MALAWI GOVT'S CANCELLATION OF PRIVATISATION THREATENS CREDIBILITY OF PRIVATISATION COMMISSION

Telecoms

The cancellation of the sale of the country's telecommunications giant, Malawi Telecommunications Limited (MTL) has thrown the whole privatisation process in disarray with the Privatisation Commission (PC) unsure of the next course of action.

Analysts have said the cancellation will have a bearing on all future transactions conducted by the PC.

Government last week, through an announcement on the national broadcaster abruptly reversed its decision to sell the fixed line entity. A week earlier President Bingu wa Mutharika had fully endorsed the sale.

The deal, if it were not cancelled was supposed to be signed by government and all the relevant stakeholders involved on 10 August, 2005, according to information from the PC.

The Information and Tourism Minister Patricia Kaliati in explanation at the unorthodox manner that the deal was halted said the President had considered it unimportant for government to privatize MTL. "We shouldn't just privatize everything," Kaliati told the local press, adding: "The government's stand is 'No more sale of MTL'." The Board of MTL, through its Chairman Kenneth Msonda reacting to the sale obtained an injunction from the High Court on 7 August effectively arguing that the price that was put forward of about K3.8 billion (USD30.7 million) was unrealistic and too low for the entity.

He said the value placed on MTL did not match with the company's assets, projects and viability.

Msonda argued that MTL had invested over K200 million (about USD24.8 billion) in projects in the years 1999 to 2005, adding that the company currently had assets in excess of over K7.6 billion.

The board chair said MTL, as a going concern was attractive and profitable, saying it had remitted dividends amounting to K100 million to government in 2003-04 fiscal year alone.

The PC's Information, Education and Communications (IEC) Manager Susan Banda speaking on what course of action the organization would take following the cancellation of the deal told The Chronicle on Friday that their hands were tied by the High Court injunction. "As you know there is an injunction in place and until that injunction is lifted we can't talk about it," she said, effectively hinting that PC cannot proceed with the injunction in place.

The IEC Manager was unable to respond on the implications and on whether the MTL predicament could have an effect on future privatisation transactions.

Some analysts have said that government is not supposed to interfere in the operations of PC because the body is professional and is fully mandated to handle all privatisation transactions.

A consortium that comprised Press Corporation Limited (PCL) as the majority shareholder, a Germany company, Detecon as the technical partner, NICO Holdings and Old Mutual Limited (OML), formed an investment vehicle called Telecom Holdings Limited (THL) for the purpose of acquiring 80 percent shareholding in MTL.

The Development Bank of Southern Africa and the Standard Banking Group of South Africa were to bankroll the now halted deal.

The cancellation of the MTL deal was however, not communicated to the stakeholders involved in the deal.

Press Corporation Limited (PCL) CEO Professor Mathews Chikaonda said he read about the cancellation in the press but could not commit himself to comment on the stand of the investors.

He said they were waiting for written communication from government on the halted deal.

Most of the parastatals that are earmarked for sale are those that have been a burden on government because they have been posting massive losses.

There have always been fears that privatisation of state-owned enterprises results in the massive job losses.

However, the PC argues that not every privatisation results in job losses and that not every job loss is as a result of privatisation.

In the whole saga, workers says they are not for or against the privatisation of the company but that their wish is to see that they are paid their dues before the entire deal is finalized.

Information Minister Kaliati said government has plans to make MTL a viable entity once again and that privatisation of the company is not necessary.

She said government now intends to put in place measures that will ensure the efficient and effective running of MTL.

Early this year President Mutharika presided over a cabinet retreat on privatisation in Lilongwe where he fully endorsed the process of the privatization of all state companies in recognition of the fact that government is less able to run entities at a profit.

The PC Executive Director, Maziko Sauti-Phiri then said the presidential endorsement is very critical in the future of privatisation and that it is rare the world over for presidents to endorse the programme. The cancellation of the almost done deal on MTL throws the whole privatization process at risk with many seeing government's intervention as counterproductive to economic reform efforts.

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