Econet seige a lesson for would-be investors in Zimbabwe

By Brian Sedze

The simultaneous and sequential signal of this latest round of State Vs. Econet is a microcosm of the huge appetite that the government has to control markets. This could be unsettling to any potential investor unless the investor is an appendage of the well-entrenched crony capitalism.

I opine that if the theme of free enterprise is properly weaved, it will lead to an economic and social renaissance in Zimbabwe and position it, Once again, as an African jewel it was in 1980.

This latest debacle is showing the world that Zimbabwe’s leaders still have a huge appetite for a “managed” economy. Managed economies are detrimental and toxic to the investment climate.

Regardless of the reasoning it is disconcerting to know that the state decided or aceded to a data floor price outside open market dictates.It is indicative of government control tendencies.Many will find it odd as to how the regulator purportes to want to increase mobile operators profits at the expense of the consumer.Something is not being said

Consumers of data and technology products are not powerless like the Minister of ICT wants us to believe. Its actually 100% wrong and delusional to assumne that state intervention restores market fairness.

Fairness should be a concept judged by the individuals involved in a transaction, not a third party. Fairness is ensured by the decision to make the transaction; it is the perception of value assigned to a service.

In a “free” economy bad actors are punished by individuals refusing to do business with them. This is the “creative destruction” that culls the corporate gluttons, the weak and the ineffective. If Econet is an epitome of greed and gluttony the consumers will vote for alternative service providers.

Unfortunately Econet has no competitors but just mere belligerent government departments and appendages masquerading as businesses.

Their advantages are lower fixed costs due to non-payment of extortionate license fees, refusal to pay interconnection fees,access to tax payers funds, debts and loans guaranteed by the government (a euphemism of “tax payer”), proximity and preferential treatment by the shareholder who also acts as the board and management.

In any case these players are with full knowledge that the ultimate price of their possible failures will be to the burden of the taxpayer like the Tel One example.Its ceases to be a business when operations are subtly underwritten by the taxpayer at the exclusion of other players in the same market place.

The signal to any investor is that the government is not passionate about creating a level playing field for businesses to thrive and grow. The governance system is flawed as success is depended on the whims and caprices of the minister who also happen to be the de facto shareholder of competing establishments.Solid investors will prefer destinations that offer certainty and guarantee free market play.

Our government gets it all wrong on the order of precedence.They are trying to change oil by inflating the spare tyre. It should be commerce first and government second and then only as a regulator and trade enabler. In any case the government won’t survive even by force without commerce because it depends on money to survive.

Managing the economy will always fail due to the law of ‘unintended consequences’ and the Heisenberg “uncertainty principle(derived from physics) that as the government try to measure fairness to the highest degree of uncertainty, it will only lead to increased uncertainty.

The Econet debacle has proven that the Competition and Tarrifs Commission is a toothless dog that doesn’t even bark.How do they explain that players in an oligopoly market structure had the audacity to approach a regulator with proposed floor prices.

The CTC is failing in its mandate to encourage and promote competition.It is doing nothing to monitor prices and prevent collusion.Much more is likely escaping their purview.No sane and ethical investor comes to a country with such murky and ill defined rules of the game.

The overtures to foist networks to share infrastructure will show any investor the unending appetite by the government for expropriation of private property. Pseudo businesses like Net One are allowed to fund many other things like corruption, incompetence, inefficiency, over invoicing and ill conceived projects.

They are even given preferential treatment in government projects like ZETDC electricity sales .They are then foisted on other company’s infrastructures. If anything the advantages of infrastructure sharing can only obtain when its done as commercial and arms length transactions,instead of making it a corporate social responsibility for one mobile network provider.

Investors should be confident of existence of the rule of law and guarantees of property rights.Property rights allow businesses the confidence to build new revenue streams and expand old ones. The latest overtures to have forced infrastructure sharing is a slap on the right to private property. It promotes the idea that the government entities must be funded from the sweat,labour and innovation of other companies. It is distasteful.

There seems to be the belief by the finance ministry that mobile telecommunications operators are magical money spinners and should be taxed until the very last cent. It seems to them that they are faceless entities that derive revenue without investment, sweat, labour and innovation.

The annual budget and mid-term fiscal reviews will always have incremental tax initiatives on the mobile operators. It scares investors to enter markets where the fiscal authorities design such inequitable tax policies. Even recharge cards are now viewed as the most prevalent litter!!

The ministers directive on reduction of data tariffs is a sure sign that POTRAZ is either dysfunctional or that the minister is overbearing. It seems the minister is now also the board and management of POTRAZ. This shows a penchant to shifting good corporate governance rules and signals a strategic intent of shredding the good practice of separating legislative powers from directing and managing.

If all power and authority is bundled into that one super minister it’s a clear and sure sign that there is no respect of good corporate governance. The corporate governance environment is a consideration for an investor. Good governance is not shown by frameworks or intentions but by deeds.

A government that inhibits its fellow countrymen from prospering and then go all out to tailor make business laws, policies and regulations to attract Dangote and the Chinese should be ashamed of itself. The consequences of these “little” actions will often result in unintended consequences.

No one trusts a government that can’t protect its own business people.

Brian Sedze is the President of Free Enterprise Initiative. He can be contacted on [email protected]