NetOne & TelOne privatisation delayed because both companies couldn’t afford transaction fees

NetOne and TelOne were supposed to be privatised since 2018, and despite government rhetoric to the effect that this was close to materialising, it turns out both companies cannot afford the transaction fees for the privatisation process.

In the 2020 mid-term budget review, the government reveals some details regarding why the privatisation has taken this long. Chief among those is the fact that both TelOne and NetOne cannot afford transaction fees to make the process a reality.

What does this mean? Well, Price Waterhouse Coopers (PWC) was appointed as the transaction advisor for the privatisation of NetOne and TelOne. It seems they are advising on how to comply with S.I 142 of 2019 – the statutory instrument that outlawed use of anything other than the ZW$.

Joint negotiations with PWC, the appointed Transaction Advisors for the privatisation of NetOne and TelOne are being carried out in light of the new monetary regime and the need to comply with the provisions of S.I. 142 in as far as the payment of services in foreign currency is concerned.

2020 Mid-Term budget review

NetOne and TelOne have said they can’t afford US$5+ million for the consultancy service. Because the two couldn’t afford the government proceeded to cancel PWCs consultancy contract:

NetOne and TelOne have indicated that they cannot afford the over USD5m transactional fees for consultancy services for the transaction. Following the unsustainable fees for the transaction, Government has cancelled the Transactional contract with PWC Transactional Advisors and is looking at retendering or sourcing for the services of other bi-lateral multilateral partners.

Government claims they have asked the World Bank International Finance Corporation (IFC) to act as transactional advisors since they won’t need an “upfront payment of fixed fees since their fees are success fee based”.

A vicious cycle

It’s important to note that S.I 142 of 2019 which was holding up the process isn’t even in effect anymore since the government reintroduced multicurrency pricing once again. This means if NetOne and TelOne had paid the fees, they would have done so for laws that have been reversed less than a year after being effected. Money gone down the drain.

Overall, the process is still in limbo because COVID-19 had a negative impact as well;

The recent COVID-19 has affected the pending visits by IFC representatives in SA to discuss the request to the World Bank.