Government was after Masiyiwa

The government was in January 2004 accused of trying to muzzle out Zimbabwean businessman Strive Masiyiwa, who was now living in South Africa, by shutting down his mobile phone company, Econet, over alleged foreign currency abuses.

The government had already shut down his newspaper, the Daily News, three months earlier.

The closing down of Econet, which was the largest mobile operator in the country, would leave two government affiliated operators, NetOne and Telecel.

At the time newly appointed central bank governor Gideon Gono was cracking down on all alleged foreign currency abusers including banks.

Full cable:

Viewing cable 04HARARE8, GOZ GOING AFTER COUNTRY’S LARGEST CELLULAR PHONE

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This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000008

SIPDIS

AF/S FOR S. DELISI, L. AROIAN, M. RAYNOR

NSC FOR SENIOR AFRICA DIRECTOR J. FRAZER, D. TEITELBAUM

LONDON FOR C. GURNEY

PARIS FOR C. NEARY

NAIROBI FOR T. PFLAUMER

E.O. 12958: DECL: 12/31/2008

TAGS: PGOV PHUM ECON EINV ECPS KPAO ZI

SUBJECT: GOZ GOING AFTER COUNTRY’S LARGEST CELLULAR PHONE

OPERATOR?

REF: HARARE 2454 AND PREVIOUS

Classified By: Political Officer Win Dayton under Section 1.5(b)(d)

¶1. (SBU) SUMMARY: Government maneuvers may be underway to

withdraw the operating license of Econet Wireless Zimbabwe

(EWZ), the nation’s largest cellular phone operator, over

alleged foreign exchange abuses. The exercise could

represent a broadening of GOZ efforts to destroy Strive

Misiyiwa, the South Africa-based Zimbabwean who is the

principal owner of EWZ and the Associated Newpapers of

Zimbabwe (ANZ), publisher of the recently closed The Daily

News (TDN). EWZ already has a string of legal victories

against the GOZ but recent GOZ willingness to shutter

businesses in defiance of court orders (as evidenced in the

ANZ case) may bode ill for the company’s long-term survival

in Zimbabwe. A shutdown of Econet would leave the country

with two cell GOZ-affiliated phone service providers and

disrupt a telecommunications sector and economy already under

immense strain. END SUMMARY.

¶2. (U) According to an article in the December 24 edition of

the goverment-controlled Herald newpaper, foreign currency

paid by Econet for calls originating outside the country was

not being remitted in Zimbabwe, contrary to a year-old

government directive. The article reported that most

incoming calls to Zimbabwe came through Econet, generating

foreign exchange, while most outgoing calls went through

competitor NetOne, which generated inadequate foreign

exchange for the company to meet its international

forex-denominated obligations. All calls were supposed to go

through one gateway. The article asserted that authorities

were investigating Econet’s practices, as well as failure by

officials of the Postal and Telecommunications Regulatory

Authority (Potraz) to implement the directive effectively.

¶3. (U) EWZ’s principal owner is South Africa-based

Zimbabwean, Strive Masiyiwa, who also owns Associated

Newspapers of Zimbabwe (ANZ), the publisher of closed

independent daily newspaper The Daily News (TDN). Government

media coverage of the Econet investigation stressed

Masiyiwa’s ownership of the newspaper and his alleged

financing of “subversive activities”, i.e., the opposition

MDC. It also highlighted adverse business turns against

Masiyiwa telecommunications interests in Nigeria and Kenya.

Masiyiwa is CEO of Econet Wireless International, which

maintains operations in several countries, including the UK.

¶4. (SBU) EWZ’s locally based chief executive Douglas Mbweni

told the Embassy on January 5 that the company has not been

approached by GOZ authorities in connection the allegations

set out in the Herald. EWZ on January 2 issued a nine-page

public notice (faxed to AF/S) recounting the company’s

contributions to national develepment and responding

specifically to the Herald allegations. The notice denied

company involvement in subversive activities and elaborated

on its compliance with the terms of relevant laws and

licenses. It claimed that the company was unaware of any

government directive reducing the number of gateways to one

but asserted that such a directive, if it existed, would be

“illegal and unjust.”

¶5. (U) Masiyiwa and Econet have had a long contentious

history with the GOZ. Econet was founded in 1998, earning

its operating license that year only after a five-year court

battle against the GOZ. Masiyiwa’s legal campaign began in

1993, when he successfully challenged the government’s

telecom monopoly as an unconstitutional infringement of free

speech. The GOZ then denied his application for a license,

issuing one instead to Telecel Zimbabwe, a company dominated

by Mugabe supporters, including Chenjerai Hunzvi, the late

war veteran leader and violent enforcer of Mugabe’s land

seizure campaign. After a lengthy legal fight, a court

ordered the issuance of a license to EZW. The company soon

became the country’s leading cell phone service provider.

The GOZ has accused Masiyiwa of funding anti-Mugabe

activities and blamed him in part for the nation’s rejection

of a GOZ-supported draft constitution in a 2000 national

referendum. After death threats and arrests, Masiyiwa moved

to South Africa in 2000 and reportedly has not returned to

Zimbabwe since.

¶6. (C) COMMENT: The complete emasculation of moneyed

players like Masiyiwa, a black Zimbabwean, and others,

including white ex-commercial farmers, who channel financial

support to the opposition has long been a priority for the

ruling party. It was a key element behind the government’s

chaotic land grab and now fuels continuing talk of

“indigenizing” other sectors of the economy. It is too early

to know whether the Herald coverage signals GOZ intent to

bring down Econet in spite of court judgments or is meant

simply to intimidate Masiyiwa in his varied engagement with

Zimbabwe. Certainly, the continued closure of TDN is

intended in part to strain Masiyiwa’s resources. We do not

know the accuracy of the Herald’s reporting of Masiyawa’s

alleged setbacks elsewhere.

¶7. (C) COMMENT (CONT’D): In some ways parallelling the ANZ

case (retels), the unfolding Econet “investigation”

represents a microcosm of Zimbabwean rule of law: the law not

as a shield but as a sword with which to constrain or to

dispatch selected enemies of the state. The government’s

oppressive and nonsensical regulatory overlay assures that no

firm could stay in business long without operating outside

the law and, indeed, all do — especially those affiliated

with the ruling party that are building empires above the

law. Thus, the state has effective legal grounds to go after

any business in country. Sharpening this Sword of Damocles

is the ruling party’s growing paranoia and financial need.

Businesspeople in Zimbabwe are in an increasingly precarious

plight, scrutinized by the ruling party through a “with us or

agin’ us” lens in an effectively extortionate atmosphere.

The growing prominence of business figures in the party

reflects pressure on the business community to evidence

loyalties demonstratively, in word and deed. This

politicization can be expected to further complicate an

already painful operating environment for the beleaguered

business community and to act as yet additional drag on the

imploding economy.

¶8. (C) COMMENT (CONT’D): As with so many other recent GOZ

economic measures, the GOZ’s obsession with its deep forex

problems in part explains why this action may be underway

now. Forex difficulties in the telecom sector, however, are

unlikely to be resolved until a badly underpriced tariff

regime is considerably restructured, pricing many Zimbabwean

consumers out of the market. In any event, by reducing

competition, the elimination of Econet would have predictably

deleterious results for the overall quality of telecom

services in Zimbabwe, which has been falling markedly during

the past year. The situation nonetheless may perversely

appeal to the GOZ by leaving two parastatals — Telecel and

NetOne — with effective monopoly control of Zimbabwe’s cell

phone services sector and attendant opportunities for revenue

enhancement at the public’s expense.

SULLIVAN

(231 VIEWS)