The deeper significance of foreign investor interest in TelOne and NetOne

The rhetoric from some of  Zimbabwe's politicians sends very mixed signals about how welcoming the country is to foreign investment. Actual events suggest that there has been a sea-change in government thinking about how to move the country forward economically which many observers have overlooked. 


The predominant focus in regards to investment in Zimbabwe has been on the controversial insistence of government that 'indigenous' locals must have a minimum 51% shareholding in all enterprises. The government has continued to talk tough about this in the face of warnings that investors would be turned off.

There are signs that the government is willing to at least selectively soften its position, but also signs that there are investors who are not turned off by the requirement for locals to have majority shareholding.

India's Essar Group was allowed to buy 54% shareholding of struggling state-owned steelworks ZISCO earlier this year. So there are clearly exceptions that can be made to the rule that a foreign investor can have no more than 49% equity. Focus has been so much on fright at the new rule that little attention has been paid to what the requirements/circumstances are for an exception like Essar's. Even if not widely applied, it does indicate more of a willingness for compromise than the hot-headed public political rhetoric may show.

Also from India, Bharti Airtel, with operations in 16 African countries already, has expressed an interest in government-owned telcos TelOne and NetOne, fixed and mobile networks respectively.

TelOne has long enjoyed a monopoly, and so has not had to pay a 'competition penalty' for its indifferent service to its customers. This will now have to change as new, cheaper voice technologies that significantly lower the barrier to entry to voice telephony finally come to Zimbabwe. Like elsewhere, they threaten the relevance and very existence of the fixed telephone.      

The government's willingness to put mobile network NetOne on the market speaks volumes about many things. It is now the last in terms of subscriber numbers and innovation of Zimbabwe's three mobile networks. But back in the 1990s it was the first cellphone network, was briefly a monopoly and after competitors came on board remained for a while the prestigious 'network of choice.' With competition from private players who did not have to answer to a political master, NetOne soon fell behind, for all the known reasons of why governments don't run businesses very well.

That the control-freak government has conceded this by allowing foreign investors to take a big chunk of TelOne and NetOne is an interesting admission of capitalist reality: potentially lucrative but high-capital sectors like telecommunications need levels of continuing investment that are not easily accessible to government or private locals.

That Indian groups are featuring prominently in the uptake of equity in previously wholly-owned government companies is not entirely accidental. In response to western sanctions on the Mugabe government that have also in many ways affected the economy in general, there has been a quite clear drive to lessen the economic footprint of investors from the West. India and China are among the countries whose investors are now benefiting from this very deliberate diversification of the profile of Zimbabwe's investors.

For the Mugabe government, it is a victory of sorts that it can continue to attract high-profile investors against the conventional wisdom that its loud 'empowerment' rhetoric would chase them away. If the experiment with new partners like Essar and Bharti works well for all concerned, what is a trickle of investment now could become a flood, especially considering Zimbabwe's many advantages over many other African countries currently considered hot investment destinations.