Resisting political corruption- the story of Econet- Part Five


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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 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 efforts.”

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 third license, so Zimbabwe would have three operators instead of two. And I said fine. 

“And he said: But do you accept one condition, that the other people should be shareholders in the company? He (Mugabe) simply said that you cannot be alone in the business, you have to have other shareholders and you should accommodate others in the company. I said: I am not going to accommodate anybody. I’ll take the company public, anyone who wants to buy a share can buy”

 

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 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 Econet.

Masiyiwa was again reported as denying that he had agreed to such an arrangement. He also protested that Telecel had been given access to the tender documents before the other contenders, and that Econet had obtained the highest number of points in the tender evaluation process.

Mugabe made a statement to press reporters in an official visit to Paris on March 8, 1997 that was again not very encouraging for Masiyiwa. He said that telecommunications was a sensitive area where the government would continue to play a role, and that there was one person (in apparent reference to Masiyiwa) who thought he had a right to the country’s second license just because he was assisted by certain foreign companies.

It was also reported in the media that Mugabe had spoken to Mujuru only hours before she announced Telecel as the winner of the tender, and had asked her to ignore Nkomo’s directive.

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 into the open, threatening a fragile political unity painstakingly hammered out after a 1980s armed conflict.”

In the same article, Nkomo was reported as saying – “The young man (Masiyiwa) was running around (setting up his cellular phone infrastructure) and now they are taking things from him. This is not acceptable.”

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 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”

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”

By the second half of March and April 1997, the general feeling in Zimbabwe was that Masiyiwa’s chances of getting a cellular license were very bleak. An industry executive was quoted as saying – “It’s not a question of faith or hope in this or that thing. It’s really a question of getting things done, and as things stand now, Masiyiwa appears to stand no chance of getting this project off the ground. There are simply too many forces that are too strong ranged against him.”

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 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”

Masiyiwa himself was not immune to the frustration and despondency that his staff were experiencing when faced with these obstacles. Around this time he was diagnosed with an illness, and was under medications for an extended period of time. In his moments of weakness, he received unconditional support from Tsitsi and his Pastor, Langton Gatsi.

Tsitsi, after her initial reservations, had come around to sharing Masiyiwa’s conviction that Africa’s future depended on the strength of its entrepreneurial class. She followed the court battles on a day-to-day basis and started contributing her insights to Masiyiwa.

Pastor Gatsi, to whom Masiyiwa would turn for support in his darkest moments, “created a spiritual support for his soul.” There were regular prayer meetings in the company to help sustain the morale of the staff. Wellwishers from the outside the company participated frequently in these meetings.

“You know, when you have such a prayer meeting, and Mr. Masiyiwa being a Christian, he has a lot of other contact people, I mean in the Christian circles, they may be pastors, they may be brothers in Christ, they just come and share. If somebody feels that he has a word for Econet, they’ll just come and share, especially in those early days, one would just have a word, a word of encouragement you know, because it wasn’t easy. I can tell you a lot of people (employees) left.” …

“A number of people had been recruited, but to go for maybe three/four months without a salary, they are not used to doing that, and if you don’t share the same vision that no, things will be okay, that we know where we are going. Yes, it may be difficult for now, but things will be fine. But not everyone shared that vision, so a lot of people left. So, those people who were there sometimes needed 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”

Tsitsi remembers a pastor who came to their home to stay and prayed and fasted for forty days. Women would come to the Masiyiwa home and spend time with Tsitsi, and pray with her.

On March 19, 1997 Mujuru ordered Masiyiwa to either sell his equipment to Telecel, or surrender it to the government for no compensation. She said that if he did not comply, the police or state security service might be instructed to arrest him, for having violated the security and defense laws of the country. According to her, Econet was broke and not in a position to run a mobile cellular business. She also claimed that the equipment that Econet had installed in the various parts of the country belonged, in fact, to Ericsson. She threatened Ericsson that if the equipment was not sold to Telecel, the government would confiscate it.

Lars Andersson, a representative of Ericsson in Harare, clarified that his firm had supplied the equipment to Econet under a commercial agreement, but he refused to disclose the terms of the agreement. Masiyiwa stated emphatically that his firm owned the equipment, and that he would overturn in court the award of the license to Telecel. He also applied to the High Court to bar the Minister from seizing his equipment. Mujuru then withdrew her threats –

“I accept that I have no right to direct the applicant as to what it must do with the equipment and I claim no right to seize the equipment or to have it confiscated by the state.”

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 ministers, who were in an adjoining room, and returned to say – “OK. You can pay in instalments.”

By S. Ramakrishna Velamuri.  Rama is Professor of Entrepreneurship at the China Europe International Business School in Shanghai, China

To be continued tomorrow

 Part One

Part Two

Part Three

Part Four

(304 VIEWS)

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The Insider

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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