planned of
26,000 jobs over the following two years. Considering that no reductions were permitted in the
Ministry of Health and Child Welfare and the Ministry of Education, which employed 114,816
persons (nearly 60%), the cuts in the remainder of the ministries were quite deep. In addition to
these cuts, many other measures such as performance evaluations and decentralization were
introduced. There were reports of problems in communications between the government and the
civil service about the motives and objectives of the reforms. Senior civil servants were reported
to have resisted these changes. Salaries had also not kept pace with the rising cost of living.
The Press 47 : The press was highly politicized, with a very strong pro-government section and a
smaller but equally vociferous anti-government (or pro-opposition) section. The pro-government
papers were The Herald (the oldest daily in Zimbabwe), The Chronicle (published in Bulawayo),
The Sunday Mail (weekly), and the Zimbabwe Mirror (weekly). The pro-opposition papers were
The Daily News, The Financial Gazette (weekly), the Zimbabwe Independent (weekly), and The
Standard (weekly).
Religion: Roughly 40% of the 11.5 million people of Zimbabwe were considered to belong to
some Christian denomination, although the influence of Christianity was far greater. The next
biggest religion in Africa was African Traditional Religion, with nearly 30% adherents. Other
religions such as Islam, Judaism, Hinduism were also represented.
46
This section draws from a document titled “Civil Service Reform in Southern and Eastern Africa – Zimbabwe” by
July Moyo, Elia T. Gwarada, and Cuthbert Zhakata.
47
This section draws from “Free and Fair: an ambition for Press Reporting,” a report to the Commonwealth Press
Union on Press Practices in Zimbabwe, by G. Ahnee, H. Hoyte, J. Mbwambo, and W. Mwangi.
Exhibit 1 - Econet Wireless Zimbabwe – Key Indicators 1999-2002
Revenues (Zim$ - millions)
Average Revenue Per User (Zim$)
Net Profit (Zim$ - millions)
EPS (Zim $)
Subscribers
1999
434
1147
8
0.0125
63,000
2000
1279
1358
77
0.0975
94,000
2001
2864
2096
279
0.322
133,976
2002
6083
3708
1024
1.2445
139,402
Exhibit 2 - Zimbabwe – GDP and Inflation 1995-2002
Real GDP growth rate
Inflation
1995 1996 1997 1998 1999 2000 2001 2002
0.6 8.7 2.8 3.7 0.1 -4.2 -7.3 -5.6
25.8 16.4 18.8 31.8 58.1 55.7 74.5 138.1