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Tough targets for NetOne

BY HARRIETT CHIKANDIWA

EXECUTIVES at the State-run mobile telecoms network, NetOne, came under pressure to perform last week, with the government setting tough growth targets to be achieved by the end of 2021.

Information Communication Technology (ICT) minister Jenfan Muswere demanded the implementation of strategies towards clearing a US$286 million debt owed to Chinese lender China Exim Bank, as he directed the firm to collect up to ZW$2,3 billion (about US$26,8 million) in outstanding debts owed by clients including the Government of Zimbabwe, by the end of October.

He said while Zimbabwe’s second largest mobile telecoms network had achieved significant progress towards chipping off EcoCash’s share of the mobile money transfer market, the battle to make fresh market in-roads must be scaled up to leave OneMoney with a 40% market share by year end.

OneMoney is NetOne’s mobile money transfer unit, while EcoCash was established by Zimbabwe’s largest mobile telecoms firm, Econet Wireless, before being unbundled to operate independently.

But for NetOne executives, the defining moment of Muswere’s short speech delivered during a virtual 2021 annual general meeting (AGM) last week, should have been his intention to roll out performance based contracts as the business implements full scale commercialisation.

Muswere’s list of demands could be tough for an executive that has operated without a substantive chief executive officer (CEO) for a long time.

But these could be signs of another looming revamp of the NetOne executive as the government gears up to frustrate the Zimbabwe Stock Exchange-listed Econet Wireless’ ambition to continue dominating the mobile telecoms space.

“I applaud NetOne for its determination to attain the majority of the market share and improve on the growth rate of yester-year,” Muswere said in his address to the AGM.

He said the firm must achieve the milestone within the next financial year.

“NetOne needs to develop 10 more data centric product lines and to achieve a 40% national telecoms revenue share. We look forward to seeing more participation in the mobile financial services sector anchored on the fact that your shareholder, the government, controls the greater amount of financial flows in the economy. We expect more and more dividends from NetOne. The great movement witnessed in the OneMoney service over the year gaining a market share of 8% from 6,4% to 14,4% is worth noting. This can nevertheless be expanded significantly to occupy a leading position in the market. We expect OneMoney to have a 40% national revenue share before year end,” he said.

The minister said NetOne must fully implement its commercialisation strategy and adopt the “no pay no service” policy.

However, working to the NetOne executive’s advantage is its demonstrable capacity to enhance shareholder value under an extremely volatile environment that has been compounded by the government’s demand that operators maintain Zimbabwe dollar tariffs in a re-dollarised terrain.

Zimbabwe’s oldest mobile network pushed 2020 revenues up 35% to $5,89 billion (about US$68 million) from $4,36 billion (about US$50 million) during the previous comparable period, wading off Covid-19 inspired hard lockdowns’ threats to business.

Operating profit charged 39% to $1,99 billion (about US$23 million in 2020, compared to $1,44 billion (about US$16 million) in 2019. The firm added about 500 000 new subscribers to its network during the review period, reaching the 3,69 million marker from 3,17 million in 2019, according to Postal and Telecommunications Regulatory Authority data.

This represented a four percentage point market share growth to 28%.

Still, NetOne trailed behind the Econet subscriber base.

“NetOne is a business entity and performance is of paramount importance. Management is encouraged to be more innovative and create new revenue streams to generate foreign currency so that repayments are made on time towards the China Exim loans totaling US$286 million,” Muswere said. said when banks cannot provide cheap lending to productive sectors, economies suffer.

“Government’s determination to control and regulate new investors has caused the newest investments to take additional years to turn into functional companies,” Robertson said.

“Hopeful investors quickly learn that local banks will not be able to help them raise the working capital needed or to raise equity finance as the government has not restored the country’s credibility in the international capital markets,” added Robertson.

He said he was worried that instead of working on policies that help firms access funding, the government was actually crowding out the private sector.

“The loans of a few years ago could not be repaid (because of high interest rates) until the local currency was sharply devalued. Since then, deeply negative interest rates have done more damage to savings,” he said.

“Badly depleted savings have made investments by Zimbabweans difficult to finance and most of those needing imported machines or materials have to buy their foreign exchange on the black market. Regulations imposed on foreign investors cause such long delays and high compliance costs that most of them go elsewhere,” Robertson said.

Banks had started off well this year, channelling almost 90% of their interventions into the economy to productive sectors to stimulate recovery.

The value of banking sector loans increased by ZWL$105 billion during the first half of 2021, as  financial institutions shifted from consumptive interventions to fund productive sector requirements, the central bank’s statistics showed.

The sector’s combined loans ended at ZWL$142,79 billion on June 30, 2021, rising from ZWL$37,7 billion a year earlier.

The big shift from an ages old tradition of targeting consumer loans boosted companies’ capacity to respond to volatilities that have rocked industries since Covid-19 broke out last year.

The Confederation of Zimbabwe Industries said recently that manufacturing sector capacity utilisation rose to 56% during the second quarter of this year, compared to 47% at the end of last year, with companies injecting about US$25 million in fresh capital to sustain operations.

“Total banking sector loans and advances increased by 73,27% from ZWL$82,41 billion as at 31 December 2020 to ZWL$142,79 billion as at 30 June 2021,” Mangudya said.

“During the period under review, financial intermediation remained stable as reflected by a loans-to-deposits ratio of 45,84%. This position reflects that there is scope for banking institutions to enhance their financial intermediation role.  The banking sector continued to support the productive sectors of the economy, as reflected by the ratio of loans to productive sectors to total loans 80,89% as at 30 June 2021. The performance of loan portfolios of banking institutions was satisfactory as reflected by the average non-performing loans to total loans ratio which remained low at 0,55% as at 30 June 2021, against the international benchmark of 5%, reflecting sound credit risk management systems and internal controls.  In the outlook period, credit risk is expected to remain low,” Mangudya added.

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