Cote D'Ivoire: the unresolved civil war undermines a once strong ICT sector
The unresolved civil war in Cote D’Ivoire seems to be accelerating the process of consolidation in the ICT sector. But the whole country is suffering from the lack of trade in major commodities like cocoa (which comes from the North). Without these vital export flows economic activity has slowed to a snail’s pace. The civil war has also had a corrosive effect upon the stability and effectiveness of civil institutions. The case of "l’affaire CORA" is almost a case study in why external investors do not trust putting money into Africa. With the plentiful help of others, Russell Southwood seeks to untangle what’s happening.
The Government has been in turmoil as various Ministries have been assigned and re-assigned during the various peace talks. Day-to-day Government business is no longer receiving attention therefore procuring software and systems is a long way from the minds of civil servants.
One example of how Government is "absent" is the deregulation of telecoms after the monopoly of Cote D’Ivoire Telecom ends on 4 February 2004, just two months away. No-one yet knows the rules and it’s difficult to have a serious bidding process for any new licences without them.
The Minister for ICT is from an opposition party and the head of the regulatory body is from the ruling party. They don’t agree on most things and don’t want to collaborate. However in a bizarre shift of the usual power relations, the Ministry (of a largely bankrupt Government) is paid for to a large extent by the licence fees the regulator is collecting. So if the Minister has to go on official business outside the country he has to ask his sworn rival for the money.
Any ICT company with any resources is looking to expand within the region in order to survive and sustain growth. As Mounir Diawara of SIT told us:"We always needed to expand regionally but never quite got round to it. Now we have to accelerate these plans. But the war is also helping us deal with several of the big players who want reliable local partners. Also those companies that have sent their overseas staff home want to outsource their IT functions."
However the war has not had the same impact on the larger companies like CFAO. A former colonial trading company (selling cars among other things) it was bought by the French magnate Francois Pinault. He decided to set up an IT subsidiary and it now has offices in Paris, Ouegadougou, Dakar, Douala, Bamako and Abidjan. It is probably the largest player in the computer field in Cote d’Ivoire, Senegal and Cameroon. It hasn’t had the growth it expected in Cote d’Ivoire but is still getting 50% growth despite the war. As Mounir Diawara of SIT told us:"The large, established players are feeling the heat from this Group and are turning to local players like us".
So how do you run a phone system in a country split in two? Cote d’Ivoire Telecom has kept the phone lines open. There are widespread fears that if utilities like telecoms and electricity are cut off, there would be a massive influx of refugees from the North. However, no revenue is being collected by Cote d’Ivoire Telecom and you can’t make international calls from there. Some revenue is being collected by CI Telecom staff in the North who are using it to pay themselves something. An Ivorian insider told us:"If there is a problem of CI telecom, President Chirac will be called." The same situation exists for mobile phone operators. But call traffic has slowed right down because most are usually made on pre-paid calling cards and these are now in short supply.
The country is connected to the SAT3 fibre cable and therefore connectivity has improved but it seems to have had little impact on price. New users are being offered promotional introductory deals but prices for existing users remain the same.
The strange strange tale of CORA
The third GSM operator (but the first to start up) has stopped operating but this has had nothing directly to do with the civil war. In the beginning an American investor joined with a local minority investor to launch the company. It had its network in place but CI Telecom refused to interconnect until it had its own network (now called Orange) in place. So subscribers were limited to calling other subscribers on the same network and couldn’t get through to fixed line numbers. In addition to being squeezed in this way it had limited funds to invest and only rolled out in Abidjan, whilst the other two networks rolled out more widely and got considerably more subscribers.
In these circumstances, the original American investor decided it was time to sell his shareholding. In the search for a new majority investor, the local minority investor M Keita met M Galley. The latter signed an agreement with him saying that he would invest in the company and would get a majority of its shares on production of a sum agreed. However M Galley never produced the money. Believing that M Galley was not serious, the local investor turned to Western Wireless who were seeking the fourth GSM licence in the country. The regulator suggested they talk to the troubled company. (Western Wireless are the SNO in Ghana where they have also experienced considerable problems.) It was able to invest using money raised from a VC company called MAGIC.
At this point a new President came to power who was related to M Galley. He felt that his agreement to buy the company was still enforceable and said that he had a favourable Court decision in Belgium to that effect. No-one in CI has seen this judgement. He sued through the Ivorian courts and won. It was appealed and he won in the Supreme Court. He then turned up at the company’s offices with a group of gendarmes (he was close to the then Minister of the Interior) and tried to break into the offices of the company and take over control of it. The CEO of the company was an American lawyer (married to an African). She called the US Embassy who sent some marines. An armed stand-off followed.
But in doing this M Galley had overstepped the mark. CI wants to be eligible for the American trade preference scheme, AGOA. The US Ambassador was saying loud and clear that CI will not get AGOA status if you do this to an American company. A long impasse followed until the President said that the case had to be settled and appointed an arbitrator.
The arbitrator got the Government and the two parties to agree that M Galley would renounce his claim on the company and that CORA would pay him 500m CFAFs (USD100,000) in ten instalments. It also gave M Galley the exclusive right to apply for the fourth licence.
Shortly afterwards M Galley set up Phoenix Telecom and was soon able to hire 30 people on the basis of the money being paid by CORA. Meanwhile M galley sought external investors and not surprisingly was unable to find any. Eventually he ran out of time and submitted his plan on the last day of the period of exclusivity agreed. In order to get the licence he needed to pay 40bn CFAFs but being unable to do so his application was rejected.
As if it could not get any more complicated, M Galley failed to pay his lawyer who then sued him through the courts and obtained the tenth payment to cover his unpaid fees. M Galley claimed that the arbitrator’s agreement was null and void because he had not received the last payment.
Therefore things went back to square one. Taking another party of gendarmes he went back to the company’s offices and threatened the staff. Two Ministers actually came down to try and sort things out. CORA offered to pay the last instalment again directly to M Galley. He refused the cheque although he later claimed that one of the Ministers had walked off with it. The President then had M Galley arrested and he was dragged away screaming: "The death squads want to kill me. "By now his biggest supporter, the former Minister of the Interior had been killed.
He was subsequently released and took the case back to the courts. It made a decision in his favour. But an ugly row followed in which the President of the Court told the Vice President of the Court who made the decision that the ruling was invalid because he hadn’t signed it. Faced with this, the new French CEO of CORA closed the company down and went back to the USA. Western Wireless is now suing the CI Government for USD50 million.
Arobase - the network that never made it
Arobase was set up to capture a significant part of the voice and data market by building a fibre network. But now according to informed sources: "It’s almost dead. It has the wrong business model and there’s a glut of bandwidth." Despite investing for almost two years the company has not completed its network and has no customers.
Its major strategic investor Banque Atlantique. Arobase was supposed to have completed 3 fibre rings in Abidjan and have a network centre up and running. When the company went back to the bank for an additional 5 bn CFAFs it discovered that there was no equipment in any of the POPs. The bank audit also concluded that 2 bn CFAFs would be needed to complete the network to the point where it could sell services.
The French CEO of Banque Atlantique argued that the further investment should be made to avoid embarassement for the bank and its investors. But he was fired by the bank. Arobase now apparently wants to become an ISP.
Nevertheless the same investors in the bank have launched Atlantique Telecom which now owns 5 GSM licences which it bought from Telecel (formerly owned by Orascom): Benin, Burkina Faso, Gabon, Niger and Togo. They have ambitions to be a telecoms and data operator and acquired Prestige Telecom as part of the package from Orascom. They also wanted to buy regional operator Afripa Telecom but were unsuccessful.
Afripa Telecom is also in serious financial trouble. Its founder Louis Diakate set out to provide wireless and satellite services for regional corporates like banks. With deregulation in France, he took a licence there. Sources who know the company told us:"The idea was good but the management wasn’t."
At the height of the internet and telecoms boom, investment bankers were able to get a major US company Titan to invest USD50m. Afripa then added pre-paid calling cards to its product portfolio, enabling Ivorians and others in the region to call France. Also with investment, they were able to market heavily in France, raising the brand profile of the company. It has opened operations in 14 African countries.
Because of management and staffing problems, things went bad and Titan (who didn’t want it on their balance sheet) stepped back. Its founder Louis Diakate now lives in Johannesburg. Once one of the millionaires of the internet and telecoms boom, he may yet live to regret not selling his company when an offer was on the table.