How Strive Masiyiwa beat off the corrupt cronies

Despite being the victim of outright corruption in Zimbabwe, Strive Masiyiwa has prospered. He would have failed without help from an unexpected quarter.

Masiyiwa's success has made him a hero: a tycoon in a country crippled by cronyism

IT HAS become something of a cliché to say that the solution to poor countries' communication problems is to allow private companies to set up cellular networks.

Where cellphones have been licensed in Eastern Europe, Latin America and, most recently, in Africa, demand has been unquenchable. People like to talk to each other. Wireless networks are quicker and cheaper to build than landlines. Conventional telephone networks are plundered for copper and equipment. And for Third World yuppies, a mobile telephone is a more affordable status symbol than, say, a BMW.

So when, in 1993, Strive Masiyiwa decided to set up a cellular network in Zimbabwe, he had little trouble raising the necessary finance. But when he suggested a joint venture with PTC, his former employer and the national telephone company, its bosses refused, saying there was no call for mobile telephones in Zimbabwe. Masiyiwa made up his mind to go it alone, which, as it turned out, was a courageous decision. At every turn his company, called Econet, was frustrated by officialdom and corruption. Such things have helped bring low one emerging market after another, which is why Masiyiwa's eventual success has made him a hero for the times: a popular tycoon in a country crippled by cronyism.

Masiyiwa's first hurdle was to overcome PTC's claim that it had a monopoly on a service it had no plans to provide. He hired lawyers to test the legality of PTC's obstruction. To many people's surprise, a judge found that there was no law to back PTC's case, and gave Masiyiwa the go-ahead. But the government, which saw telephones as a means of spying on people rather than as a business, was unhappy. The Supreme Court overturned the ruling.

A faint-hearted entrepreneur would have given up. Masiyiwa, who had returned to his country from Wales after the end of white rule in 1980, appealed to the constitution instead. He argued that the behaviour of the state telephone monopoly violated the constitutional right to free speech. At a time when most European countries had yet to liberalise telecoms, this was a bold strategy. But it worked. In 1995, the Supreme Court ruled in Masiyiwa's favour, and he started setting up base stations around Harare, with help from Ericsson, a Swedish mobile-phone company. It took a presidential decree to stop him. In February 1996, Robert Mugabe forbade private cellphone operations, with a two-year jail term for offenders. Econet's Swedish partners had to abandon their equipment and retreat to their hotels.

Masiyiwa waited, and then appealed to the Supreme Court, who ruled the decree unconstitutional. There was a tender for a private cellphone licence. By this time, however, PTC had set up its own cellphone operation, and a number of political heavyweights were interested in a private network. The licence was awarded to Telecel, a consortium backed by, among others, the president's nephew, Leo Mugabe. Masiyiwa sued for the right to see the details of Telecel's bid; sure enough, it met few of the tender's specifications.

Telecel's licence was suspended, but the telecommunications minister, whose husband was an old business partner of one of the main Telecel shareholders, restored it. Two months later, a cabinet reshuffle cleared Masiyiwa's path. He won his licence in December 1997, while Telecel's was cancelled. Go-betweens tried to bribe, and then to intimidate Masiyiwa into sharing his business with Telecel's backers. He turned them away. Telecel eventually won a new licence, but because its managers know more about lobbying than running a telephone firm, it poses little threat to Econet.

In between court appearances, Masiyiwa set up a mobile network in Botswana, so he had experience on his side. Within a week of starting his Zimbabwean operations in July, Masiyiwa's company had no fewer than 10 000 customers.

Two months after its launch, Econet's network had a 45% market share: it is expected to overtake NetOne, PTC's subsidiary, before long. Econet's shares, offered to the public last month, were heavily oversubscribed. Masiyiwa's first serious threat is likely to come with the planned privatisation of Net One, presumably with a foreign partner, though if the pace of Zimbabwean privatisation until now is anything to go by, that could take several years.

How to explain this improbable coup? A boyish 37, the devout Masiyiwa gives the credit to God. A more secular analysis holds lessons for other reformers. One advantage for Masiyiwa was that Zimbabwe's government was not used to spirited opposition. Bankers and politicians who privately think Mugabe is a disaster will nevertheless praise him to his face. But even an entrepreneur such as Masiyiwa would not have got far without the courts. There are still honest judges in Zimbabwe, and they gave him the power to embarrass the bureaucracy. Thanks to the law, Mugabe's cronies gave up. The effort of reforming finance, company accounting and banking supervision in developing countries is essential. But it will be much more potent if the courts act as the last line of defence. - The Economist Newspaper Ltd, London 1998.