How Econet was forced out of Nigeria (Part One)

Intra African Trade: Learning from African Women
December 16, 2015
How Econet was forced out of Nigeria (Part Two)
December 16, 2015

How Econet was forced out of Nigeria (Part One)

- Strive MASIYIWA

Strive Masiyiwa is the chairman and founder of Econet, a diversified telecommunications group with operations and investments in Africa, Europe, North America, Latin America and the Asia Pacific. His business interests also include renewable energy, water treatment, Coca Cola bottling, financial services and hospitality. He is, reportedly, Zimbabwe's richest men and one of Africa's most powerful and richest men. He led his company, ECONET, to partake in the auction for GSM licence in 2001, winning one of the four licences on offer. But his stay in Nigeria was not to last long.

Much of what transpired has not been revealed, with the matter ending up in court. The company has continued to change hands, changing names over and over, but the pioneering role of Strive Masiyiwa has never been in doubt. Recently, he took the lid off the story of his experience in Nigeria, opening a can of worms on corruption and boardroom intrigues. He throws up a lot of questions on ethics and corporate governance in the business and entrepreneurship space in Africa Paying the price.

“I had the privilege of making Nigeria's first GSM phone call back in 2001 when I called the regulator to say, “We're live!” Who would've believed then that Nigeria today would have more than 167 million mobile phones?! It all started out as a very exciting new chapter for enterprise in Africa. Shortly after President Obasanjo was elected, the new government announced an incredibly transparent international auction process for three national mobile phone licenses.

To participate in the bid, you not only had to raise money, but there had to be a member of the bidding consortium who was an experienced GSM operator.
Econet Wireless met the requirements because of its experience in Zimbabwe and Botswana. Our Nigerian partners, which included state governments, local banks and high net worth individuals, were financial investors. The largest shareholder had only 10%. That was the written agreement.

I managed to assemble a consortium of 22 investors to put up the money needed to bid. Our shareholders were all Nigerian, mostly institutional investors including leading banks and two state governments, Lagos State and Delta State. The license cost us $285m and was the most expensive license ever issued in Africa at the time. This was 2001. We considered the investment not only about putting together a network, but also about building a nation. We knew it had the potential to transform Nigeria's entire business and social architecture.
Most of our investors had between 1-10% shareholding. Econet Wireless Nigeria had only 5% of the shares, but that was fine because it was 5% ownership of a very big pie. As the "technical partner and operator," Econet was the company with the expertise to build and operate such a business. James IboriOur financial investors recognised this, and also allowed us to receive 3% of the turnover as our fees. This was standard practice in the industry. We were one of the winning bidders and they gave us just six months to set up business and get our network operating. We were under a lot of pressure but our network was live two days before the others! Customers were pouring in. We were number one in the market with an estimated 57% market share.

Then came the fateful day when I was told that our company must pay a total of $9m in bribes to senior politicians (in state government) who had facilitated the raising of the money to pay for the license. I refused to authorise the illegal payments. Meeting after meeting was held to try to get me to agree, but I would not. The money would not be paid as long as Econet was the operator and I had signing authority.

The Governor of Delta State, James Ibori, was demanding $4.5m be paid to him in his personal capacity. He was one of the most powerful men in the country and had a reputation for violence. When he heard that I was refusing to approve payment he issued an ultimatum: "Pay or I will chase you and your people out of the country." I refused.

The shareholders met and voted Econet Wireless Nigeria out of management. They cancelled our management contract. James Ibori and his colleagues personally attended the meeting to remove us. After the meeting one of them (a prominent local businessman even today) came up to me and said: "Unfortunately for you, God does not have a vote." I had to withdraw all my staff and their families: 200 people in all. We left Nigeria.

Most of our people had to be retrenched. The loss of the contract almost drove us to bankruptcy as a group.
They invited a big international operator to replace us as technical partner and operator. They changed the name of the company from Econet to Vmobile.

Within days of their arrival, the managers of the new operator signed off the payments demanded as bribes.Then what happened? A few noble Nigerians had both the integrity and courage to carefully collect all the documentation on the movement of the money, and pass it all on to me. There's a sayingworth remembering in uncovering the trail of destruction that is corruption: “Follow the money”

SPEAK OUT TO STOP THE ROT

It was 2003. I bided my time... then I wrote a letter to the United States Department of Justice! In my letter to the US Justice Department, I detailed the full history of the demands for a bribe. I had dates, times, records. I then reminded them that since the big international operator had a listing on the New York Stock Exchange, they were duty-bound to launch an enquiry.

Why did I go to them?The United States government has a law called the Foreign Corrupt Practices Act. The United Kingdom has a similar one called the British Anti-Bribery Act.
Whatever you do, make sure you never fall foul of those laws because, if they ever use them to come after you, you're a "gonner" my friends.

A few weeks later, US officials wrote back advising me that an enquiry had been launched.
They contacted the big international company seeking answers to my allegations. My contacts at the company called to tell me, "All hell has broken loose at the company." The parent company of the South African-based multinational sent external auditors and lawyers from London to Nigeria. They immediately dismissed all the
senior executives sent to Nigeria to run the company, and they left in a hurry!

Although they fled the scene of the crime and returned to their country -- after admitting even to both the US Justice Department and the EFCC that the money had been paid out – the stolen funds were never returned to the Nigerian people, even to this day. Meanwhile, the departure of the other mobile operator did not mean we could return to Nigeria. The shareholders found another operator, this time from the Middle East.

They sold this new operator the control of the company even though Econet Wireless Nigeria had the "right of first refusal" over any sale. They simply ignored that provision in our agreement. This was illegal, both according to our shareholders agreement and Nigerian Company Law. It was left for us to take up the fight in another forum, the Nigerian courts.

Part Two

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