Electronic copy available at: http://ssrn.com/abstract=1009452

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.

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 country1.” 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 detained2. 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 well-

known 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 day3.” 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 sub-

contracted 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 self-

evident 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 slot4. 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 system5.”

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”

19956. 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 Zimbabwean7, 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 rights8 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” 10 The Vancouver Sun, June 9, 1996: “Unspeakably useless phone system tells the Zimbabwean story”

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 See also Newsweek, July 29, 1996: “Wrong number - Paying the penalty for challenging the state” 13 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

company16. 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 15-

20% of the shares in the second cellular operator would be offered to the losing bidders,

including Econet17. 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 companies18. 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 directive19.

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” 18 The Sunday Mail, March 9, 1997: “Telecommunications a sensitive area” 19 The Financial Gazette, undated: “Masiyiwa’s chances dashed yet again”

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 acceptable20.”

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

him21.” 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 soul22.”

There were regular prayer meetings in the company to help sustain the morale of the staff. Well-

wishers 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 state23.”

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

instalments24.”

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 done25.”

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 The Christian Science Monitor, March 1, 2000: “How one entrepreneur beat corruption” 25 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 submitted26.

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

office27.” 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 Econet28.

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 pressed29.

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 persecution30.”

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 officers31.”

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 Zimbabwe Standard, April 13-19, 1997: “Call for board of enquiry into current tender system” 31 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 partner32.” 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

shareholding33.” 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 The Herald, January 16, 1998: “Cellphone saga effectively ends” 33 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 network34.”

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 lines35.

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

Mugabe36. Security police sympathetic to Masiyiwa recommended that he should leave the

country because his life was under threat37.

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 Wall Street Journal Europe, April 25, 2000: “Zimbabwe falls victim to politics of vengeance” 37 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 “buy38.”

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 history39

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

nineties40. 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. 41 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”

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

criteria43." 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 Judiciary44: 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 condoned45.”

44 This section draws from a report of the International Bar Association titled “Report on Zimbabwe Mission 2001” 45 International Bar Association: “Report on Zimbabwe Mission 2001”

Civil Service46: 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 Press47: 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

1999 2000 2001 2002 Revenues (Zim$ - millions) 434 1279 2864 6083 Average Revenue Per User (Zim$) 1147 1358 2096 3708 Net Profit (Zim$ - millions) 8 77 279 1024 EPS (Zim $) 0.0125 0.0975 0.322 1.2445 Subscribers 63,000 94,000 133,976 139,402

Exhibit 2 - Zimbabwe – GDP and Inflation 1995-2002 1995 1996 1997 1998 1999 2000 2001 2002Real GDP growth rate 0.6 8.7 2.8 3.7 0.1 -4.2 -7.3 -5.6Inflation 25.8 16.4 18.8 31.8 58.1 55.7 74.5 138.1