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 Peoples Republic of China Tel: +86-21-28905890 (Switchboard); +86-21-28905663 (Direct) Email: rvelamuri@ceibs.edu

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

Abstract

This case study documents the story of Zimbabwean entrepreneur Strive Masiyiwa in his quest to obtain a mobile telecommunications license. First the Post and Telecommunications Corporation of Zimbabwe (PTC) and then the Ministry of Information, Post and Telecommunications of the government of President Robert Mugabe place obstacle after obstacle in his path, but Masiyiwa challenges their decisions and actions in the High Court and the Supreme Court. Throughout this five year process (1993-1998), he remains determined to obtain the license through ethical means. A number of individuals and organizations impressed by his values and come to his help and this assistance, along with the independence of the Judiciary, is instrumental in his firm being given the license in July 1998. The case represents an in-depth study of a successful example of resistance to political corruption.

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

Resisting Political Corruption: Econet Wireless Zimbabwe (Research Case Study)

1 Introduction Strive Masiyiwa was born in 1961 in Zimbabwe. He attended primary school in Zambia and secondary school in Scotland. When he went back to Africa to fight for the liberation of his country from white rule, one of the senior officers told him Look, were about to win anyway, and what we really need is people like you to help rebuild the country 1 . He then went back to Britain and obtained a Bachelors 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 didnt 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

As reported in Time magazines 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 mothers phone number for interested parties to call. Because he lacked capital, he focused initially on renovating peoples 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 Masiyiwas life. He was abducted at gun-point from his office by the Central Intelligence Organization (CIO). There are conflicting reports as to why he was detained 2 . He was told that he was being arrested

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. Guzhas case had been widely reported in the press. As soon as Masiyiwa was taken away, his secretary informed one of his friends, who in turn got in touch with Anthony Eastwood, a partner in the law firm Kantor & Immerman and a wellknown human rights activist. Eastwood urgently filed an application to the High Court compelling the CIO to release Masiyiwa. Masiyiwa was stripped naked, interrogated, and left in a cell until 9 PM, when his captor returned, handed him back his clothes, and asked him to get into a car. I thought I was a dead man. I prayed in the car. In fact, I had been praying all day while in the cell. People say that I am a religious man; it started on that day 3 . He was taken to a hotel in downtown Harare and asked to get out. A police officer told him several months later that he was very lucky to be alive. The CIO abducted me in 1990 and it was the nature of my interrogation which made me realise that the Mugabe government was determined to destroy any successful business. I was the most high profile black businessman at the time because I had just been named by the Chamber of Commerce the Businessman of the Year. Following my abduction by the CIO the news spread quickly about what had happened within the black business circles although it never appeared in any newspaper. A few months after my abduction a well-known black businessman called Joseph Mapondera was killed in a car crash. This man was related to President Robert Mugabe, and the latter went to his home to pay his condolences. Joseph's cousin another businessman was at the home when Mugabe arrived
Mugabe government, with the CIO being one of them. They had decided to harass him to send a message to a rival power faction. 3 Strive Masiyiwa cited in an undated newspaper article, titled CIO detained Strive Masiyiwa

and raised the subject of harassment of black businessmen by security agents and used my case as an example. John Mapondera told the President that there was a view amongst black businessmen that this was part of the government drive to establish socialism in the country. Mugabe denied it and said he would be willing to meet with black businessmen and use the occasion to show the country that he believed that black people should be encouraged to set up businesses. A few weeks later a meeting was set up and I was part of a delegation of seven prominent businessmen who met Mugabe and discussed the need to encourage black people to set up in business. The meeting was highly publicised and a few days later we launched the IBDC as an organisation to promote the development of black business in the country. John Mapondera was the first President and I was the first Secretary General. In getting the government to understand that business was a good thing I succeeded beyond my wildest imagination but the result was that suddenly every senior government official and minister wanted to be in business and it led to a lot of corruption and patronage. This was not my intended objective (Strive Masiyiwa - from written responses to clarifications sought). Masiyiwa and the other prominent black Zimbabwean entrepreneurs were concerned that blacks, who made up 95% of Zimbabwes population, had virtually no ownership of its economic assets. One of the biggest problems they faced was access to capital, since they had no assets that they could offer as collateral to banks. The IBDC was set up and declared in its 1990 manifesto that its task was that of identifying the economic, political, legal, and social factors, including the institutional framework, that militate against the development of a vibrant Small and Medium Scale Enterprise sector. The formation

of the centre stemmed from the desire to institutionalise the problem identification and problem solving strategies thus giving continuity and permanency to its advocacy programme. The IBDC sought government guarantees, subsidized interest rates, and preferential allotment of governmental contracts to compete against established foreign businesses. Tandon (1996) points out that the IBDC did achieve some success: it was given a US$10 million grant and a US$40 million loan facility from the Zimbabwe government; a Credit Guarantee Company of Zimbabwe was established that gave government guarantees to commercial banks for business loans to indigenous entrepreneurs; a Venture Capital Company and a Small Enterprise Development Corporation (SEDCO) were set up; a government program was set up that stipulated that contracts in the construction industry of less than Z$10 million should first be offered to indigenous contractors, and 30% of the value of large scale building contracts should be subcontracted to small and medium enterprises; finally, international donor organizations from Norway, Ireland, Britain, Austria, and the US also provided some funding. Masiyiwas 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 Mugabes 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 Motorolas Iridium project, which he believed offered an ideal solution to Africas 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 Masiyiwas plan for setting up a mobile telecommunications network and its impact on Zimbabwes economy and society. Based largely on Masiyiwas enthusiasm and his knowledge of the telecommunications industry, he proceeded to sanction the largest loan his bank had ever sanctioned - Zim$120 million (approximately US$ 40 million) - to Retrofit to launch the cellular telephone business. Moyo indicated that the reason

for sanctioning such a large loan to the venture at such an early stage was that it was a selfevident technology. When asked whether he saw mobile telephony as a business opportunity with profit potential or as a cost-effective solution for Zimbabwe, Masiyiwa explained, Oh, yes, definitely. I saw that (a profit opportunity). But, I saw the opportunity to provide a service in a way that had never been provided before. At that time, although cellular was very much a prestige thing, the average African country that had even introduced cellular had an average of five thousand, two thousand subscribers, and I believed that that was a misuse of the technology, where it was just for the rich. And I wrote furiously about this and said: Look, theres 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). Moyos 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 PTCs 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 ONeill, who had acquired a deep understanding of international telecommunications law. ONeill 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 PTCs 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 PTCs 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 Retrofits 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, Masiyiwas team was confident that Justice McNally would rule in their favor. However, in June 1994, the Supreme Court reversed the High Courts 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, Im a born-again Christian, and that was a decision I took. Ive 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 didnt 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 didnt 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 Zimbabwes 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 PTCs 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 PTCs 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, youre going we have to go against the Minister of Justice, weve 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 wouldnt 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. ONeill, 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 governments 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 persons spirit. However, Masiyiwa would always slip away before the police arrested him (he even hid in the trunk of a friends 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, dont turn around, I need a favour from you. I need you to get out of this park immediately before my colleagues see you here. Im one of the people that has the responsibility to track your movements. I dont 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 youre not. Im 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 governments 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 wasnt an easy task. Were it not for our belief that the Lord will provide, I tell you we wouldnt have got through. Mr. Masiyiwa, in particular, believed he had a vision from God. It wasnt just an idea which cropped up just like that, or just imagined he could do something great I mean, Econet, but rather it was a vision from God, and he believed that if it was a vision from God, God would see it through. He would provide the means. I can tell you with no form of revenue in the beginning, it was not easy to go through with people who you have to pay salaries, you have to pay rentals, Mr. Masiyiwa in particular, had to travel (Johane Sango Interview transcript). In 1995, Masiyiwa was appointed to the Board of the Southern African Enterprise Development Fund by US President Bill Clinton. By this time, the PTC had also woken up to the opportunities in cellular telephony. At that time, the GSM technology could only be operated between 890 and 960 Mhz, and there was room for only two operators within this range. The PTC took over one slot 4 . The ruling party announced that it was setting up its own mobile service, took over the other slot, and set up a committee
4

The Herald, January 4, 1996: PTC enters race to establish cellular telephone network

made up of the Commander of the Army, the Minister of State Security, and the Minister of Communications. It purchased equipment on credit from Ericsson, and this equipment arrived in Zimbabwe from Sweden. Masiyiwa saw this as an attempt by the ruling party to kill Econets 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 PTCs monopoly over telecommunications under section 26(1) of the PTC Act contravened Article 20 of the Zimbabwe Constitution, and stated that It is axiomatic that for the corporation to monopolise telecommunications services in Zimbabwe, and then to furnish a public switched telephone network of notorious worth, available to but a small percentage of the populace, manifestly interferes with the constitutional right of every person to receive and impart ideas and information by means of this persuasive two-way communications system 5 . The Supreme Court also concluded that at the current rate it would take the PTC 14 years to clear the backlog of 95,000 applicants who were waiting for a fixed line. In his ruling, Chief Justice Gubbay gave the Minister of Information, Post, and Telecommunications Cde David Karimanzira until December 6, 1995 to show cause why the monopoly should not be scrapped. The Minister filed a counter-appeal in November 1995 seeking time for the PTC to put in place a regulatory framework and to conduct a major study of the restructuring of the PTC. At this time, an individual with several years experience in international banking (hereinafter referred to as Banker) started working with Masiyiwa soon after the Supreme Court verdict in

The Herald, August 31, 1995: Phone Monopoly not Justifiable Supreme Court

1995 6 . He had returned some months earlier from a one year international assignment with a multinational bank. The two had met during their IBDC days and gotten to know each other quite well. As soon as he came back, he set up a financial consultancy service. Masiyiwa was so occupied with the court battles that he felt he needed help in putting together the funding for Econet. The court decision was expected in four months (in December 1995), and he thought that it would be the last obstacle before Econet could start operating a cellular telephone network. Banker wanted to set up a financial institution of his own, but he agreed to help his friend for four months. Banker had not anticipated how tough it would be to raise finances for Econet. It was almost impossible, because every bank looked at us as anti-establishment, and therefore up until then there hadnt 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 couldnt. 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 cant 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).

This interviewee requested not to be named.

Marion Moore, a white Zimbabwean 7 , joined Econet as Chief Financial Officer in November 1995. She had professional accounting qualifications and had worked for several years in the IT industry and later for an American multinational firm. She was looking for an opportunity to work in a local Zimbabwean company, and was told that Econet was looking for a finance professional. She had followed Econet in the media, and was attracted by the achievements and courage of Masiyiwa. Her second interview was with Masiyiwa himself. She described it as an unusual one, in that she was asked many personal questions about her family. He was also interested in her IT background. She came away from the interview with the impression that she and Masiyiwa had gotten to know each other quite well. She recollected the atmosphere in the firm, which by then had grown to about 35 people: It was the most amazing company to work in, and what I can say is those three and a half years we were fighting the battle, were probably the most valuable working experience Ive 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, hes on a huge pedestal for me, hes 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 Moores 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 wasnt 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 Zimbabwes 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 whos Nicholas Vingirai. There is a group in Zimbabwe called Intermarket. His is probably the largest banking group. He played a very pivotal role in the background (Strive Masiyiwa Interview transcript). Chanakira had earlier worked in the Central Bank of Zimbabwe, before setting up Kingdom Financial Holdings. When he was asked why he had offered support to Masiyiwa, he replied The Lord spoke to me that I had to help him. The Supreme Court ruled on December 6th that PTC could not prevent other players from entering the telecommunications field, and that even if a new regulatory framework was introduced, Econet would have to be considered on a first come, first served basis. The Supreme Court also gave Econet permission to proceed to build a network. Soon after the Supreme Court verdict, Masiyiwa traveled to Johannesburg, South Africa, for meetings with Siemens and Ericsson for the purchase of equipment for Econet. He concluded a deal with Ericsson that he would pay US$1 million as deposit and receive the equipment that was originally meant for the ruling party of Zimbabwe and that was lying in the Durban warehouse. In return, Ericsson would become the sole equipment provider to Econet. He then offered Telecel International a 40% stake in the company. Telecel accepted and agreed to put up US$ 1 million to fund the purchase of the equipment. As the equipment was being loaded in Durban for shipment to Harare, Masiyiwa received information from his friends in government that Mugabe was considering issuing a Presidential Decree in January 1996 upon his return from his Christmas vacation. The decree would

effectively overturn the Supreme Court verdict. A Presidential Decree, provided for under a special Presidential Powers Act, was meant to be used only in situations of national emergency. De Bourbon suggested that if Econet could install some equipment and commence transmission before the decree was issued, it could claim grandfather rights 8 to the radio frequency. As soon as the equipment from Ericsson arrived, Masiyiwas 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 PTCs 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 dont 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 Presidents 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

10

Newsweek, July 29, 1996: Wrong number Paying the penalty for challenging the state The Vancouver Sun, June 9, 1996: Unspeakably useless phone system tells the Zimbabwean story

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, Econets team of lawyers went back to the Supreme Court to present

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.

11

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 Masiyiwas 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, lets end this. Why are you fighting? Lets go and see the President and Cabinet Secretary, lets talk to this guy. I said: Listen, Ill go tonight. Ill go and see him. And lets restructure this, lets accommodate A, B and C into this. It was always there. But the more I went, the more my convictions became clearer and clearer that I was making a stand, that I had to go this way, and the rewards would be greater if you stood by what you believe in (as recounted by Strive Masiyiwa Interview transcript) 12 . On December 18, 1996, the Supreme Court, in a unanimous judgment, ordered the new Minister of Information Ms. Joyce Mujuru to grant Econet a license by the end of February, 1997. The Court stipulated, however, that the license should be granted only if the provisions of the amendment to the Telecommunications Act were met. It added that if the government did not grant Econet or any other operators licenses by February 1997, then Econet shall be deemed to be licensed for a period of three years. 13 The court also ordered the Minister to pay four-fifths

12 13

See also Newsweek, July 29, 1996: Wrong number - Paying the penalty for challenging the state Financial Gazette, December 19, 1996: Masiyiwa wins cellular court battle

of Econets court application costs. Chief Justice Anthony Gubbay was critical of the governments 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 Courts 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 Masiyiwas 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 Mugabes 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 Womens Organization, the Zimbabwe Farmers 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 its 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, lets talk about it later. In the evening the Vice President called me and said to me Mugabe had agreed to issue a
15

The Financial Gazette, February 27, 1997: Dramatic climax to Econet court battle

third license, so Zimbabwe would have three operators instead of two. And I said fine. And he said: But do you accept one condition, that the other people should be shareholders in the company? He (Mugabe) simply said that you cannot be alone in the business, you have to have other shareholders and you should accommodate others in the company 16 . I said: I am not going to accommodate anybody. Ill 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 governments 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 (PTCs 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 Econets 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 Presidents 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 Masiyiwas share in the company should not exceed 25%

Nkomo to issue a license to Masiyiwa. The article also reported that Masiyiwa had withdrawn his application in the Supreme Court for Econet be duly licensed as a result of the failure of Mujuru to meet the deadline for presenting her arguments. He stated that he had received assurances from the highest office in the land that he would get the license. On March 7, 1997, The Chronicle reported Mujuru as saying that the Tender Board had awarded the license to Telecel, and that she had obtained consensus from all concerned parties that 1520% of the shares in the second cellular operator would be offered to the losing bidders, including Econet 17 . Masiyiwa was again reported as denying that he had agreed to such an arrangement. He also protested that Telecel had been given access to the tender documents before the other contenders, and that Econet had obtained the highest number of points in the tender evaluation process. Mugabe made a statement to press reporters in an official visit to Paris on March 8, 1997 that was again not very encouraging for Masiyiwa. He said that telecommunications was a sensitive area where the government would continue to play a role, and that there was one person (in apparent reference to Masiyiwa) who thought he had a right to the countrys second license just because he was assisted by certain foreign companies 18 . It was also reported in the media that Mugabe had spoken to Mujuru only hours before she announced Telecel as the winner of the tender, and had asked her to ignore Nkomos directive 19 . Mujuru stated that after the awarding of the second license to Telecel, the government would only award a third license if the first two licensees proved unreliable. The Financial Gazette reported on March 15, 1997, that Zimbabwes top political leadership split into two opposing camps this week as an unprecedented battle for control of the countrys economic levers spilled
17 18

The Chronicle, March 7, 1997: Nkomo fumes over cellphone tender The Sunday Mail, March 9, 1997: Telecommunications a sensitive area 19 The Financial Gazette, undated: Masiyiwas 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 acceptable 20 . Moore recalls that news of the award of the cellular license to Telecel was a very big blow to the morale of the Econet team. I think one of the most the thing that affected me and that I remember especially when Im 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 dont know where he gets the energy, I dont 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 Ill 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 didnt, 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, were going to inspect the tender, were off to find out why Telecel won that tender, and were going to question it if its 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 (Telecels) 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, wed 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 Econets 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, Id 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 Ive ever worked with, also very, very principled, very dedicated, excellent lawyer, incorruptible, and hes 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 Im saying youre dealing with someone who could literally have got a farm were talking about a lot of money for half the price of what he did, and I think its quite rare to find someone who is prepared to put their money where their principles are.. The employees (of Econet) werent paid because they just didnt have the money. And the lawyers werent 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 youre 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 Masiyiwas chances of getting a cellular license were very bleak. An industry executive was quoted as saying Its not a question of faith or hope in this or that thing. Its really a question

of getting things done, and as things stand now, Masiyiwa appears to stand no chance of getting this project off the ground. There are simply too many forces that are too strong ranged against him 21 . In spite of this pessimism, the staff at Econet, which had grown to 51, carried on working normally the administration department was fine tuning procedures to ensure that everything would work smoothly when the license came, the engineers were installing base stations and undertaking service and maintenance, and six members of staff were in South Africa, receiving intensive training at MTN. Banker recalls those days, The last 12 months were the most difficult, were the most difficult of the whole period, because there was even maybe some inner fear that if we get to December and we still don't get a hearing, are we going to be able to go for another four months? Really, there's a saying in Shona custom that an elephant feels the weight of its tusks when it's about to arrive at its destination, these tusks are heavy. That's exactly the situation we were in. But, you know, by faith, the thing that held everything together was faith. We stood and subscribed to Christian principles, and that became the source of our strength, of our inspiration, because we really needed supernatural power, we needed supernatural strength to go through that situation. There's no way in our own natural ability, I can explain and say we were so smart, we are strategists, or take credit whatsoever for what happened. I can't, because I know myself, I cannot explain a lot of the things that happened. I cannot explain how we managed to keep all those people. Our creditors believed in us, and stayed away. I see them taking other companies to court who committed less than what we had, we did at that time. But they stayed with us. So really, it was faith and just favour from God and from all those people that supported us. And in that we found ourselves going along, the church was praying for us, the Christian community, countrywide. Each time we're thrown out of
21

Financial Gazette, April 17, 1997: Masiyiwa says hes 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 Masiyiwas conviction that Africas future depended on the strength of its entrepreneurial class. She followed the court battles on a day-to-day basis and started contributing her insights to Masiyiwa. Pastor Gatsi, to whom Masiyiwa would turn for support in his darkest moments, created a spiritual support for his soul 22 . There were regular prayer meetings in the company to help sustain the morale of the staff. Wellwishers from the outside the company participated frequently in these meetings. You know, when you have such a prayer meeting, and Mr. Masiyiwa being a Christian, he has a lot of other contact people, I mean in the Christian circles, they may be pastors, they may be brothers in Christ, they just come and share. If somebody feels that he has a word for Econet, theyll just come and share, especially in those early days, one would just have a word, a word of encouragement you know, because it wasnt 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 dont 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 havent got their salaries, this and that, you know you still have to pay rent, you have to do that, and all the pressure was upon him (Johane Sango Interview transcript). Tsitsi remembers a pastor who came to their home to stay and prayed and fasted for forty days. Women would come to the Masiyiwa home and spend time with Tsitsi, and pray with her. On March 19, 1997 Mujuru ordered Masiyiwa to either sell his equipment to Telecel, or surrender it to the government for no compensation. She said that if he did not comply, the police or state security service might be instructed to arrest him, for having violated the security and defense laws of the country. According to her, Econet was broke and not in a position to run a mobile cellular business. She also claimed that the equipment that Econet had installed in the various parts of the country belonged, in fact, to Ericsson. She threatened Ericsson that if the equipment was not sold to Telecel, the government would confiscate it. Lars Andersson, a representative of Ericsson in Harare, clarified that his firm had supplied the equipment to Econet under a commercial agreement, but he refused to disclose the terms of the agreement. Masiyiwa stated emphatically that his firm owned the equipment, and that he would overturn in court the award of the license to Telecel. He also applied to the High Court to bar the Minister from seizing his equipment. Mujuru then withdrew her threats I accept that I have no right to direct the applicant as to what it must do with the equipment and I claim no right to seize the equipment or to have it confiscated by the state 23 . One press article reported that a middleman for three government ministers had stated outright to Masiyiwa The price for a license is $400,000 US. He then reportedly consulted with the
23

Financial Gazette, March 27, 1997: Masiyiwa asks High Court to bar the govt from seizing his equipment

ministers, who were in an adjoining room, and returned to say OK. You can pay in instalments 24 .

10 The challenge to the tender outcome Econet now presented a 100 page letter to the Government Tender Board (GTB), which was made up of senior civil servants and came under the Ministry of Finance, outlining its objections to the award of the license to Telecel. One point of contention was that whereas the tender document had specified the GSM technology, Telecel had submitted a proposal for the incompatible CDMA technology. Another was that Telecel had misled the GTB by stating that it was the largest cellular operator in Africa; Econet challenged this claim, pointing out that South Africas MTN and Vodacom were the continents 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 Econets complaint point by point. This decision by the GTB was received with disbelief in government circles. A week after the three week deadline established by the GTB had expired, Mujuru refused to respond There is no point in providing you with a point-by-point response to the appeal. The Tender Board has no power to suspend the license as the Chairman purports to have done 25 . There were also allegations of a conflict of interest against Minister Mujuru: in addition to her husband being a business associate of James Makamba, a leading member of the Telecel team, it

24 25

The Christian Science Monitor, March 1, 2000: How one entrepreneur beat corruption Financial Gazette, April 24, 1997: Govt mulls more cellular licenses

was also reported that she had been listed as Makambas referee in the tender document that Telecel had submitted 26 . The Zimbabwe Independent reported on April 4, 1997 that a member of the Cellular Technical Committee, which had been appointed by the Minister of Information, had resigned over irregularities in the evaluation of the bids, and that other members would soon follow suit. It appears the minister, in her haste to ensure all went according to plan, has in the process estranged herself from the technical committee, the tender board, and even the attorney generals office 27 . The Government of Zimbabwe Attorney General had on an earlier occasion refused to pursue the governments case in court stating that it had no merit, thus forcing the Minister of Information to hire private lawyers to fight her case against Econet 28 . On April 11 (Friday), 1997, police stormed into Econets 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. Masiyiwas lawyers reached an agreement with the police that he would report to the police station on the following Monday. His declaration was taken on Monday, but no charges were pressed 29 . The lawyers representing the government tried to force Econet into liquidation. According to Rudnick,

26

News Digest, April 2, 2997: Favoritism charge takes Zim cellular license saga to new juncture; Financial Gazette, April 3, 1997: Losing bidders demand cancellation of license 27 Zimbabwe Independent, April 4, 1997: Telecel project goes ahead despite tender suspension 28 Office of Telecommunications Technologies, US Department of Commerce, July 17, 1997: Telecommunications Update for Zimbabwe 29 Zimbabwe Independent, April 11 to 17, 1997: Police storm Econet offices

They tried to because Econet didnt 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 hasnt paid you. Will you cede the debt to us? Well pay you, you cede the debt to us and were 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 Masiyiwas company had run out of money again, another friend suddenly walked into Masiyiwas 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 Masiyiwas 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 Masiyiwas 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 boards adjudication processes, we feel that there needs to be an element of transparency to retain the publics faith in the states 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 Masiyiwas 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 Econets 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 Denmarks disapproval at the way Masiyiwa had been treated. About 4,000 students of the University of Zimbabwe held a demonstration in Harare in mid-April in protest against the rampant corruption in the public tender system. Further demonstrations were scheduled nationwide with participation from the Zimbabwe Human Rights Association (Zimrights), the Zimbabwe National Students Union, and other civic organizations. The Chairman of Zimrights, Mr. Reginald Matchaba Hove, said in an

interview We call on government to stop harassing this indigenous entrepreneur, Strive Masiyiwa, who was only trying to take advantage of the opening up of the economy to create new jobs, new services, and new wealth. We strongly condemn his continued persecution 30 . Towards the end of April 1997, in a new development that added pressure to the government, the GTB submitted to the High Court a full record of its deliberations during the evaluation of the cellular bids. It was revealed that the GTB had reached a compromise decision and had originally recommended that both Telecel and Econet should be jointly licensed under a 50/50 shareholding, and that the Secretary of the Office of the President, Charles Utete, had given instructions to the GTB to exclude Econet. Utete denied this accusation. High Court Justice Gillespie gave the Minister of Information Mujuru until May 31, 1997 to respond to Econets 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 boards participation in the exercise is attributable to the infiltration and manipulation of the board by the applicants (Masiyiwas) own officers 31 . Mujurus woes grew when she was reportedly reprimanded by Mugabe for making a disrespectful statement towards Vice-President Nkomo she had said that he was an old man who no longer understood or remembered things. Pro-Nkomo groups pressured Mugabe to dismiss Mujuru. Mugabe was reported to have told the central committee meeting of the ZANU-

30 31

Zimbabwe Standard, April 13-19, 1997: Call for board of enquiry into current tender system The Herald, June 12, 1997: Mujuru admits phone licensing flawed

PF that the party was being weighed down by loose discipline, loose thinking, and loose talk. Mujuru then wrote to Nkomo apologizing for her remarks. Econet received a pleasant surprise in its preparation for the court hearing to challenge the award of the license to Telecel. One of Econets 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 Econets appeal were set for September 18 and 19, 1997. After the hearing, Justice Sanduras 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 Courts decision finally came on December 31, 1997 Justice Sandura revoked the license awarded to Telecel, and ruled that the second cellular license be awarded to Econet. By this time, Telecel had already started installing its infrastructure; its Chairman announced that his company would contest the High Court decision. On January 15, 1998, the new Minister of Information Chen Chimutengwende, who had replaced Mujuru, said that the government had unconditionally accepted the court ruling, which meant the automatic invalidation of the Telecel license. He added that Econet was under no obligation to

take on board Telecel as a business partner 32 . Telecel filed an urgent appeal to the Supreme Court against the High Court ruling. In the affidavit that he filed in response, Masiyiwa stated that Telecels appeal was designed to coerce his company into offering Telecel some form of shareholding 33 . High Court Justice Smith ruled on February 10, 1998, that Telecels appeal to the Supreme Court did not suspend Econets 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 Mugabes government unashamedly overturned repeated and unambiguous rulings of the countrys 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 governments 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 governments

32 33

The Herald, January 16, 1998: Cellphone saga effectively ends The Herald, January 29, 2003: Telecels urgent appeal to be held today.

supporters have come unstuck and looked certain to remain so forever, it is suddenly all right and necessary to have another network 34 . By April, Econet had drafted an interconnection agreement with PTC that they hoped would be signed by the end of May. The agreement was expected to earn PTC Zim$64 million annually in the first year; this would increase to Zim$600 million by the tenth year. Econets 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 Id 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 hadnt 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 werent 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 theyd been helping with the court case, theyd 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 wasnt 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 didnt yet have the money to put these things in, but theyd 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, Econets 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 Econets equity capital. Masiyiwa and his team felt that the IPO was necessary so early in the companys 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, well probably start with 1,000 and rise. They said: No, no, no, no, no, why dont you start with two base stations and lets see where that goes? We said: No, the cellular business doesnt 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 PTCs 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 Econets IPO campaign was in full swing, Mugabes 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 didnt 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 didnt 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 wed 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. Theyre under-configured, the network is so congested. They need capital. It was such a pity. If theyd 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 theyd allowed Strive to start up when he applied, we would have an incredibly efficient network now. We would have been able to buy at a decent price, we would have had the whole infrastructure in before all this economic hardship started hitting the ground (Marion Moore Interview transcript). In spite of this difficult macro-economic environment, Econet had 63,000 subscribers by the end of its financial year June 30, 1999, which was 85% higher than the original forecast of 34,000, and which gave it a market share of 55%. Agreements had been signed with the 20,000 member Government Workers Association, and the 30,000 member Civil Service Cooperative Society.

Revenues stood at Zim$ 434 million. The company also achieved the very unusual feat in the telecommunications business of reporting a profit in its very first year of trading; the average time to profitability in the capital-intensive cellular business was considered to be three years. The Econet share was quoting at approximately Zim$ 4.50 by the end of June, giving the company a market capitalization of Zim$ 3.26 billion (US$ 86 million). In November 1999, Masiyiwa was named one of the top 10 outstanding young global leaders by the International Junior Chamber. Past recipients of the award had been the late US President John Kennedy, slain Filipino leader Benigno Aquino, ice hockey star Wayne Gretzky, and former US Secretary of State Henry Kissinger. The Zimbabwe Independent cited telecommunications experts who believed that the competitive spirit unleashed by Masiyiwa in Botswana and Zimbabwe had contributed to the highest cellular penetrations in Africa, with cellular phone numbers exceeding fixed lines 35 . Due to foreign exchange being unavailable, Econets 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. Mugabes 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. Mugabes party lost the referendum, the first time it had been defeated in a public vote. According to newspapers and government sources, Masiyiwas name was mentioned in several cabinet meetings. The President believed that there was a political motive behind the messages, and that Masiyiwa was supporting the Opposition party Movement for Democratic Change (MDC). Masiyiwa was informed that Mugabe had said that he should be eliminated. The government denied any such comment by Mugabe 36 . Security police sympathetic to Masiyiwa recommended that he should leave the country because his life was under threat 37 . The government then introduced a bill, the Postal and Telecommunications Bill, which would give it sweeping powers to eavesdrop on telephone conversations and to intercept e-mail messages between individuals and companies. Pastor Gatsi encouraged Masiyiwa to leave the country. The Econet Board had been looking at ways to reduce the companys exposure to the volatile Zimbabwean economy (see below). Masiyiwa decided to move to Johannesburg, and his family soon followed him.

13 The strategic decision to internationalize Given the fast deteriorating economic environment, the Econet management took in February 2000 perhaps its most significant strategic decision: to reduce the exposure to Zimbabwe by developing other markets in Africa and beyond. The vision of the company, which had been To provide telecommunications to all the peoples of Zimbabwe (IPO prospectus August, 1998), was now reformulated To provide telecommunications to all the peoples of Africa.

36 37

Wall Street Journal Europe, April 25, 2000: Zimbabwe falls victim to politics of vengeance The Namibian, May 8, 2000: Mugabe targets top business

We did a strategic review and we basically concluded that one of the biggest risks we had is single country exposure. Okay. Although at the time we had two exposures, we had Botswana and Zimbabwe, we realized that single country exposure was one of the risks we had to mitigate. There was an absolute howl amongst shareholders, because shareholders, particular market analysts, they can't see beyond this afternoon. They said: How can Strive get up, abandon a company two years into operation? If you guys want to expand, why don't you send a marketing department to be based in South Africa. You don't have to leave Zimbabwe. I said: Listen, the biggest risk this company has is single country exposure. They couldn't see it. I packed my bags - basically we sent Nic (Rudnick) forward together with another of our guys who's now based in London, called Marco Signorini, and told him to come and set up this office. So they came from scratch, they looked around. Finally they got this building where we are here, and I came in and lived in a hotel just down the road here, and we began to build. Now you've got to realize that we're coming from a country where there's a foreign currency control regime. So we could not transfer capital. So coming here was a massive challenge. That's why a lot of Zimbabwean business wouldn't do what we did, but we said: Look, we will find a way to build the relationships and access the capital, but we wanted to be in South Africa for basically five reasons (Strive Masiyiwa Interview transcript). The five reasons cited by Masiyiwa for being in Johannesburg, South Africa were: 1) Access to capital; 2) Access to international skills; 3) A banking system that was accustomed to supporting international companies; 4) Networks of senior managers; 5) Logistics Johannesburg was the city with the largest number of international airlines in Africa.

The macro-economic environment in Zimbabwe continued to deteriorate during the financial year 1999-2000, with high inflation, shortages of essential commodities such as food and fuel, and a falling currency. In his statement to the shareholders in the Annual Report for 2000, Chairman of the Board Prof. Norman Nyazema wrote, The crisis experienced by the country during the 6 months to June 2000 worsened the already deteriorating macro-economic environment. The economy was characterized by severe shortages of foreign currency, high interest rates of over 70%, inflation of approximately 60% and a serious decline in business confidence which resulted in the withdrawal of international credit cover to Zimbabwe by financiers and the suspension of bilateral and multilateral aid by the donor community. Furthermore, the exchange rate although officially pegged at Zim$ 38 to the US dollar was trading at an unofficial rate of around Zim$ 63 to the US dollar, which further increased operating costs (Prof. Norman Nyazema Chairmans 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 companys 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 NASDAQs telecommunications sector. Salomon Smith

Barney rated Econet one of the most exciting shares in Africa for international investors. In spite of the economic problems in Zimbabwe, HSBC recommended the Econet stock as a buy 38 . The company entered into new battles with the Ministry, with PTC, and with the Post and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ), which was set up in October 2000. Rudnick was quick to point out that these battles were not unique to Econet, or even to Zimbabwe in the whole of Africa Zimbabwe is no exception to that the idea of having a Regulator is something new. but the attitude of the Regulator which comes from the Government and is the same people who opposed us years before, is significantly influenced by what happened during the court case. Their attitude to us, the manner in which they treat us, how they respond to requests from us, is directly influenced by the history. But they havent continued to fight us anywhere near on the same scale that they did in the early days, and I wouldnt say that its 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 Econets 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 Masiyiwas 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. Econets 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, lets face it, customers and the public are fickle. They had enormous goodwill. Ive 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, its like a ship. Take down the sails, put it into a safe harbour, because its in the middle of a storm. Now, my customer on the ground is saying: You know, Im 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 theyre doing all that. And I say: But they dont have to publish accounts, we do. So even the way we look now at how they do their expansion, its a completely different approach. So that is why we have, for instance, developed things like Your Fone, the pay phone business. Im 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 its 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 Econets 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 groups 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. ... theyre an unpopular share at the moment. Theyre 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 Strives 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, Masiyiwas 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 groups expansion plans. The investors were in the process of conducting due diligence on the groups operations before releasing the funds. Out of these additional funds, US$ 150 million would be invested in Econet Nigeria which would take EWGs 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 Turnover (in US$ millions) EBITDA (in US$ millions) 648 211 2005 850 295 2006 987 369 2007 1036 385

Masiyiwa was hopeful of listing EWG on the Johannesburg stock exchange by the end of 2003.

14 Zimbabwe: a brief history 39 The British settled an area that was to become Southern and Northern Rhodesia (named after their founder Cecil John Rhodes) and the capital of Southern Rhodesia was established at Salisbury (now Harare) in 1890. It was administered by the British South Africa Company. After the Companys 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 Peoples 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

This section draws from GlobalEdges on-line Zimbabwe history, from BBCs online history of Zimbabwe, and from a document titled Zimbabwes Struggle for Liberation authored by Allison Ray (Fall, 1997).

39

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 Africas 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.

Mugabes government made impressive progress in education and the provision of healthcare during the period 1980-1990 - the adult literacy rate had reached almost 90% by the early nineties 40 . This progress came through an increase in public expenditures, which during most of the 1980s were around 45% of the GDP. The governments 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 41

OECD/AfDB report on Zimbabwe, 2002. Operations Evaluations Department (The World Bank Group), February 1, 1996: Structural Adjustment and Zimbabwes Poor 42 Operations Evaluations Department (The World Bank Group), February 1, 1996: Structural Adjustment and Zimbabwes 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 criteria 43 ." The 54 nation Commonwealth suspended Zimbabwe for 12 months. By this time international agencies such as the IMF and the World bank had also suspended aid to Zimbabwe. See Table 2 for a summary of Zimbabwes 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, Mugabes 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 electorates discontent with the ruling party that the MDC was able to capture 57 of the 120 seats in the elections held in 2000. The Judiciary 44 : The general common law of Zimbabwe is Roman Dutch Law, mixed with English Common Law. The Court System is divided into a number of tiers: the Supreme Court, the High Court, the Magistrates Courts, and the Local Court. The judiciary was respected both nationally and internationally as independent and impartial. There were many instances in the 1980s and early 1990s in which the Courts had demonstrated their independence. The land invasions by war veterans in 2000 brought the Courts into direct confrontation with the Government. There was repeated sharp criticism of the judiciary, and especially of the white judges, by the President, the Minister of Justice, parliamentarians of the ruling party, and the war veterans. The criticism systematically sought to link the decisions of the Judges to their supposed nostalgia for the colonial times. In 2001, the Chief Justice of the Supreme Court Anthony Gubbay resigned, with more than a year of his term to serve. According to the delegation that prepared the International Bar Association report, The position taken by Minister Chinamasa (and by President Mugabe) is that Chief Justice Gubbay resigned his position voluntarily. The delegation is satisfied that this is not the case and that Chief Justice Gubbay was forced into early retirement by relentless pressure from the Government and state controlled Government supporting media that he should resign, coupled with unfair and untrue allegations about him and threats of violence which the Government appears at least to have condoned 45 .

44 45

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

Civil Service 46 : The Civil Service increased from 10,570 posts in 1980 (only 31% blacks) to 193,000 in 1994. As part of the Economic Structural Adjustment Program (ESAP), the civil service was drastically reduced in 1995 by 23,500 to 169,500, with a further reduction planned of 26,000 jobs over the following two years. Considering that no reductions were permitted in the Ministry of Health and Child Welfare and the Ministry of Education, which employed 114,816 persons (nearly 60%), the cuts in the remainder of the ministries were quite deep. In addition to these cuts, many other measures such as performance evaluations and decentralization were introduced. There were reports of problems in communications between the government and the civil service about the motives and objectives of the reforms. Senior civil servants were reported to have resisted these changes. Salaries had also not kept pace with the rising cost of living. The Press 47 : The press was highly politicized, with a very strong pro-government section and a smaller but equally vociferous anti-government (or pro-opposition) section. The pro-government papers were The Herald (the oldest daily in Zimbabwe), The Chronicle (published in Bulawayo), The Sunday Mail (weekly), and the Zimbabwe Mirror (weekly). The pro-opposition papers were The Daily News, The Financial Gazette (weekly), the Zimbabwe Independent (weekly), and The Standard (weekly).

Religion: Roughly 40% of the 11.5 million people of Zimbabwe were considered to belong to some Christian denomination, although the influence of Christianity was far greater. The next biggest religion in Africa was African Traditional Religion, with nearly 30% adherents. Other religions such as Islam, Judaism, Hinduism were also represented.

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.

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Exhibit 1 - Econet Wireless Zimbabwe Key Indicators 1999-2002

1999 434 1147 8 0.0125 63,000 2000 1279 1358 77 0.0975 94,000 2001 2864 2096 279 0.322 133,976 2002 6083 3708 1024 1.2445 139,402

Revenues (Zim$ - millions) Average Revenue Per User (Zim$) Net Profit (Zim$ - millions) EPS (Zim $) Subscribers

Exhibit 2 - Zimbabwe GDP and Inflation 1995-2002

1995 1996 1997 1998 1999 2000 2001 2002 0.6 8.7 2.8 3.7 0.1 -4.2 -7.3 -5.6 25.8 16.4 18.8 31.8 58.1 55.7 74.5 138.1

Real GDP growth rate Inflation