Thursday, October 23, 2008

Econet externalising lines?

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It has been a norm since the beginning of the GSM industry in Zimbabwe that purchasing lines has been the most difficult thing. This is because of the shortage of foreign currency in the country that is torn by the highest level of inflation in the world.
GSM operators, Econet (the biggest by subscriber base and market share), Net*one and Telecel have therefore come up with other means to generate the much needed foreign currency for their operations. Most of the means that have been applied by these companies are not known to the public and they remain unknown.

However, it has been observed of late that Econet Wireless, a purely African company that is run under the control of the visionary business tycoon Strive Masiyiwa, has started selling lines in countries like the United Kingdom and neighboring South Africa.
Who ever thought Econet GSM lines that are meant to be used only in areas with Econet network coverage, unless activated for Roaming, could be exported? Yes, they are indeed being exported from Zimbabwe to other countries. How are they being used in those countries? Well, it is not about being used in those countries, these lines are expected to be channeled back to their roots, Zimbabwe, as soon as they are purchased in those countries. So why are they not just being sold in Zimbabwe if they are meant for Zimbabweans? This is where the catchy is!

Below are the three scenarios that are taking place:

1. Lines are produced in Zimbabwe where the market rate is ZWD225
2. They are not sold in Zimbabwe, but exported (or simply put, brought to South Africa), where they are sold by “dealers” for anything between R500 and R650 depending on quantity.
3. As soon as they are bought, they are taken back to Zimbabwe where they are flooded on the parallel market and sold for anything between R1,000 and R1,400 per line.

In South Africa, GSM lines for Vodacom, MTN and Cell-C cost less than R2. So what is the difference in manufacturing costs between Econet lines and other players in the same industry?

The Reserve Bank of Zimbabwe Governor, Dr. Gideon Gono, who is notoriously known for clamping down on foreign currency externalisers is very silent about this development. Is it because Econet is remitting back the money to Zimbabwe or the Central Intelligence Officers, well known as the CIOs, have been caught off-guard on this issue. Or the RBZ, as it has been previously involved in scandalous cases of protecting other “special citizens” is again protecting Econet in this case?