Zimbabwe has just bought a company it does not need for $40m

Zimbabwe is not expected to record any significant economic growth in 2016, with the World Bank projecting 1.5 percent this year. The country expects a loan from the International Monetary Fund(IMF) in the third quarter, after paying off foreign lenders by the end of June, in an effort to save the economy. But while it waits, Zimbabwe has paid Amsterdam headquartered Vimpelcom $40 million for a 60 percent stake in telecommunications operator Telecel.

Information Communications Technology Minister Supa Mandiwanzira told a committee of parliament the government had raised the money from National Social Security Authority (NSSA), a state-run national pension fund, Reuters reports.

Vimpelcom disclosed in November it had agreed to sell its shares in Telecel to the government after pressure to comply with the local majority ownership laws, and Zimbabwe has now snapped the shares up through ZARNet (the Zimbabwe Academic and Research Network).

Many question the decision of the government to spend $40 million on a company it does not need at a time the country’s economy is struggling. More so, the government is running NetOne, the second largest network operator in the country at a loss. However, Mandiwanzira claims the purchase was beneficial to Zimbabwe.

“This acquisition is localising an international entity it is going to be a Zimbabwean entity, where they were paying management fees to Switzerland and Amsterdam, those monies will no longer be leaving the country,” says Mandiwanzira.

According to him, the takeover of Telecel enhances the government’s indigenisation plans. “If we look at the makeup of the telecoms industry in this country, there are no foreign players.”

Zimbabwe had given foreign firms until April 1 to meet 51 percent local-ownership targets, failing which they would be ejected and have their assets seized. The Indigenization and Economic Empowerment Act, which was passed in 2008 under President Robert Mugabe’s black empowerment drive, requires foreign companies to sell at least 51 percent shares to locals. The impact of the policy is yet to be felt.