Zambia gov’t move to borrow US$300 million to recapitalize telecoms firm receives backlash


The announcement by the Zambian government that it will go to the international market to borrow funds to recapitalize a financially crippled state telecommunication firm on Tuesday received wide condemnation from a cross section of stakeholders.

Minister of Transport, Works, Supply and Communications Yamfwa Mukanga said over the weekend that the government will return to the international market to borrow 300 million U.S. dollars for the recapitalization of Zamtel which was currently facing liquidity problems.

The Zambian minister said the telecommunication firm was currently limping and failing to compete with other players due to lack of investment, adding that the money will make the company more viable and competitive.
The announcement comes barely a month after the government acquired a 1.2 billion dollars Eurobond to be paid back at a high interest rate of nine percent.

Mambo Hamaundu, a financial analyst, said the government should not rush into borrowing money to recapitalize the company but should instead analyze why the company was failing to operate efficiently.

“They should not rush into borrowing because even if they borrow money and recapitalize the company, chances are high that it will not make the company turn around and compete unless structural issues are addressed. How come other companies in the telecommunication industry are managing to operate,” he told Xinhua in an interview.
He further said borrowing from the international market now will not be a good thing because the country’s credit worthiness and investor confidence has reduced, a move that may make the country borrow at a high rate.

“They must first address the viability of the company. The amount of money that they want to borrow is just too much and when you look at the nature of parastatals firms, that money will just go down the drain,” he added.
Simon Ng’onga, coordinator of CUTS Zambia Center, a local lobby group, said instead rushing to the international market to borrow more money, government should first try to mobilize local resources to support the company.

The telecommunication firm, he said, was owed huge amounts of money in unpaid telecommunication bills by both government ministries and private institutions, adding that the government should first mobilize these resources.
According to him, it was unfortunate that the company, which was performing well when Libya’s Lap Green started operating it, was currently crippled by financial problems.

“What we were being given out in terms of annual financial reports was showing that the company was getting into a stable evironment.It is unfortunate that we have the situation replaced to an extent that we have liabilities when this company is owned and being run by management which are locals,” he said in an interview with HOT FM, a local radio station.

“It is very, very unfortunate. What is more important is to invest more in resource mobilization domestically because if you see, Zamtel is owed a lot of money by government ministries and also other private sector stakeholders. What we need to do is to invest more to get those resources before we run to the international market,” he added.

Last month, Zambia issued its third Eurobond of 1.25 billion dollar. Africa’s number two copper producer issued its debut Eurobond of 750 million dollars in 2012 with the second bond of 1 billion dollars coming in June 2014.

The telecommunication firm was sold to Libya’s Lap Green Networks in 2010 but the government of President Michael Sata repossessed it in 2012 on grounds that the company was illegally sold.

The Libyan company owned a 75 percent stake in the company with the Zambian government owning the remaining 25 percent. Enditem

Source: Xinhua

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