Resisting political corruption- the story of Econet Wireless

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 licence through ethical means. A number of individuals and organisations impressed by his values come to his help and this assistance, along with the independence of the Judiciary, is instrumental in his firm being given the licence in July 1998. The case represents an in-depth study of a successful example of resistance to political corruption.

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, we’re about to win anyway, and what we really need is people like you to help rebuild the country.”

He then went back to Britain and obtained a Bachelor’s 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 (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 organisation 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 didn’t do very much except politics. Below you had an organisation that was 80% white, that was over the next two or three years to become 80% black. So it was an interesting time from that point of view to be a young engineer in almost a political cauldron” .

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.

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 mother’s phone number for interested parties to call. Because he lacked capital, he focused initially on renovating people’s 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.

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 Masiyiwa’s life. He was abducted at gun-point from his office by the Central Intelligence Organisation (CIO). There are conflicting reports as to why he was detained. He was told that he was being arrested 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. Guzha’s 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.” 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 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”

Masiyiwa and the other prominent black Zimbabwean entrepreneurs were concerned that blacks, who made up 95% of Zimbabwe’s 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, subsidised interest rates, and preferential allotment of governmental contracts to compete against established foreign businesses. Tandon 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 programme 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 organisations from Norway, Ireland, Britain, Austria, and the US also provided some funding.

Masiyiwa’s 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 Mugabe’s 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.

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

To be continued tomorrow:

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