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ZAMBIA: Telecommunications Sale ‘Lacks Transparency’

Kelvin Kachingwe

LUSAKA, Dec 22 2009 (IPS) - The impending privatisation of the Zambia Telecommunications Company (Zamtel) is being opposed by civil society organisations and opposition political parties, who accuse the government of lacking transparency in selling one of the last remaining state-utility firms.

Early this year the cabinet decided to sell 75 percent of the Zamtel shares, and appointed RP Capital, of Cayman Islands, to evaluate its assets.

RP Capital is an investment firm specialising in identifying intermediate and long-term investment opportunities on behalf of institutional investors, and qualified high-net-worth individuals in Eastern Europe, the Middle East, Africa and India.

But the evaluation report has never been made public, and was the subject of a tribunal, as it was alleged by civil society organisations that Dora Siliya, then Minister of Communication and Transport, had ignored the advice of the attorney general in awarding the two million dollar contract to RP Capital to evaluate Zamtel.

Attorney General Mumba Malila had advised Siliya against signing a memorandum of understanding between the government and RP capital on evaluating Zamtel assets.

Fackson Shamenda, former Zambia Congress of Trade Union president, says the RB Capital valuation report would have been a good starting point for everyone concerned about the future of Zamtel.

“We want to know the evaluation and its outcome, up to now, very few people are privileged with the information. There hasn’t been transparency in the sale of Zamtel. Maybe government is right to sell Zamtel, but without the valuation report, we won’t know the truth,” Shamenda says.

The government says it cannot make public the valuation report, as it would jeopardize the privatisation process.

Dr Buleti Nsemukila, permanent secretary in the Ministry of Commerce, Trade and Industry, says it would be wrong to disclose the value of Zamtel, as all the prospective buyers would bid around the value of the assets and frustrate the process.

“The decision not to disclose the value of the company is the right one, and an important tool for negotiations for the sale,” Nsemukila says.

In 2002 the government shelved plans to privatise Zamtel, opting instead to commercialise it. But this did not work either, as performance continued to decline. The company, established about 40 years ago, is now encumbered with liabilities of more than 120 million dollars. It also has an annual operational deficit of 17 million dollars, and is heavily indebted to the government in unremitted taxes.

A parliamentary committee on communication, transport, works and supply in January last year recommended that Zamtel be restructured and recapitalised to find a lasting solution.

Yamfwa Mukanga, opposition Patriotic Front (PF) chairperson for industry, says the cure for Zamtel lies in improving management to improve the firm’s efficiency.

The PF as a party is strongly opposed to privatisation, and has threatened to nationalise Zamtel if elected to office.

David Punabantu, a Lusaka-based economics analyst, favours improving management by giving preference to Zambians, with privatisation the last option.

“The question we should be asking ourselves is, are we just selling something because certain management has failed to use it to its full capacity?” asks Punabantu.

But Mark O’Donnel, former chairman of the Zambia Association of Manufacturers, says only the private sector can give Zamtel the re-capitalisation it urgently needs.

Reeling from past experience of privatisation, many Zambians are wary of what has been a major defining policy of the ruling Movement for Multi-Party Democracy (MMD) since it came to power in 1991.

“What is happening to Zamtel is exactly what happened with Zambia Airways. We had a quarrel with the government when they were liquidating Zambia Airways. How many years down the line have passed and they are still struggling to dispose of its assets? Its way over a decade,” Shamenda says.

“They could have reorganised it, put an efficient management in place and stopped political interference, and it was going to succeed. Zamtel is solid, it’s not as people say it is. Look at the foreign exchange that is there, the optic fibre they’re putting in place, the buildings and the human resources.”

The Zambia Development Agency, legally mandated to dispose of state enterprises, has announced that eight companies out of 30 have pre-qualified, and will participate in due diligence up to Dec 23 this year.

These include Orascom Telecom Holdings, SAE/Telecel Globe Limited of Egypt, Altimore Holdings/Vimpelcom of Russia, Libyan LAP Greencom Limited/LAP Green Networks, Portugal’s Telecom and SGPS SA.

Onda Analystics, British telecommunications investment consultants, said in its latest report Zamtel’s new owner could revitalise the company, gaining a 19 percent share of the mobile market by 2015, considerably up from its current 4 percent.

“A new operator will have to turn around an operator in crisis. A strategy along the lines of a new entrant will be needed, as Zamtel has fallen further and further behind the mobile market,” explains report co-author Tom Harden.

“A massive staff reduction programme will need to be carried out by whichever company takes over. The union has recognised this, hoping to get the best packages for its members by negotiating with the government now, rather than the new owner later.”

The National Union of Communications Workers (NUCW) and Zamtel management have agreed on a conditional separation package to be paid to all workers before the firm is privatised.

Clement Kasonde, NUCW general secretary, says the conditional separation package agreed between management and the union includes three months’ salary for each year served, two months’ salary for repatriation and one month in lieu of notice.