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Saturday, 1 August 2009

A Privatized ZAMTEL, 2nd Edition

A passionate debate over the privatisation of ZAMTEL courtesy of the Brain Drain team. Some good exchanges between Dr Richard Mbewe, James Mwape and our resident contributor Dr Kaela Mulenga [with many others chipping in].

Whilst the discussion was interesting, I found it missed a number of crucial issues, which would take a while to fully explain. The main one being that contributors did not sufficiently appreciate that its not one ZAMTEL but three! There's the issue of the domestic land infrastructure; CELL-Z; and, more importantly the international gateway. Readers are encouraged to listen in but also review much of existing narrative posted on the communications tag which debunks many of the points raised by the participants (and agrees with some). For this post, I simply want to set out briefly where I think we are and what government needs to answer.

The decision by the President to privatise ZAMTEL is welcome, but should also be met with cautious optimism, especially by many of us who have long been arguing not just for a ZAMTEL strategy but a communication strategy that would ensure improved connectivity for the average consumer.

The current Government proposals are too sketchy at present to reach definitive conclusions on their viability. We certainly need more details from Government, until then its worth bearing in mind the following questions that need to be addressed :
  • Is the Government proposing to split ZAMTEL in two as was recommended by the Parliamentary Committee on Communication or it planning to sell the whole lot?
  • How has Government concluded that “partial privatisation” is the answer, when previously we heard all options were on the table?
  • Where is the evidence of their analysis for all Zambians to see and judge for themselves?
  • What is to be done about Cell-Z? What about the international gateway? Will it be made independent? How will it be funded going forward?
  • We are told the international gateway will be liberalised, what does that mean? Are the international gateway fees going to be reduced? Will ZAIN and MTN will be allowed to own separate gateways or will they become co-owners of a potentially new jointly owned gateway venture?
  • How will the privatisation relate to the new Information and Communications Technologies Bill 2009 ? Is the bill predicated on a privatised ZAMTEL? Will preventing privatisation impact negatively on its implementation and that of ZICTA's new powers?
As previously noted the Zambian Economist has previously written to the Ministry of Finance and the Zambia Development Agency proposing a model that could move our industry towards efficient access for the international gateway, while ownership remains shared with Government hands. The other domestic part of ZAMTEL would then be sold along the lines of the ZANACO model of ownership between new investors, workers and ordinary Zambians. The Government wrote back dismissing the idea saying all that was needed was money. Why has their position now changed?

In short, if I was to summarise my position, I would say that we appreciate the positive signals from Government and the possibility of new emerging policy and operational framework for the communication industry, especially when considered within the framework of the Information and Communications Technologies Bill 2009. But Government should bear in mind that what Zambia needs is a communication strategy not a ZAMTEL strategy. We also need to have transparency with respect to the existing audit of ZAMTEL, as noted by former Minister of Finance Ng'andu Magande. No progress can be made until viable answers are provided to the issues raised.


  1. Bangladesh has many international gateways, presumably the more the merrier.

    I presume as other fibre optic cables link into Zambia such as EASSY, more international gateways can be established.

  2. Hehe, a clip of Dr. Richard Mbewe being interviewed on Polish television, in Polish. :)

    Rozwój Warszawy utknal w korkach

  3. I appreciate the lack of understanding of the implications in selling off Zamtel by some quarters but aside from security implications cited by Brig Gen. Miyanda- please view this humiliating exchange between ZAF and green leader RAF ( Rhodesian air force ) here

    The Zambian army,ZNBC,ZAF and Zambia intelligence rely on Zamtel infrastructure for communication sothe sale of Zamtel as a whole has wide implication, I would go with Cho in proposing it's split up for the such of our national security and pride.

  4. Kwanunikwanu; can you explain how ZAF vs RAF has anything to do with ZAMTEL? Honestly I have always wondered what these 'security concerns' are? Let's say we allowed other competitors to run their own IGs and let govt retain the ZAMTEL IG; will this also endanger the security of the nation? I presume countries like Ghana, Kenya, Uganda etc have endangered their 'national seccurity' for allowing Zain to operate IGs.

  5. The security issue has never been defined.

    It's not good enough just saying there are security concerns.

    One needs to explain in detail what these are; and, why they can only resolved by government ownership.

    Scaring people with buzz words is not progressive way to debate issues.

    I am in full agreement with BrokenHill Man (great name - when is Zambia getting the remains back from Britain?)

  6. Brokenhill man-

    Am not sure Cho will give me the space on this blog necessary to bring you up to speed from the broken hill man era ( just joking). I detest inference but if you are asking what does communication have to do with wars? Gee…. I couldn’t begin to tell you?
    What did the Reuters family get rich deploying pigeons to carry news of battlefront condition in the First World War?
    What did the US first target the core of the Baghdad telephony system in early minutes of the Iraq war?
    Indeed why was there any qualms about Obama walking around with an unencrypted blackberry when he took office and insisted on keeping his blackberry?

    To begin to answer you question, I must dispel any suggestion of that am opposed to partial or for that matter if Zambians choose to go full Monty on this idea. As others have pointed out Like Prof Luo in the post , Zambians especially those like you who may not be able to make connection between Zamtel and rural radio/TV reception or the ZAF Base in Mbala to the plot one, it is important that those who know raise alarm for caution so that GRZ can make other arrangements or take the status quo in to consideration when the sale is undertaken, lest those in know be blame for not speaking out in the future.

    The security concerns are not primarily with limiting IGW, there are about ensuring that defense forces will still have the fore back communication system should any emergency that requires immediate contact between powerful politicians in Lusaka and other far flung areas and the forces on the ground in strategic locations. If you watched the you tube clip you can imagine the horror of that junior officer if for some reason say (Zain congestion) prevented him from reaching his commander, not that this happens all the time but I hope you appreciate the need for some to speak.

  7. Interesting letter in The Post, from 'a concerned employee', which mentions 4 reasons for ZAMTEL's relatively poor performance:

    Zamtel privatisation: employee’s concern
    Written by Concerned employee, PK
    Thursday, August 06, 2009 5:39:22 AM

    I write to support my fellow Zamtel employee who wrote in a recent edition of The Post that the company is not valueless as our learned economist Rupiah Banda puts it.

    First and foremost, I want to say even a grade 2 pupil can tell that a company like Zamtel with assets in all 72 districts in Zambia, with a fleet of over 500 vehicles, qualified technical manpower on which Zain and MTN have been founded, prime land, switches in all locations, not to mention the Mwembeshi Satellite Station, cannot be valueless.

    Yes, every business owes someone. The little we owe the Chinese should not be a national anthem to sing at all press conferences. We dealt with the corrupt-free Swedish, Japanese and British in terms of technical support and no one sung a song. Now that we are dealing with Chinese, Zamtel is not viable.

    Fellow Zambians, the problem we have here is corruption, unpatriotism, selfishness and being myopic.

    None of our past managing directors has raised a finger to lambast the greedy politicians and tell the nation how these companies are milked. The current managing director presented a budget for the year 2009-2010 which was to see Zamtel make a profit, but the powers that be [Dora Siliya] dissolved the board the following day upon seeing that budget because it was going to derail their plans of selling the company for thirty pieces of silver.

    I am schocked that the presenter of the budget - the managing director - has joined politicians after ascending to the throne on the basis that Zamtel is viable.

    The reasons why Zamtel is ailing are: -

    (1) it’s too centralised in its operations;

    (2) the managing director makes decisions that are not implemented, they accumulate dust at the ministry before implementation and are usually overtaken by events;

    (3) resources such as fuel, vehicles, hotel accommodation are abused by the government;

    (4) lack of support from shareholders such as ministers, and the permanent secretary. Senior government officials are all on MTN or Zain, only when it’s free do they use Cell Z, that includes internet.

    [5] Former president Kenneth Kaunda’s policy for government to do business with Zamtel has been thrown out because there are no kickbacks when you do business with Zamtel. Services that Zamtel used to provide even at State House are now in private hands.

    This company belongs to our children. Let’s not **** in the well after drinking from it. Let the Chinese work in China, we don’t want Chinese cleaners here.

    Our children have the right to work, and Zambia will only be developed by Zambians.

  8. MrK,

    Thanks for this.

    The reasons are correct.

    But even under any party it would be same..

    Our political system is probably not geared towards parastals..

    We need to reform it...and then perhaps give more power to the people to monitor them..

  9. These Zamtel 'employees' writing in the Post have caught my attention too. On point:

    "(3) resources such as fuel, vehicles, hotel accommodation are abused by the government"

    The other 'employee', whom the author of this was referring to, alleged that Zamtel had bought about 150 Mazda vans last year, the bulk of which went to MMD for their Presidential election campaigns.

    If that is true, then it's yet another reason I support Zamtel's privatisation.

    Problem is, by the time it is sold, the tax payer would hardly come out the beneficiary, if the murky water is not cleared.

  10. Zedian,

    Government corruption is no reason for privatisation.

    Corruption comes from lack of regulation, oversight and transparancy.

    This is not addressed through privatisation. If anything, a private company is even less transparant than a public one. Private companies do not own explanations to parliamentary committees. CEOs have very little accountability.

    There is absolutely no telling what is going to happen to the company once it has been privatised. It could be disbanded, split up, change ownership over and over...

    What is needed, and we cannot run away from this, is regulation, and a separation of state assets like ZAMTEL, from the political class that makes up the government.


    We need to reform it...and then perhaps give more power to the people to monitor them..

    I think the separation of the government and the state should be spelled out in the constitution. Promotion within parastatals, consequences to non-payment of bills by the government, all of that can be put into law.

    The same with the civil service in general. There should be one political appointment, the top civil servant, and everyone else should be appointed from the ranks of the civil service, by other civil servants.

  11. Mrk,

    Your point is well taken, but with proper judicial or legislative review for public utilities, privatised companies are absolutely subject to oversight. The problem in Zambia, as with many countries in the region, is an overblown Executive branch that so overshadows any other elected or judicial official as to render their judgment meaningless if opposed to that of appointees in the President's office. George Kunda's ill-advised comments early today on the physical safety of the Press in Zambia are a case in point. With parastatals or private companies, the key is Independent oversight. In the wake of Zambian officials unwilling to allow such oversight, privatisation becomes the only answer. I would note that this is also a problem unaddressed by your ZANU-PF favoured sons down in Zimbabwe, which is a big part of why any industry nationalised there has subsequently failed. Not because national industries are inherently flawed, but because the kind of management you continue to champion is.

  12. Quoting from the letter: None of our past managing directors has raised a finger to lambast the greedy politicians and tell the nation how these companies are milked. The current managing director presented a budget for the year 2009-2010 which was to see Zamtel make a profit, but the powers that be [Dora Siliya] dissolved the board the following day upon seeing that budget because it was going to derail their plans of selling the company for thirty pieces of silver.

    This is a clear issue of lack of transparancy, and of governance.

    Why does it fall from within the power of Minister Siliya to dissolve the board of a parastatal?

    The problem is that privatisation does not solve this. It simply shifts the problem to the private sector, but does not solve the issue of bad decisions being made at the top level.

    If the mines are anything to go by, it simply shifts corruption from milking the parastatals, to making corrupt deals with management - no taxes for kickbacks, for instance.

    Also, it is the prospect of privatisation, that causes a lot of the non-payment of bills that sinks these parastatals. If a company is going to be sold off anyway, why pay the bills at all? It will simply become part of the company's debt, which will be wiped out through privatisation.

    That sets up the destruction of a state asset, which will then be privatised in secret, with the maximum possibility for corruption, kickbacks, fees, etc.

    Then, you end up with a private sector ownership and management, which owe no allegiance to Zambia, have no stake in seeing the company being well run, only in making profits or breaking even. Which they can do by asset stripping. They can even acquire the company to destroy it, if that makes them more money elsewhere. With RP Capital Partners being a Dany Gertler company, and with Gertler's business in the DRC, you may even wake up one day and find that what once was ZAMTEL, is now a Congolese company, run from Kinshasa. Are you ready for the political and military consequences of that, if there is a conflict with that country? And wouldn't that fact weaken the Zambian government's hand in any negotiations with the government in the DRC?

    I would take poor management by the Zambian government over that scenario any day.

    However, we don't need to settle for poor management. The problems with ZAMTEL have been well spelled out in this letter, and are very remediable through legislation. All we need, is legislation that creates parastatal (state) independence from government (politicians). That's all.

    It is time that we had a constitution which separated the party in government, the government, and the state.

    And it can be done. The people must demand it.

  13. MrK,

    I thought your overall position was that you are indifferent between private ownership with HIGH TAXES and public ownership?

    What is wrong with privatising ZAMTEL Domestic and then taxing it significantly in line with its inherent monopoly on landlines (provided it is making profits)?

  14. Mr K,

    I am in agreement with you on the need for "a constitution which separated the party in government, the government, and the state," the lack of which has plagued just about all the parastatal companies for decades and prevented them from operating at their optimum.

    Notwithstanding this fact, I have other reasons why in principle I think Zamtel should be privatised and will outline later in my review of the situation.

    I have similar concerns with regard to the RP Capital cloud of secrecy hanging over Zamtel which I have demanded be resolved before any anything proceeds. So far the Republican President has dodged any questions to do with this, simply saying that Zamtel workers wanted the company privatised. Very simplistic indeed.

    All that is required is transparency as well as due diligence in veting potential buyers for the firm, or parts of it. If the govt engaged a transparent bidding process and rigorously vetted bidders (for which I expect there to be many), against a predetermined and strict criteria, then your fears about selling Zamtel to some dodgy buyer in Congo should be allayed. This should be standard procedure, especially given that the company or parts of it to be sold are viable businesses. Zamtel simply needs re-energising and refocusing priorities; it is not a failed company and therefore should not be evaluated nor sold as such.

    The public must seek surety from the government that Zamtel will never be sold to just anyone.

  15. I was thinking about MrK's argument about procedures (and transparency).

    Even if ZAMTEL published information regularly (like Thames Water or a Government Ministry in the developed world) it wont lead it to run perfectly.

    A public company has the problem that it is owned by too many people who can't care less to monitor it each day...even if all the information was there....

    There are no black or white answers to these issues.

    Personally decoupling ZAMTEL is the way forward - the international bit can be jointly owned via PPP. The domestic part should be auctioned off to highest bidder!

    It is not possible following the ICT Bill 2009 for Government to own ZAMTEL Domestic. People really should read the legislation!

  16. Cho,

    "The domestic part should be auctioned off to highest bidder!"

    I think capability to run the utility should also be taken into consideration, in order to eliminate bidders trying to buy the company for reasons other than running a telco. That should also serve as surety for the employees.

    I knew of a subsidiary company in Zambia that was up for sale by it's huge American parent company some time ago. The subsidiary company was doing very well by local standards but the parent company had to sell it in view of global repositioning, and so they on insisted on selling it to the most capable bidder, because they were more interested in the subsidiary continuing running as a reseller of their products and solutions.

    There're lost of similarities with the Zamtel there.

  17. Zedian,

    I agree, but if the bidding is done properly you should get a high price for it forcing whoever takes over to run it properly.

    The point is that GRZ does not think it is sitting on something people would bid for. It is talking like someone is doing Zambia a favor to take over the company. Yes the company has debts, but is actual value exceeds the debt in the long term. They need to think 10 - 15 years not 2010. 

    Anyway, I have now given up on Lungwangwa. The man does not what he is doing. He's absolutely clueless. Let us call a spade a spade. 

  18. Cho,


    I thought your overall position was that you are indifferent between private ownership with HIGH TAXES and public ownership?

    What is wrong with privatising ZAMTEL Domestic and then taxing it significantly in line with its inherent monopoly on landlines (provided it is making profits)?

    This is what I mean with the issue of poor management or political corruption not being solved by privatisation. As long as they are willing to bribe and bully the politicians, foreign corporations will never voluntarily pay any kinds of high taxes.

    I am all for high taxation of the mines, but if it was up to me, I would not even touch 'profits', because it is almost impossible to find out what an international corporation's incomes really are. There are too many accounting tricks - like amortisation of loans, depreciation of capital goods, and other deductions. As we have seen with the mines.

    In fact, even in the US, most corporations don't pay taxes for the same reasons - they apply hordes of lawyers and accountants to exploit loopholes in the law. Recently, there was an instance of one building in the Bahama's that 'housed' over 15,000 US Corporations - simply for the purpose of tax evasion. And I'm not hammering on the USA (I never hammer on an individual country), because these corporations exist in a space that is way beyond any nation. They are transnational corporations. That's why they can do business in the US, headquarter in the Bahamas or Dubai, and have their manufacturing operations in the Philippines, China, Mexico, etc.

    So instead of taxing profits, I would tax turnover - confiscate 1 in 5 truckloads with ore leaving the mines and call it a tax - that is how I would do it.

    Then the Zambian government can sell it's own ore, or build copper reserves, maybe even open it's own mines, and back the Kwacha with copper, and create money against that to capitalize it's economy without creating inflation.

    The fundamental shift in discourse has to be that the mines are there to provide capital, not jobs. Only 58,000 people in total are employed in the mining industry out of a workforce of 5,000,000, a fraction of those who would be employed in a developed agricultural and manufacturing industry. And yet, the mines exported $4 billion in copper and cobalt (in 2004).

  19. MrK,

    We are in agreement.

    As you know I am a full supporter of revenue focused tax systems because they are easier to implement and monitor.

    This is why the windfall tax needs to be reinstated.

    In theory the variable tax may accomplish similar aims but as you say it's difficult for govt to untangle costs etc. The current tax regime is a gift to the mining companies.

  20. Zedian,

    I have similar concerns with regard to the RP Capital cloud of secrecy hanging over Zamtel which I have demanded be resolved before any anything proceeds. So far the Republican President has dodged any questions to do with this, simply saying that Zamtel workers wanted the company privatised. Very simplistic indeed.

    And now the workers say that they were never even asked.

    Workers didn’t support Zamtel sale – Chilyobwe
    Written by Margaret Habbuno

    NATIONAL Union of Communications Workers (NUCW) Ndola branch chairman Mwepa Chilyobwe has refuted assertions that the partial privatisation of Zamtel was supported by all workers. Reacting to NUCW president Patrick Kaonga's statement that workers were the first to get the news of privatisation of Zamtel, Chilyobwe said that was not true because the employees were left out of the whole process.

    "As the Zamtel workers, we have never been given a platform by our union where we could air our views but we were surprised when we read in the Daily Mail newspaper dated August 5, 2009 that we were of the idea of partial privatisation of the company. Our president Mr Kaonga is not telling the truth because we have been left helpless after the [planned] partial privatisation of our company as workers," Chilyobwe said.


    The current tax regime is a gift to the mining companies.

    Like the Development Agreements.

    Things would be very different, if the mines were state owned and overseen by panels of senior civil servants and monitored on a daily basis, with complete openness to the public.

  21. Now Kavindele has waded into the pool with some rather self-serving, albeit not unexpected, arguments opposing the sale of Zamtel.

    The Post reports that he said, "...The injunction granted to Vodacom Zambia Limited by High Court judge Philip Musonda in October last year prohibits the entry of a new cellular telecommunication operator by way of merger, acquisition, investment, divestiture and or buy-out of the existing mobile telecommunication providers until the final determination of the case in the Supreme Court."

    It gets even more bizarre:

    "According to the ex parte order for interlocutory injunction granted to Vodacom Zambia by judge Musonda on October 3, 2008, CAZ had been restrained further publishing any invitation to tender or grant any mobile licence whatsoever kind to any national mobile cellular operator for Zambia or any related cellular technology whether it be via broadband, WiMAX, data, Spectrum allocation in any available frequency, 2G, 3G, 3.5G, 4G, GSM, CDMA, mobile data, Wi-Fi, Cable, DSL, Hotsport, Voice Over Internet Protocol and Internet Protocol Television (IPTV)."

    Read the rest of the story here

    Well, if that's true then it's really unfortunate that essentially all new telecoms license issuing should be put on hold just so that Mr Kavindele's license case (which has moral question marks), could be heard in court.

    I encourage people to read the background to Mr Kavindele's license issue here.

    As far as I and many people am concerned, Mr Kavindele could just shut up and do us all a big favour.

  22. Zedian,

    Thanks for that technical assessment of why we should all view Kavindele's position with cynicism about his personal gain or loss due to his overt connection to Vodacom. Personally, thanks to the unprofessional statements made by the unelected VP, George "Orwell" Kunda, anyone who has previously served in this capacity is automatically suspect due to questions about how they were able to convince the Head of State that they were worthy to serve in a democratic state as the duly appointed successor to the President, if it had nothing to do with electoral math. That a former appointed Zambian VP would go to work for an unscrupulous multinational corporation looking to exploit the potentials of African consumers and government agents unfamiliar with the fundamental truths about Information Age tools but looking for personal advantage, well this is not surprising, it comes with the unelected structure.

  23. Zedian,

    I agree there's clearly some element of hypocrisy, but surely that is irrelevant.

    The motive for Kavindele is beside the point.

    What matters is whether legally he has a point.

    And if he does, it is incumbent upon ALL Zambians to ensure it is upheld even if that leads to the exitiction of ZAMTEL.

    The kind of talk in the Times Editorial today was absolutely shameful. If Kavindele is wrong, let us see it proven in the Courts not just in Shikapwasha's mind!

  24. Cho,

    Well, I beg to differ.

    In my view, what's irrelevant is Mr Kavindele's current legal stance, because he clearly deceived the country about the true intentions of his initial intervention in the original legal wrangle between the regulator and Celtel over spectrum for a 4th GSM operator. If you followed the original piece I quoted on my blog, Mr Kavindele casually waded into the argument and used his position as Vice President to give Celtel a slap on the wrist!

    If anything, his intervention then, had NO legal backing whatsoever!!

    Please convince me otherwise.

    Moreover, Mr Kavindele only made his intentions clear and took the legal route after he was sacked as VP.

    He may well have a legal case today, but as far as I am concerned, his hypocritical stance is on the other side of the moral spectrum.

    This may be speculation by I am pretty sure your stance on this would have been very different had that case occurred today.

  25. Zedian,

    Yes I read that piece at the time and remember even linking to it. I re-read again when you reminded us. As I said in my previous comment I fully agree Kavindele deceived people and that gave him a better position which he is now defending.

    BUT where we depart is that it should be up to the courts to determine that.

    No one has ever taken Kavindele to court over the matter.

    On the contrary Kavindele is in court and he deserves equal protection before our legal system.

    If we start saying, as the Times and Shilapwasha are saying, that Govt can do what it likes the what is the point of our legal system.

    We need to uphold the law even when it justifies those we don't agree with.

    If we have probem with the law the answer lies in careful reform.

    We had the same problem over the presidential bye-election. Thank God the law prevailed.

  26. Cho,

    I have respect for the law and therefore believe the courts should be the only arbiter in all cases brought before them.

    "No one has ever taken Kavindele to court over the matter.

    True, because he didn't break any law. What he broke though was probably a ministerial code of conduct for which he was sacked, apparently.

    My worry here is that this is a case of ends justifying the means, and it doesn't discourage anyone holding public office from performing similar morally indefensible actions in future, so long as they gain big, as in this case. Mr Kavindele is sitting on a 'gold mine' and doesn't care about the moral stench, belching underneath it.

    But I do, and I would personally like to wave a placard with an international symbol of shame in his face! to ensure he doesn't misunderstand.

    If it were in the West, he and Vodacom would have quit their case by now, simply due to protests.

    Anway, I simply brought up the Kavindele saga as a side issue in relation to what he had to say about the sale of Zamtel. I personally think it is ridiculous that his license injunction case puts a lid on all telecom licensing matters including "Cable, DSL, Hotsport, Voice Over Internet Protocol and Internet Protocol Television (IPTV)", which have nothing to to with a cellular license.

  27. Zedian,

    I think we are essentially saying the same thing.

    In general I am not surprised though where we are.

    CAZ is incompent.

    Our Judicial system is broken.

    Our Executive does not even consult!

    If they had consulted properly the Kavindele point would have come out and be debated.


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