AFRICA ICT INVESTMENTS UNDER SCRUTINY

Mergers, Acquisitions and Financial Results

Investments in African ICTs have come under scrutiny lately as the World Bank offered to help fund several projects, and in one case this week was rejected.

The moves coincide with several other initiatives in both the private and public sectors to set development milestones and spur growth of telecommunication equipment distribution.

The World Bank has moved over the last month to spur some projects that have been flagging. But this week, officials heading the East Africa Submarine Cable System (EASSY) were in a position to reject a $100m conditional loan offered by the World Bank.

The World Bank had offered to provide the project with 50% funding of the total $200m required to complete the project, on condition that the cable operators adopt open-access guidelines.

EASSY project coordinator, John Sihra, says that the project management team rejected the funding from the bank because of the condition. He adds, however, that there is no need for the funding, since the project financing has been fully subscribed by members. However this statement contradicts one made by Consortium member Dalkom’s Jama Mohamed at a meeting on EASSy (see Telecom News above).

The EASSY project aims to completely encircle Africa with high capacity fibre-optic cable. Open-access strictures would require that all service providers be free to join the project.

EASSY project managers say, however, they will only allow service providers with international gateway licences to become members.

The World Bank's fear is that if the service providers with international gateway licences are the only ones allowed to acquire bandwidth, they could form a monopoly.

This could result in high costs for users if the current members decide at a later stage to sell capacity to other service providers.

Many service providers could be left out. For example, no service provider in Zambia has yet been granted an international gateway licence by the Communications Authority of Zambia (CAZ).

"The World Bank has been pushing us to accept its money, which has conditions attached, but we are asking why we should get it when the project is fully financed by our members," Sihra says.

Currently the EASSY project has 33 members, including Mauritius Telecoms, Botswana Telecom, Ethiopian Telecommunications Company, Djibouti Telecoms and the Tanzania Telecom company.

The laying of the 9 900-kilometre cable is supposed to begin in the second quarter of this year, and it is earmarked to be operational in the middle of next year.

The World Bank, meanwhile, is continuing efforts to push ICT development. Last month it entered into an ICT development agreement with the Common Market for Eastern and Southern Africa (Comesa).

As part of that effort, the World Bank has also agreed to establish a regional co-operation department that will work with Comesa to finance regional ICT projects, according to Comesa assistant secretary-general, Sindiso Ngwenya.

The Comesa region consists of 21 countries from the eastern and southern Africa regions, including Angola, Kenya, Zimbabwe, Malawi, Mauritius and Zambia.

The World Bank agreement comes in the wake of the region's failure for five years to raise enough money to put the Comtel project in operation. The project is estimated to require about $300m.

Member countries had agreed to contribute funds to the project, which would roll out 16 000 kilometres of fibre-optics and a microwave network. But so far only the Development Bank of Southern Africa (DBSA), which finances developmental projects in Southern Africa, has offered the project money -- about $1 000.

"We agreed that the World Bank should establish a regional department that will specifically look at the financing of the regional ICT projects. This will make everything easier because we will be negotiating for funds from within the region," Ngwenya told the IDG News Service.

The Comtel project is a private regional telecom company being spearheaded by Comesa to create a regional network and unify pricing for telecommunication services.

ICT World