Angolan Government takes back control of Movicel as financial crisis bites for President dos Santos’s former allies

9 July 2021

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Sold without a proper tendering process in 2009 to the allies of former President dos Santos former state-owned mobile operator Movicel is in financial trouble. Russell Southwood looks at the different reasons the Government has for repossessing the company.

According to a report in Expansao, Movicel has racked up considerable interconnection debts with Angola Telecom and exhausted its credit with international carriers, who have cut off many of its services. Its private shareholders (of which more below) probably thought of it as a cash cow, much as Isabel do Santos used her shareholding at Unitel to raise capital for other ventures.

However, it has not turned out that way. The Expansao report says that needs an short-term cash injection of US$100-150 million and an ‘urgent’ payment of US$40 million. Well-run mobile companies have large annual capital requirements but those that are not efficiently operated, feel the accumulating pain. The operator faces problems in terms of quality, technical issues and network coverage.

The sale of Movicel in 2009 was made to a series of local Angolan investors who were all associated with the former President Dos Santos. According to a 2010 book by Rafael Marques de Morais, The Angolan presidency: the epicentre of corruption, the main shareholders were Porturil (or Portmill) Investments (40%), Modus Comicare (19%), Ipang- Industria de Papel e Derivados (10%), Lambda Investment and Novatel SA.

The shareholders of Porturil were Lieutenant-Colonel Leonardo Lidinikeni, Officer of the President’s Security Detail, Presidential Guard and Lieutenant Colonel Francisco Mbava, Psychological Action Department, Military Bureau of the Presidency.

The shareholders of Modus Comicare were Lieutenant Colonel Tadeu Agostinho dos Santos Hikatala, Officer of the President’s Security Detail, Presidential Guard, Lieutenant Colonel João José António Soares, Adviser to the head of the Presidential Guard, General Alfredo Tyaunda and Colonel José Luís Alves, Military Bureau of the Presidency.

According to the book:“Ipang is the only beneficiary company that has businessmen in its shareholding structure. These are Miguel Domingos Martins and his three children, lawyer Ildeberto Manuel Teixeira and the Portuguese national José Mamade Etbal. Another businessman associated with Ipang is Spanish national Óscar Ouersagasti Soraluce.”

However, a recent report in Telegeography reports that the largest (38%) Movicel stake was owned by Angolan investment firm Lello, reportedly linked to General Leopoldino do Nascimento (‘General Dino’), an adviser to former president Jose Eduardo dos Santos. General Dino and Helder Vieira Dias Junior (‘General Kopelipa’) were forced to return certain assets to the state last year and have been investigated on suspicion of benefitting from the dos Santos regime’s dealings with China International Fund.

The revamped shareholder structure includes GAFP Investimentos e Participacoes (38%), Angola Telecom (18%) and Angola Telecom’s satellite subsidiary Infrasat (12%), which is already 30% owned by GAFP. Two other existing indirect Angolan state-held stakes in Movicel have remained unchanged in percentage terms: namely those held by Angola’s social security institution, Instituto Nacional da Segurança Social (INSS, 25%) and National Post & Telegraph of Angola (Empresa Nacional de Correios e Telegrafos de Angola, ENCTA, 2%). Apparently the new shareholders have been pressuring INSS to put in the US$100 million said to be required. The bigger question is how in a large market with only two operators Movicel failed to make money?

The new shareholders described above add up to 95% so it is unclear whether the Government has diluted the shareholding of the former Government’s allies or simply repossessed them.

Are Mobile Operators the next Fintech Startups? The spread of super apps

Africa’s mobile operators are increasingly seeking to occupy the strategic high ground of payment transactions., seeking to get in ahead of the social media platforms. Eric Osiakwan explores how things are turning out for them.

Africa’s leading Mobile Network Operators (MNOs), MTN, Vodacom and Safaricom, have recently made bold plans to venture into the increasingly dynamic world of fintech. On 23rd June 2021, Safaricom launched its super app, which creates an ecosystem of mini apps from the network operator as well as third party apps that feed off the super app . A month prior to this development, Safaricom, the leading MNO in Kenya announced plans to release an Application Protocol Interface (API) for the super app to enable third-party app developers to build more products and services on top of the super app . This means the super app is going to be an app store that consolidates the reach of Safaricom.

In May, MTN also announced plans to become a tech platform to rival the likes of Apple and WeChat as part of their Ambition 2025 which is currently being implemented . MTN, Africa’s leading telecom operator, is developing its Ayoba messaging platform into a super app that will include its Mobile Money (MoMo) application and video and music streaming services, largely inspired by the international success of WeChat, a powerful multi-purpose messaging, social media and digital wallet app. In April, Vodacom CEO sat down with CNN to discuss plans for building a super app in South Africa in partnership with Alipay. The new service will be integrated with Vodapay to create a financial services super app that will let users pay utility bills, transfer money and get connected with online merchants and suppliers . Although the partnership with Alipay was announced last year during the pandemic to bring the much-needed digital services to consumers under lockdown, it has taken almost a year for them to bring the service to life . This suggests that becoming a fintech startup is easier said than done.

In March, Liquid Telecom with operations in different African countries rebranded to Liquid Intelligent Technologies to show that it is now a one-stop-shop technology group . Very soon, the company would also launch a super app to allow consumers to access all its services through one platform. Although Orange, another MNO with operations in 18 African countries has not announced a super app, the company’s launching of Orange Bank Africa last year, in addition to their already existing Orange Money service, seems to play into the super app narrative . Airtel Africa has also not announced a super app although they had stellar performances last year in the MoMo and data business .

Super apps act as a single point of entry for multiple consumer functions. The model emerged in Asia and allows a user to access a range of services — banking, ride-hailing, communication, hiring, trades, people, etc — all from within one app . Back in 2019, Cellulant from Kenya, a leading African fintech firm, also announced plans to launch a super app called Tingg . Super apps are trending not only in Africa. There is a global race to create the next super app that would rival the likes of WeChat, which has a billion users and now estimated to offer more than one million mini programs created by third parties. The other main player is Ant Group's Alipay, which also has more than one billion users and offers 120,000 mini apps by third parties .

WeChat, owned by Tencent, the most valuable publicly-traded company in China, began making inroads in Africa in 2013 via South Africa’s Nasper, an early strategic investor in WeChat’s parent company. WeChat’s foray into Africa failed, with the company quietly exiting in 2017 . Given that WeChat’s partnership with Nasper did not guarantee success, time will tell whether Alipay’s partnership with Vodacom would be successful. Major MNOs are all eager to become nimble fintech startups to compete with the agile young tech ventures, which begs the question, can old dogs learn new tricks? The answer could be yes because the MNOs have led the innovation in MoMo dating back to 2007, when Safaricom ushered in M-Pesa, a pioneering MoMo app into the Kenyan market, leading to a remarkable digital payment and mobile banking revolution across the entire African continent.

Today, all major MNOs have MoMo operations, which has become their new cash cow to the detriment of the banks. In some markets such as East Africa, the MNOs, including Safaricom, are operating “banking services” directly competing with traditional banks. In Nigeria, this has not been the case until the 3rd quarter of 2020, when the Central Bank of Nigeria (CBN) issued final approval to Glo, 9Mobile and Unified Payment subsidiaries to operate as Payment Service Banks (PSBs) . In parts of West Africa, the banks, including Fidelity Ghana and Ecobank Ghana, managed to lobby the regulators to “force” the MNOs to work with them to deliver those banking type services. Back in East Africa, the question has been asked, “Is M-PESA transforming into a bank” with the launch of its super app? This question has led regulators and public policy makers in some countries to require the MNOs to separate their MoMo operations (classified as fintech) from their mainstream voice business. In some markets, the companies are also required to make some ownership of their fintech ventures available to the public through listing on the local stock exchange, just as they are mandated to list their voice businesses. In Kenya, there is a bill before parliament requiring the separation of M-PESA from Safaricom as a standalone fintech business .

The MoMo operations of the MNOs made the most significant returns under the pandemic because majority of transactions were done through their networks . Nigeria recorded $428B worth of e-transactions in 2020, 42% higher than in 2019. In Ghana, MoMo transactions outstripped cheques by $40B in the first quarter of 2021 . This sent shock waves to the Ghanaian banking sector such that the banks are now forging collaborations as they fear for their future . In other news, Ghana is edging towards a state-backed digital currency to mitigate against the volatility of unregulated digital currencies, such as bitcoin (BTC) . The value of M-Pesa transactions in Kenya grew by 32.9% year-on-year to $82B in 2020, whilst the volume of M-Pesa transactions grew by 14.9%, to 5.12 billion transactions. Orange's MoMo service also saw an 18.9% increase in active users to total 19.6M customers by the end of June 2020 . In Kenya, MoMo payment rate represents 87% of the country’s GDP; in Ghana the figure is 82%. These are the highest ratios in the world after China where mobile transfers represent 125% of GDP (this includes person-to-person transactions not included in GDP calculations) .

On the contrary, South Africa where Vodacom and MTN reside, have not seen that much success with mobile money mainly because that country has a solidly entrenched banking system, with 70% of adults having a transaction account . Earlier attempts by both operators to introduce MoMo in South Africa failed but in February 2020, MTN relaunched its MoMo service with UBank and in December 2020, with the mobile telecom giant claiming 2 million new customers. Vodacom’s new Alipay app is their second attempt to carve out a fintech niche in South Africa, whilst Discovery Bank and Tyme Bank have launched exclusive digital offerings without the telcos. Things are clearly playing out quite differently in Southern Africa. Given that the MNOs are in a fist-fight with the banks with regards to fintech, would the banks also seek to become innovative mobile startups now that the MNOs are becoming fintech startups?

In Brief

Liquid Technologies and Facebook have announced a partnership to build an extensive long haul and metro fibre network in the Democratic Republic of Congo (DRC) that is expected to improve internet access for more than 30 million people and help meet growing demand for regional connectivity across Central Africa.

Founders Factory Africa (FFA), a venture development company based in Johannesburg, South Africa, has announced a move to fund three new pan-African startups. Working with its corporate investors Standard Bank Group and Netcare, FFA announced that they will be welcoming Wazi (Kenya), Asaak (Uganda), and Revix (South Africa) to join their portfolio of more than 25 companies.

Smile Identity, a five-year-old Africa-oriented identification verification startup, said Thursday it has secured $7 million in a Series A funding round. The investment was co-led by Costanoa Ventures along with pan-African investor CRE Venture Capital. LocalGlobe, Intercept Ventures, Future Africa and some angel investors also pitched in.

Microsoft has unveiled a new cloud-based business management solution, Dynamics 365 Business Central, to help small and medium-sized businesses (SMBs) in Africa and the Middle East to streamline their operations. Dynamics 365 Business Central will support the SMBs to connect their financials, sales, service, and operations to streamline business processes and improve customer interactions.

Following its investments in Uganda, Ethiopia and DRC, the Raxio Group is investing to build and operate “Raxio Mozambique", with a first facility of up to 1.5 MW located in Beluluane Industrial Park that will be the country’s first Tier III data centre Due to be commissioned during 2022 Raxio Mozambique will be a critical feature to the country’s evolving digital infrastructure and will help accelerate the country’s demand for digital tools and services across industries.

Togo’s council of ministers has adopted a draft decree codifying the Regulatory Authority for Electronic Communications and Posts (ARCEP’s) improved powers for handling conflict resolution, sanctions, and conciliation processes.

Ghana’s Internet ecosystem has received a welcome boost from a collaboration between Ecoband Networks and Workonline Communications, one of the largest IP transit providers on the African continent. Workonline, a wholesale provider of Internet connectivity services, announced its presence in Ghana last year, just as the number of Internet users in Ghana breached 15 million in the country.   Ecoband were chosen by Workonline as a provider of dark fibre infrastructure services to assist with Workonline’s connection from its point of presence at PAIX to the cable landing station.

Ghana: Invest In Africa (IIA), an enterprise focused on growing local small and medium-sized enterprises (SMEs) in Sub-Saharan Africa to deliver positive economic impacts and create jobs, has partnered with Vodafone Ghana to support local businesses by enhancing their digital capabilities. The partnership will provide local SMEs with tailor-made digital solutions to enable them to adapt to the disruptions caused by the COVID-19 pandemic, continue interacting with customers online and grow their businesses.

Opera is launching Hype Clubs, public and interest-based group chats in Hype, the new chat service built into the Opera Mini web browser. Hype is currently available and gaining popularity in Kenya, South Africa, Ghana, Zambia, Nigeria and other English-speaking African countries.

TinSky Connect (PTY) Ltd has announced that it is now offering the Intelsat FlexMove managed service for ubiquitous, high-speed connectivity. With FlexMove, TinSky Connect’s customers can easily connect to the internet, private data networks and cloud services from virtually anywhere in the world, including while on-the-move, or on-the-pause at a temporary site.