Why I intend to vote yes for Econet’s delisting!

I am a professional investor, and I have been an investor in Econet since its original IPO in September 1998. I’m from New Zealand where I live.

As with all New Zealanders I speak my mind and tell it as it is.

I was sent to Zimbabwe in 1993 when the ZSE first opened the Capital Markets to international investors. I attended the Barclays Bank Inaugural investment conference in October 1993. In 1994 I spent the entire year studying stock markets in Sub Sahara Africa and published 2 small books (financial journals) about Zimbabwe and African Stock markets . One was called ‘Zimbabwe Structural Adjustment Progress’, and the other was titled ‘Out of the Starting Blocks, A guide to African Stock Markets’ . 

In 1996 Zimbabwe became the world’s best performing emerging market. There was a current account surplus and the then Zimbabwe Dollar started to appreciate as it exported more goods than it imported. Its economy was fabulous; it exported tobacco, gold, silver , coal, nickel and chrome, and was busy developing a billion USD platinum mine, as well as earning hundreds of millions of dollars from tourism. 

I have followed the markets ever since, and after returning from New York to London in 1998. I worked for a specialist African Investment fund and travelled monthly to Zimbabwe and Africa to study investment opportunities and the then emerging GSM telecommunications markets. 

Capital markets in Africa were stimulated by the IMF and World bank who were then trying to get private capital and private entrepreneurs to stimulate economic development. They called the process Structural Adjustment. 

• Tarakinyu, Mhandu triumph at Victoria Falls marathon
• BCC, HCC adopt results-based ambulance services
• Water rationing looms in Bulawayo
• Building narratives: Chindiya empowers girls through sports

I met Strive Masiyiwa in 1998, when I was looking for long term infrastructure investment and dedicated entrepreneurs in Zimbabwe who could navigate any weather or commodity price downturn. He drove me around Harare from Cell tower to Cell tower and explained engineering concepts of how cell phone networks actually worked and what the basic business model was.

My Dad was an electrical engineer, and so was Strive. So I quickly resonated with his explanations of Transmission, Switching and Customer Service . What I really liked was that Strive was pioneering servicing the entire community, not just the rich and the big business groups.

When Strive Masiyiwa decided to list Econet on the ZSE in 1998, he was fiercely resisted, in fact it took a threat to go to court before an exchange controlled by a little clique that used to meet at the Harare Club agreed to let him list. 

Following the listing they practically boycotted the company and I remember sitting in the Meikles hotel listening to how it would not work. It was trading below its market value for more than six months. Almost no one in Zimbabwe bought its shares, such was the animosity because he had dared to challenge them.

When Strive Masiyiwa travelled to London to meet investors there I attended one of those investor briefings and we were shocked that a telecom company was trading at such low prices. A group of us led by Blakeney Management decided to support this plucky African entrepreneur and we mobilized to buy stock, reaching out to other frontier investors in London, New York and Johannesburg.

I have always been a white guy, because I was born white. But I remember travelling to Harare and listening to some racist rants at the Harare Club who felt that an international operator would eventually buy the company. This ranting really upset me.

I decided we needed a Black entrepreneur like Strive and decided to buy more shares and tuck them away for a 50 year cycle. I thought I would learn more from this entrepreneur and get a good return on the investment. I got both! 

Several years After I brought a large block of stock in the company, I never forget Strive asking me why I had put so much weight on, over the last 6 months? Why was I getting fat? I moved from 82kgs to 96kgs. I explained it was because investment banks and other operators kept taking me to lunch and dinner to ask if Strive would ever sell out to the big international operators. I soon got sick of the arrogance of other operators which were internationally owned, thinking only they could operate a mobile phone network.

I continually explained that the Continent of Africa needs local Black African entrepreneurs to actually own their businesses and develop them. I also explained how Strive’s Econet group helped the portfolio managers understand what it took to navigate droughts, floods and commodity price booms. 

Foreign investors started to flock to buy this little company and its price shot up until it was the most valuable company in Zimbabwe.

When some of the local power players realised that Econet was one the most sought after company foreign investors were interested in, if not the most sought after, some investors them tried to put together a bid to take over the company. They almost succeeded until they realised that the foreign investors were primarily interested in the entrepreneurial capacity of the founder. 

When Masiyiwa left Zimbabwe in 2000, the foreign investors panicked and demanded to see him. In London, he vowed to ensure the company in Zimbabwe remained on track. A few years later he asked one of the most experienced telecoms executive from the US to become chairman of Econet. Dr Jim Myers was Vice President at AT&T before he retired and a world class governance expert .

Of course some investors have left Econet , but some of us stayed and Masiyiwa kept his promise, guiding the company spectacularly from a value of just $25m when it listed to $2bn by 2018! This despite the world’s highest inflation cycles and political turbulence, mining booms and busts, floods and droughts. And simultaneously being able to keep Higherlife Foundation afloat to help orphans.

The decision to delist is the best decision for all shareholders in my mind after weeks of research. 

No one has been asked to sell and the company remains public whilst prices are protected by the company.

The offer price of 50 cents for those who choose to leave is very generous and frankly I have never seen that anywhere, as it was just 8 cents this time last year!

Even if they offered half that value, it would still be a higher premium than anything ever offered in a similar transaction in many African markets.

But why even leave?

I’m not selling my shares because I know the value comes from the entrepreneur who founded this company. 

For instance, he is now about to unlock more value through the infrastructure company, Econet InfraCo, which is now going to be spun off. 

I am frankly disappointed that although Econet is one of the very few operators that still owns its passive infrastructure business, at a time others have either sold or spun off these units years ago, there has been no real conversation about the embedded value that lies dormant in Econet, which is properly appreciated and talked about.

Econet has promised to continue paying dividends and even to buy shares from anyone who wants to leave in future, if they cannot find their own buyer through an OTC platform.

If you’re a local institutional investor, if your pension fund currently holds Econet shares, they will likely increase dramatically in value in US dollars, the day after the yes vote.

The Zimbabwe Securities Commission should have engaged foreign investors to find out why they decided to leave so abruptly. It had less to do with Zimbabwe itself because we stayed throughout the troubles. 

Econet will, in my mind, definitely return one day to the Zimbabwe Stock Market, with its investors. But I think right now is time for sweeping reforms supported by sensible investable guarantees to investors and entrepreneurs. Only then will you see a new generation of entrepreneurs bringing their companies to be listed and foreign investors returning. Econet in my mind is always willing to help Zimbabwe, because the DNA of the business is servicing small consumer-facing businesses and individual consumers. 

My message to other investors is, continue to secure a return on your capital through ups and downs and continue to learn about Data Centers , 5G , 6 G , and 7G networks from African experts. Fertilise a unique company with your capital and expect to get more than dividends as groups like the Higherlife Foundation create positive ESG momentum.