Resisting political corruption- the story of Econet- Part Three

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 wasn’t an easy task. Were it not for our belief that the Lord will provide, I tell you we wouldn’t have got through. Mr. Masiyiwa, in particular, believed he had a vision from God. It wasn’t 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”.

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.

The ruling party announced that it was setting up its own mobile service, took over the other slot, and set up a committee 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 Econet’s 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 PTC’s 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.”

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”.

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 hadn’t 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 couldn’t.

“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 can’t 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.”

This interviewee requested not to be named. Marion Moore, a white Zimbabwean, 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 I’ve 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, he’s on a huge pedestal for me, he’s 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.”

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 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 wasn’t 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 Zimbabwe’s 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 who’s 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”

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 to the radio frequency. 

As soon as the equipment from Ericsson arrived, Masiyiwa’s 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.

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

To be continued tomorrow

Part One

Part Two

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