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Mobile operator brand ambassadors – MTN group

Opinion & Analysis
Africa’s mobile operator space has evolved since the first network was launched in Kinshasa, Democratic Republic of Congo, in 1987. A year before South Africa’s democratic dispensation, a new corporate organisation, Mobile Telephone Networks (Pvt) Limited (MTN) was born. MTN was born during the last hours of apartheid and the granting of a licence in […]

Africa’s mobile operator space has evolved since the first network was launched in Kinshasa, Democratic Republic of Congo, in 1987.

A year before South Africa’s democratic dispensation, a new corporate organisation, Mobile Telephone Networks (Pvt) Limited (MTN) was born.

MTN was born during the last hours of apartheid and the granting of a licence in 1993 already anticipated what was to take place in the post-apartheid era.

Two operators were licensed, one controlled by Afrikaners and the other by English-speaking Africans from whose heritage, the Union Republic was founded.

The network was launched in 1994, the same year Nelson Mandela took an oath of office as President, but the history, evolution and growth of the company tells a story of what Africa can do when freedom reigns.

The chairman of the MTN group (formerly MCell Limited) is Cyril Ramaphosa, an unlikely candidate for the job if apartheid had not ended in 1994.

The company has, therefore, the same age as democratic South Africa for us to draw legitimate comparisons on what is possible in post-colonial Africa.

From humble origins, the company has extended its tentacles beyond the borders of the country of origin and now boasts 16 mobile operations in the continent of Africa with a total subscriber base of about 122 million, making it the largest pan-African provider of telecommunications services in Africa with African roots.

MTN was started by TV MNet with Cable&Wireless, a company incorporated in the United Kingdom, Transnet, the state-owned transport and logistics provider, and Fabcos, Foundation for African Business and Consumer Services (South Africa). MCell held 72% interest in MTN.

MNet Limited was established as a television operator in South Africa in 1986 and was listed on the Johannesburg Stock Exchange in 1990.

Johnnic was the ultimate controlling shareholder of MCell. As part of the corporate restructuring of South Africa, during August 1996, Anglo American Corporation of South Africa, the controlling shareholder of Johnnic, agreed with the National Empowerment Consortium (NEC) for Anglo to sell most of its stake in Johnnic to the NEC with payment to be made over an 18-month period.

Through this transaction, black ownership was facilitated and yet the black beneficiaries of this kind of empowerment yet have to empower their fellow Africans in the continent where the company has operations.

On October 14 2002, the name MCell Limited was changed to MTN Group.

This article focuses on the ownership structure of the MTN group. MTN was born in South Africa and its evolution to make it one of the important players in the African corporate space must be understood in a broader context of multinational corporate civilisation.

MTN Group is incorporated in the Republic of South Africa.

It will not be surprising to the informed that most of the MTN Group investments are not directly held by the South African incorporated company.

Notwithstanding the fact that South Africa has one of the most sophisticated African capital and institutional markets, the existence of exchange controls and other policy measures that are generally perceived to be anti-business, even companies born in South Africa have found reason to locate their corporate vehicles outside the country of birth to drive their global expansion outside the borders of South Africa.

Ramaphosa is a well-known figure in political and business circles. He is a member of the National Executive Committee of the ruling African National Congress —and yet could find no justification for the MTN group holding all its African and other investments directly from the South African entity.

MTN South Africa is a separate juristic person that is wholly owned by MTN Holdings. MTN Holdings is the parent of all MTN investments and is generally referred to as the Group to correctly describe the family of investments that fall under its stable.

MTN Holdings is the holder of 100% of the issued share capital in MTN International, the company through which foreign investments are held.

In line with many multinational corporations, MTN chose Mauritius for understandable reasons, as the location of its investment holding company.

MTN Mauritius is the shareholder of four African mobile operators in Cameroon, Congo-Brazzaville, Nigeria, and Cote Ivory Coast as follows: 70%, 100%, 78,7% and 65%, respectively.

It is also the sole shareholder of MTN Dubai that in turn is the shareholder in six African mobile operations as follows: Guinea Conakry (Areeba); Ghana; Liberia (Lonestar); Benin; Guinea Bissau; and Sudan and the ownership is as follows: 75%; 98%’ 60%; 75%; 100% and 85%, respectively.

MTN International, a company incorporated in South Africa is the holder of shares in the remaining five African countries as follows: Swaziland; Uganda; Botswana (Mascom); Rwanda; and Zambia and the ownership is as follows: 30%; 96%; 53%; 80% and 86%, respectively.

Why would Mauritius and Dubai be more attractive as a home for MTN’s investments in Africa? Mauritius is an African island State that has no neighbour. It gained independence in 1968 and has developed from a low-income, agriculture-based economy to a middle-income diversified economy.

It does not have the same minerals resources that other African states boast of, but has used tourism, textiles, sugar and financial services to drive a development agenda that has produced its own unique African outcomes.

Recognising that money is a visitor and investment flows are linked to many of the variables that do not exist in many least developed states, the country embarked on a multi-sector reform agenda in 2006 with the objective of improving the competitiveness of the economy.

As a consequence of these reforms, African companies like MTN have and are responding to the promise of a secure investment via Mauritius.

The reforms and not the God-given natural resources have had considerable success in accelerating the rate of growth, reducing unemployment and attracting foreign direct investment.

Through the reforms, fiscal space was created to allow state actors to put in place measures to mitigate the negative impact of the global financial crisis.

The country has no exploitable natural resources to rely on, yet has one of the most stable and successful economies in Africa that is highly rated in terms of competitiveness, investment climate, governance and the freest economy with a gross domestic product estimated at $20,2 billion.

Mauritius has built its economy on a free market economy and leads Africa in economic freedom. The link between economic freedom and prosperity is best illustrated by the Mauritian experience.

For the fourth consecutive year, the World Bank’s 2012 Ease of Doing Business Report ranked the country as the first among African economies and 23rd out of 183 economies in terms of doing business.

According to the 2012 Index of Economic Freedom, the country leads Africa and is ranked eighth worldwide. The report’s ranking is based on measures of economic openness, regulatory efficiency, rule of law and competitiveness.

Can you imagine that Mauritius today is the largest foreign investor in India? The country has a functioning legal system based on elements of British common law and French civil law. Unlike many African states, the judiciary is independent and trials are fair.

The political leadership of Mauritius is less visible than many African heads of state that are known for words and not the correct approach to governance.

The fact that the legal system is generally perceived to be non-discriminatory and transparent is not an accident of history, but reflects the realisation by the islanders that if they did not change their attitude to the concept of the rule of law, their future would be condemned not by the evil actions of others, but by their own choices.

Laws are enforced relatively effectively and the results show.

Even South Africa has not been able to match the investment climate that exists in Mauritius to suggest that the choice of MTN and others represents some unpatriotic behaviour.

What lessons do we learn from the MTN corporate structure? We learn that if Africa has to deliver the promise of better, equal, just and prosperous lives then we need to study critically how Mauritius has been able to convert a little geography into a viable nation state in our lifetime.

The political and state actors in Mauritius are acutely conscious that money does not need any friction and even the use of slogans to attract investment and, therefore, have invested in creating a home that is friendly for income-generating corporate and natural citizens.

Invariably when conversations take place on what is best for Africa, the question of leadership comes up more often, yet it must be obvious that the changes that have taken place in Mauritius since independence are a consequence of the actions of many and not a few wise men and women who dominate the corridors of state power.

Economic freedom is what attracted MTN to consider Mauritius as an address, yet South Africa with just a change of thinking could equal if not better what Mauritius offers.

Regrettably, the thinking in many African states is backward focused and premised on resources whose ownership has to be engineered by state actors as a source of salvation.

However, salvation will only come when actions that motivated MTN to make the choices that it made are understood in their proper context and perspective.

Mutumwa Mawere is a businessman based in South Africa. He writes in his personal capacity.