Sunday, November 12, 2017

Calling the Financiial Elite

The spread of mobile phones across Africa has been one of the continent’s success stories over the past two decades, transforming lives through better communication. It has also resulted in huge profits for powerful international companies – and for some of Africa’s wealthiest and best-connected individuals. 

An investigation for the Observer into the African interests of UK mobile phone giant Vodafone, by the Finance Uncovered network, has raised serious questions about transparency and the processes by which western firms entered Africa’s telecoms markets. Often western operators that wanted market access in a particular country would have to choose between accepting a government stake in the venture, or giving significant shareholdings to “local investors”. But how those governments selected their partners appears contentious, and questions have been raised over how some deals were structured.

 In certain cases, politically connected elites secured shares in Vodafone subsidiaries by borrowing money from Vodafone itself. Such arrangements are legal, and for the lucky few able to do such deals the rewards have been huge. 

The International Finance Corporation, part of the World Bank, estimates that mobile phone revenue in sub-Saharan Africa grew from $100m in 1995 to $40bn in 2015. Last September, Vodafone raised $1.1bn by selling a mere 5% stake in its main African subsidiary, Vodacom Group. And the month before, Vodacom Tanzania raised $213m by selling a 25% stake. The flotation, the biggest on the Dar es Salaam stock market, was a coup for one of Tanzania’s wealthiest businessmen, Rostam Aziz. A US embassy cable quoted a fellow politician saying of Aziz: “I don’t know what magic that guy has, but he is the power behind the throne.”  From a successful Tanzanian trading family, with interests in mining, agriculture, ports and media, Aziz became an MP in 1994 and went on to become the national treasurer for the ruling party after he bankrolled and managed Jakaya Kikwete’s successful presidential campaign in 2005. In 2011 he resigned as an MP amid corruption allegations. By this time he was a very wealthy man. 

In 1999 an Aziz company acquired a 10% stake in Vodacom Tanzania. Over the next eight years Aziz increased his shareholding to 35% via two companies, Mirambo and Caspian. Under rules that were common to shareholders in Vodacom Tanzania, local investors such as Aziz’s companies were obliged to lend the telecoms operator money to help it build its network. But Vodacom also lent Aziz’s company millions of dollars to help him with those obligations. By 2012, Vodafone says, Aziz’s company owed Vodacom $52.5m. Two years later Aziz’s company sold half of his shares for $240m. His shareholding catapulted him on to the Forbes list of global billionaires. Vodacom Tanzania now wants to buy out Aziz’s company’s remaining share, which would net him another huge payday.

Vodacom Tanzania is not the only Vodafone interest in Africa that has resulted in significant profits for influential and well-connected minority shareholders. In 1999 the Kenyan government of Daniel arap Moi allowed Vodafone Kenya to buy a 40% share in the state-controlled telecoms operator, Safaricom, for $42m.  Vodafone had been given “advice and assistance” on securing the investment by an anonymous Guernsey-registered company called Mobitelea. In 2001 Vodafone granted Mobitelea share options in Vodafone Kenya at 1999 prices, enabling it to buy a stake in Safaricom. Finance Uncovered estimates that these options eventually yielded Mobitelea a profit of about $51m in 2009, a reflection of Safaricom’s spectacular success. The involvement of Mobitelea did not surface until 2007, when the Kenyan government floated some of its Safaricom holding, and was required to list all current shareholders. But exactly who was behind the company has never been publicly disclosed. There is speculation that members of Moi’s inner circle may have benefited from the deal.  Vodafone says it was legally obliged not to publicly disclose the identity of the beneficial owner of Mobitelea for reasons of commercial confidentiality.  John Githongo, Kenya’s renowned anti-corruption champion and chairman of the Africa Centre for Open Governance, said he was concerned that the true beneficiaries behind Mobitelea had never been identified publicly.
“Reportage of these transactions continues with a bitter taste left in the mouth,” Githongo said. “How would British media and NGOs respond to the same practices if they took place within the UK?”
In 2007 Vodacom Mozambique lent Emotel, a telecom company owned by the economic arm of Frelimo, the country’s ruling party, nearly $1m to enable the government to meet its obligations to become a 3% shareholder in the telecom operator. Vodafone said Vodacom was told by the government that if it wanted to operate in the country it would have to partner with Emotel. Another shareholder was Intelec, a company that administers the business interests of Armando Guebuza, president of Mozambique until 2015, and one of the country’s richest individuals. A third was the Whatana Investment Group, an investment company chaired by Graça Machel, Nelson Mandela’s widow. Her first husband was Samora Machel, the president of Mozambique until his death in 1986.
The former chair of the public accounts committee, Labour MP Dame Margaret Hodge, questioned whether Vodafone could have done more to ensure that ordinary Africans benefited from the transactions.
“Vodafone should not just hold its nose while the wealthiest in Africa get even wealthier,” Hodge said. “They could have used their power to ensure that, where there were local ownership rules, the ordinary people of the country benefited, rather than the wealthy elite.”



No comments: