This post is part of our special coverage Libya Uprising 2011.
Just over a year ago, the Zambian government sold the telecommunications parastatal, Zambia Telecommunication Company (Zamtel) to a Libyan parastatal, LAPGreen for over US$270 million. The initial process of selling the company was very controversial because RP Capital, the company that that was engaged to carry out due diligence and valuation was contracted under suspicious circumstances, which saw the minister responsible at the time, Dora Siliya, being reported to the Chief Justice for investigation under a ministerial and parliamentary tribunal.
Siliya, who was then Transport and Communication Minister, relinquished her position when the Chief Justice approved the Tribunal comprising three Supreme Court judges who found that she acted improperly in the manner in which RP Capital was appointed in the transaction. The High Court however overturned the tribunal’s findings on appeal and Siliya was reappointed Education Minister by President Rupiah Banda.
The Zamtel deal with LAPGreen has come back to haunt the Zambian government with the instability that has rocked Libya following street protests that swept out of power Hosni Mubarak of Egypt and Zine El Abidine Ben Ali of Tunisia. Zambian netizens have seized on the developments in Libya to question the future of the Libyan company in the country.
Dr Richard Mbewe, a Zambian economist based in Poland, wrote in an opinion piece on online news site Lusaka Times :
Firstly, what will happen to foreign investments undertaken by the Gaddafi regime? Since Gaddafi was Libya’s strongman, he was behind all these investment decisions. In light of a new nationalist government taking over, will these investments be cancelled off and the money taken back to Libya? Also, there is a danger that there might be a power vacuum upon Gaddafi’s departure. This power vacuum might be filled by Islamic fundamentalists. They might want to keep intact these investments (especially in telecommunications) in order to foster their further development of Islam in these countries where LAPGreenN is operating, especially in Africa south of the Sahara.
Taking into consideration that telecommunication is one of the most strategic sectors of an economic of a given country, what dangers will these African governments (including Zambia) will face in the new circumstances? On the other hand, the new government in Libya might as well just want to get rid of these investments to anybody that offers the best bid. This results of such a move whereby a strategic sector falls into the hands of investors who do not necessarily have Zambia’s national interests at heart.
This situation of LAPGreenN investment in ZamTel is a classical example of how you really have to analyze any privatization investment, prior to its launching it. Had the Zambian government undertaken appropriate assessment LAPGreenN, surely they would have come up with information that there is a possible threat to this investment exhibited by a change in the political situation in Libya. This should have been proved and counter-checked by Zambian intelligence security reports from Libya, as to how long the Gaddafi regime was going to hold on to power. Now it is time to protect our national interests by our not further losing control over such a strategic company.
Dr Mbewe’s post attracted over 120 comments with a good number agreeing with him and others disagreeing.
SHAKA OZ says:
Dr.Richard Mbewe you are a great analytical man.
Zambia wasted a lot of money and ZAMTEL by allowing an MMD [the ruling party] political made decision (not a business) at State House to allow LAP GreenN to take over ZAMTEL.
So we may end up losing even the few QUIDS we were suppose to save had the decision made independently without political interference.
President Banda should learn something from what is happening in Libya, the problem, he has said that he is a sturborn man and can not listen to advise. May be he can listen to act under pressure now.
Academic Worrior says:
Great analysis Dr Mbewe.
Rupiah and his corrupt worshippers are more concerned about making themselves rich through dubious deals at state house since he has taken over the National Tender Board. Therefore, they don’t analyse situations when selling companies.
Zambians refused the sale of ZamTel. We are in trouble to say the least. Lesa fye umwine. (Only God will save us)
INDEPENDENT OBSERVER says that Dr. Mbewe's analysis is flawed:
Dr Richard Mbewe – your analysis is very flawed and unsound. You have focused only on the investment & memorandums that Libya has acquired into Africa.
If RB has made a mistake then the rest of the world has made mistakes including USA, UK, France, German, China, Brazil, South Korea and South Africa doing buisness with Gadaffi.
Libya has many Wealth Managers in Western Countries via Hedge Funds. Like in Zambia, Gadaffi invested heavily in Government Bonds & Treasuries in USA UK, German, China, Brazil, France, South Korea & South Africa. Gadaffi has also invested in Telecom companies in the Western Hemispheres / Countries.
Richard Mbewe touches on the problems of an headless foreign direct investment policy. I suppose the larger question is – does it ever make sense to allow another government, especially an authoritarian one, to own your strategic asset? A point incidentally not mentioned in his assessment is that the world has begun to freeze Libyan assets – what implications does this have for ZAMTEL? Indeed, will Zambia even consider freezing these assets in line with emerging international actions? No easy answers, but surely Zambians deserve to know. What is the government's current assessment of the situation? These questions demand further exploration.
Chola's post attracted some comments as well.
I feel that the quote [*see below] from Richard Mbewe is nonsense. No one knew that this was going to happen in Libya. No matter how thorough the investigation or due diligence, the likelihood of such an event was near zero at the time of the diligence exercise.
Hindsight is always 20/20, foresight is much harder.
I however agree that there may be problems ahead for Zamtel as a result of the asset freeze. It may hinder investment plans.
* This is the quote from Dr. Mbewe that Anonymous was discussing in his comment above: “Had the Zambian government undertaken appropriate assessment of LAPGreenN, surely they would have come up with information that there is a possible threat to this investment exhibited by a change in the political situation in Libya. This should have been proved and counter-checked by Zambian intelligence security reports from Libya, as to how long the Gaddafi regime was going to hold on to power. Now it is time to protect our national interests by our not further losing control over such a strategic company.”
Although I would agree that it would have been nearly impossible to foresee the wave of ‘uprisings’ (?) sweeping across the mainly arabic spreaking world, it was always apparent that there were big problems with the ‘privatisation’ of ZAMTEL.
1) LP Capital Partners
The dubious identity of the company that is headquartered in a tax shelter was always clear. It belongs to Dan Gertler, who has extensive diamond and other interests in Central Africa.
How much was paid to the likes of Dora Siliya and other MMD people in this deal?
I remember Dora Siliya making herself available on Zambiablogtalkradio, and not taking questions on any except one single subject. Apparently she wasn't so sure she could answer questions about ZAMTEL.
It is not ‘privatisation’ or ‘showing what the markets can do’ when a Zambian state owned company is sold to a Libyian state owned investment fund.
3) National Security
What are the national security implications of having the nation's main telecom company in foreign hands? And the hands of a totalitarian state at that? How about some nationalism?
It is not difficult to have forseen this. Libya is and has always been a dictatorship under Gadaffi for the past 42 years. “This is something we know we know”. Questions should have been asked about the risks of selling a strategic asset to a country ruled by one man. Everybody knows that dictators never step down on their own free will. It is usually through upheavals or revolutions. Do we even know as to who owns LAP Green? It is common knowledge that when you enter into deals with rascals or dictators you risk having your fingures burnt.This is no hindsight. The truth is that Zambian authorities are slow upstairs! It is even highly likely that no assessment was ever made whether LAP Green was a fit and proper entity to buy ZAMTEL. This deal was sealed through someones trip to Libya and a tent meeting with the colonel. Thus the decision was made first to sell ZAMTEL to the Libya government or is it to Gadaffi and Sons? Thereafter everything that followed was just going through the motions!
With hindsight, people appear more intelligent than they really are. Like Frank has said, Gadaffi had been in power for 42 years, short of dying, what would have prevented him from remaining in power for another 42 years? Let us not pretend that the uprisings in Tunisia, Egypt, Bahrain, Yemen, Jordan and Libya were foreseen. Even the USA is questioning why its own intelligence did not foresee these events. The cards fell the way they did and if we are affected in one way or another, so be it. Zambia once lost a major investor in Anglo-American Corporation when the company withdraw from Konkola. Besides, Zamtel was sold to Libya and not to Gadaffi. Should Libya decide to disinvest, then Zambia will simply have another chance at seeking another investor. And those who are waffling should then be asked to put their money where their mouths are.
As it is now, the Zambian government does not know how to deal with the diplomatic issue regarding Libya and Colonel Muammar Gaddafi. Foreign Minister Kabinga Pande is quoted by one of Zambia’s main newspapers as saying that a decision whether or not to cut ties with the Libyan regime will depend on resolutions passed by the United Nations Human Rights Council.
This post is part of our special coverage Libya Uprising 2011.